ACIT Vs Everest Food Products Pvt. Ltd. (ITAT Mumbai)
ITAT Mumbai: Deletion of GP Addition on Alleged Bogus Purchases Upheld Where Purchases Substantiated by Documentary Evidence
The Mumbai Bench of the Income Tax Appellate Tribunal upheld the order of the CIT(A) deleting an addition of ₹25.55 crore made by applying a gross profit rate of about 46% on alleged non-genuine purchases. The Tribunal held that mere non-filing or alleged irregular filing of income-tax returns by suppliers cannot, by itself, justify disallowance of purchase expenditure when the assessee has substantiated the transactions through cogent documentary evidence. In the present case, the assessee, a leading manufacturer of spices, had furnished ledger accounts, purchase invoices, goods receipt notes, e-way bills, transportation documents, weighment slips, quality reports and bank statements evidencing payments through banking channels. It was also demonstrated through income-tax portal screenshots that most suppliers were not “specified persons” under sections 206AB and 206CCA and that GST returns were regularly filed with corresponding input tax credit duly allowed.
The Tribunal observed that the Assessing Officer neither disputed the sales nor rejected the audited books of account, nor established that the suppliers were accommodation entry providers. No independent inquiry was conducted to disprove the existence of suppliers or the genuineness of transactions. The Tribunal emphasized that it is impermissible to accept manufacturing output and sales while doubting the essential raw material purchases without concrete evidence. It further held that the assessee’s obligation does not extend to ensuring tax compliance by its suppliers once business expenditure is otherwise proved. Consequently, the Tribunal found no infirmity in the CIT(A)’s reasoning and dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been filed by the Revenue, challenging the order of the Learned Commissioner of Income Tax (Appeals) [‘Ld. CIT(A)’ for short], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’), pertaining to the Assessment Year (‘A.Y.’ for short) 2021-22.
