2015 (1) TMI 792 - AT - Income Tax

Bogus purchases - CIT(A) deleted the addition accepting additional evidence - Held that - The ld. CIT(A) required the assessee to substantiate the purchases by proving through mode of delivery and transport receipts. He also required the assessee to furnish the stock register to examine, whether raw material purchased has been consumed or not. He also asked the assessee to produce bank statement to see whether any cash has been withdrawn after making the payment through cheque for the purchases made from these parties. On perusal and examination of these records, he found that, firstly no cash has been withdrawn from the bank account for making the cash payment to the alleged purchasers to show that it was for the purposes of accommodation entries; secondly, the purchase bills were duly supported by GR Nos. and mode of delivery and; lastly, stock register reflected the consumption of material bought by the assessee. On these three counts, correctly held that the purchases cannot be said to be non-genuine. Deletion of addition on account of bogus purchases by the ld. CIT(A) is factually correct and no interference is called for. - Decided against revenue. Regarding violation of Rule 46A as raised by the department, we are of the opinion that, if the first appellate authority in exercise of his powers has directed the assessee to produce any evidence, information or material not produced or considered by the AO, then there is no violation of Rule 46A. The Rule 46A provides that, when the assessee on its own file any additional evidence, then the ld. CIT(A) has to follow the provisions of the said Rule. There is no fetter on the powers of the first appellate authority to call for any fresh information or materials for adjudicating the lis before him. Thus, in this case, there is no violation of Rule 46A, as the additional evidences were filed on the direction of the ld. CIT(A). - Decided against revenue.

Summary

Issues involved:
1. Addition of Rs. 10,40,875/- made by AO on account of bogus purchases.
2. Acceptance of additional evidence by Ld. CIT(A) in contravention of Rule 46A.

Detailed Analysis:
1. The case involved the Revenue appealing against the order passed by the Ld. CIT(A)-17, Mumbai, under section 143(3) r.w.s.147 of the Income Tax Act, 1961 for the assessment year 2002-03. The AO treated purchases made by the assessee from certain parties as bogus, adding Rs. 10,40,875/- to the total income based on information received regarding accommodation bills issued by these parties. The Ld. CIT(A) required the assessee to provide evidence of the genuineness of purchases, including proof of delivery and transport receipts. The assessee furnished purchase bills, bank account copies, and stock register to substantiate the purchases for manufacturing designer ladies handbags. The Ld. CIT(A) found that the purchases were genuine as evidenced by the documents provided and deleted the addition made by the AO.

2. The Revenue contended that the Ld. CIT(A) violated Rule 46A by accepting additional evidence without granting an opportunity to the AO to verify it. The assessee argued that the documents were produced as directed by the Ld. CIT(A) and did not constitute additional evidence under Rule 46A. The Tribunal found that the Ld. CIT(A) had the authority to request additional information for adjudication, and in this case, there was no violation of Rule 46A. The Tribunal upheld the Ld. CIT(A)'s decision to delete the addition, stating that the purchases were substantiated and genuine based on the evidence provided. The appeal of the Revenue was dismissed, affirming the Ld. CIT(A)'s order.

Overall, the Tribunal upheld the Ld. CIT(A)'s decision to delete the addition of Rs. 10,40,875/- as the purchases were found to be genuine based on the evidence provided by the assessee. The Tribunal also clarified that the Ld. CIT(A) did not violate Rule 46A by requesting additional evidence necessary for the adjudication of the case.