2004 (8) TMI 320 - AT - Income Tax

Additions To Income - hawala transactions and hawala commission for providing bogus entry - Discrepancies in stock movement and quantitative details - Non-availability of purchaser - business transactions and documentary evidence - HELD THAT - The assessee provided Photostat copies of pay-in slips and bank statements to support its claim of receiving payments through Account Payee cheques. The Commissioner (Appeals) verified these documents and found that the payments were indeed received through this mode, which ensures protection u/s the Negotiable Instruments Act. The AO's Remand Report did not provide any evidence to contradict this. AO alleged discrepancies in the stock movement between the Bombay and Bhayander Godowns. However, the assessee provided a stock tally and other documentary evidence, such as octroi duty receipts and lorry transport receipts, to prove the genuineness of its business. The Commissioner (Appeals) found no discrepancies in the stock tally and noted that the AO admitted there was no evidence concerning the rate of cash sales. AO issued summons to certain purchaser parties, and 12 parties appeared and confirmed the transactions. The Commissioner (Appeals) held that the non-availability of some purchasers could not lead to the conclusion that the assessee issued bogus bills. The assessee provided sufficient evidence to support the genuineness of its transactions. The assessee maintained complete books of account, including day-to-day and kilogram-to-kilogram stock registers, which were produced before the AO. The Commissioner (Appeals) found no mistakes in these records. The assessee also provided delivery challans, sales bills, and other documentary evidence to support the legitimacy of its business transactions. The Commissioner (Appeals) concluded that the transactions were genuine and not hawala entries. Conclusion The Revenue failed to provide substantial evidence to support its allegations against the assessee. The Commissioner (Appeals) found the assessee's transactions to be genuine, supported by ample documentary evidence. The appeal of the department was dismissed, and the order of the Commissioner (Appeals) was confirmed.

Issues Involved:

1. Genuineness of Sales Transactions
2. Alleged Hawala Transactions and Commission
3. Discrepancies in Stock and Sales
4. Verification of Purchaser Parties
5. Applicability of Sales Tax Order

Summary:

1. Genuineness of Sales Transactions:

The assessee, a partnership firm engaged in trading SS Pattas, declared an income of Rs. 66,826 for AY 1993-94. The Assessing Officer (AO) found discrepancies in the sales bills and challans, which lacked detailed information present in the purchase documents. The AO questioned the inability of the assessee to correlate purchase and sale prices. Despite this, the CIT(A) observed that the AO did not find any defect or discrepancy in the regular accounts maintained by the assessee. The entire purchases and sales were fully vouched, and payments were made through account-payee cheques.

2. Alleged Hawala Transactions and Commission:

The AO categorized the purchasers into three groups: untraceable, non-cooperative, and those furnishing incomplete details. The AO concluded that the assessee sold goods in cash to small manufacturers and sold the sales bills to hawala operators in Bombay, estimating a hawala commission at 5%. However, the CIT(A) found no tangible evidence of the assessee receiving hawala commission and held that the AO's view was based on conjectures and surmises. The CIT(A) emphasized that the assessee received payments through account-payee cheques and maintained proper records, including octroi receipts and lorry receipts.

3. Discrepancies in Stock and Sales:

The AO noted discrepancies in the stock available in the Bombay godown and the sales made there, concluding that goods were sold in cash at Bhayander and sales bills were sold to hawala operators. The CIT(A) observed that the AO did not provide any evidence of suppression of sales or lower selling rates. The assessee maintained day-to-day stock registers and provided detailed quantitative records, which the AO did not dispute.

4. Verification of Purchaser Parties:

The AO issued summons to some Bombay parties to verify the genuineness of sales. The CIT(A) noted that the AO did not find any evidence against the customers of the assessee. The assessee produced pay-in slips, bank statements, and a comparative sales chart. Twelve parties appeared before the AO in response to summons and confirmed the transactions. The CIT(A) held that the non-availability of some purchasers could not lead to the conclusion that the assessee issued bogus sale bills.

5. Applicability of Sales Tax Order:

The CIT(A) relied on a scrutiny order passed u/s 33(3) of the Bombay Sales Tax Act, which confirmed the figures of sales declared by the assessee. The AO's objection that the sales tax order was a summary order was dismissed, as the sales tax order involved detailed verification of the assessee's books.

Conclusion:

The Tribunal upheld the CIT(A)'s order, finding no evidence of hawala transactions or commission. The assessee's records were found to be in order, and the sales were deemed genuine. The appeal of the department was dismissed.

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