2015 (8) TMI 375 - HC - Income Tax

Bogus purchases - ITAT deleted the addition concluding that the sugar purchased had been duly recorded in the books of accounts, which are duly audited; there is nothing on record to show that the purchases had been made outside the regular books of accounts - Held that - Once the delivery of the sugar was taken over on as is where is basis at the godowns itself by taking the same on rent with the consent of the landlord and it has been noticed that the Manager s statement was recorded twice and he got confused as to the factum whether the same was lying vacant or in possession for the purpose other than specified which was wrongly interpreted by the Assessing Officer. It was rightly noticed that a letter had been written on 22.9.2009 by the assessee that the sugar had already been sold to various parties and a complete list of the parties had been given to the Deputy Commissioner/Deputy Magistrate on 1.10.2009. Once the said parties had confirmed the purchase which had been duly supported by the bills and they were regular traders and were unrelated to each other, therefore, the allegation made was held to be without any basis. The said findings pertaining to the goods lying at the spot and whether the purchases had been made on credit basis and thereafter sold are all questions of facts which are now being raised, which have been extensively dealt with in detail by the Tribunal. The findings have been recorded that the sellers and purchasers are all dealing in sugar and the purchases had been accounted for in the regular books of accounts maintained, duly audited and thus, there is nothing to show that the quantity of sugar had been purchased and sold outside the books. Merely because the assessee was being prosecuted for keeping the sugar beyond the permissible limit and was trading in the same by sale and purchase on as is where is basis and as per his own case on credit could not entitle the Assessing Officer to add the value of the sugar to his undisclosed income which was done on the basis of conjectures. The said finding has been rightly reversed by the Tribunal after going into the factual matrix of the case which in the facts and circumstances cannot be held to be perverse and no substantial question of law arises for consideration in our opinion. - Decided against revenue.

Summary

Issues:
1. Addition of income by the Revenue
2. Questions of law raised by the Revenue

Analysis:
1. The appeal filed by the Revenue challenged the deletion of additions made to the assessee's income amounting to Rs. 2,64,95,897 by the Income Tax Appellate Tribunal. The Tribunal found that the sugar purchases were duly recorded in the audited books of accounts, with no evidence of purchases made outside the regular books. Absence of rejection of account books and adverse material led to the conclusion that the income addition was unjustified.

2. The substantial questions of law raised by the Revenue included considerations on the authenticity of credit purchases and sales, relevance of previous court decisions, the timing and motive behind the transactions post-seizure, discrepancies in the assessee's statements to the Food & Civil Supplies Department, the nature of transactions without actual payments, and the acceptance of account books by the Department among other issues.

3. The respondent-assessee, a trading business proprietor, faced a raid on their godown leading to the discovery of a large quantity of sugar, subsequent sealing by the Food & Civil Supplies Department, and a criminal case. The assessment year 2010-11 saw the initiation of proceedings based on the raid information, with the assessee declaring taxable income of Rs. 1,36,79,960.

4. The assessee claimed to have purchased sugar from multiple parties before the raid, with pending sales to other parties, though no payments were made or sugar lifted. The Assessing Officer disbelieved the credit purchase claim, leading to an addition of Rs. 26,64,68,073 to the assessment order.

5. The appeal against the assessment was dismissed, citing discrepancies in the statements made by the assessee and the godown owner, leading to the rejection of profits and addition of unexplained investment amount.

6. The Tribunal overturned the previous decisions, considering the documented purchases from registered traders, confirmed sales, VAT returns, rent agreements, and ledger accounts. The lack of bills shown to the raiding party was deemed irrelevant to the issue at hand.

7. Detailed examination by the Tribunal revealed facts supporting the legitimacy of transactions, including the delivery of sugar at the godowns, confusion in statements, and the submission of a list of parties confirming purchases. Allegations were deemed baseless.

8. The Tribunal's findings emphasized the proper accounting of purchases and sales in audited books, refuting the addition of sugar value to undisclosed income based on conjectures. The Tribunal's decision was upheld, dismissing the appeal with no substantial legal questions identified.

9. The dismissal of the appeal concluded that no substantial questions of law warranted further consideration, affirming the Tribunal's detailed analysis and decision.