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Facts
The assessee, engaged in trading furnishing items, declared an income of ₹1,33,64,769/- for A.Y. 2021-22. The AO made an addition of ₹4,38,61,650/- for alleged bogus purchases, citing non-verifiable details and defects in PAN data of suppliers. Additionally, the AO disallowed commission and contract payments to related parties, including the assessee's HUF, amounting to ₹93,88,930/-, stating that the expenditure was not proved to be wholly and exclusively for business purposes. The CIT(A) deleted both additions.
Held
The Tribunal upheld the CIT(A)'s deletion of the bogus purchase addition, noting that goods were supplied and sold to a Semi-Government Department, sales were not doubted, books of accounts were not rejected, and the assessee provided substantial evidence including cash book, payment proofs, and supplier lists. For the commission and contract payments, the Tribunal affirmed the CIT(A)'s decision to delete the disallowance, finding that the assessee provided comprehensive details of recipients (PANs, ITRs, bank statements, confirmations), proved the payments were regular and for business, and the recipients had shown the income in their returns, with the AO failing to show the payments were bogus or unreasonable. Consequently, the Revenue's appeal was dismissed.
Key Issues
1. Whether the CIT(A) was justified in deleting the addition for alleged bogus purchases. 2. Whether the CIT(A) was justified in deleting the disallowance of commission and contract expenses paid to related parties.
Sections Cited
143(2), 142(1), 37, 44AB, 69C
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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 03.06.2024 for the A.Y. 2021-22.
The issue raised by the Revenue in ground nos. 1 and 2 is against the order of ld. CIT (A) deleting the addition as made by the AO on account of bogus purchases of ₹4,38,61,650/-.
2.1. The facts in brief are that the assessee is in the business of trading in furnishing items and during the year filed the return of income on 01.03.2022, declaring total income of ₹1,33,64,769/-. The case of the assessee was selected for scrutiny and the notice u/s 143(2) and 142(1) of the Act along with questionnaire were duly 2.2. In the appellate proceedings, the ld. CIT (A) deleted the additions by observing and holding as under:-
“5.2.1 The appellant has filed a consolidated reply on the above grounds of appeal. The appellant has submitted that "the AO had given 04 days time to file reply against Show Cause Notice (SCN) which is improper and against the natural justice. The facts that GSTIN Returns of Assessee & dealer reflects purchases a sum of Rs. 2,25,00,000/- from Fast Deal Corporation wherein assessee has also claimed ITC therein and payment to the supplier was made through bank channels and fact that purchases from one Subodh Kumar amounting Rs. 1,94,33,085/- and from Kamal Bajaj amounting Rs. 19,28,565/- do not reflect in the aseessee's GSTIN retums and he did not claimed any ITC therein nor the said purchase was recorded in the books of accounts. Moreover, the fact that the assessee has also filed an affidavit (ANNEXURE-2 ) before the AO for non-purchase of any goods from said Subodh Kumar & Kamal Bajaj, and the fact that the AO has not intimated the assessee the evidences with him for supply of goods by said Subodh Kumar and Kamal Bajaj inspite of request of the assessee, consequently, the addition made for Rs. 4,38,61,650/- is liable to be deleted and the addition so made is without application of judicial mind.
3. The issue raised in ground no.3 is against the order of ld. CIT (A) deleting the disallowances of expenses of contract and commission despite the fact that the assessee has failed to establish the expenditure being incurred wholly and exclusively for the purpose of business.
3.1. The facts in brief are that the ld. AO during the course of assessment proceedings noted that assessee has incurred expenses in respect of commission payments and contract payments which were made to related parties which included assessee’s own HUF. The details whereof are given at page no.13 in Para no.3.4 of the assessment order Accordingly, the assessee was issued show cause notice for disallowance of the same which was replied by the assessee. The assessee submitted before the ld. AO that all the recipients have been filing their returns of income regularly and also furnished their ITRs, balance sheets, statement of affairs, computation of TDS, etc. for the last three years along with bank statements. However, the ld. AO , by rejecting all the pleas of the assessee, disallowed the commission paid to the related party.
3.2. The ld. CIT (A) in the appellate proceedings, allowed the appeal of the assessee by observing and holding as under:-
“5.3.2 The assessing officer has noted in the assessment order that "thus assessee has merely furnished copies of ledger accounts, ITR returns of the above parties. However, these documents are in no way indicative of the discharge of onus u/s 37 of Order pronounced in the open court on 02.01.2026.