ITO Vs Bhagwan Das (ITAT Chandigarh)
No Fresh Credit, No 68, GST Paid Due to Supplier Default Allowed as Business Expense, Miscomparison of GST Figures Proved
Revenue appealed against the CIT(A)/NFAC order deleting multiple additions made by AO in a scrutiny assessment of Bhagwan Das, Proprietor of Bhagwan Steel. Assessee declared income of Rs.11,05,810/-. AO made additions aggregating to several crores on the grounds of unexplained sundry creditors, GST payment disallowance, alleged bogus purchases & purchase-value differences.
On the issue of Rs.24,82,734/- u/s 68 for two creditors, Tribunal observed that the balances were opening balances carried from earlier year & no fresh credit existed during the relevant year. Since s.68 applies only where a sum is credited during the year, CIT(A) rightly deleted the addition following Sanjay Mehta (ITAT Kolkata) & Topline Buildtech (Delhi HC).
Regarding GST payment of Rs.12,38,488/-, Tribunal upheld CIT(A)’s finding that GST deposited by Assessee due to suppliers’ failure constituted a crystallized business liability allowable u/s 36(1)(vii) or alternatively u/s 37, supported by the Supreme Court ruling in Khyati Realtors Pvt Ltd (2022).
For the large addition of Rs.5,07,64,711/- as bogus purchases, Tribunal noted that AO relied solely on non-traceable suppliers but did not reject books u/s 145(3) nor dispute sales or stock records. Assessee produced invoices, e-way bills, lorry receipts, toll receipts, GSTR records & bank payments. CIT(A) restricted addition to GP element of 0.84% (Rs.4,26,423/-) following the Bombay HC in Mohammad Haji Adam & Co., which Tribunal affirmed, observing that even this small GP addition was conservative.
