The bench comprising Aby T Varkey (Judicial Member) and MS Padmavathy S (Accountant Member) emphasized that the Assessing Officer (AO) had neither contested the sales declared by the assessee nor discovered any discrepancies in the books of accounts. Thus, they concluded that any addition related to the impugned purchases should be restricted to the profit embedded in such transactions.
The case involved a partnership firm engaged in civil contracting in Thane, specifically constructing public and community toilet blocks in Mumbai’s slums. The AO’s scrutiny was prompted by a survey and subsequent statements under section 131 from the firm’s partner and accountant. These statements purportedly indicated a deliberate suppression of profits amounting to Rs. 1.3 crores. Furthermore, the AO noted outstanding trade creditor amounts linked to parties flagged by the Sales Tax Department as entry providers without actual material supply.
The AO’s assertions were based on the accountant’s statement and corroborated by an independent inquiry revealing the non-existence of listed vendor premises. Additionally, the Sales Tax Department’s findings and affidavits from vendors admitting to acting as entry providers were cited.
Consequently, the ITAT directed the AO to reassess the issue, specifically examining the profit percentage on transactions and comparing it with genuine purchase transactions by the assessee. This decision underscores the importance of thorough examination and adherence to established principles in income tax assessments.
