ACIT Vs Rudra Global Infra Products Limited: ITAT Ahmedabad rejects ₹41.71 crore bogus purchase addition based solely on Section 133(6) non-compliance

1. Background and Case Overview

The Ahmedabad Bench of the ITAT in ACIT Vs Rudra Global Infra Products Limited dealt with a major addition of ₹41,71,10,137/- made on account of alleged bogus purchases for AY 2022-23. The Assessing Officer (AO) had treated purchases of MS scrap from four suppliers as non-genuine primarily because of non-response or incomplete response to notices issued under Section 133(6) of the Income Tax Act 1961.

The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [CIT(A)] deleted the addition after a detailed factual and documentary examination. The Revenue challenged this relief before the Tribunal, while the assessee filed a cross-objection on certain jurisdictional and procedural issues.

The ITAT ultimately:

• Dismissed the Revenue’s appeal, upholding deletion of the entire ₹41.71 crore addition; and
• Dismissed the assessee’s cross-objection as infructuous, since the relief on merits rendered those issues academic.

The ruling reiterates that mere non-compliance with Section 133(6) notices, without any independent enquiry or rebuttal of documentary evidence, cannot justify an adverse inference of bogus purchases.

2. Parties, Assessment and Appeal Structure

2.1 Assessee’s business and return filing

• The assessee-company is engaged in the manufacture of TMT bars.
• Its production process involves converting MS scrap into billets, which are then rolled into TMT bars.
• For AY 2022-23, the assessee filed its return declaring:
  • NIL income, and
  • Book profit under MAT of ₹1,88,64,123/-.

The return was processed under Section 143(1) with a disallowance of brought-forward losses amounting to ₹9,20,26,780/-, resulting in an assessed income of ₹9,20,26,781/-.

The case was subsequently selected for scrutiny under CASS.

2.2 Core addition made by the AO

During scrutiny, the AO treated purchases from four MS scrap suppliers as bogus and added the entire amount of ₹41,71,10,137/- to the assessee’s income. The suppliers were:

The AO’s reasoning substantially rested on:

• Non-response or partial response to notices issued under Section 133(6) to the above suppliers;
• In one case, the verification unit not finding a supplier at the recorded address; and
• Incomplete details (e.g., non-filing of bank statements) from one supplier despite some confirmation.

Notably:

• The AO did not reject the books of account under Section 145;
• The AO did not doubt sales, opening stock, or closing stock; and
• There was no independent enquiry to contradict the contemporaneous records produced by the assessee.

2.3 Revenue’s ground before ITAT

The Revenue’s sole substantive grievance was that the CIT(A) allegedly erred in deleting the addition of ₹41,71,10,137/- claimed to be bogus purchases, contending that the assessee had not established the genuineness of those purchases.

2.4 Assessee’s cross-objections

The assessee raised the following broad objections before the Tribunal:

1. Admission of additional legal grounds (based on the principle in NTPC 229 ITR 383).
2. Validity of Section 143(2) notice:
   • Alleged non-disclosure that the case was selected through CASS, claimed as a violation of natural justice.
   • Contention that, had CASS parameters been indicated, the assessee could have objected to enquiries beyond those parameters.
3. Additions on Non-CASS issues:
   • Argument that the AO travelled beyond CASS parameters and CBDT Instruction F. No. 225/66/2023/ITA-II dated 24.05.2023, which, according to the assessee, restricted the scope of scrutiny in CASS-selected cases unless falling under compulsory scrutiny.

However, since the assessee succeeded on the merits of the addition, the ITAT treated these cross-objections as academic and dismissed them as infructuous.

3. Findings of CIT(A): Why the bogus purchase addition was deleted

The CIT(A) conducted a detailed, supplier-wise examination and concluded that the AO had proceeded purely on presumptions and non-compliance under Section 133(6) without any meaningful enquiry.

3.1 AO’s reasons for treating purchases as bogus

The CIT(A) summarised the AO’s reasons as:

1. Naresh Ram and Ruby Kumar:

   • No response to Section 133(6) notices.

2. GSRS Steel & Alloys Pvt. Ltd.:

   • Not located at the given address during field verification.