2020 (10) TMI 509 - AT - Income Tax

Bogus purchases - proof of existence or genuineness of the alleged sellers as long as purchases are recorded in the books and payments of purchase and brokerage have been made through cheques - addition made on the basis of survey conducted by the DGIT (Inv) u/s 133A on one Shri Sanjay Chaudhary and his concerns namely M/s Mayank Impex and M/s Nazar Impex (P) Ltd. - HELD THAT - On the issue of purchase diamonds from bogus concerns, we agree with the submission of Ld. AR that the applicant cannot be asked to discharge the burden of proof of existence or genuineness of the alleged sellers as long as purchases are recorded in the books and payments have been made through account payee cheques. The applicants have furnished copies of purchase bills, bank statements, copies of return filed and copies of ledger accounts and sale tax registration. No hesitation in upholding the order of learned CIT (A). While upholding the order passed by the learned CIT (A), we rely on the judgment of the Hon ble Jurisdictional High Court in the case of CIT vs. M/s Surendra Buildtech Pvt. Ltd. 2012 (5) TMI 629 - DELHI HIGH COURT wherein the Hon ble Court held that where the Revenue failed to rebut the findings recorded by the learned CIT (A) by bringing any contrary material on record, the finding recorded by the lower authority based on documentary evidences needs to be upheld. - Decided against revenue.

Summary

Issues:
Appeal against order of CIT (A) for assessment year 2013-14 - Addition on account of bogus purchases - Retraction of statement by Shri Sanjay Chaudhary - Reliance on documentary evidence - Similar allegations in earlier years - ITSC findings - CIT (A) deletion of addition upheld.

Analysis:
The appeal before the ITAT Delhi concerned the addition of ?3,12,42,835 on account of bogus purchases made by the assessee company from certain concerns. The Revenue contended that the addition was based on a survey conducted by the DGIT (Inv) on Shri Sanjay Chaudhary, who admitted to providing accommodation entries, not actual sale/purchase of diamonds. The AO rejected Chaudhary's retraction from his statement, arguing it was not filed before the Investigation Wing. The AR, however, supported CIT (A)'s decision to delete the addition based on positive documentary evidence.

The ITAT noted that Chaudhary's retraction, supported by an affidavit, remained uncontroverted, rendering the Revenue's basis for the addition invalid. Additionally, the ITAT considered CIT (A)'s reliance on a similar case involving M/s Khanna Jewellers Pvt. Ltd, where Chaudhary's retraction was accepted, leading to no adverse inference against the concern. The ITAT upheld CIT (A)'s decision to delete the addition based on these findings.

Moreover, the ITAT highlighted that in earlier years, similar allegations were made against the assessee, who approached the ITSC for settlement. The ITSC deemed the transactions genuine based on documentary evidence like purchase bills and bank statements. Citing the Hon'ble Jurisdictional High Court's judgment, the ITAT upheld CIT (A)'s decision, emphasizing the importance of documentary evidence in the absence of contrary material.

Ultimately, the ITAT dismissed the appeal of the department, affirming CIT (A)'s deletion of the addition. Grounds 6 to 8 were deemed general and did not require adjudication, leading to the final result of the appeal being dismissal.

This detailed analysis showcases the thorough consideration of facts, legal precedents, and documentary evidence that led to the ITAT's decision to uphold CIT (A)'s deletion of the addition in the case of bogus purchases, emphasizing the importance of documentary evidence and the significance of uncontroverted retractions in legal proceedings.