2019 (12) TMI 817 - AT - Income Tax

Unexplained investments u/s 69 - HELD THAT - Revenue had not been able to place on record any material which could dislodge or disprove the aforesaid claim of the assessee, and therein prove to the contrary that the aforesaid amounts were actually paid by the assessee. Rather, we are also persuaded to subscribe to the reasoning given by the assessee for the failure on its part to make the aforesaid payments. It is the claim of the assessee that as it was passing through a financial crisis, and also there were certain internal disputes amongst the directors of the assessee company, therefore, the purchase transaction of the aforesaid land at Village Mundwa, Pune, which was proposed to be acquired for setting up a residential-cum-commercial project had came to a standstill. The aforesaid claim of the assessee is also supported by the fact that an amount of ₹ 2,00,00,000/- had thereafter been received back by the assessee company from the aforementioned persons i.e S/sh. Avinash Bhosale Amit Bhosale on 05.03.2013. In the backdrop of the aforesaid facts, we are of the considered view, that the CIT(A) after duly appreciating the facts of the case had by way of a very well reasoned order vacated the addition - Decided in favour of assessee. Bogus purchases - disallowance @12.5% of the aggregate value of impugned purchases - HELD THAT - Neither the assessee had been able to substantiate the genuineness of the purchase transactions on the basis of any irrefutable documentary evidence, nor the revenue has carried out the required extensive verifications for arriving at a fair conclusion as regards the genuineness of the purchase transactions. Accordingly, in all fairness, we set aside the order of the CIT(A) in context of the issue under consideration and restore the matter to the file of the A.O for carrying out necessary verifications. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate the genuineness of the impugned purchase transactions on the basis of fresh documentary evidence. Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Addition of ?9,50,00,000/- on account of unexplained investments under Section 69 of the Income Tax Act, 1961.
2. Treatment of entries found on loose paper during survey proceedings.
3. Addition of 12.5% of ?1,11,84,319/- on alleged unsubstantiated purchases.
4. Verification of the genuineness of purchase transactions from tainted dealers.

Detailed Analysis:

1. Addition of ?9,50,00,000/- on Account of Unexplained Investments:
The revenue challenged the deletion of the addition of ?9,50,00,000/- made by the Assessing Officer (A.O) under Section 69 of the Income Tax Act, 1961, based on entries found in a loose document during survey proceedings. The A.O inferred that the entries represented unaccounted payments. However, the CIT(A) deleted the addition, observing that the entries were proposed payments that were not actually made. The directors of the assessee company confirmed that the amounts were not paid due to land acquisition issues and internal disputes. The Tribunal upheld the CIT(A)'s order, noting the lack of corroborative evidence from the revenue and the consistent statements from the directors and third parties confirming that the payments were not made.

2. Treatment of Entries Found on Loose Paper:
The revenue contended that the CIT(A) erred in treating the entries found on loose paper differently. The CIT(A) accepted seven entries as actual payments made by the assessee but did not accept the remaining two entries as payments. The Tribunal found that the document was printed on 11.02.2013, making it illogical for a payment dated 28.02.2013 to be recorded. The Tribunal concluded that the entries referred to tentative payments that were not made, supported by the directors' statements and the lack of contrary evidence from the revenue.

3. Addition of 12.5% of ?1,11,84,319/- on Alleged Unsubstantiated Purchases:
The A.O disallowed 12.5% of the aggregate value of purchases amounting to ?8,94,74,548/- from two concerns, M/s Priya Exim Pvt. Ltd. and M/s Kotsons Impex Pvt. Ltd., based on information from the Sales Tax Department that these parties were providing accommodation entries. The CIT(A) upheld the disallowance, directing the A.O to verify the correct amount of purchases. The Tribunal found that the assessee substantiated the purchases with supporting documents and physical verification by the A.O's inspector. However, due to the peculiar nature of the transactions and the involvement of tainted parties, the Tribunal remanded the matter to the A.O for further verification, allowing the assessee to provide fresh evidence.

4. Verification of the Genuineness of Purchase Transactions:
The Tribunal noted that while the assessee provided substantial evidence, including bills, invoices, and physical verification, the revenue did not conduct extensive verification, such as summoning the actual suppliers or verifying from M/s Sources Unlimited. The Tribunal directed the A.O to carry out necessary verifications, allowing the assessee to substantiate the genuineness of the purchases with fresh evidence.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's cross-objection for statistical purposes, directing the A.O to conduct further verifications on the genuineness of the purchase transactions. The Tribunal upheld the CIT(A)'s deletion of the addition of ?9,50,00,000/- but remanded the issue of the 12.5% disallowance for further verification.

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