2016 (7) TMI 682 - AT - Income Tax

Non- genuine purchases - Held that - Enough documentary evidences by way of purchase bills, sales bills, ledger copies of suppliers, etc., along with the fact that payments were made through cheque has been brought on record by the assessee to demonstrate that purchases made from the concerned suppliers are genuine. In addition, it is a fact on record that not only the entire purchase transaction has been reflected in the assessee s books of account but the sales effected by the concerned suppliers are also recorded in their books of account which were submitted before the Assessing Officer as well as the first appellate authority. Moreover, all the suppliers are identifiable persons with permanent account numbers and are assessed to Income-tax regularly. There is no material before us to show that sales effected by these persons have been held to be non-genuine at their hands in any Income-tax assessment proceedings. Thus, when the sales effected by the suppliers are accepted in their hands, the purchases made from them by the assessee cannot be held to be non- genuine. In these circumstances, as the Department has failed to bring any substantive evidence/material to controvert the findings of the learned Commissioner (Appeals), we are not in a position to disturb the order of the learned Commissioner (Appeals). - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of addition under section 68 of the Income-tax Act, 1961.
2. Genuineness of purchases made by the assessee.
3. Verification of share application money.

Detailed Analysis:

1. Deletion of Addition under Section 68 of the Income-tax Act, 1961:
The primary issue in the appeal was the deletion of an addition of Rs. 118.64 crores made by the Assessing Officer (AO) under section 68 of the Income-tax Act, 1961. The AO had treated the purchases made by the assessee as bogus and added the amount to the income of the assessee. The Commissioner of Income-tax (Appeals) [CIT(A)] found that the AO had not doubted the sales turnover of the assessee and that the purchases were supported by proper bills and reflected in the books of account of both the assessee and the suppliers, which were audited. The CIT(A) concluded that the identity of the share applicants was established, and no addition could be made under section 68, relying on the Supreme Court decision in CIT v. Lovely Exports P. Ltd. The Tribunal upheld the CIT(A)'s order, noting that the Department had not provided any substantive evidence to dispute the findings.

2. Genuineness of Purchases Made by the Assessee:
The AO had disallowed the entire purchases of goods worth Rs. 118.64 crores, alleging that the purchases were bogus and the parties were providing accommodation bills. The assessee argued that the purchases and sales were reflected in the books of account and supported by proper bills. The CIT(A) found that the suppliers had confirmed the sales to the assessee and that the transactions were reflected in their audited books of account. The Tribunal noted that the suppliers had appeared before the AO, confirmed the transactions, and provided documentary evidence. The Tribunal held that the Department had not provided any material to prove that the purchases were non-genuine and upheld the CIT(A)'s order.

3. Verification of Share Application Money:
The AO had conducted an enquiry by issuing notices under section 133(6) to the concerned parties to verify the authenticity of the share application money. The notices issued to some parties were returned unserved, but the parties later filed submissions with new addresses. The other parties responded to the notices and accepted the transactions. The AO found that some parties had converted balances to share application money through journal entries. The CIT(A) found that the share application money was supported by proper bills and reflected in the books of account. The Tribunal noted that the suppliers had confirmed the transactions and provided documentary evidence, and upheld the CIT(A)'s order.

Conclusion:
The Tribunal dismissed the Department's appeal, upholding the CIT(A)'s order that deleted the addition made by the AO under section 68 of the Income-tax Act, 1961. The Tribunal found that the Department had not provided any substantive evidence to dispute the findings of the CIT(A) regarding the genuineness of the purchases and the verification of the share application money. The Tribunal also noted that the suppliers had confirmed the transactions and provided documentary evidence, and that the transactions were reflected in the audited books of account of both the assessee and the suppliers.