ACIT Vs Patodia Filaments Pvt Ltd. (ITAT Mumbai)
In the case of ACIT vs. Patodia Filaments Pvt Ltd., the Income Tax Appellate Tribunal (ITAT) Mumbai ruled that trading results and gross profits cannot be interfered with if the assessee provides sufficient evidence of purchases, sales, delivery, and payments. The case involved additions made by the Assessing Officer (AO) for bogus purchases in Assessment Years (AY) 2016-17 and 2018-19. The additions were based on statements from an individual linked to the suppliers, who admitted to issuing accommodation bills. However, ITAT upheld the principle that mere statements without independent corroborative evidence do not justify additions.
The Commissioner of Income Tax (Appeals) [CIT(A)] referred to PCIT vs. Mohammad Haji Adam & Co. (103 com 459) and Nikunj Eximp Enterprises (P) Ltd. (35 taxmann.com 384) and held that the sales made from the allegedly bogus purchases were duly recorded and undisputed. Since the gross profit margin on such transactions was nearly identical to genuine purchases, the additions were deleted for AY 2016-17. However, for AY 2018-19, the CIT(A) found a minor discrepancy in gross profit and upheld a partial addition based on a 0.88% differential.
The ITAT examined evidence, including invoices, bank statements, ledger accounts, and delivery challans. It observed that the AO had neither rejected the assessee’s books of accounts nor disputed the quantitative details of purchases and sales. Given that payments were made through banking channels and all transactions were supported by documents, ITAT held that mere reliance on a third-party statement without direct incriminating evidence against the assessee was insufficient for an addition.
