2019 (11) TMI 94 - AT - Income Tax

Bogus purchases - Revenue Authority is of the view that assessee could not give any plausible explanation with the support of evidences for this transaction - HELD THAT - Assessee has not discharged the onus which was casted upon him by making a necessary investigation in the case Kamud Drugs Pvt. Ltd. by the Investigation Wing, Pune. After discussing the evidence, collected by the Investigation wing and the finding of the Ld. AO the Ld. First Appellate Authority has uphold the addition by holding that it is a bogus purchase claim to have been made from Shri Abhijeet Kunduskar (HUF). Ld. First Appellate Authority has also applied the ratio of the case Durga Prasad 1971 (8) TMI 17 - SUPREME COURT as held that surrounding circumstances and human probabilities should not be ignored by the Taxing Authorities. The Ld. First Appellate Authority has also applied the ratio of decision of Sumati Dayal 1995 (3) TMI 3 - SUPREME COURT has again given the importance of human probability and considering the surrounding circumstances. Order passed by the Revenue Authority along with the documentary evidence filed by the assessee in the shape of Paper Book and the case law. These are not applicable in the facts and circumstances of the present case. First Appellate Authority has passed a well reasoned order which needs no interference. Therefore, the present appeal filed by the assessee is dismissed.

Summary

Issues involved:
1. Addition of ?17,63,065 on account of bogus purchases.

Detailed Analysis:
1. The appellant challenged the addition of ?17,63,065 as bogus purchases, arguing that the CIT(A) merely upheld the decision without considering genuine supporting evidence. The appellant contended that the addition should be deleted. The appellant presented various documentary evidences to substantiate their claim, and the Counsel highlighted case law summaries to support the appellant's position.

2. The Assessing Officer (AO) initiated scrutiny proceedings after the appellant filed their return declaring income of ?4,16,170 for the assessment year 2009-10. The AO selected the case for scrutiny based on a report received against the Tax Evasion Petition (TEP). The AO found discrepancies related to transactions involving the sale of old gold ornaments by a third party to the appellant, raising suspicions of bogus purchases.

3. The AO detailed the background of the case, linking it to a larger investigation involving drug trafficking activities. The AO raised concerns about the authenticity of the transactions, given the negligible net profits declared by the jewelers involved, indicating potential accommodation entries. The AO also noted discrepancies in the turnover and net profit figures of the appellant and related parties.

4. The AO forwarded the case for further investigation and issued notices to the appellant regarding the alleged bogus purchases. The appellant failed to provide satisfactory explanations or evidence to refute the allegations. The AO proceeded to make the addition of ?17,63,065 to the appellant's total income, treating it as expenses on account of bogus purchases.

5. The First Appellate Authority upheld the AO's decision after considering the documentary evidence and submissions made by the appellant. The Authority found that the appellant failed to provide a plausible explanation for the transactions and did not meet the burden of proof. Citing relevant case law, the Authority emphasized the importance of considering surrounding circumstances and human probabilities in such cases.

6. The Authority concluded that the AO's order was well-reasoned and warranted no interference. Consequently, the appeal filed by the appellant was dismissed, affirming the addition of ?17,63,065 as income from undisclosed sources due to bogus purchases.

This detailed analysis outlines the progression of events leading to the dispute over the addition of ?17,63,065 on account of alleged bogus purchases, culminating in the dismissal of the appellant's appeal by the First Appellate Authority.