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2013 (7) TMI 949 - AT - Income TaxBogus Purchases - Concealment of Income - Rejection of Accounts u/s 145(3) - Onus of Proof on Assessee - The Assessing Officer found that the assessee had not maintained any stock register. Also purchases were unverifiable and there were serious defects in the books of account. Confirmation PAN and acknowledgment of return was furnished by the assessee to prove the genuineness of the purchases. - HELD THAT- Assessee has failed to discharge its burden to prove that the purchases are genuine. This burden could not have been shifted on the revenue merely by providing their Permanent Account Number/acknowledgement of return or showing that the payments in respect of such accommodation entries were made by cheque. Investigation by Assessing officer was in compliance with Section 144 of the act thus appeal by assessee is rejected.
Issues Involved:
1. Rejection of books of account under Section 145(3) of the I.T. Act, 1961. 2. Sustenance of addition of Rs. 1,52,105/- treating certain purchases as non-genuine. Issue-wise Detailed Analysis: 1. Rejection of Books of Account: The appellant's books of account were rejected by the Assessing Officer (AO) under Section 145(3) of the I.T. Act, 1961, due to the absence of a stock register and quantitative details of opening stock, closing stock, purchases, and sales. The valuation of the closing stock was certified by the partners without any supporting quantitative details. Purchases amounting to Rs. 6,08,414/- from three parties (M/s Ashu Gems, M/s Century Gems, and M/s Ranka Jewells and Impex) were deemed non-genuine as these parties were known for providing bogus bills. Summons issued to these parties under Section 131 of the Act were not complied with. The AO concluded that the accounts were not correct and complete, and true profits could not be deduced, leading to the rejection of the books of account. This rejection was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], who found serious defects in the books and noted the lack of complete quantitative and qualitative details. 2. Sustenance of Addition of Rs. 1,52,105/-: The AO added Rs. 1,52,104/- to the assessee's declared trading results, estimating 25% of the non-genuine purchases of Rs. 6,08,414/-. The CIT(A) upheld this addition, noting that the assessee could not controvert the AO's findings. The assessee argued that the AO's findings were based on surmises and conjectures, and the purchases were genuine as payments were made by account payee cheques. They contended that the AO did not provide an opportunity to confront the material collected by the Investigation Wing and failed to enforce the summons. The assessee also highlighted that their gross profit rate had increased from 18.29% to 18.96%, suggesting better trading results compared to the previous year. However, the AO and CIT(A) found that the assessee was regularly indulging in bogus purchases to decrease true profits. The Tribunal noted that the assessee did not produce any reliable material to substantiate the genuineness of the purchases and failed to discharge the burden of proof. The Tribunal upheld the AO's estimation, finding it justified and based on relevant materials and considerations. Conclusion: The Tribunal dismissed the appeal, finding no merit in the grounds raised by the assessee. The rejection of the books of account and the addition of Rs. 1,52,104/- were upheld as the assessee failed to prove the genuineness of the purchases and the estimation by the AO was found to be bonafide and reasonable.
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