2019 (6) TMI 1643 - AT - Income Tax

Addition u/s 68 - unexplained purchases - HELD THAT - As two of the parties have denied making any sales to the assessee. No entries of such sales have been recorded in the books of account. Two parties have admitted to have made sales to the assessee and filed reply under section 133(6) of the I.T. Act, 1961, supported by bill and Affidavit, on which, no adverse inference have been drawn by the A.O. All the payments of purchases have been made through banking channel which have not been doubted by the authorities below. The assessee also filed the quantitative details of opening stock, purchase goods, manufacture, sales made and closing stock which also supports the explanation of assessee that he has made genuine purchases which have been sold later on. These facts clearly show that there was no basis for the authorities below to consider it to be a case of bogus purchases. It is also an admitted fact that statement of Shri Rajendra Jain was not provided to assessee nor statement was subjected to cross-examination on behalf of the assessee. He has also retracted from his earlier statement. Therefore, there was no basis to make any addition against the assessee. The issue is, therefore, covered by the Order of ITAT, Delhi SMCBench in the case of same assessee for the A.Y. 2011-2012 2019 (4) TMI 1112 - ITAT DELHI . In view of the above, we set aside the Orders of the authorities below and delete the entire addition. - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of the assessment.
2. Addition under section 68 of the I.T. Act, 1961, on account of unexplained purchases.

Issue-Wise Detailed Analysis:

1. Reopening of the Assessment:
The Assessee did not press Ground Nos. 1 and 2 regarding the reopening of the assessment, and therefore, these grounds were dismissed as not pressed.

2. Addition under Section 68 of the I.T. Act, 1961:
On Ground Nos. 3 to 7, the assessee challenged the addition of ?52,63,386/- under section 68 on account of unexplained purchases. The facts of the case reveal that the assessee company filed a return declaring NIL income, and the case was reopened under section 148. The main issue involved was the alleged involvement of the assessee in transactions with entry providers, namely Shri Rajendra Jain, Shri Sanjay Choudhary, and Shri Dharminchand Jain, who were accused of providing accommodation entries in the nature of bogus sales and unsecured loans.

The A.O. noted that the assessee made purchases from these parties, and during the search, statements from Shri Rajendra Jain and Shri Surendra Jain admitted to providing accommodation entries to the assessee. The details of the transactions were as follows:

| S. No | Name of concern operated by Rajendra Jain Group | Name of the beneficiary company | Amount (Rs.) |
|------|-----------------------------------------------|---------------------------------|--------------|
| 1. | Arihant Exports [AFLPP5405N] | M/s. Bhatia Diamonds Pvt. Ltd. | ?20,63,326 |
| 2. | Karnawat Impex Pvt. Ltd. [AADCK1927A] | M/s. Bhatia Diamonds Pvt. Ltd. | ?5,60,930 |
| 3. | Kriya Impex Pvt. Ltd. [AADCK1926B] | M/s. Bhatia Diamonds Pvt. Ltd. | ?6,37,882 |
| 4. | AVI Exports [ABIPJ5587A] | M/s. Bhatia Diamonds Pvt. Ltd. | ?20,01,248 |
| | | Total | ?52,63,386 |

The A.O. concluded that the assessee introduced undisclosed income of ?52,63,386/- through these transactions. The assessee contended that purchases were made only from Arihant Exports and AVI Exports, and provided invoices and affidavits confirming the transactions. However, the A.O. noted that two other parties, Karnawat Impex Pvt. Ltd. and Kriya Impex Pvt. Ltd., denied any transactions with the assessee. The A.O. also noted that Shri Rajendra Jain retracted his statement, but rejected the assessee's claim of genuine purchases and made the addition under section 68.

The Tribunal considered the submissions and noted that in a similar case for A.Y. 2011-2012, the ITAT, Delhi SMC-Bench, had deleted a similar addition. The Tribunal observed that the statement of Shri Rajendra Jain was not provided to the assessee for cross-examination, and he had retracted his statement. The Tribunal also noted that the payments for purchases were made through banking channels, and the parties confirmed the transactions. The Tribunal found that there was no basis for the authorities to consider the purchases as bogus and deleted the entire addition.

Conclusion:
The Tribunal set aside the orders of the authorities below and deleted the addition of ?52,63,386/- under section 68, allowing the appeal of the assessee. The decision was pronounced in the open court.