ACIT Vs Bonlon Industries Ltd. (ITAT Delhi)
The Delhi ITAT disposed of Revenue appeals and the assessee’s cross-objections arising from orders of the CIT(A)/NFAC deleting additions made on account of alleged bogus purchases and related transactions involving RCI Industries & Technologies Ltd.
For Assessment Year 2018-19, the Assessing Officer had reopened the assessment and made an addition of ₹9.16 crore by estimating 12.5% of purchases from RCI Industries as bogus. The Revenue relied primarily on investigation reports, retrospective cancellation of the supplier’s GST registration, and non-response to notices. The assessee contended that it maintained complete books of account, stock registers, purchase invoices, transport documents, GST returns, bank statements, confirmations from the supplier, and corresponding sales records. It also explained that RCI Industries had entered Corporate Insolvency Resolution Process (CIRP), and therefore the Assessing Officer ought to have sought information from the Resolution Professional instead of drawing adverse inferences. The assessee further pointed out that similar transactions with RCI Industries had been accepted by the Department in other cases.
The Tribunal noted that the Revenue had not challenged the CIT(A)’s finding declaring the reassessment invalid on the additional legal ground. Nevertheless, it examined the deletion of the addition on merits. It observed that the CIT(A) had thoroughly analysed the evidence, including purchase invoices, e-way bills, GST returns, transport receipts, bank payments, stock records and confirmations. The books of account had not been rejected, the sales were accepted as genuine, and there was no evidence showing that the purchases were sham or intended to evade tax. The Tribunal also found merit in the assessee’s contention that notices should have been addressed to the Resolution Professional after commencement of CIRP. Holding that ad hoc disallowance of 12.5% of purchases without disproving the documentary evidence was unsustainable, it upheld the deletion of the addition and dismissed the Revenue’s appeal. The assessee’s cross-objection was dismissed as academic in view of the decision on merits.
For Assessment Year 2019-20, the Assessing Officer made additions under Sections 69C and 69A aggregating over ₹32.33 crore by treating purchases from and sales to RCI Industries as non-genuine. The additions were based on alleged bogus purchases, unexplained money arising from sales involving the amalgamated company Smita Global Pvt. Ltd., cancellation of the supplier’s GST registration, absence of certain transport documents and non-confirmation of transactions. The assessee argued that the purchases and sales were fully supported by invoices, GST returns, ledger accounts, bank statements, stock records, e-way bills and confirmations. It further submitted that relevant records had been seized by the GST authorities and requested the Assessing Officer to summon those records, which was not done. It also highlighted that RCI Industries had responded to notices through the Resolution Professional during CIRP and had furnished available records.
The Tribunal upheld the CIT(A)’s detailed findings deleting all additions. It observed that retrospective cancellation of the supplier’s GST registration did not invalidate transactions undertaken when the registration was valid. It accepted the finding that the outstanding trade creditors were not unusually old, the purchases and sales were fully reconciled, the books of account had not been rejected, and the Assessing Officer had failed to conduct proper independent enquiries despite possessing statutory powers. The Tribunal further agreed that no addition could be sustained merely on suspicion or general information when contemporaneous commercial records established genuine business transactions and corresponding sales had been accepted. Since the additions under Sections 69A and 69C were deleted, the consequential application of Section 115BBE also ceased to survive. Accordingly, the Revenue’s appeal for Assessment Year 2019-20 was dismissed.
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