2016 (2) TMI 504 - AT - Income Tax

Bogus purchases - Held that - FAA had raised certain objections like supply of goods for a particular period, absence of delivery challans or impossibility of production of finished goods. But, he had not given reasons for arriving at such conclusions. The assessee had produced all the delivery challans along with the inward register. The suppliers of the raw material had specifically mentioned that delivery was made at the work place and that they did not charge transportation charges from the assessee. It is a fact that the goods manufactured by the assessee were supplied to parties who are in the field of transmission business. The AO/FAA have not made any enquiry with the recipient of the finished goods. In our opinion, the information received from sales tax was a good starting point for making further investigation, but it was not taken to the logical end. If the evidences produced by the assessee are vague against the conclusions drawn by the AO/ FAA it becomes clear that the assessee had discharged the burden cast upon it. Therefore, reversing the order of the FAA we decided the effective Ground of appeal in favour of the assessee

Summary

Issues involved:
Challenging disallowance of Rs. 1.47 Crores on grounds of bogus purchases from suppliers Sendoz Steel (SS) and Ronak Industries (RI).

Analysis:
1. The Assessing Officer (AO) added Rs. 1.47 Crores to the assessee's income, considering purchases from SS and RI as bogus based on information from Sales Tax Department, despite delivery challans and inward registers provided by the assessee.
2. The First Appellate Authority (FAA) upheld the addition, citing discrepancies in delivery details, time gaps in manufacturing, and lack of evidence for genuine purchases from SS and RI.
3. The Appellate Tribunal found the AO's reliance on Sales Tax Department's information insufficient, noting the lack of investigation into alleged bogus purchases and the credibility of suppliers. The Tribunal emphasized the documentary evidence provided by the assessee, overturning the FAA's decision.
4. Referring to a similar case, the Tribunal highlighted the need for thorough investigation beyond suspicions, such as examining bank accounts and goods transportation, to establish the genuineness of transactions. The Tribunal reversed the FAA's decision, ruling in favor of the assessee.

In conclusion, the Appellate Tribunal allowed the appeal, reversing the disallowance of Rs. 1.47 Crores, emphasizing the importance of comprehensive investigation and reliance on concrete evidence in determining the legitimacy of transactions.