Sriram Enterprises Vs ACIT (ITAT Kolkata)
Suppliers Didn’t File Returns? Doesn’t Mean Assessee Didn’t Buy; Books Audited, Work Done, Payments Made – ITAT to AO: Prove It Bogus or Allow It Don’t Punish; No Confirmation? No Problem – Check ledgers, invoices & bank before taxing
Assessee was a partnership firm engaged in large-scale government infrastructure contracts such as construction of roads, bridges & flood control works. For A.Y. 2021-22, it disclosed a massive turnover of ₹222.97 crore & a net profit of over ₹14 crore. The books of account were audited, & no defects were pointed out by AO.
During scrutiny, AO noticed that certain suppliers of materials & sub-contractors did not respond to notices issued u/s 133(6) & were also non-filers of income tax returns. On this basis alone, AO treated the corresponding transactions as unverified/unexplained & made additions of ₹32,73,262 (purchases from 11 parties) & ₹10,00,479 (sub-contract charges to one party), disallowing these expenses. The CIT(A) confirmed the additions, mainly relying on the fact that confirmations were not filed & the parties were non-filers, & also pointing out some defects such as lack of transportation details or incomplete invoices, without going into deeper verification.
Before the ITAT, Assessee strongly argued that non-filing of return by a supplier does not make the transaction bogus, especially when Assessee had produced ledger accounts, invoices, bank payment proofs, TDS deductions, & even showed that some of the parties were regular vendors/sub-contractors in earlier & later years. It was also submitted that Assessee , being a government contractor, executes work only after strict departmental checks, & therefore, materials & labour must have actually been used in the projects. Assessee further submitted that the CIT(A) made general remarks without examining each party specifically & ignored the extensive evidence filed.
