2017 (8) TMI 741 - AT - Income Tax

Reopening of assessment - in-genuineness of purchases - reliance on the report given by the Sales Tax Department for reopening - proof of independent application of mind by AO - Held that - We noticed that the assessee has furnished all the evidences such as bills delivery challans lager account copy of the supplier payment details through bank quantitative details stock register sales invoice etc. in order to prove the genuineness of the purchases. Further we noticed that the supplier M/s. Trishul Enterprises through its agent Mr. Suresh A. Parekh has confirmed the factum of supply of materials to the assessee. Hence in our view that the assessee has sufficiently discharged its burden to prove the genuineness of the purchases. On the contrary we noticed that the Assessing Officer has simply placed reliance on the report given by the Sales Tax Department and he did not bring any material on record to disprove the claim of the assessee. - Decided against revenue.

Issues Involved:
1. Deletion of disallowance of alleged bogus purchases.
2. Reliance on the Sales Tax Department report.
3. Assessment of peak credit of purchases.
4. Evidence provided by the assessee regarding purchases.
5. Confirmation of supply by the suppliers.
6. Cross-examination of suppliers.
7. Genuineness of sales and purchases.
8. Application of judicial precedents.

Detailed Analysis:

1. Deletion of Disallowance of Alleged Bogus Purchases:
The Revenue was aggrieved by the decision of the learned CIT(A) in deleting the disallowance of alleged bogus purchases made by the Assessing Officer (AO) for A.Ys. 2008-09 and 2009-10. The CIT(A) was convinced with the explanations and contentions of the assessee and accordingly deleted the addition in both years. The CIT(A) noted that the AO made the addition based on the Sales Tax Department's report, which treated certain dealers as bogus for not paying taxes and issuing sale bills. However, the assessee produced the concerned persons before the AO, who confirmed the sales to the assessee. The CIT(A) found no reason to treat the purchases as bogus since there was a quantitative tally of stock, purchases, and sales, and all payments were made through banking channels.

2. Reliance on the Sales Tax Department Report:
The AO placed reliance solely on the report given by the Sales Tax Department, which reported that certain dealers, including M/s. Trishul Enterprises, were providing accommodation entries without actually supplying the material. The CIT(A) and the Tribunal found this reliance insufficient, as the assessee had produced evidence and confirmation from the suppliers about the genuineness of the transactions.

3. Assessment of Peak Credit of Purchases:
The AO proposed to assess the peak credit of the purchases, working out the peak credit for A.Y. 2009-10 at ?2,87,96,789/- and for A.Y. 2008-09 at ?1,83,70,101/-. The AO also added 1% of the peak credit addition as charges incurred by the assessee in procuring accommodation bills. The CIT(A) and the Tribunal found this approach unfounded and baseless, as there was no evidence that payments were received back in cash by the assessee.

4. Evidence Provided by the Assessee Regarding Purchases:
The assessee furnished all necessary details, including bills, vouchers, transport bills, delivery challans, octroi paid details, evidence for consumption of these items, and payments made through banking channels. The Tribunal noted that the assessee had sufficiently discharged its burden of proving the genuineness of the purchases.

5. Confirmation of Supply by the Suppliers:
The suppliers, including M/s. Trishul Enterprises through its agent Mr. Suresh A. Parekh, confirmed the factum of supply of materials to the assessee. The Tribunal found this confirmation crucial in establishing the genuineness of the purchases.

6. Cross-examination of Suppliers:
The AO provided an opportunity to the assessee to cross-examine the supplier, but the assessee did not avail the opportunity. The Tribunal noted that the necessity of cross-examining the supplier did not arise since the suppliers had already confirmed the transactions.

7. Genuineness of Sales and Purchases:
The Tribunal observed that the AO did not disbelieve the genuineness of the sales made by the assessee. The Tribunal found it illogical to question the purchases when the sales were not disputed, especially when there was a quantitative tally of stock, purchases, and sales.

8. Application of Judicial Precedents:
The Tribunal referred to the case of Videocon Industries Ltd. Vs. DCIT, where similar issues were considered, and the Tribunal had deleted the addition holding that no adverse inference qua purchases can be made. The Tribunal found the facts of the present case identical to the Videocon case, except that in the latter, the materials were consumed, whereas, in the instant case, they were sold.

In conclusion, the Tribunal upheld the orders passed by the CIT(A) and dismissed the appeals of the Revenue, finding no reason to deviate from the findings that the purchases were genuine and the additions made by the AO were not tenable either factually or legally.

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