ITAT Deletes Additions As Assessee Proved Genuineness Of Purchases By Documentary Evidence

The two-member bench of Yogesh Kumar US (Judicial Member) and Pradeep Kumar Khedia (Accountant Member) has excluded the statement of the witness of the department as no opportunity of cross-examination was accorded to the assessee.

The appellant/assessee is in the business of manufacturing and trading yarn and garments. The assessee filed its return of income for the Assessment Year 2015-16, declaring a total income of Rs. 9,98,57,170. In the course of scrutiny assessment, the Assessing Officer alleged purchases of Rs. 39,98,522 made by M/s. Rishabh Foods, controlled by Ram Prakash Bhatia, to be bogus.

The information was received from the Investigation Wing in the course of a survey carried out at the premises of Ram Prakash Bhatia. On the basis of a statement by Ram Prakash Bhatia, the genuineness of purchases made by assessees from M/s. Rishabh Foods was doubted. The Assessing Officer added Rs. 7,99,704 to the total, estimating the profit embedded in the bogus purchase to be 20%.

The assessee preferred to appeal before the CIT (A). The CIT (A) endorsed the action of the Assessing Officer in principle. However, CIT (A) modified and scaled down the amount of disallowance to Rs. 6,50,160 by applying the average GP rate at the rate of 16.26% instead of the 20% estimated by the Assessing Officer.

The assessee filed an appeal with the Tribunal after being dissatisfied with the estimated additions of alleged bogus purchases.

The assessee contended that the statement of Ram Prakash Bhatia was used against the assessee-company for making additions and disallowances to the income of the assessee. Therefore, it was incumbent upon the Revenue to provide for the cross-examination of the witness for the Department as a matter of fair play and in consonance with the principles of natural justice.

The assessee contended that the purchases were genuine on the grounds that the payments to the suppliers were made through RTGS, banking channels; the goods so purchased were duly entered into the Stock Inward Register; and all purchases were duly supported by way bills, etc.

The ITAT noted that the statement of Shri Bhatia is to be regarded as extraneous to the determination of the issue. Once the statement of Shri Bhatia has been excluded, the conclusion is obvious in the light of the documentary evidence supporting its bona fides as claimed.

"We find merit in the plea of the assessee for reversal of unjustified additions. Consequently, the order of the CIT (A) is set aside and the additions made towards bogus purchases are reversed," the Tribunal said.

Case Title: Garg Acrylics Ltd Versus ACIT

Citation: I.T.A. No. 5872/DEL/2018

Dated: 15.06.2022

Counsel For Appellant: CA Ashwani Kumar

Counsel For Respondent: Sr.D.R. Mithun Shete

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