Where assessee had submitted purchase bills, transportation bills, confirmed copy of accounts and VAT Registration of sellers as also their Income-tax Return and payment was made through cheques, impugned purchases could not be disallowed
 110 taxmann.com 64 (SC)
SUPREME COURT OF INDIA
Commissioner of Income Tax-7, New Delhi
Odeon Builders (P.) Ltd.
R.F. NARIMAN AND MS. INDU MALHOTRA, JJ.
REVIEW PETITION (C) DIARY NO(S). 22394 OF 2019
CIVIL APPEAL NOS. 9604-9605 OF 2018†
AUGUST 21, 2019
Section 37(1) of the Income-tax Act, 1961 – Business expenditure – Allowability of (Bogus purchase) – Certain portion of purchases made by assessee was disallowed – Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provided copy of such statements to appellant, thus, denying opportunity of cross examination to appellant, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and fact of payment through cheques, VAT Registration of sellers and their Income-tax Return – He held that purchases made by appellant was acceptable and disallowance was to be deleted – Tribunal dismissed revenue’s appeal – High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings – Whether no substantial question of law arose from impugned order of Tribunal – Held, yes [Para 4] [In favour of assessee]
Final Judgment and Order dated 17-9-2018 in C.A. No. 9604/2018, 17-9-2018, in C.A. No. 9605/2018 passed by the Supreme Court of India (para 5) affirmed.
1. Delay condoned.
2. We have perused the review petition and find that the tax effect in this case is above Rs. 1 crore, that is, Rs. 6,59,27,298/-. Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than Rs. 1 crore.
3. However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating:
“Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted.”
4. The ITAT by its judgment dated 16th May, 2014 relied on the self-same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT.
5. In these circumstances, the Review Petitions are dismisseddia – IN FAVOUR OF ASSESSEE.
† Arising out of Final Judgment and Order dated 17-9-2018 in C.A. No. 9604/2018, 17-9-2018, in C.A. No. 9605/2018 passed by the Supreme Court of India.