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2012 (6) TMI 411 - HC - Income TaxPurchases from non-existent firms bogus transactions in the books of accounts contention that Section 145(2) were attracted - Held that - Evidence against the applicant-assessee would show that the whole purchases shown by the applicant-assessee from M/s Raj Kumar Raghbir Kumar were bogus - the copies of the sales tax bills issued to assessee did not inspire any evidence as the bills did not carry any sales tax/Central Sales Tax number nor the telephone number - the said firm was not found to be in existence when inquiry was made by the AO in the year 1989 nor the address of the party was known to the postal authorities - the said firm was not an existing assessee and the applicant-assessee had failed to produce the said party as also their books of account as the truck numbers given by the applicant-assessee were not truck at all but either scooters, motorcycle and mopeds and many other found to be non-existence because no such number had been allotted by the transport authorities - Section 145 have no application to such a situation as the provision deals with cases where AO is not satisfied about correctness and completeness of the accounts of the assessee and not fraudulent or fabricated entry against assessee.
Issues:
- Determination of purchases from non-existent firms as bogus without explicit finding under Section 145(2) of the Income Tax Act, 1961. - Interpretation of Section 145 of the Act regarding method of accounting and best judgment assessment. - Examination of evidence and findings to establish the genuineness of purchases made by the assessee. Analysis: 1. The judgment concerns a bunch of appeals filed under Section 260A of the Income Tax Act, 1961 against orders of the Income Tax Appellate Tribunal (ITAT) regarding purchases made by an assessee from a non-existent firm. The central question raised was whether the Tribunal was correct in treating these purchases as bogus without explicitly invoking Section 145(2) of the Act, especially when quantitative details were available. 2. The appellant, a Private Limited Company engaged in the extraction and sale of solvent oil, recorded purchases from a firm that was later found to be non-existent. The Assessing Officer treated the entire purchases as bogus, leading to appeals and subsequent contradictory decisions by the CIT(A) and the Tribunal. The Tribunal ultimately upheld the Assessing Officer's view, prompting a reference to the High Court. 3. Section 145 of the Act deals with the method of accounting, specifically addressing situations where the Income-tax Officer is not satisfied with the correctness or completeness of the accounts. In this case, the Assessing Officer's conclusion that the purchases were bogus was based on detailed investigations revealing discrepancies and lack of evidence of actual transactions with the purported firm. 4. The appellant's argument that the CIT(A) had accepted the genuineness of the purchases was refuted by the Tribunal's findings, which highlighted various irregularities and lack of concrete evidence supporting the transactions. The Tribunal's observations cast doubt on the legitimacy of the purchases and the existence of the supplier firm. 5. The High Court clarified that Section 145(2) applies when the correctness or completeness of accounts is in question, not in cases of fraudulent or fabricated entries. The findings of non-existence of the supplier firm and lack of actual transactions indicated a clear case of fraudulent entries, falling outside the purview of Section 145. 6. Despite the appellant's contentions regarding the utilization of purchased goods and the satisfaction of the CIT(A), the overwhelming evidence presented against the appellant by the revenue, including discrepancies in bills, non-existence of the supplier firm, and lack of supporting documentation, led the High Court to rule in favor of the revenue. 7. Consequently, the High Court answered the question against the assessee, upholding the Tribunal's decision to treat the purchases as bogus. The appeals filed by the revenue were allowed, while the appellant's appeal was dismissed, concluding the matter in favor of the revenue based on the evidence and findings presented.
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