ITO Vs Vaman International P. Ltd. (ITAT Mumbai)
This case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] regarding the assessment year 2010-11, where the Assessing Officer (AO) added ₹4,75,42,385/- under section 69C of the Income Tax Act, 1961, treating certain purchases made by Vaman International P. Ltd. as unexplained expenditure. The AO based this decision on information from the Sales Tax Department, which listed the suppliers as providing accommodation entries. The assessee, engaged in furniture trading, had made substantial purchases from Impex Trading Co. and Victor Intertrade Pvt. Ltd. The AO, after issuing notices to these suppliers which went unanswered, relied on statements from the suppliers’ representatives obtained by the Sales Tax Department, and dismissed the assessee’s evidence, including purchase invoices, bank statements showing payments, and stock ledgers, citing the lack of lorry receipts and the suppliers’ non-appearance. The AO also denied the assessees request to cross examine the people who gave the statements to the Sales tax department.
The CIT(A) overturned the AO’s order, finding legal infirmities and procedural lapses. The CIT(A) noted that the AO relied solely on the Sales Tax Department’s statements without considering the assessee’s evidence or allowing cross-examination. The CIT(A) emphasized that the AO failed to disprove the assessee’s evidence, which included proof of payments through banking channels and sales records corresponding to the disputed purchases. The CIT(A) relied on precedents, including the Bombay High Court’s ruling in Nikunj Eximp Enterprises Ltd., which highlighted that mere non-appearance of suppliers or statements without cross-examination cannot justify treating purchases as bogus. The CIT(A) concluded that the AO’s addition under section 69C was unsustainable, as the assessee had provided sufficient evidence of genuine transactions, and the AO failed to conduct adequate inquiries or disprove the submitted evidence. The CIT(A) ruled that the AO should have conducted further inquiries rather than relying solely on the information provided by the sales tax department.
The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)’s order, dismissing the Revenue’s appeal. The ITAT reiterated that the AO’s reliance on the Sales Tax Department’s information and statements without allowing cross-examination or conducting further inquiries was insufficient to treat the purchases as bogus. The ITAT emphasized that the assessee had provided substantial documentary evidence, including purchase invoices, bank statements, and stock ledgers, to prove the genuineness of the transactions. The tribunal also noted that the AO did not dispute the sales made by the assessee, implying that the corresponding purchases were necessary. The ITAT found that the AO’s failure to disprove the assessee’s evidence and the lack of evidence showing the payments were routed back to the assessee rendered the addition under section 69C unsustainable. The ITAT concluded that the CIT(A)’s order was justified and dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
