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2017 (5) TMI 426 - AT - Income TaxAddition on bogus purchases - addition made merely relying on information obtained from the Sales Tax Department, the statements / affidavits of third parties - Held that - A.O. failed to cause any enquiry to be made to establish his suspicions that the said purchases are bogus, the assessee has brought on record documentary evidences to establish the genuineness of the said purchase transactions, transactions, the action of the A.O. in brushing aside these evidences cannot be accepted. Further in the case of CIT vs Ashish International (2011 (2) TMI 1506 - BOMBAY HIGH COURT) has held that the genuineness of the statements relied upon by Revenue is not established when the assessee disputes the correctness thereof and has not been afforded opportunity to cross examine these parties. Moreover, when the payments for the said purchases to the said 12 persons is through proper banking channels and there is no evidence brought on record by the A.O. to establish that the said payments were routed back to the assessee, the addition made by the A.O. is unsustainable. - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition on account of bogus purchases. 2. Reliance on case law CIT vs. Nikunj Exim Enterprises Pvt. Ltd. 3. Non-retraction of the assessee's statement during survey proceedings. 4. Non-support of alleged bills by supply of goods and failure to produce parties. 5. Overlooking findings of the investigation by Sales Tax Department. Detailed Analysis: 1. Deletion of Addition on Account of Bogus Purchases: The primary issue revolves around the deletion of ?56,87,118/- by the CIT(A) which the A.O. had added as bogus purchases. The A.O. based the addition on the grounds that the suppliers were listed as suspicious on the Sales Tax Department's website and that notices sent to these suppliers under section 133(6) were either uncomplied with or returned unserved. The CIT(A) observed that the appellant, a government contractor, had provided detailed documentation and evidence of the purchases, including payments made by account payee cheques. The CIT(A) concluded that the A.O. did not provide conclusive evidence to substantiate the claim of bogus purchases and that the appellant's records were consistent and credible. 2. Reliance on Case Law CIT vs. Nikunj Exim Enterprises Pvt. Ltd.: The department contended that the CIT(A) erred in relying on the judgment in CIT vs. Nikunj Exim Enterprises Pvt. Ltd. without appreciating the different facts in the appellant's case. However, the CIT(A) found merit in the appellant's argument, noting that the A.O. failed to provide credible evidence against the purchases. The CIT(A) held that mere suspicion or listing on the Sales Tax Department's website was insufficient to disallow the purchases, especially when the appellant had provided substantial documentation and there was no evidence of cash being received back. 3. Non-Retraction of Assessee's Statement During Survey Proceedings: The department argued that the assessee had not retracted his statement made under oath during the survey proceedings, where additional income was surrendered. The CIT(A) noted that a statement made during a survey is not enough evidence to suspect the income, especially when no other credible evidence was found during the assessment. The CIT(A) emphasized that the A.O. should have verified the appellant's submissions and found no infirmity in the appellant's records. 4. Non-Support of Alleged Bills by Supply of Goods and Failure to Produce Parties: The A.O. held that the alleged bills were not supported by the supply of goods and that some notices issued to parties were returned undelivered. The CIT(A) observed that the appellant had provided detailed records of the purchases and their utilization in the work carried out. The CIT(A) noted that the A.O. did not find any discrepancies in the appellant's records or evidence of cash being received back. The CIT(A) concluded that the appellant's documentation and the absence of any contrary evidence during the survey supported the genuineness of the purchases. 5. Overlooking Findings of the Investigation by Sales Tax Department: The department argued that the CIT(A) overlooked the findings of the Sales Tax Department's investigation, which indicated that the suppliers were providing only bills without actual supply of goods. The CIT(A) noted that the A.O. did not provide conclusive evidence to support this claim and that the appellant had provided substantial documentation to prove the genuineness of the purchases. The CIT(A) emphasized that the burden of proof lies with the A.O. to establish that the purchases were bogus, which was not done in this case. Conclusion: The Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal. The Tribunal noted that the A.O. failed to provide conclusive evidence to prove that the purchases were bogus and that the appellant had provided substantial documentation to support the genuineness of the purchases. The Tribunal emphasized that mere suspicion or reliance on the Sales Tax Department's listing was insufficient to disallow the purchases. The Tribunal also noted that the appellant's records were consistent and credible, and there was no evidence of cash being received back. The appeal of the revenue was dismissed, and the order of the CIT(A) was upheld.
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