2012 (5) TMI 702 - AT - Income Tax

Summary

Issues Involved:

1. Addition of Rs. 3,02,17,147/- as income from undisclosed sources on account of so-called bogus purchases.
2. Initiation of penalty proceedings u/s 271A of the Act.
3. Deletion of addition of Rs. 1 crore on account of share application for want of verification of nature and source thereof.

Summary:

Issue 1: Addition of Rs. 3,02,17,147/- as income from undisclosed sources on account of so-called bogus purchases

The assessee contested the addition of Rs. 3,02,17,147/- made by the Assessing Officer (AO) as income from undisclosed sources on account of bogus purchases. The assessee argued that the purchases were genuine, supported by cogent and corroborative evidence, including statements and affidavits from the suppliers. The AO had treated the purchases from M/s Vikas Kumar Vivek Kumar, M/s Rithala Enterprises, and M/s Shanti Enterprises as bogus based on the statement of Shri Rohtash Mittal and the closure of the other two businesses. The CIT(A) upheld the AO's findings, relying on the decision in CIT v La Medica, 250 ITR 575 (Del). However, the Tribunal found that the suppliers existed and confirmed the transactions through affidavits and bank statements. The Tribunal held that the revenue failed to provide credible evidence to disprove the genuineness of the purchases and noted that the sales from these purchases were accepted by the department. Consequently, the Tribunal allowed the assessee's appeal on this ground.

Issue 2: Initiation of penalty proceedings u/s 271A of the Act

The assessee challenged the initiation of penalty proceedings u/s 271A. The Tribunal noted that no appeal lies against the mere initiation of penalty proceedings. Therefore, this ground of appeal was dismissed.

Issue 3: Deletion of addition of Rs. 1 crore on account of share application for want of verification of nature and source thereof

The revenue appealed against the deletion of the addition of Rs. 1 crore made by the AO on account of share application money. The CIT(A) found that the amount represented a book adjustment and not an unrecorded investment. The Tribunal upheld the CIT(A)'s findings, noting that the amount was an adjustment entry in the books of M/s Swarna Industries Ltd. and did not impact the assets and liabilities of the assessee. Therefore, the Tribunal dismissed the revenue's appeal on this ground.

Conclusion:

- The assessee's appeal (ITA No. 264/Chd/2010) was partly allowed.
- The revenue's appeal (ITA No. 411/Chd/2010) was dismissed.