2013 (5) TMI 474 - AT - Income Tax

Unexplained expenditure u/s.69C - Notices u/s.133(6) - Held that - Clearly, if the goods stand transported as well as processed by third parties, with even duty having been paid on such processing, it cannot be said that no goods at all have been purchased. Further, as regards the fact of sale, the same would become material only if the assessee could, with reference to its stock register or any other record, exhibit that the goods so purchased were either sold during the relevant year itself or, being unsold, stand included in the closing stock. It is only in either of these two situations, it may be appreciated, that a claim for purchase could be validly made. This matter, which we consider as relevant, though arising out of the record, has not investigated or examined by the authorities below. In view of the foregoing, it is fit and proper that the matter is restored back to the file of the FAA for the purpose. The onus, there is no gainsaying, to establish its claims, would only be on the assessee & adverting to the decision of Kachwala Gems vs. JCIT 2006 (12) TMI 83 - SUPREME COURT whereat it approved of best judgment assessment where the purchases could not proved by the assessee beyond doubt. Qua difference in the amount of purchases, resulting in a disallowance of Rs.2.39 lakhs - Held that - When the assessee s accounts are considered as incorrect on the basis of the accounts of the corresponding party, the same becomes a material with the Revenue on the basis of which the assessee s books of account are being impugned by it. It was, therefore, incumbent on the Revenue to provide the assessee the same, which it has failed to, despite, repeated requests by the assessee for the same, as gathered from the statement of facts, as filed both during the course of proceedings in the first and the second round, as well as the arguments made before us - this issue is also likewise restore back to decide the same afresh.

Summary

Issues Involved:
1. Disallowance of purchase for Rs. 13.30 lakhs.
2. Difference in the amount of purchases resulting in a disallowance of Rs. 2.39 lakhs.

Issue-wise Detailed Analysis:

1. Disallowance of purchase for Rs. 13.30 lakhs:

The primary issue involves the disallowance of purchases amounting to Rs. 13.30 lakhs from two parties, M/s. Am Pee Fabrics and M/s. Rinowa Creation. Notices issued to these parties under Section 133(6) were returned unserved by postal authorities, and the assessee failed to provide their updated addresses or permanent account numbers (PAN). The assessee reiterated its inability to furnish this information in the set aside proceedings, leading to the disallowance being confirmed. The tribunal emphasized that the identity and existence of the payees were crucial to establish the genuineness of the purchases. The tribunal noted that the assessee did not provide any substantial evidence such as PAN, Sales Tax or Excise Registration, TIN, or even the names of the persons managing the affairs of the said firms. The tribunal highlighted that the primary onus to establish the genuineness of the transactions was on the assessee.

The assessee argued that non-response from the parties to notices under Section 133(6) should not automatically lead to the inference of bogus purchases. The tribunal acknowledged that indirect evidence, such as transportation and processing of goods, could support the genuineness of the purchases. However, the tribunal found no findings or arguments raised by the assessee before the authorities below regarding this indirect evidence. The tribunal decided to restore the matter back to the file of the first appellate authority to allow the assessee another opportunity to establish the genuineness of the purchases with appropriate evidence.

2. Difference in the amount of purchases resulting in a disallowance of Rs. 2.39 lakhs:

The second issue pertains to the difference in the amount of purchases, leading to a disallowance of Rs. 2.39 lakhs. The assessee argued that the purchases per its books were higher in the case of one party and lower for the other, and the Revenue had added both amounts without considering the nature of the differences. The assessee contended that the copies of accounts of both parties were not furnished to it, preventing it from providing any reconciliation.

The tribunal observed that for a valid disallowance to be effected, there must be a finding that the assessee had not recorded its purchases truly and correctly in its books of accounts. The tribunal emphasized that the Revenue should have provided the assessee with the copy of the account statement of the assessee's ledger account as appearing in the books of the suppliers. The tribunal decided to restore this issue back to the file of the Assessing Officer (A.O.) to decide afresh, supplying the assessee with the necessary materials and affording an opportunity of being heard.

Conclusion:

In conclusion, the tribunal restored both issues back to the respective authorities for fresh consideration. The assessee's appeal was allowed for statistical purposes, and the tribunal directed the authorities to provide the assessee with an opportunity to substantiate its claims with appropriate evidence. The order was pronounced on April 5, 2013.