2016 (7) TMI 1506 - AT - Income Tax

Admitting of additional evidences under Rule 46D r.w.s. 250(4) by CIT-A - whether CIT-A has not given an opportunity to the Assessing Officer? - HELD THAT - We noted from the order of CIT(A) that in this case the assessee made the written submissions before the CIT(A) and the CIT(A) asked for the remand report of the Assessing Officer. The Assessing Officer has given the remand report dated 16/072014. The said remand report has been produced by the CIT(A) under para 6.1 page 13 of his order. In view of this fact, it is not the case where the CIT(A) has not given an opportunity to the Assessing Officer. We, therefore, dismiss ground No. 1 taken by the Revenue. Bogus purchases - quantitative reconciliation has been filed about the purchase and sales - tax on the real income - HELD THAT - This is a case where the AO has not rejected the books of account of the assessee. The assessee has submitted all the details of the purchases and the sales. All the quantitative details of purchase and sales were filed. The books were duly produced before the Assessing Officer which were not rejected. The sales has been accepted by the Assessing Officer during the year. It is also not denied that the purchases have been made by the assessee for the purpose of sales. If the sales has been accepted by the Assessing Officer and quantitative reconciliation has been filed about the purchase and sales, the assessee cannot make the sales without making the purchase. The Revenue has to levy the tax on the real income. The income has to be computed only by deducting out of the gross receipt the expenses incurred by the assessee including the purchases. The assessee has made purchases not only from M/s Annapurna Trading Co. but from 13 parties. None of the parties were held to be bogus. If the purchases are to be recorded to be bogus, the assessee, in our opinion, cannot make the sales. Without purchase being made, the sales cannot be made. This is not the case where the assessee has not given quantitative details in respect of purchase and sales and quantitative details are not tallied. In view of this fact, we do not find any infirmity or illegality in the order of CIT(A) in deleting the addition - Decided against revenue

Summary

Issues Involved:
1. Admission of additional evidence under Rule 46D r.w.s. 250(4) of the I.T. Act, 1961.
2. Relief of ?4,19,94,000/- on account of bogus purchases.

Issue-wise Detailed Analysis:

1. Admission of Additional Evidence:
The Revenue contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in admitting additional evidence under Rule 46D r.w.s. 250(4) of the I.T. Act, 1961. The Tribunal reviewed the submissions and noted that the CIT(A) had indeed asked for and received a remand report from the Assessing Officer (AO), which was included in the CIT(A)'s order. The Tribunal concluded that the AO had been given a reasonable opportunity to examine the additional evidence. Therefore, the Tribunal dismissed this ground, affirming that the CIT(A) had not violated procedural rules.

2. Relief of ?4,19,94,000/- on Account of Bogus Purchases:
The Revenue also challenged the CIT(A)'s decision to allow relief of ?4,19,94,000/- for alleged bogus purchases from M/s Annapurna Trading Co. The Tribunal examined the facts and found that the assessee, who runs a roller flour mill and a biscuit manufacturing unit, had shown purchases amounting to ?4,19,94,000/- from M/s Annapurna Trading Co. The AO had treated these purchases as bogus based on a statement from Shri Har Narain Gupta, proprietor of M/s Annapurna Trading Co., who admitted to issuing bills without actual sales.

The CIT(A), however, noted that the books of accounts of both the assessee and M/s Annapurna Trading Co. were not rejected by the respective AOs. The CIT(A) highlighted that the AO did not find any specific defects in the books of accounts, which were audited and produced multiple times. The CIT(A) also pointed out that the purchases were recorded in the stock register, payments were made by cheque, and sales were made to M/s Parle Biscuits Pvt. Ltd., also paid by cheque, thus excluding the possibility of cash transactions.

The CIT(A) referenced similar cases, including CIT v. M/s Nangalia Fabrics Pvt. and DCIT v. Rajeev G. Kolathil, where additions for unverifiable purchases were deleted when transactions were recorded, and payments were made by cheque. The Tribunal agreed with the CIT(A)'s detailed and comprehensive assessment, noting that the AO accepted the sales and quantitative reconciliation provided by the assessee. The Tribunal affirmed that without purchases, sales could not be made, and thus, the addition of ?4,19,94,000/- was unjustified.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's Cross Objection, confirming the CIT(A)'s decision to delete the addition of ?4,19,94,000/- for alleged bogus purchases. The order was pronounced in the open court on 27/07/2016.