2022 (9) TMI 307 - HC - Income Tax

Unexplained expenditure u/s 69C - genuineness of purchases - HELD THAT - There is no evidence or material brought on record by the Assessing Officer that the purchases made were for cash or that the purchasers had returned the cash corresponding to the cheque payments received from the Assessee. CIT(A) has recorded that there is no evidence of money flowing back to the Assessee and that the AO had made the addition merely on the basis of presumption. AO had not made available copies of the documents relied upon by him for the purpose of making the addition. These are all findings of fact for which the Tribunal is the last fact finding authority. Assessee in our view has discharged his onus in respect of the subject purchases. AO has also not doubted the sales arising out of the said export activity and its GPR. This is not a case which falls within the ambit of Section 69C as held by the AO. In the case at hand, the Assessee statedly had made purchases from the three parties in respect of which it has been found by both the CIT(A) as well as the Tribunal that the sales in question have not been doubted, that the payments have been made by the Assessee through banking channels and that the AO has also accepted the book results shown by the Assessee. It is also finding of fact that the Assessee has produced before the AO delivery challans, purchase bills as well as evidence of payments through banking channels. Assessee has discharged the initial burden or onus of providing the details of the parties; and it was incumbent on the AO to rebut the evidence produced by the Assessee. We do not find anything on record controverting the findings of fact of the CIT(A) as well as the Tribunal. Despite uncontroverted findings of fact and keeping in mind that the AO had issued 133(6) notices to the three suppliers of goods and the parties had not attended and even though the AO did not take any further steps for investigation, in all fairness, CIT(A) as well as the Tribunal had upheld the dis-allowance in respect of the purchases for the year under consideration to the extent of 10% of such purchases against which admittedly no appeal has been filed by the Assessee. If the CIT(A) relying upon the various decisions including the decision in the case of CIT Vs. Bholenath Poly Fab (P) Ltd. 2013 (10) TMI 933 - GUJARAT HIGH COURT has restricted the disallowance to 10% of the purchases, which decision has not been disturbed by the Tribunal, we find that The view taken by the Tribunal is a possible view and cannot be faulted with.

Summary

Issues Involved:
1. Whether the Tribunal was right in upholding the CIT(A)'s order restricting the addition under Section 69C to 10% of the accommodation entries.
2. Whether the Tribunal was justified in ignoring the lack of evidence provided by the Assessee to prove the genuineness of the purchases.
3. Whether the AO is compelled to accept book or bank entries in the absence of evidence regarding the genuine nature of the purchases.
4. Whether corresponding sales indicate that accommodation bills, despite evidence of non-genuineness, can be allowed as a deduction.

Detailed Analysis:

Issue 1: Restriction of Addition under Section 69C
The Revenue appealed against the ITAT's decision to uphold the CIT(A)'s restriction of addition under Section 69C to 10% of the accommodation entries. The Assessing Officer (AO) had initially added Rs. 3,15,72,840/- as unexplained expenditure under Section 69C, presuming that the purchases were made in cash from the market and sale bills were obtained from hawala dealers. The CIT(A) observed that the Assessee had made payments through account payee cheques, furnished bills, and delivery challans, and reflected all purchases in the stock reconciliation. The CIT(A) concluded that the Assessee had discharged his onus and that the AO's addition was based on mere presumption without concrete evidence. The CIT(A) restricted the disallowance to 10% of the alleged bogus purchases, amounting to Rs. 31,57,284/-, which the ITAT upheld.

Issue 2: Evidence of Genuine Purchases
The Revenue argued that the Assessee failed to provide concrete evidence of having made purchases against the accounted bills. The AO's investigation revealed that the suppliers were hawala operators issuing bogus bills without actual delivery of goods. Notices under Section 133(6) were issued to the suppliers, but they did not respond. The Assessee provided ledger accounts and bank statements but did not produce the parties for cross-verification. The CIT(A) and ITAT found that the Assessee had produced sufficient evidence, including delivery challans and purchase bills, and made payments through banking channels. The Tribunal held that the AO did not bring any evidence to rebut the Assessee's evidence.

Issue 3: Acceptance of Book or Bank Entries
The Revenue contended that in the absence of evidence regarding the genuine nature of the purchases, the AO should not be compelled to accept book or bank entries. The AO suspected that the Assessee had received cash back from the suppliers after making cheque payments. The CIT(A) and ITAT found no evidence of money flowing back to the Assessee and concluded that the AO's addition was based on presumption. The Tribunal held that the Assessee had discharged the initial burden of proof, and the AO did not provide evidence to the contrary.

Issue 4: Corresponding Sales and Accommodation Bills
The Revenue argued that the existence of corresponding sales should not justify the deduction of accommodation bills that were non-genuine. The CIT(A) and ITAT found that the AO had accepted the book results and sales shown by the Assessee. The payments were made through banking channels, and the Assessee provided delivery challans and purchase bills. The Tribunal concluded that the Assessee had discharged his onus, and the AO did not bring any evidence to rebut the Assessee's evidence. The Tribunal upheld the CIT(A)'s decision to restrict the disallowance to 10% of the purchases.

Conclusion:
The High Court found no error or perversity in the ITAT's order. The Assessee had discharged his onus by providing sufficient evidence, and the AO's addition was based on mere presumption without concrete evidence. The Tribunal's decision to uphold the CIT(A)'s restriction of the addition to 10% of the purchases was a possible view and could not be faulted. The appeal was dismissed, and no substantial question of law was raised.