2015 (5) TMI 750 - AT - Income Tax

Bogus purchases - CIT(A) deleting the addition - Held that - As relying on precedent of assessee's own case it was only on the basis of the documents put-forth by the assessee that purchases from the said parties have been held to be bogus. Notably, assessee had furnished the invoices raised by the said parties and had also explained that all the payments were made by the cheques. Assessee had also furnished their sales-tax numbers. With respect to the transportation, assessee had explained that the responsibility of transportation was of the supplier and therefore assessee could not produce the transport receipts. The explanations put-forth by the assessee were not subject to any enquiry or verification by the Assessing Officer but have been merely disbelieved. The Assessing Officer, in our view, was influenced by the outcome of enquiries made with respect to the other six parties. However, in the absence of any material on record to negate the position canvassed by the assessee with respect to the said five parties, the explanation of the assessee could not be disbelieved. Under these circumstances, in our view, the CIT(A) made no mistake in deleting the addition with respect to the aforesaid five parties. As a consequence, on this aspect Revenue fails - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the purchases made by the assessee from certain parties were bogus.
2. The validity of the additions made by the Assessing Officer (AO) based on alleged bogus purchases.
3. The correctness of the Commissioner of Income Tax (Appeals) [CIT(A)]'s decisions regarding these purchases.

Detailed Analysis:

1. Whether the purchases made by the assessee from certain parties were bogus:

The primary dispute in these appeals revolves around the action of the Assessing Officer in treating purchases made by the assessee from certain parties as bogus. The assessee belongs to the M/s Kolte Patil Developers Ltd. group, which underwent a search action under section 132(1) of the Income Tax Act, 1961. During the search, the Department conducted enquiries with several suppliers who allegedly provided steel and other materials to the assessee and other group companies. Based on these enquiries, the AO concluded that purchases from eleven parties were bogus. The Tribunal had previously dealt with a similar issue in the case of M/s Kolte Patil Developers Ltd., where it was held that purchases from these parties were bogus.

2. The validity of the additions made by the Assessing Officer (AO) based on alleged bogus purchases:

For the assessment year 2007-08, the AO held that purchases from three suppliers were bogus, totaling Rs. 34,29,911/-. The CIT(A) sustained the addition for one supplier (M/s Praky Mercantile Pvt. Ltd.) amounting to Rs. 13,30,352/- and deleted the additions for the other two suppliers (Shree Surya Steel and Mayoora Metal Trade Corporation). The assessee challenged the addition of Rs. 13,30,352/-, while the Revenue challenged the deletion of Rs. 20,99,559/-.

The Tribunal upheld the CIT(A)'s decision based on the precedent set in the case of M/s Kolte Patil Developers Ltd., where it was found that the purchases from six parties were bogus due to lack of primary evidence such as delivery challans or octroi receipts. The Tribunal noted that the assessee failed to provide primary evidence to refute the statements given by the suppliers denying actual supply of goods. Moreover, the affidavit submitted by one of the suppliers was not corroborated by any primary evidence, leading to the conclusion that the purchases were indeed bogus.

3. The correctness of the Commissioner of Income Tax (Appeals) [CIT(A)]'s decisions regarding these purchases:

For the assessment year 2007-08, the Tribunal affirmed the CIT(A)'s decision to delete the addition for purchases from Shree Surya Steel and Mayoora Metal Trade Corporation. The Tribunal found that the AO did not conduct any third-party verification for these five parties, unlike the six parties where post-search enquiries were conducted. The AO merely disbelieved the explanations provided by the assessee without any material evidence to negate the assessee's position. Consequently, the Tribunal upheld the CIT(A)'s decision to treat these purchases as genuine.

For the assessment years 2008-09 and 2009-10, the Tribunal followed the same reasoning and precedent to affirm the CIT(A)'s decision to delete the additions for purchases from Shree Surya Steel, Mayoora Metal Trade Corporation, and Yash Trading Co.

Conclusion:

The Tribunal dismissed all the appeals for the assessment years 2007-08, 2008-09, and 2009-10, affirming the CIT(A)'s decisions and sustaining the additions made by the AO only for purchases from M/s Praky Mercantile Pvt. Ltd. The Tribunal relied on the precedent set in the case of M/s Kolte Patil Developers Ltd. and emphasized the lack of primary evidence to support the genuineness of the disputed purchases.