2018 (4) TMI 1180 - AT - Income Tax

Bogus transaction/bogus purchase - maintenance of books of accounts - not allowing the assessee to cross-examine the witness - Held that - The assessee under consideration is maintaining proper books of account including cash book, bank book, journal register, stock register and the assessing officer has failed to bring any cogent evidence on record to establish that the purchases made from M/s Sparsh Exports Pvt. Ltd. is not properly recorded in the books of the assessee. The addition made by the Assessing Officer was purely based on the guess work and conjectures, which is not justifiable. Also not allowing the assessee to cross-examine the witness by the adjudicating authority, though the statement of those witness were made, the basis of the impugned order, is a serious flaw of law which makes the order nullity. - Decided in favour of assessee

Summary

Issues:
Assessment of bogus transaction/bogus purchase.

Analysis:
The appeal pertains to Assessment Year 2008-09 and challenges an order by the Commissioner of Income Tax(Appeals) regarding purchases made by the assessee. The assessee contended that the purchases were not bogus transactions. The Assessing Officer treated a purchase of ?9,36,314 as bogus and added an unaccounted expenditure of ?11,37,412 to the income of the assessee. The Commissioner directed the Assessing Officer to locate the person associated with the entry and take necessary action. The assessee argued that the purchases were legitimate, supported by invoices, payment details, and confirmation from the supplier. The Assessing Officer failed to provide evidence prior to the statement recorded by the Investigation Wing. The assessee was not given an opportunity to cross-examine the supplier. The Tribunal noted discrepancies in the Assessing Officer's approach, emphasizing the lack of concrete evidence to support the bogus purchase claim.

The Tribunal observed that the Assessing Officer relied solely on a statement from the supplier without corroborating evidence. The Tribunal highlighted that the Assessing Officer did not establish the unexplained expenditure adequately. The Tribunal noted that the assessee maintained proper books of accounts, including stock registers, and the Assessing Officer failed to examine these records. The Tribunal emphasized the importance of allowing the assessee to cross-examine witnesses, citing a Supreme Court judgment. Ultimately, the Tribunal found the addition made by the Assessing Officer to be unjustified and deleted the amount from the assessee's income. The appeal was allowed in favor of the assessee.

In conclusion, the Tribunal's decision focused on the lack of substantial evidence supporting the Assessing Officer's claim of a bogus purchase. The Tribunal emphasized the importance of proper examination of records and the opportunity for cross-examination. The Tribunal's ruling highlighted the need for concrete evidence before making additions to the assessee's income, ultimately leading to the deletion of the disputed amount from the assessment.