2017 (6) TMI 9 - AT - Income Tax

Addition of bogus purchases - Held that - The quantitative tally of purchase and corresponding sale of goods alleged to be bogus is not available with exacting specification. The enquiry about the bonafide of the purchase is not established by the CIT(A). The assessee is apparently not interested in defending the appeal of the revenue and revert the allegations of the AO. Consequently, we consider it appropriate that matter be remitted back to the file of the CIT(A) for de-novo consideration of the entire facts in issue after ascertaining the consumption, stock sale qua the purchase under dispute. Accordingly the order of the CIT(A) is set aside in terms of directions noted above. The appeal of the revenue is allowed for statistical purpose.

Summary

Issues:
1. Bogus purchases and unexplained cash deposits in bank accounts for A.Y. 2008-09.
2. Addition of ?1,40,13,079 out of total addition of ?1,86,84,105 made on account of bogus purchases.
3. Deletion of addition of ?94,50,00 made on account of unexplained cash deposit in bank accounts.
4. Violation of principles of natural justice in serving notices and providing statements.
5. Confirmation of penalty under section 271(1)(c) for furnishing inaccurate particulars of income.

Analysis:
1. The case involved three connected appeals filed by the Revenue and the assessee against the order of the Commissioner of Income Tax(Appeals) for A.Y. 2008-09. The Revenue challenged the deletion of a significant portion of the addition made on account of bogus purchases and the deletion of the addition made on unexplained cash deposits in bank accounts. The Assessing Officer had found that the purchases made from M/s. Vishal Traders were bogus based on statements and lack of supporting evidence.

2. The Revenue's appeal focused on the CIT(A)'s decision to delete a substantial portion of the addition made on account of bogus purchases. The Assessing Officer had added ?1,86,84,105 as bogus purchases made from M/s. Vishal Traders. Despite multiple opportunities, the assessee failed to produce evidence to support the purchases. The Tribunal remitted the matter back to the CIT(A) for a fresh consideration of facts to ascertain the consumption, stock sale, and purchase correlation.

3. The assessee's appeal contested the addition of ?46,71,026 as bogus purchases and raised concerns about the violation of natural justice in serving notices. The CIT(A) confirmed the addition based on estimates and relied on a High Court decision related to a manufacturing unit, which the appellant argued was not applicable to their wholesale grain trading business. The Tribunal set aside the appeal for similar reasons as the Revenue's appeal.

4. The penalty appeal under section 271(1)(c) was also discussed, where the CIT(A) confirmed the penalty without satisfying the conditions precedent and without concrete evidence of inaccurate particulars of income. The Tribunal decided to decide the penalty appeal afresh by the CIT(A) since the quantum appeals had been set aside.

5. In conclusion, the Tribunal allowed the appeals filed by both the Revenue and the assessee for statistical purposes, setting aside the orders related to bogus purchases, unexplained cash deposits, and penalties, and remitting the matters back for fresh consideration.