| Question And Answer | |
|---|---|
| Subject: | Disallowance of Purchases |
| Category: | Income-Tax |
| Querist: | Ruchi |
| Answered by: | Advocate Neelam Jadhav |
| Tags: | books of account, purchases |
| Date: | March 21, 2023 |
Assessee is engaged in the business of manufacturing of steel pipes. The books of accounts are duly audited U/Sec. 44AB of the Act. quantitative record of finished goods as well as raw material consumption is maintained . Stock register for production as During the course of assessment proceedings for A.Y. 2020-21, Assessing officer has disallowed the purchases and made the addition to total income on following grounds
1. In respect of purchases of Rs. 1015000.00 from one supplier on the Ground that the assessee has not filed the Return of Income for the relevant year.
2. In respect of purchases of Rs. 635000.00 on the ground that assessee has not responded to Notice U/Sec.133(6) and party is not available on the address and has not filed the Return of Income. Eventhough the Assessee has submitted that the said supplier has expired and also produced the copy of the death certificate as well as confirmation from widow that after the death of the supplier they have stop the business and submitted the copies of GST Returns filed for the relevant period.
1.Whether the addition made by the AO is legally justified ?
2. Are there any decisions to support the contention of the assessee that purchases should not been disallowed only on the ground that supplier has not filed the ROI/or not responded to Notice U/Sec.133(6) or summons U/Sec. 131 of the Act.
pl guide.
The Action of the Assessing officer for making addition for non-genuine purchases is not justified. As the Assessee has furnished quantitative details of finished goods as well as raw material consumption, stock register for production during assessment proceedings. Therefore, the assessee cannot be faulted if the seller is not traceable and also that it is not the burden of the assessee to investigate the genuineness of the seller or their business transaction.
Further when the assessee has provided all the information available with it regarding the transaction, merely on the basis that the entity has not responded to notice issued under section 133 (6) of the Act the transaction cannot be doubted and be treated as non-genuine, when the Assessee has submitted that the said supplier has expired and also produced the copy of the death certificate as well as confirmation from widow that after the death of the supplier have stopped the business.
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 assessee had discharged initial burden or onus of providing details of parties, addition for purchase as non-genuine is not justified.