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2016 (7) TMI 1237 - AT - Income TaxAddition of bogus purchases - Held that - AO and CIT(A) not referred in their order about the filing of affidavit by the proprietor of M/s Astha Silk Industries & M/s Shree Ram Sales & Synthetics. The assessee has placed on record the ledger account of M/s Manoj Mills M/s Astha Silk Industries & M/s Shree Ram Sales & Synthetics along with the bills and delivery challans wherein payment made through cheques are duly reflected. The sale of the assessee is not disputed by AO and ld CIT(A). Thus evidences are sufficient to show that actual delivery of goods was received by assessee from the said parties. While making the submission DR for Revenue has not countered any of the evidence placed on record by the assessee. With these observations we hold that AO made the addition on the basis of mere presumption and the ld CIT (A) also sustained the 25% of addition without giving any reasoning. Therefore keeping in view the pacularity of facts and circumstances of the case the entire addition made by the AO deserves to be deleted. Hence this Ground of appeal raised by the assessee is allowed.
Issues Involved:
1. Partial allowance of appeal by CIT(A) instead of full. 2. Confirmation of addition of ?19,92,196 out of ?79,68,784 by AO. 3. Justification of CIT(A) in restricting the addition to 25% of ?79,68,784. 4. Overlooking of lack of proof for actual purchases by assessee. 5. Reopening of assessment based on alleged bogus purchases. Issue-wise Detailed Analysis: 1. Partial Allowance of Appeal by CIT(A): The assessee contended that the CIT(A) should have allowed the appeal in full rather than partially. The CIT(A) had confirmed an addition of ?19,92,196 out of the total ?79,68,784, which the assessee argued was against the principles of law. The Tribunal examined the facts and found that the CIT(A) had restricted the addition to 25% of the impugned purchases without providing sufficient reasoning for this decision. 2. Confirmation of Addition of ?19,92,196: The AO had initially added ?79,68,784 to the assessee's income, claiming these were bogus purchases. The CIT(A) reduced this addition to ?19,92,196, equating to 25% of the total alleged bogus purchases. The Tribunal found that the AO and CIT(A) did not dispute that payments for purchases were made by cross cheques and reflected in bank statements. No material evidence was brought to suggest that the payments were received back in cash by the assessee. 3. Justification of CIT(A) in Restricting Addition to 25%: The Revenue argued that the CIT(A) was not justified in restricting the addition to 25% of the total alleged bogus purchases. The Tribunal noted that the CIT(A) did not provide a clear rationale for this restriction. The Tribunal also referred to previous decisions where similar additions were deleted entirely, emphasizing that the AO did not record satisfaction that the purchases were not genuine. 4. Overlooking Lack of Proof for Actual Purchases: The Revenue contended that the assessee failed to prove the actual purchases from the three parties, and hence, the entire amount should have been disallowed. The Tribunal observed that the AO relied on the statement of Mr. Rakesh Kumar Gupta, which was later retracted. The assessee provided affidavits, ledger accounts, purchase invoices, and bank statements to substantiate the transactions. The Tribunal found that the AO did not make further inquiries or examine the affidavits, and hence, the addition was based on mere presumption. 5. Reopening of Assessment Based on Alleged Bogus Purchases: The AO reopened the assessment based on information that the assessee had made purchases from parties providing accommodation bills. The Tribunal noted that the reopening was not contested by the assessee. However, the Tribunal found that the AO did not bring any material evidence to support the claim that the purchases were bogus, relying instead on a retracted statement. Conclusion: The Tribunal concluded that the AO made the addition based on presumption without substantial evidence. The CIT(A)'s decision to restrict the addition to 25% was also without clear reasoning. Therefore, the Tribunal deleted the entire addition of ?79,68,784, allowing the assessee's appeal and dismissing the Revenue's appeal as infructuous. Order: The appeal filed by the assessee is allowed, and the appeal filed by the Revenue is dismissed. The order was pronounced in the open court on 27th July 2016.
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