The present appeal was preferred by the Revenue against the order passed by the Commissioner of Income Tax (Appeals) under section 250 of the Income-tax Act, 1961 for Assessment Year 2021-22. The assessee company, engaged in the manufacture and sale of masala and spices under the brand name “Everest”, had filed its return of income declaring total income exceeding ₹517 crore after revising its original return.

The case was selected for scrutiny under CASS on the ground that the assessee had made substantial purchases from certain suppliers who were alleged to be non-filers or to have reported low turnover. The assessment was completed under section 143(3), wherein the Assessing Officer treated purchases from certain parties as non-genuine and made an addition of ₹25.55 crore by applying a gross profit rate of approximately 46% on alleged unverifiable purchases aggregating to ₹55.55 crore.

On appeal, the Commissioner (Appeals) deleted the entire addition after recording a categorical finding that the assessee had substantiated the impugned purchases through extensive documentary evidence, including party-wise ledger accounts, tax invoices, goods receipt notes, e-way bills, transportation records, bank statements evidencing payments, GST returns, and income-tax portal confirmations. It was also noted that most suppliers had responded to notices issued under section 133(6), and none were identified as accommodation entry providers.

Before the Tribunal, the Revenue contended that the Commissioner (Appeals) erred in ignoring judicial precedents of the jurisdictional High Court, including the decisions in Mohammad Haji Adam & Co. and Kanak Impex Pvt. Ltd., and argued that non-genuine purchases warranted either gross profit addition or full disallowance.

After examining the record, the Tribunal observed that the Assessing Officer had neither disproved the documentary evidence furnished by the assessee nor conducted any independent inquiry to establish that the suppliers were fictitious or engaged in providing accommodation entries. The Tribunal further held that non-filing of income-tax returns by suppliers, by itself, cannot be a determinative factor to treat purchases as bogus, particularly when corresponding sales are accepted and the business results are supported by audited books of account.

The Tribunal distinguished the High Court rulings relied upon by the Revenue on facts and reaffirmed the settled legal position that while suspicious transactions may warrant deeper investigation, additions cannot be sustained in the absence of concrete evidence. Accordingly, finding no infirmity in the order of the Commissioner (Appeals), the Tribunal dismissed the Revenue’s appeal.

Source Link-  https://itat.gov.in/public/files/upload/1767607099-gWmKnz-1-TO.pdf

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