2017 (10) TMI 729 - HC - Income Tax

Bogus purchase - Held that - The appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from RajImpex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises.

Summary

Issues:
1. Disallowance of purchase expenditure by the Assessing Officer.
2. Justification of treating purchases as legitimate by the Appellate Tribunal.
3. Consideration of evidence regarding payments made by account payee cheques.
4. Confirmation of transactions by M/s. Raj Impex.
5. Conclusion reached by the appellate authority and the Tribunal.

The High Court of Gujarat heard an appeal by the Revenue against the Income Tax Appellate Tribunal's judgment regarding the disallowance of purchase expenditure amounting to ?5.19 crores. The main question raised was whether the Tribunal was correct in treating the purchases as legitimate based on the supporting bills and payments made by account payee cheques, despite findings from the Investigation Wing regarding the nature of the transactions. The Assessing Officer had initially disallowed the expenditure, but the CIT(Appeals) allowed the appeal, emphasizing that all payments were made by account payee cheques. The Tribunal upheld this decision, noting that the purchases were supported by bills, payments were made by cheques, and M/s. Raj Impex confirmed the transactions. The Tribunal found no evidence to suggest that the money paid for purchases had been returned to the assessee in cash. Additionally, since the assessee had shown sales from the purchases made from Raj Impex, which were accepted by the Revenue, the Court agreed with the concurrent conclusion of the appellate authority and the Tribunal that the purchases were legitimate. Consequently, the Tax Appeal was dismissed.