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2020 (11) TMI 457 - AT - Income TaxBogus purchases - HELD THAT - In the instant case, for the year under consideration also, the sales made by the assessee are not disputed. Hence, it could be safely concluded that without the purchases, there cannot be any sales. We find that the Ld. AR had also placed reliance on the decision in the case of CIT vs Odeon Builders Pvt.Ltd. 2019 (8) TMI 1072 - SUPREME COURT and in the case of Vaman International Pvt.Ltd 2020 (2) TMI 464 - BOMBAY HIGH COURT . As categorically stated that the Ld. AO had not conducted any independent investigation, which is similar to the facts prevailing before us - all the primary documents were duly placed on record including the quantitative details of purchases and corresponding sales together with stock register, confirmations from suppliers etc and hence no addition could be merely made u/s 69C by placing reliance on the statements made by some suppliers and parties before the Sales tax department. We find that the Hon ble Jurisidictional High Court had agreed with the views expressed by both the CITA as well as the Tribunal in the aforesaid case. We find that the facts before us in the impugned appeal squarely falls into the factual matrix of the aforesaid case before the Hon ble Bombay High Court. We direct the Ld. AO to delete the disallowances made on account of non genuine purchases in the peculiar facts and circumstances of the instant case.
Issues Involved:
1. Validity of reassessment. 2. Justification of addition on account of alleged bogus purchases. Detailed Analysis: 1. Validity of Reassessment: The ground challenging the validity of reassessment was not pressed by the assessee's representative during the hearing. Consequently, this issue was dismissed as not pressed. 2. Justification of Addition on Account of Alleged Bogus Purchases: The primary issue in both appeals was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in confirming the addition of ?79,60,882/- on account of alleged bogus purchases. The assessee, engaged in manufacturing and exporting diamond-studded, gold, and platinum jewelry, had its original return of income for AY 2011-12 processed under section 143(1) of the Income Tax Act, 1961. The assessment was later reopened under section 148 based on information from the investigation wing that certain suppliers were involved in issuing accommodation entries. The Assessing Officer (AO) observed that the assessee had made purchases from five parties linked to the Bhanwarlal Jain Group, which was implicated in fraudulent transactions. Despite the assessee submitting affidavits, confirmations, ledger accounts, purchase invoices, bank statements, and stock registers, the AO treated the purchases as non-genuine and added ?79,60,882/- to the assessee's income. The CIT(A) upheld the AO's decision, rejecting the assessee's additional evidence and confirming the addition. The CIT(A) also mentioned that the assessee failed to produce the stock register, which was factually incorrect as the AO had acknowledged its submission. The Tribunal noted that in a similar case for AY 2012-13, the CIT(A) had deleted similar additions, and the Tribunal had upheld this decision. The Tribunal found that the AO had not conducted any independent investigation and relied solely on the investigation wing's report and the statement of Bhanwarlal Jain, which had been retracted. The Tribunal emphasized that the principles of natural justice required the AO to provide the assessee an opportunity to cross-examine Bhanwarlal Jain. The assessee had linked the purchases to consumption and closing stock, and the sales made during the year were not disputed. The Tribunal cited various judicial precedents, including decisions of the Hon'ble Bombay High Court and the Hon'ble Supreme Court, which supported the assessee's case. The Tribunal concluded that the purchases were genuine, as evidenced by the primary documents submitted by the assessee. It directed the AO to delete the disallowance of ?79,60,882/- for AY 2011-12. The decision was applied mutatis mutandis to AY 2014-15, with variations in figures and supplier names. Conclusion: The appeals for AY 2011-12 were partly allowed, and for AY 2014-15, they were fully allowed. The Tribunal directed the deletion of the disallowance made on account of non-genuine purchases in both years.
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