2017 (10) TMI 585 - AT - Income Tax

Addition on account of bogus purchases - onus on the assessee to prove the genuineness of purchases - Held that - Primary onus cast upon the assessee to prove the genuineness of purchases has sufficiently been discharged. If the Assessing Officer still had doubt regarding the purchases made from the concerned parties, it should have triggered further enquiry or investigation at his end and he should have brought cogent evidence on record to establish the fact that purchases claimed to have been made from the concerned parties are not genuine. It is not a case where the sellers / suppliers are found to be non existent or had not complied to the notices issued by the Assessing Officer by furnishing necessary information. In this case, the suppliers have come forward and have confirmed the sales effected to the assessee through proper documentary evidences. Thus, on the face of such evidences available on record, the purchases made cannot be held as bogus merely on presumption and surmises and on the sole reasoning that the assessee was unable to produce delivery challan / angadia receipts. In this context, assessee s explanation that diamond did not require to be transported through vehicle appears plausible. In view of the aforesaid facts, we hold that, even, disallowance @ 2.5% as made by the learned Commissioner (Appeals) is also unjustified. - Decided in favour of assessee.

Summary

Issues involved:
1. Revenue's appeal against part reduction of addition made on account of bogus purchases.
2. Assessee's cross objection challenging the addition partly sustained by the Commissioner (Appeals) and the validity of re-assessment under section 147 of the Income-tax Act, 1961.

Detailed Analysis:
1. The Revenue's appeal contested the reduction of an addition made on account of bogus purchases, while the assessee's cross objection challenged the addition partly sustained by the Commissioner (Appeals) and questioned the validity of re-assessment under section 147 of the Income-tax Act, 1961. The original assessment for the disputed year was completed under section 143(3) r/w section 153A of the Act, resulting in a total income determination of ?1,52,78,500. Subsequently, the Assessing Officer reopened the assessment based on information received regarding alleged bogus purchases. The Assessing Officer disallowed a portion of the alleged bogus purchase amount, leading to an appeal by the assessee. The Commissioner (Appeals) sustained a reduced disallowance of 2.5% of the alleged bogus purchases, prompting the Revenue's appeal and the assessee's cross objection.

2. During the re-assessment proceedings, the Assessing Officer scrutinized the purchases made by the assessee, specifically focusing on transactions with two parties flagged as potentially bogus. Despite the assessee submitting documentary evidence to prove the genuineness of these purchases, the Assessing Officer remained unconvinced due to the absence of delivery challans or angadia receipts. However, the assessee maintained stock records and provided quantitative details linking purchases to sales. The Commissioner (Appeals) upheld a reduced disallowance, but the Tribunal found that the documentary evidence and responses from the concerned parties supported the genuineness of the purchases. The Tribunal emphasized that the Assessing Officer failed to conduct further investigations or provide concrete evidence to refute the genuineness of the purchases. As a result, the Tribunal concluded that the primary burden of proof had been met by the assessee, leading to the deletion of the addition sustained by the Commissioner (Appeals). The Tribunal dismissed the Revenue's appeal and allowed the cross objection on this issue.

3. The Tribunal also addressed additional grounds raised by the assessee in the cross objection, dismissing them as of academic interest after the primary issue was resolved in favor of the assessee. Consequently, the Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross objection, emphasizing the importance of meeting the burden of proof in establishing the genuineness of transactions during assessment and re-assessment proceedings.

This detailed analysis highlights the key legal arguments, evidentiary considerations, and the Tribunal's reasoning in resolving the issues raised in the appeal and cross objection.