2007 (2) TMI 195 - HC - Income Tax

Search and seizure operation u/s 132 - purchase bills of silver ornaments - treated as non-genuine bills - non-mentioning of purchase in the books of account - addition u/s 68 - whether the Tribunal was justified in unsettling the finding of the CIT(A) by putting the onus on the assessee with regard to the source - HELD THAT - It is crystal clear that the source of M/s. Chouksey Rajnikant and Co., was not essential to be proved inasmuch as the assessee had been able to prove the identity, entry and source of the third party and it should be regarded that the assessee has been able to discharge the onus. Thus, we are of the considered opinion that as far as the transaction relating to purchase of silver made by the assessee-firm from M/s. Chouksey Rajnikant and Co., on credit basis which finds mention in the books of account it could not have been added on the basis of suppression. The second aspect relates to non-mentioning of purchase in the books of account . The explanation preferred was that the partner who was looking after the books of account was not available. The Tribunal has not lent credence to the same. The same is in the realm of facts. We are inclined to accept that the Tribunal has rightly not given credence to the same and the conclusion arrived at by the Tribunal in that regard is absolutely impeccable. Hence, we are disposed to hold that the Tribunal was not justified in arriving at the finding that the purchase of silver vide bill dated October 8, 1985, of M/s. Chouksey Rajnikant and Co., for silver ornaments of 59.547 kgs., amounting to Rs. 1,50,000, which was found recorded in the books of account found at the time of search, was not a genuine purchase and the Tribunal was justified in arriving at the finding that the purchase of silver ornaments weighing 38.990 kgs. for Rs. 99,552 vide bill dated October 28, 1985, was not genuine purchase. Consequently, question No.1 is answered in the negative, in favour of the assessee and question No.2 is answered in the affirmative, in favour of the Revenue and against the assessee.

Summary

Issues:
1. Justification of Income-tax Appellate Tribunal's finding on the genuineness of silver purchases.
2. Onus of proof on the assessee regarding the source of purchases.

Analysis:
1. The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the genuineness of silver purchases by the assessee firm. The Tribunal questioned the authenticity of purchases totaling 98.437 kgs. from M/s. Chouksey Rajnikant and Co., Sagar, made on credit basis. The Tribunal found discrepancies in the recording of purchase bills, leading to the addition of Rs. 2,49,552. The Commissioner of Income-tax (Appeals) initially deleted the addition, but the Tribunal reinstated it, prompting the reference to the High Court.

2. The High Court considered the arguments presented by both parties. The assessee contended that the Tribunal's decision was based on conjectures and failed to recognize the genuineness of the transactions. The assessee emphasized that the first purchase bill was recorded in the books of account, reflecting a credit transaction, which established the transaction's authenticity. However, the Tribunal doubted the credit given to the assessee by the seller due to lack of prior dealings. The High Court referenced legal precedents to highlight that once the identity of the third party is established, the burden shifts to the department to prove any discrepancies. The Court concluded that the assessee had discharged the onus regarding the first transaction recorded in the books of account.

3. Regarding the second purchase bill not recorded in the books, the explanation provided was the unavailability of the partner responsible for bookkeeping. The Tribunal rejected this explanation, and the High Court upheld this decision, considering it a factual matter. The Court affirmed the Tribunal's finding that the second purchase was not genuine due to the absence of proper recording. Consequently, the High Court answered the first question in favor of the assessee and the second question in favor of the Revenue, upholding the Tribunal's decision on the genuineness of the silver purchases.

This detailed analysis of the judgment addresses the issues raised in the case comprehensively, discussing the Tribunal's findings, legal arguments presented, and the High Court's final decision based on relevant legal principles and precedents.