ITAT Kolkata on bogus-purchase additions: supplier's non-filing alone cannot sustain the disallowance

Can purchases be disallowed only because the supplier didn't file returns?

No. Additions for purchases or sub-contract expenses cannot rest solely on the supplier's non-filing or non-response; genuineness must be examined.

Facts in brief

• The AO disallowed purchases and sub-contract expenses because the suppliers/sub-contractors were non-filers of income-tax returns or did not respond to notices.

Issue before the bench

Whether a supplier's compliance default is, by itself, a sustainable basis for disallowance.

Held

The matter was remanded to the lower authorities, giving the assessee another opportunity to prove the genuineness of the transactions.

Practitioner takeaway