2016 (2) TMI 935 - AT - Income Tax

Addition under section 69C - Held that - Assessing Officer has not brought any material on record to conclusively establish the fact that purchases are bogus. Merely relying upon the information from the Sales Tax Department or the fact that parties were not produced the Assessing Officer could not have treated the purchases as bogus and made addition. If the Assessing Officer had any doubt with regard to purchases made, it was incumbent upon him to make further investigation to ascertain the genuineness of the transactions. Without making any enquiry or investigation the Assessing Officer cannot sit back and make the addition by simply relying upon the information obtained from the Sales Tax Department and issuing notices under section 133(6) of the Act. As the Assessing Officer has failed to make any enquiry or investigation to prove the fact that the purchase transactions are not genuine whereas the assessee has brought documentary evidences on record to prove genuineness of such transactions which are not found to be fabricated or non-genuine, the action of the Assessing Officer in ignoring them cannot be accepted. Moreover, as rightly observed by the learned Commissioner (Appeals), when the payment to the concerned parties are through proper banking channel and there is no evidence before the Assessing Officer that the payments made were again routed back to the assessee, the addition made under section 69C cannot be sustained - Decided in favour of assessee.

Summary

Issues:
Department's appeal against deletion of addition under section 69C of the Income Tax Act, 1961 for the assessment year 2010-11.

Analysis:
The Department contested the decision of the Commissioner (Appeals) to delete the addition of Rs. 58,94,887 made by the Assessing Officer under section 69C of the Income Tax Act. The Assessing Officer found that certain dealers, including three parties from whom the assessee had made purchases, were listed as bogus dealers by the Sales Tax Department. Notices issued to these parties were either returned unclaimed or not responded to. The assessee failed to produce the parties but submitted ledger copies, bank statements, and other documents. The Assessing Officer treated the purchases as unexplained expenditure. The Commissioner (Appeals) noted that the assessee provided evidence proving the genuineness of the purchases, which the Assessing Officer ignored. The Commissioner (Appeals) referred to precedents and deleted the addition.

During the appeal, the Departmental Representative argued that since the assessee failed to produce the concerned parties, the genuineness of the purchases could not be verified. Conversely, the assessee's Counsel contended that the burden of proof lies with the Department, and the assessee provided substantial evidence of genuine transactions. The Tribunal observed that the Assessing Officer relied mainly on information from the Sales Tax Department and did not conclusively establish the purchases as bogus. The Tribunal emphasized that without proper investigation, the Assessing Officer could not treat the purchases as bogus. The Tribunal upheld the Commissioner (Appeals)' decision based on the evidence provided by the assessee and the lack of concrete proof from the Department.

The Tribunal found that the Assessing Officer's reliance on information from the Sales Tax Department without further investigation was insufficient to deem the purchases as bogus. The Tribunal emphasized that the assessee's evidence, including banking transactions and other documents, supported the genuineness of the purchases. The Tribunal also noted that the payments made were through proper banking channels, and there was no evidence of funds being routed back to the assessee. Citing relevant case law, the Tribunal upheld the Commissioner (Appeals)' decision to delete the addition under section 69C. The Tribunal dismissed the Department's appeal, affirming the Commissioner (Appeals)' order.