2017 (7) TMI 1431 - AT - Income Tax

Bogus purchases - Addition of hawala purchases - HELD THAT - In the facts of the case, the assessee had tried to meet the case of AO and hence, the onus shifted upon the AO to disprove the claim of assessee. AO has failed to discharge the onus in this regard. AO has failed to complete the investigation in the case. In view of the affidavits / confirmation letters filed by the assessee, no further enquiries were made in the present set of facts. In the absence of the same and where the assessee has tried to built upon its case and has also shown the trail of goods i.e. as against the booking of sales, it had made the purchases and in this regard has complete quantitative records available with him, then the onus cast upon the assessee stands discharged once the same is produced before the authorities below. Where the assessee has discharged the onus of proving the factum of making purchases from the respective parties by way of filing affidavits and also establishing the trail of goods, in turn, relying on the stock details maintained by him, there is no merit in holding the said purchases to be bogus. The statements of bogus suppliers were relied upon without giving an opportunity to cross-examine the said parties to the assessee. It is case of trader, where admittedly, the assessee was engaged in the sale of industrial oil and only against the confirmed orders, it was making said purchases; then the assessee has discharged the onus cast upon him and in the absence of any contrary evidence being brought on record, mere reliance on the investigation carried out by the Sales Tax Department does not warrant any addition in the hands of assessee. Accordingly, we hold so. Thus, we direct the AO to delete the addition on account of bogus purchases. The grounds of appeal raised by the assessee are thus, allowed and the grounds of appeal raised by the Revenue are dismissed.

Summary

Issues Involved:
1. Addition on account of alleged hawala purchases.
2. Gross Profit rate estimation on alleged hawala purchases.
3. Genuineness of purchases supported by documentary evidence and affidavits.
4. Onus of proving the genuineness of purchases.
5. Acceptance of affidavits from suppliers.
6. Deletion of addition by CIT(A) and justification thereof.

Detailed Analysis:

1. Addition on Account of Alleged Hawala Purchases:
The primary issue was the addition made by the Assessing Officer (AO) based on information from the Maharashtra Sales Tax Department, which identified the assessee as a beneficiary of bogus purchase bills totaling Rs.2,45,93,371/-. The AO made this addition due to the inability of the assessee to produce the suppliers and the returned letters from postal authorities marked as 'Left/Refused/Not Known.'

2. Gross Profit Rate Estimation on Alleged Hawala Purchases:
The CIT(A) partly confirmed the disallowance by estimating the Gross Profit (GP) rate at 5% on the alleged hawala purchases, as opposed to the 0.69% declared by the assessee. This resulted in an addition of Rs.10,59,974/-.

3. Genuineness of Purchases Supported by Documentary Evidence and Affidavits:
The assessee argued that the purchases were genuine, supported by documentary evidence, and affidavits from suppliers stating that sales were genuine and the Sales Tax Department had obtained their statements under duress. The CIT(A) noted that the AO did not dispute the sales, suggesting that the issue could be one of inflated purchases rather than bogus purchases.

4. Onus of Proving the Genuineness of Purchases:
The Revenue contended that the onus was on the assessee to verify the purchases, especially given their substantial amount. However, the Tribunal held that the onus shifted to the AO once the assessee provided affidavits and documentary evidence. The AO failed to disprove the assessee's claims or complete the investigation adequately.

5. Acceptance of Affidavits from Suppliers:
The Tribunal noted that the affidavits from suppliers, which were not contradicted by the AO, supported the assessee's claim of genuine purchases. The Tribunal emphasized that the AO did not allow cross-examination of the suppliers, which weakened the Revenue's case.

6. Deletion of Addition by CIT(A) and Justification Thereof:
The CIT(A) deleted the addition of Rs.2.45 crores, concluding that the purchases were genuine and only the GP rate should be adjusted. The Tribunal upheld this decision, directing the AO to delete the addition on account of bogus purchases, as the assessee had discharged its onus by providing affidavits and maintaining stock records.

Conclusion:
The Tribunal allowed the appeals of the assessee and dismissed the appeals of the Revenue. The Tribunal directed the AO to delete the addition on account of bogus purchases, emphasizing that the assessee had provided sufficient evidence to prove the genuineness of the purchases, and the AO failed to disprove these claims. The Tribunal's decision applied to all related appeals for the assessment years 2009-10 to 2011-12.