2016 (9) TMI 1676 - AT - Income Tax

Bogus transactions - addition on account of purchase of paintings from different parties - HELD THAT - The decision of Hon‟ble jurisdictional High Court in the case of Nikunj Eximp Enterprises (P.) Ltd 2013 (1) TMI 88 - BOMBAY HIGH COURT wherein it was observed when the sales of purchased goods were not doubted when copies of bank statement showing entries of payment through bank cheques to the suppliers are present then the purchases made by the assessee cannot be a bogus one. Therefore, we decide that the purchases in both the assessment years made by the assessee were found to be genuine and therefore, set aside the orders of the authorities below and delete the impugned additions on account of bogus purchases. Appeal of the assessee is allowed.

Summary

Issues:
- Addition on account of purchase of paintings from different parties labeled as "bogus transactions."

Analysis:
The appeal was filed by the assessee against the order of the CIT (A)-38, Mumbai for the assessment year 2007-2008, specifically challenging the addition made on the grounds of "bogus transactions" related to the purchase of paintings from various parties. The assessee raised four grounds in total, with the primary issue revolving around the addition concerning the purchase of paintings. The assessee's counsel referred to a relevant Tribunal order in a similar case and emphasized that the additions on the basis of bogus transactions were unjustified. The counsel also highlighted the absence of the assessee's name in certain statements and provided evidence such as confirmation letters, bank transactions, and book entries to support the genuineness of the transactions. It was pointed out that the Tribunal's decision in a related case favored the assessee, who was also the Director of the instant assessee-company.

Upon reviewing the arguments presented by both parties and examining the orders of the Revenue Authorities along with the Tribunal's decision in the referenced case, the Tribunal noted specific observations. The Tribunal highlighted that payments for the purchases were made via account payee cheques, supported by bank confirmations and other transaction details that were undisputed. The Tribunal also emphasized that since the sales were accepted as genuine, the corresponding purchases could not be considered as bogus. Additionally, the Tribunal referred to a High Court decision stating that when sales were not in doubt and bank statements showed payments made through bank cheques, the purchases could not be deemed as bogus. Consequently, the Tribunal concluded that the purchases made by the assessee were genuine for the respective assessment years and thus set aside the orders of the lower authorities, deleting the additions made on account of bogus purchases.

In light of the above analysis and the precedents cited, the Tribunal found merit in the assessee's grounds and ruled in favor of the assessee, allowing the appeal. As a result, the appeal of the assessee was allowed, and the order was pronounced in open court on 23rd September 2016.