2024 (7) TMI 88 - AT - Income Tax

Reopening of assessment - Bogus purchases - assessee is the beneficiary of accommodation entry of purchases as has been held by AO - AO made addition on the basis of information available with him - assessee right from the beginning contending that they have not made any purchase from Keshav Impex rather they have sold goods to them - HELD THAT - AO remained silent on such objection. The assessee furnished sales register, payment register and stock register. No comments on such evidences were made by AO. AO reiterated his contention of purchases from alleged entry provider while making addition despite recording the facts stated by the assessee about the sales with the impugned party. The statement of such party or report of Investigation Wing nowhere mentioned in the assessment order. We find that the sale of assessee to the impugned party was not disputed. AO has not brought any evidence to show that assessee had any other transaction of same amount with the impugned party. Similarly, the payment received by assessee against sale is not doubted. Book result of assessee was of the Act even touched by the AO. Thus AO made addition by blind eyes. We find that before the CIT(A), the assessee reiterated his similar contention as raised before the AO. CIT(A) allowed relief to the assessee by holding that AO has not discharged his onus of disproving the transaction of sale by assessee with Keshav Impex. AO neither referred the statement of proprietor of Keshav Impex wherein he has allegedly mentioned the name of the assessee as a beneficiary of bogus transaction nor brought any cogent evidence on record to controvert the document filed by the assessee. AO made addition of bogus purchases, no comments were made on the nature of sales made by assessee. Books of account of assessee was not rejected nor recasted the trading result. The assessee has produced the record of purchases and sales, VAT has been duly paid, sales tax assessment has been completed and input credits were also allowed in favour of assessee. We find that the ld. CIT(A) allowed full relief to the assessee by appreciating the facts in right prospective. No adverse material is brought on record to substantiate the allegation of reopening that the assessee has shown purchases from impugned party i.e. Keshav Impex. AO made addition by ignoring vital facts. We find that the ld. CIT(A) on appreciation of facts, deleted the entire addition. Before us, no contrary fact or evidence is brought on record to take other view. Therefore grounds of appeal raised by the revenue are dismissed.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) of Rs. 5,04,80,000/-.
2. Validity of reopening the assessment under Section 148 of the Income Tax Act.
3. Treatment of transactions with "Keshav Impex" as bogus accommodation entries.
4. Whether the payments made through banking channels establish the genuineness of transactions.

Detailed Analysis:

1. Deletion of Addition Made by AO of Rs. 5,04,80,000/-:
The Revenue argued that the Ld. CIT(A) erred in deleting the addition made by the AO without appreciating that the assessee failed to prove the genuineness of the transaction with "Keshav Impex," identified as a bogus accommodation entry provider. The AO had added Rs. 5.04 crores on account of unaccounted bogus purchases, claiming the assessee failed to furnish verifiable evidence. However, the Ld. CIT(A) found that the AO did not discharge his onus of disproving the transaction and failed to produce any cogent evidence to counter the documents filed by the assessee. The Tribunal affirmed the Ld. CIT(A)'s order, noting that the AO made the addition without proper verification and without bringing any adverse material on record.

2. Validity of Reopening the Assessment under Section 148:
The assessee challenged the reopening of the assessment, arguing it was based on borrowed satisfaction and not justified as they had sold goods to Keshav Impex rather than purchasing from them. The Ld. CIT(A) upheld the reopening, citing the Supreme Court's decisions in Raymond Woolen Mills Ltd. vs. ITO and ACIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., stating that sufficiency or correctness of the material is not to be considered at the reopening stage. However, the Tribunal found that the AO did not conduct an independent inquiry and ignored the vital facts presented by the assessee, thereby affirming the Ld. CIT(A)'s decision but with additional observations.

3. Treatment of Transactions with "Keshav Impex" as Bogus Accommodation Entries:
The AO treated the transactions with Keshav Impex as bogus accommodation entries, alleging that the assessee made purchases from a non-genuine supplier. The assessee contended that they sold goods to Keshav Impex and received payments through banking channels. The Ld. CIT(A) noted that the AO did not reject the assessee's books of account or recast the trading results. The Tribunal found that the AO failed to bring any evidence to show other transactions of the same amount with Keshav Impex and ignored the sales records, payment registers, and stock registers provided by the assessee. The Tribunal upheld the Ld. CIT(A)'s decision, noting that the AO made the addition without proper verification.

4. Payments Made Through Banking Channels:
The Revenue argued that payments made through banking channels do not establish the genuineness of transactions. However, the Tribunal found that the assessee provided sufficient evidence of sales to Keshav Impex and received payments within a reasonable time. The AO did not dispute the sales or the payments received. The Tribunal concluded that no adverse material was brought on record to substantiate the AO's allegations, and the Ld. CIT(A) rightly deleted the addition.

Conclusion:
The Tribunal dismissed the Revenue's appeal and the assessee's cross-objection, affirming the Ld. CIT(A)'s order. The Tribunal found that the AO made the addition without proper verification and failed to bring any adverse material on record. The Tribunal also noted that the reopening of the assessment was upheld, but the AO ignored vital facts and did not conduct an independent inquiry. The Tribunal concluded that the payments made through banking channels and the evidence provided by the assessee established the genuineness of the transactions.