Maloo Constructions (India) Pvt. Ltd. Vs DCIT (ITAT Bangalore)
ITAT Bangalore Deletes Bogus Purchase Addition – AO Cannot Rely Solely on Third-Party Information Without Enquiry
Assessee, engaged in construction & government contracts, filed return declaring income of ₹6.51 crore. The case was selected for scrutiny based on REIC information alleging bogus purchase bills issued by M/s. Gandhi Iron & Steel Co. AO held that purchases worth ₹97.57 lakh from Gandhi Iron & Steel Co. were bogus, disallowing the same u/s 143(3). CIT(A) upheld disallowance, observing that mere invoices, ledger & bank statements did not establish genuineness without delivery challans, stock register & proof of movement of goods.
Before Tribunal, Assessee submitted that all supporting documents including invoices, e-way bills, bank statements, GST returns & GSTR-2A were produced. Audit observation of GST authorities (15.03.2021) treated purchases as valid, only proposing ITC reversal due to delayed supplier payment beyond 180 days, not bogus purchases. AO made addition merely on REIC report without independent verification. Reliance was placed on PCIT v. Shapoorji Pallonji & Co. Ltd. (423 ITR 220 Bom-HC ), affirmed by SC.
Tribunal observed that AO failed to establish why only part of total purchases of ₹2.53 crore were bogus. Evidence filed by Assessee was not found false. Audit observation of GST department did not allege bogus purchases but only ITC reversal due to delayed payment. Addition solely on basis of REIC information without enquiry was unjustified. Tribunal held that AO cannot disallow purchases merely on suspicion based on third-party information. Documentary evidence including invoices, GST returns, e-way bills & bank statements supported genuineness. Addition of ₹97.57 lakh was deleted & appeal allowed in favour of Assessee.
