| Question And Answer | |
|---|---|
| Subject: | Bogus Purchases U/Sec. 37 of the Act. |
| Category: | Income-Tax |
| Querist: | prakash |
| Answered by: | Advocate Neelam Jadhav |
| Tags: | Alleged bogus purchases, Bogus Purchases, Disallowance |
| Date: | October 7, 2023 |
Assessee is trader of the steel and also registered under the GSt. Books of accounts are audited U/SEc. 44AB of the Act. In the assessment proceedings for A.Y. 2021-22, A.O. has asked the details of the purchases and on the basis of those details he has sent the Notices U/SEc. 133(6) to various parties. Two parties have not responded to the Notice U/SEc. 133(6) of the Act. AO has issued the SCN to assessee as to why the purchases of these parties should not be disallowed U/SEc. 37 of the Act since they have not responded to Notice U/SEc 133(6) and form data available with the department they are non filer of Income Tax Return.
Assessee has submitted the detailed reply along with the copy of Bill, copy of E way Bill, Delivery Challan, Bank statement indicating the payments are through Banking channel, details of quantitative record, details of sales effected against the goods purchase from these parties .
However the AO disallowed 100% purchases from these parties U/SEc. 37 of the Act since they have not responded to Notice U/SEc 133(6) and form data available with the department they are non filer of Income Tax Return.
whether the action of the AO is correct ?
what are the remedies available to assessee. pl guide
The Action of the Assessing officer proposing to make addition for 100% disallowance of purchases from these parties merely on the ground that theya have not responded to Notice u/s. 133(6) is not justified. When the assessee has furnished a copy of the Bill, copy of the E-way Bill, Delivery Challan, Bank statement indicating the payments are through the Banking channel, details of the quantitative record, and details of sales effected against the goods purchased from these parties. Therefore, the assessee cannot be faulted if the seller is not traceable now The remedy available to the Assessee is to file an appeal before the CIT(A).
In the case of CIT v Nikunj Eximp Enterprises (P) Ltd [2015] 372 ITR 619 (Bom)(HC) held that sales supported purchase and payment was made through banks, merely because suppliers had not appeared before Assessing Officer purchase could not be rejected as bogus.
Pr. CIT vs. Jagdish Thakkar [2022] 145 taxmann.com 414 (Bom)(HC) held that the assessee had discharged the initial burden or onus of providing details of parties, addition for purchase as non-genuine is not justified.
In the case of Pr. CIT vs. Vishwashakti Construction (2023) 454 ITR 448 (Bom)(HC) held that, even if the assessee failed to produce parties for verification, the Assessing Officer could not have treated entire purchases as bogus purchases; only the profit element embedded in such purchases to be considered for addition.
The assessee may have to demonstrate the quantity tally of goods purchased and sold . How the payment was made, whether any broker was involved , What is the status in the GST assessment , Whether the assessee has dealt with same assessee in earlier years or latter years etc .