ACIT Vs Karam Chand Rubber Industries (P) Ltd. (ITAT Delhi)
In the case of ACIT vs. Karam Chand Rubber Industries (P) Ltd. (ITAT Delhi), the Income Tax Appellate Tribunal (ITAT) addressed two key issues: the addition of ₹2.79 crores for alleged bogus purchases and the disallowance of ₹4.2 lakhs in salary payments.
Alleged Bogus Purchases:
The Assessing Officer (AO) added ₹2.79 crores, asserting that purchases from four suppliers were bogus, as the suppliers were not traceable during post-search inquiries. The AO claimed the assessee failed to establish the identity, creditworthiness, and genuineness of these transactions. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, reasoning that the assessee substantiated the purchases with:
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Purchase invoices and ledger accounts.
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Payments made through banking channels.
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VAT returns and “C Form” issued to suppliers.
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Form No. XXXVIII, containing transport and consignment details.
The ITAT upheld the CIT(A)’s decision, noting that:
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No incriminating evidence was found during the search.
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Payments were routed through banking channels, and the transactions were documented.
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The raw materials were utilized in manufacturing, and the resulting sales were undisputed.
Judicial precedents cited by the Revenue, such as N.K. Proteins Ltd. and Vijay Proteins Ltd., were deemed inapplicable as they involved significant incriminating findings, like blank cheques and close links between the parties, which were absent in the present case.
Salary Disallowance: The AO disallowed ₹4.2 lakhs paid to Smt. Shibani Khosla under Section 40A(2)(b), claiming it was excessive for her services. CIT(A) reduced the disallowance to ₹1.8 lakhs, acknowledging her contributions to the company. The ITAT upheld this, citing consistency in her remuneration over years and the absence of evidence to suggest she rendered no services.
Conclusion: The ITAT dismissed the Revenue’s appeal, affirming CIT(A)’s reasoning that the assessee discharged its initial burden of proof. It ruled that additions based on non-traceability of suppliers, without disproving documentary evidence, were untenable. Similarly, disallowing salary entirely, despite acknowledgment of work performed, was unwarranted.
FULL TEXT OF THE ORDER OF ITAT DELHI
