2021 (4) TMI 1338 - AT - Income Tax

Bogus purchases - As per AO bills issued by three parties are computer-generated identical bills and in his opinion same were not genuine - assessee reiterated the same submission that those parties were registered with VAT and therefore, the assessee was not required to produce those parties before the AO and it is for the AO to find out their addresses either from the bank or from the Registrar of companies - HELD THAT - The fact of returned back of the notice u/s 133(6) and parties not found during verification by the Inspector were duly informed to the assessee, however, no attempt was made by the assessee to provide their current addresses to the Assessing Officer and the assessee only reiterated that those parties were duly registered with VAT and the AO might obtain their address from banks or Registrar of Companies. Despite specifically being asked to produce those parties for verification of their purchases, no attempt was made by the assessee to produce those parties. CIT(A) has also observed that no quantitative details of purchases and sales were provided by the assessee. In such circumstances, we are of the opinion that the purchases claimed by the assessee are not free from doubt. The assessee has to demonstrate sales corresponding to the purchases. In the case relied upon by the assessee, the sales were made to government department and thus sales were not doubted, but the instant case it has not been brought on record, whether the sales are made to the government Department or export sales. If the sales corresponding to the purchases are not demonstrated, then possibility of the entire purchases being doubtful cannot be denied. If the corresponding sales are demonstrated, then even if delivery of goods from purchase parties is not established, then possibility of purchase of goods in cash from another parties, cannot be denied. We are of the opinion that without reconciliation of purchases and corresponding sales with the help of the stock register, sustaining the disallowance of entire purchases is not justified. Therefore, we restore this issue back to the file of the Assessing Officer for deciding afresh with the direction to the assessee to file stock reconsideration statement along with relevant invoices of sales, documents in support of delivery of the goods from purchase parties. The assessee shall also produce relevant purchase parties along with their confirmation - AO may carry out inquiries as deemed fit - Appeal of assessee is allowed for statistical purposes.

Summary

Issues:
- Disallowance of purchases made by the assessee on account of alleged bogus purchases without pointing out any defect in the stock register and quantitative information furnished.
- Failure of the assessee to produce parties for verification and lack of genuine purchase bills.
- Dispute regarding the genuineness of purchases from specific parties.
- Lack of quantitative details of purchases and sales provided by the assessee.
- Discrepancies in addresses of purchase parties and failure to provide current addresses.
- Disagreement on sustaining the disallowance of purchases without corresponding sales being doubted.

Issue 1: Disallowance of Purchases

The Assessing Officer disallowed purchases amounting to Rs. 48,01,597 made by the assessee from specific parties, citing computer-generated identical bills as not genuine. Despite notices and verification attempts, the parties were not found at the provided addresses. The assessee failed to produce the parties for verification, only submitting purchase bills and ledger accounts. The CIT(A) observed the lack of quantitative details of purchases and sales. The Tribunal found the purchases not free from doubt, emphasizing the need to demonstrate corresponding sales. The case was restored to the Assessing Officer for fresh decision, directing the assessee to provide stock reconciliation statements and relevant invoices to reconcile purchases and sales.

Issue 2: Failure to Produce Parties for Verification

The assessee's argument that the parties were registered with VAT and should be verified by the authorities was not accepted by the Assessing Officer and CIT(A). Despite being asked to produce the parties, the assessee did not provide current addresses, shifting the onus to the authorities. The Tribunal emphasized the assessee's responsibility to cooperate in verifying purchases, leading to the decision to restore the issue for fresh assessment.

Issue 3: Dispute Over Genuineness of Purchases

Specific parties from whom purchases were made were questioned by the Assessing Officer due to discrepancies in addresses and lack of verification. The Inspector's report highlighted that some parties could not be located at the given addresses, raising doubts on the genuineness of purchases. The Tribunal noted the failure to provide concrete evidence of purchases' authenticity, leading to the decision for reassessment.

Issue 4: Lack of Quantitative Details Provided

The assessee did not furnish quantitative details of purchases and sales, which was crucial for verifying the transactions. The absence of this information raised doubts on the accuracy and legitimacy of the claimed purchases, contributing to the decision to remand the issue for further examination.

Issue 5: Disagreement on Disallowance Without Doubting Sales

The disagreement arose regarding sustaining the disallowance of purchases without questioning corresponding sales. The Tribunal emphasized the need to reconcile purchases and sales with the stock register to ensure accuracy and legitimacy. The lack of such reconciliation led to the decision to allow the appeal for statistical purposes and remand the issue for detailed assessment.

This comprehensive summary covers the key issues addressed in the legal judgment, providing a detailed analysis of each aspect involved in the case.