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2018 (11) TMI 1655 - AT - Income TaxBogus purchases - addition on the basis of the statement recorded by the third party statement - CIT-A deleted the additional evidence - HELD THAT - In the instant case the purchases claimed by the assessee were not admitted by the AO on the ground that the notices issued u/s 133(6) of the Act remained un-served. Besides the AO also observed that there was a search by the VAT Department of Mumbai in respect of the parties as discussed above wherein it was admitted by the parties that they were engaged in providing accommodation entries to the parties. In this regard we note that there was no material available with the Revenue other than the statement of the parties as discussed above evidencing that the assessee has made bogus purchases from the aforesaid parties. There was also no whisper and iota of evidence that the payment made in connection with the bogus purchases has come back to the assessee. There was also no allegation that the assessee has made purchases and sales outside the books of accounts. No addition can be made merely on the basis of the statement recorded by the third party statement i.e. Sales Tax Department of Mumbai in the case before us. We also note that the ld. DR at the time of hearing has not brought anything on record suggesting that the CIT(A) has admitted any additional documents in contravention to the provision of Rule 46A of the Income Tax Rule. - Decided in favour of assessee.
Issues Involved:
1. Acceptance of bogus purchases. 2. Deletion of addition made on account of bogus purchases amounting to ?66,76,411/-. 3. Admission of fresh evidence without allowing the Assessing Officer (AO) to examine it as required under Rule 46A. Issue-wise Detailed Analysis: 1. Acceptance of Bogus Purchases: The Revenue contended that the CIT(A) erred in law and on facts by accepting the bogus purchase entries in the assessee's books which could not be verified during the assessment proceedings. The AO had issued notices under Section 133(6) of the Income Tax Act to verify the genuineness of the purchases, but these notices were returned with the postal remark "not known." Additionally, the AO relied on statements from the Sales Tax Department, Mumbai, where parties admitted to providing accommodation entries and charging a fee for such services. Consequently, the AO concluded that the purchases were bogus and added ?66,76,237/- to the total income of the assessee. 2. Deletion of Addition Made on Account of Bogus Purchases: The CIT(A) deleted the addition made by the AO, observing that the assessee had submitted various documents to support the genuineness of the transactions, including VAT returns, cheques, bank statements, and confirmations from the parties involved. The CIT(A) noted that the assessee's total purchases were ?1,44,80,582/-, of which ?66,76,237/- were considered non-genuine by the AO. The CIT(A) found it implausible that 47% of the total purchases were non-genuine, especially when the sales were not disputed and substantial sales were made to reputed concerns. The CIT(A) also pointed out that the payments were made through account payee cheques, and there was no evidence to suggest that the assessee received back the amount in cash. Furthermore, the statements from the Sales Tax Department were general and did not specifically implicate the assessee. The CIT(A) concluded that the assessee had discharged his onus to prove the genuineness of the transactions, leading to the deletion of the addition. 3. Admission of Fresh Evidence Without Allowing AO to Examine It: The Revenue argued that the CIT(A) entertained fresh evidence without allowing the AO to examine it, as required under Rule 46A. However, the Tribunal noted that the CIT(A) had considered the documents submitted by the assessee during the assessment proceedings, including VAT returns, cheques, bank statements, and confirmations from the parties. The Tribunal also observed that the Revenue did not provide any material evidence to counter the assessee's submissions or to prove that the CIT(A) had admitted any additional documents in contravention of Rule 46A. Tribunal's Conclusion: The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO, emphasizing that no addition can be made merely based on third-party statements from the Sales Tax Department without corroborative evidence. The Tribunal also referred to various judicial precedents where similar additions were deleted due to lack of concrete evidence. The Tribunal dismissed the Revenue's appeal, finding no infirmity in the CIT(A)'s order. Final Order: The appeal of the Revenue was dismissed, and the order pronounced in the Court on 01st November 2018 at Ahmedabad.
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