Vaibhav Nandkishor Patil Vs ITO (ITAT Mumbai)
Mumbai ITAT Deletes Bogus Purchase Addition: Sales Accepted, One-to-One Correlation Proved; Ad-hoc Expense Disallowance Also Quashed
Sales Accepted, Purchases Can’t Be Bogus: ITAT Ends MVAT-Based Additions- Suspicion Is No Substitute for Proof: Hawala Tag Alone Fails
Assessee, proprietor of event-management concern M/s Evepro, faced reassessment u/s 147 based solely on information from MVAT Department alleging purchases from a listed hawala dealer. AO treated purchases of ₹15.47 lakh from Adinath Enterprises as bogus u/s 69C & further made ad-hoc disallowance of 20% of routine business expenses. Tribunal noted that Assessee maintained audited books, sales were never disputed, & detailed one-to-one correlation between purchases & corresponding client billings on cost-to-cost reimbursement basis was furnished along with invoices, delivery evidence, Blue Dart transport bills & event photographs. AO neither pointed out any defect in these documents nor conducted any meaningful independent inquiry beyond issuing an unserved notice u/s 133(6), relying merely on MVAT information.
Holding that sales cannot exist without purchases & that suspicion based solely on third-party information cannot substitute proof, Tribunal deleted entire addition towards alleged bogus purchases. Tribunal further held that ad-hoc disallowance of expenses merely on presumption of personal element, without identifying specific defects & despite tax audit, is unsustainable, & accordingly deleted the same. Appeal allowed in full.
Key Takeaway:
When sales are accepted & purchases are supported by contemporaneous evidence with one-to-one linkage, entire bogus-purchase addition based only on MVAT alerts cannot survive; ad-hoc expense disallowance without defects is equally untenable.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
