2018 (10) TMI 1292 - AT - Income Tax

Reopening of assessment - Disallowance of 12.5% of bogus purchase - reasons to believe - Held that - Credible and cogent information was received in this case by the assessing officer that certain accommodation entry provider/bogus suppliers were being used by certain parties to obtained bogus bills. The assessee was found to have taken accommodation entry/bogus purchase bills during the concerned assessment year from different parties. Based upon this information assessment was reopened. The credibility of information relating to reopening remains un-assailed. In such factual scenario, AO has made the necessary enquiry. The issue of notice to the party has returned unserved. Assessee has not been able to provide any confirmation from any of the party. Assessee has also not been able to produce any of the party. Necessary evidence relating to transportation of the goods was also not on record. In this factual scenario, it is amply clear that the assessee has obtained bogus purchase bills. Mere preparation of documents for purchases cannot controvert overwhelming evidence that the provider of these bills is bogus and non-existent. The Sales Tax Department in its enquiry has found the parties to be providing bogus accommodation entries. The assessing officer also issued notices to these parties at the addresses provided by the assessee. All these notices have returned unserved. Assessee has not been able to produce any of the parties. Neither the assessee has been able to produce any confirmation from these parties. There is no doubt that these parties are non-existent. We find it further strange that assessee wants the Revenue to produce assessee s own vendors, whom the assessee could not produce. The purchase bills from these non-existent/bogus parties cannot be taken as cogent evidence of purchases. In light of the overwhelming evidence, the Revenue authorities cannot put upon blinkers and accept these purchases as genuine. - Decided against assessee.

Summary

Issues:
- Disallowance of 12.5% of bogus purchase amount for multiple assessment years.

Analysis:
The case involved an appeal against the disallowance of 12.5% of bogus purchases made by the assessee for three consecutive assessment years. The Assessing Officer (AO) had received information that the appellant had obtained accommodation bills of purchases from bogus Hawala Dealers. Despite the assessee providing details and claiming payments were made through banking channels, the AO's attempts to verify the purchases were unsuccessful. The AO, relying on case laws, concluded that the purchases were not genuine and disallowed 25% of the amount. The Commissioner of Income Tax (Appeals) restricted the disallowance to 12.5%. The ITAT upheld the decision of the CIT(A) based on overwhelming evidence that the suppliers were non-existent and the purchases were bogus. The ITAT emphasized that the documents provided by the assessee could not override the evidence of non-existent suppliers.

The ITAT referred to various legal precedents, including the Supreme Court decision in Sumati Dayal vs. CIT and CIT vs. Durga Prasad More, to support its conclusion that purchases from non-existent parties cannot be considered genuine. The ITAT also noted a jurisdictional High Court decision where 100% allowance for bogus purchases was upheld, but clarified that the facts of that case were different. Additionally, the ITAT cited a Gujarat High Court decision where 100% disallowance of bogus purchases was deemed necessary. The ITAT highlighted a Rajasthan High Court case that emphasized adherence to the principles established by the Supreme Court in similar matters.

Ultimately, the ITAT dismissed the appeal filed by the assessee, affirming the decision of the CIT(A) to restrict the disallowance to 12.5% of the bogus purchases. The ITAT concluded that it was inappropriate to reconsider the relief already granted by the lower authorities to the assessee, as it was not an appeal by the Revenue.