ITO Vs Spectra Televentures Pvt. Ltd (ITAT Delhi)
Sales Accepted, Purchases cannot be disallowed; ITAT Delhi quashes Rs 12.88 Cr Bogus Purchase addition – No 100% Gross Profit – Entire Purchases can’t be disallowed when Sales are Accepted
Delhi ITAT has upheld the order of CIT(A), deleting an addition of Rs 12.88 crore made by AO on account of alleged bogus purchases. Assessee, a telecom services & civil works company engaged with major operators such as Reliance Jio, Airtel, & Nokia, had filed its return of income declaring Rs 48.13 lakh for AY 2021-22. The case was selected for scrutiny to verify the genuineness of business purchases. AO , relying on a verification report in respect of four suppliers, held that the entire purchases of Rs12.88 crore were non-genuine. AO concluded that some suppliers were untraceable, their GST registrations did not include the goods supplied, or their declared income was disproportionately low compared to the transactions. Without rejecting the books of account, AO disallowed the entire purchases.
CIT(A) found that the enquiries were confined only to four suppliers accounting for purchases worth Rs2.88 crore, yet AO disallowed the entire Rs 12.88 crore. Assessee had provided confirmations, invoices, e-way bills, ITRs, balance sheets & stock registers which were ignored by the AO. CIT(A) observed that if sales of over Rs 14 crore were accepted, purchases could not be disallowed in entirety, as it would result in an absurd gross profit of 100%.Books of account were not rejected & the stock register maintained invoice-wise was found to be in order.Holding that the AO’s approach was unjustified, CIT(A) deleted the addition.
