Non-appearance of suppliers or their inability to respond to notices under Section 133(6) does not make the purchases non-genuine
Mumbai ITAT recently in the case of Suresh Kishinchand Changwani v. Deputy Commissioner of Income-tax [2025] 170 taxmann.com (Mumbai – Trib.) has held that Non-appearance of suppliers or their inability to respond to notices under Section 133(6) does not make the purchases non-genuine
Let us have a Short Overview of the case:
This case addresses two key issues under the Income Tax Act, 1961:
1. Additions made under Section 69C for alleged bogus purchases.
2. Disallowance under Section 40(a)(ia) for interest claimed on unsecured loans without furnishing Form 15G/15H.
Facts of the Case:
– The assessee, a cloth merchant, claimed purchases from ten parties, but the Assessing Officer (AO) noted that these parties either had fictitious addresses or did not exist. Based on this, the AO made a 100% addition, treating the purchases as unexplained expenditure under Section 69C.
– The assessee, however, provided corroborative documents mapping the purchases to export sales, with proceeds realized through proper banking channels.
– Separately, the AO disallowed interest expenditure on unsecured loans under Section 40(a)(ia), alleging non-furnishing of Form 15G/15H.
Judgement:
1. Bogus Purchases (Section 69C):
– The Income Tax Appellate Tribunal (ITAT) ruled in favor of the assessee, deleting the addition. It held that the mere non-appearance of suppliers or their inability to respond to notices under Section 133(6) does not make the purchases non-genuine.
– The assessee successfully established the genuineness of purchases through corroborative evidence, linking them to export sales. The ITAT also noted that no discrepancies were found in the evidence provided.
2. Disallowance of Interest (Section 40(a)(ia)):
– The ITAT remanded this issue to the AO for verification of Form 15G/15H. The AO was directed to allow the claim if the forms were found to be valid and in compliance with the law.
Businesses must ensure:
– Proper record-keeping for all purchases and expenses.
– Timely responses to notices issued by tax authorities.
– Submission of requisite forms and compliance with procedural requirements (e.g., Form 15G/15H).
The copy of the order is as under: