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2014 (12) TMI 1202 - AT - Income TaxUnexplained purchase - Held that - It is not in dispute that the survey action was conducted on a third party. It is also not in dispute that the assessee had business relation with Moxdiam Group like so many other parties. It is also a fact that there is not even a iota of evidence with the AO to prove that the assessee did not have straight dealings with the Moxdiam Group. It is also a fact that that the assessee entered each of its transaction in its primary books comprising of ledger and stock register. From the order of the AO the DR could not establish before us that the transaction as recorded in the books was sham. We cannot accept a bald statement made by the AO that any transaction/business done with a party would be sham simply because the opposite party besides doing regular business was also indulging in providing accommodation entries. Simply on the basis of statement given by the third party that they were also providing accommodation entries as well the conduct of the assessee cannot be doubted and held to be sham. The assessee had conducted business this is proved by various books of account produced before the AO which were original and primary books and not even the after thought of the assessee which has been acknowledged by the AO.In such a circumstance we cannot sustain the addition as made by the AO. - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition in respect of unexplained purchases. 2. Substantiation of purchases with evidence. 3. Reliance on statements made during survey actions. 4. Reconciliation of stock details. Issue-wise Detailed Analysis: 1. Deletion of Addition in Respect of Unexplained Purchases: The department contested the deletion of additions for unexplained purchases amounting to Rs. 16,57,334/- for the assessment year 2007-08, Rs. 83,61,135/- for the assessment year 2008-09, and Rs. 48,13,153/- for the assessment year 2008-09 by the CIT(A). The CIT(A) deleted these additions, observing that the discrepancies in stock details were reconciled, and the addition was based on retracted statements without supporting evidence. 2. Substantiation of Purchases with Evidence: The department argued that the assessee failed to substantiate the purchases with evidence other than self-serving documents. However, the CIT(A) found that the assessee provided sufficient documentation, including bills, delivery notes, bank statements, and stock registers, which were not considered authentic by the AO. The CIT(A) concluded that the stock details were reconciled and supported the assessee's claim of genuine purchases. 3. Reliance on Statements Made During Survey Actions: The AO's addition was based on statements made during a survey on the Moxdiam group, where it was claimed that accommodation bills were provided. The CIT(A) noted that the addition was based solely on these statements, which were later retracted. The CIT(A) emphasized that no further inquiry or evidence supported the AO's claim, and the addition could not be sustained merely on the basis of retracted statements. 4. Reconciliation of Stock Details: The CIT(A) examined the stock details provided by the assessee and compared them with the audit report. It was found that the opening and closing stock figures matched, and the discrepancies in the interim figures were reconciled. The CIT(A) concluded that there was no evidence of unaccounted purchases, and the stock details supported the assessee's claim. Conclusion: The ITAT upheld the CIT(A)'s decision to delete the additions for unexplained purchases. The ITAT agreed that the addition was based on retracted statements without supporting evidence and that the stock details were reconciled. The department's appeals were dismissed, and the orders of the CIT(A) were sustained. The ITAT emphasized that additions could not be made solely on the basis of statements made during survey actions, especially when retracted and unsupported by further evidence. The ITAT's decision was consistent across all three appeals, leading to the dismissal of the department's appeals.
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