2013 (12) TMI 898 - AT - Income Tax

Unexplained investment and purchases - Held that - There is no material on record to say that the purchases made by the assessee were bogus except the general statement recorded by the Department in the case of Shri Rakesh Kumar Gupta. which was later on retracted - In absence of any material brought on record against the submissions made by Shri Rakesh Kumar Gupta before the AO of the assessee the addition, if any, made in the case of the assessee will be based on presumption only - As against that assessee has submitted various evidences to show that the actual delivery of the goods was received by the assessee from the said party which has not been discarded by the AO - The addition cannot be made solely on the basis of the statement of the third party - The alleged bills through which the assessee has claimed to have purchased the material has not been examined - For all these 3 years the assessee has not shown any opening stock or closing stock which further supports the view of the Assessing Officer that there was no physical purchase and sale of the goods in question - To prove the genuineness of the purchase and sale the supporting material has to be produced to show that the transactions in question are backed by actual delivery - The issue was restored for fresh adjudication.

Issues Involved:
1. Addition of unexplained/unproved purchases/investments under Section 69 of the Income Tax Act, 1961.
2. Validity of reopening the assessment under Section 147 based on survey findings.
3. Credibility of statements made during the survey and post-survey inquiry.
4. Retraction of statements and its impact on the assessment.
5. Burden of proof on the assessee to establish the genuineness of purchases.

Detailed Analysis:

Issue 1: Addition of Unexplained/Unproved Purchases/Investments under Section 69
The primary issue revolves around the addition of Rs. 28,72,536/- as unexplained/unproved purchases under Section 69 of the Income Tax Act, 1961. The assessee's return of income was initially accepted under Section 143(1), but later reopened under Section 147 due to findings from a survey conducted under Section 133A. The survey revealed that certain group concerns were issuing accommodation bills without actual trading activities. The Assessing Officer (AO) concluded that the assessee had obtained such accommodation bills to inflate purchases, leading to the addition of the entire amount of purchases from these group concerns. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition, stating that the assessee failed to prove the genuineness of the purchases.

Issue 2: Validity of Reopening the Assessment under Section 147
The assessment was reopened based on the survey findings that indicated non-existent trading activities by the group concerns of Shri Rakeshkumar Gupta. The AO recorded reasons for reopening the assessment, which were primarily based on the survey results and subsequent statements made by Shri Rakeshkumar Gupta and his family members. The reopening was deemed valid as it was based on substantial evidence gathered during the survey.

Issue 3: Credibility of Statements Made During the Survey and Post-Survey Inquiry
Statements made by Shri Rakeshkumar Gupta during the survey and post-survey inquiry under Section 131 were pivotal. He admitted to issuing accommodation bills without actual trading activities. The AO relied heavily on these statements, which were supported by evidence found during the survey, such as the absence of stock and the modus operandi of issuing accommodation bills. The AO considered these statements credible as they were made voluntarily and without any coercion.

Issue 4: Retraction of Statements and Its Impact on the Assessment
Shri Rakeshkumar Gupta later retracted his statements through a letter and affidavits, claiming the transactions with the assessee were genuine. However, the AO and CIT(A) did not accept the retraction, as it lacked any claim of coercion or threat during the original statements. The Tribunal noted that retraction after a significant gap and without substantial evidence could not be accepted. The affidavits were deemed self-serving and contradictory to the earlier categorical statements.

Issue 5: Burden of Proof on the Assessee to Establish the Genuineness of Purchases
The Tribunal emphasized that while additions cannot be made solely based on third-party statements, the burden shifts to the assessee to prove the genuineness of purchases once substantial evidence is presented by the AO. The assessee provided purchase bills and payment details, but the AO found no material evidence to support the actual delivery of goods. The Tribunal highlighted the importance of physical delivery of goods to substantiate the transactions. The case was remanded to the AO to re-examine the evidence and verify the genuineness of the purchases.

Conclusion:
The Tribunal set aside the matter to the AO for a fresh examination of the relevant records and verification of the genuineness of the purchases. The AO was directed to consider the physical delivery of goods and other supporting materials while deciding the issue on merits. The appeals were allowed for statistical purposes, indicating the need for a thorough re-evaluation of the evidence presented by the assessee.

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