2014 (8) TMI 1005 - AT - Income Tax

Addition relating to bogus purchases - Held that - The undisputed facts are that the purchases were supported by bills, the payments were made by account payee cheque and the payments were duly reflected in the bank statement of the assessee. A perusal of the statement of the diamond traded during the year under consideration shows that the assessee purchased 1358.54 carats from M/s. Zalak Impex on 1.8.2005, the same was exported on 5.8.2005 and 871.57 carats were purchased on 2.8.2005 from M/s. Zalak Impex and were exported on 12.8.2005. No adverse inferences have been drawn by the AO in so far as exports of diamonds are concerned. Without purchases there cannot be any sales. The entire additions made by the AO are based on assumptions and presumptions. We, therefore, decline to interfere with the findings of the Ld. CIT(A). - Decided against revenue

Summary

Issues involved:
1. Deletion of addition of Rs. 1,27,98,022/- relating to bogus purchases from M/s. Zalak Impex.
2. Failure to appreciate the deposition of Shri Hiten Rawal as evidence against the assessee.

Analysis:
1. The appeal by the Revenue challenged the deletion of the addition of Rs. 1,27,98,022/- related to alleged bogus purchases from M/s. Zalak Impex. The assessment was reopened based on information regarding accommodation entries provided by M/s. Zalak Impex. The AO contended that the purchases were bogus, as evidenced by the deposition of Shri Hiten Raval. The AO made additions on this basis. However, the assessee provided details of exported diamonds purchased from M/s. Zalak Impex, supported by sales bills and bank transactions. The Ld. CIT(A) observed physical movement of diamonds, payments through banking channels, and export documentation, concluding that the purchases were not bogus. The Ld. CIT(A) found no credible basis for the AO's claim and deleted the addition.

2. The second issue raised was the failure to appreciate Shri Hiten Rawal's deposition as evidence against the assessee. The AO relied on this deposition to assert the purchases were bogus. However, the Ld. CIT(A) considered the physical movement of diamonds, payment evidence, and export documentation provided by the assessee. The Ld. CIT(A) concluded that the purchases were genuine and not based on mere assumptions. The appellate tribunal upheld the Ld. CIT(A)'s decision, emphasizing the lack of adverse inferences regarding diamond exports and the reliance on bills and banking transactions to support the legitimacy of the purchases.

Conclusion:
The appellate tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision to delete the addition related to alleged bogus purchases from M/s. Zalak Impex. The tribunal emphasized the importance of physical evidence, banking transactions, and export documentation in establishing the genuineness of the purchases, rejecting the Revenue's arguments based on assumptions and presumptions.