Additions merely on the basis of information from Sales tax department/Investigation Wing without concluding independent enquiry is not sustainable

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Additions merely on the basis of information from Sales tax department/Investigation Wing without concluding independent enquiry is not sustainable

 

 

Various courts have held that additions merely on the basis of information from the GST Department/ Sales tax department/Investigation Wing without concluding independent enquiry is not sustainable.

Some of the cases are as under:

  • Ramesh Kumar and Co v. ACIT (ITA No. 2959/Mum/2014)
  • PCIT v. Shapoorji Pallonji & Co. Ltd. [2020] 423 ITR 220 (Bombay)
  • Shri Ganpatraj A Sanghavi v. ACIT (ITA No. 2826/Mum/2013)
  • PCIT v. Vaman International Pvt. Ltd. (ITA No. 1940 of 2017, Bombay)
  • DCIT v. Shri Rajeev G Kalathil (ITA No. 6727/Mum/2012)

It may be noted that the Hon’ble Supreme Court in the case of N.K. Proteins Ltd. v. DCIT [2017] 84 taxmann.com 195 (SC) has dismissed the SLP of the assessee against the decision of the Gujarat High Court [N.K. Industries Ltd. v. DCIT (2016) 72 taxmann.com 289 (Gujarat)] wherein 100% of bogus purchases were added to the total income of the assessee. The Hon’ble High Court had held that,

“in the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to Rs. 2,92,93,288/- and taxing only 25% of these bogus claim goes against the principles of Section 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come to a categorical finding that the amount of Rs. 2,92,93,288/- represented alleged purchases from bogus suppliers it was not incumbent on it to restrict the disallowance to only Rs. 73,23,322/-.

Following the above decision of the Hon’ble Apex Court, the Mumbai Tribunal in case of Pratibha Pipes & Structurals Ltd v. DCIT (ITA No. 3874/Mum/2015) had noted that the Assessing Officer has not made addition only on the basis of report of Sales Tax department and the Assessing Officer has conducted all possible enquiries and directed assessee to file confirmations and to produce the parties for examination which was not done by the assessee. Further, no identification has been made of entry of goods in respect of the 22 parties.

Accordingly, the Tribunal followed the decision of N.K. Proteins Ltd. (supra) and upheld 100% addition of bogus purchases under section 69C.

 

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