2017 (4) TMI 653 - AT - Income Tax

Trading addition on account of bogus purchase - Held that - CIT(A) while confirming the disallowance has stated that though confirmation has been obtained from the party however a simple confirmation is not sufficient to establish the fact of purchase without elaborating what more is required from the assessee to justify its claim. Regarding non appearance of the supplier the assessee has submitted that the supplier was based in Delhi and he has denied coming to Jaipur but at the same time he has sent its requisite confirmation directly to the department by the registered post. Further the amount outstanding against the said purchases has been paid by account payee cheque in April and May 2015 and now there is no outstanding amount against the said supplier. Regarding the other details submitted by the assessee namely copy of Ledger amount and purchase bill of M/s Mahaveer Textiles copy of the confirmation of the amount sent by M/s Mahaveer Textile Mills to the department and the fact that the materials so purchased form part of the turnover and which has been exported there is no finding by the Assessing Officer as to reasons for nonacceptance of the said documents and in absence of that the stand taken by the Revenue cannot be accepted. Merely non-appearance of the supplier in absence of any other corroborate evidence cannot be a basis to justify the stand of the Revenue that the transaction of purchase is bogus. In the result the purchases made from M/s Mahaveer Textiles have not been proved to be bogus by the Revenue and the said additions cannot be sustained in the eye of law in absence of any conclusive evidence brought on record. The ground of appeal taken by the assessee is thus allowed.

Summary

Issues:
1. Disallowance of trading addition on account of alleged bogus purchase from M/s Mahaveer Textiles.
2. Reopening of assessment proceedings for AY 2007-08 based on findings from AY 2008-09.

Issue 1: Disallowance of trading addition on account of alleged bogus purchase from M/s Mahaveer Textiles:
The Assessing Officer observed purchases amounting to ?13,39,969 from M/s Mahaveer Textiles Mills during AY 2007-08. The assessee failed to produce the supplier for verification, leading to the purchases being deemed non-genuine. The ld. CIT(A) upheld the disallowance citing lack of sufficient evidence from the appellant to support the claim. The appellant contended that the supplier sent a confirmation of account by registered post, but the AO did not receive it. The appellant's past history of additions for bogus purchases in AY 2008-09 raised doubts. However, the appellant argued that payments were made to the supplier in 2015, and exports supported the transactions. The ITAT Jaipur bench's past decisions and case laws were cited to support the genuineness of purchases. The Tribunal held that the Revenue failed to provide conclusive evidence to prove the purchases as bogus, thus allowing the appeal and rejecting the disallowance.

Issue 2: Reopening of assessment proceedings for AY 2007-08 based on findings from AY 2008-09:
The assessment proceedings for AY 2007-08 were reopened after the disallowance in AY 2008-09. The AO relied on findings from the previous year to treat the transactions with M/s Mahaveer Textiles as bogus. However, the Tribunal noted that no concrete evidence was presented during the assessment or reassessment proceedings to support the claim of bogus purchases. The AO's reliance on non-appearance of the supplier and lack of payments was deemed insufficient to justify the disallowance. The Tribunal emphasized the lack of conclusive evidence and accepted the appellant's submissions regarding payments made and export turnover. Consequently, the Tribunal allowed the appeal, ruling in favor of the assessee and rejecting the disallowance of the purchases from M/s Mahaveer Textiles.

In conclusion, the Tribunal set aside the disallowance of purchases from M/s Mahaveer Textiles, emphasizing the lack of concrete evidence to prove the transactions as bogus. The Tribunal's decision highlighted the importance of providing substantial evidence to support claims and rejected the Revenue's stance based on insufficient grounds.