2017 (11) TMI 1347 - AT - Income Tax

Addition u/s. 69C - in-genuine purchases - Held that - We find that the assessee purchased from Shree Sai Trading Co. of ₹ 13,89,232/-, from V3 Enterprise of ₹ 24,50,130/-, from Deep Enterprises of ₹ 33,18,054/- and from Niidhish Impex P. Ltd. of ₹ 24,44,624/- and these were same parties from whom purchases were made by assessee in A.Y. 2010-11. Therefore, no addition can be made in respect of these parties as Tribunal has already deleted addition thereof in A.Y. 2010-11. We find that in respect of other parties, the AO during the assessment proceeding asked the assessee to produce the purchase bill, alleged bogus purchase payment detail, corresponding sales details and quantity detail of the stock. We find from the assessment order that AO, without making any independent enquiry, has made addition of 12.5% on total transaction, which was not fair. We find that in the similar situation, it has been decided by ITAT in the case of Ramesh Kumar & Co vs. ACIT 2014 (11) TMI 1016 - ITAT MUMBAI as held that there is nothing, in the order of the AO, about the cash trail. Secondly, proof of movement of goods is not a doubt. Therefore considering the peculiar facts and circumstances of the case under appeal, we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on file to endorse the view taken by the AO - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the Commissioner of Income Tax (Appeals) [CIT(A)] erred in deciding the appeal in favor of the assessee without sufficient substantiation of claims.
2. Whether the CIT(A) wrongly provided full relief to the assessee despite similar cases where only the profit margin was taxed.
3. Whether the CIT(A) failed to appreciate that the alleged Hawala dealers admitted to not selling any material.

Issue-wise Detailed Analysis:

1. Substantiation of Claims by the Assessee:
The Revenue contended that the CIT(A) erred in deciding the appeal in favor of the assessee without appreciating that the assessee could not substantiate his claims despite ample opportunity. The case involved allegations of bogus purchases from 13 parties, identified as Hawala dealers by the Maharashtra Sales Tax Department. The Assessing Officer (AO) disallowed 12.5% of the total purchase amount (?2,06,78,079/-) resulting in an addition of ?33,34,760/-. The assessee produced all required details, including delivery evidence and payment proofs, but the AO still disallowed a portion of the purchases. The CIT(A) allowed the appeal, referencing a previous ITAT decision in the assessee's favor for AY 2010-11, where similar additions were deleted. The Tribunal agreed with the CIT(A), noting that the AO did not dispute the use of materials or stock records and failed to make independent inquiries.

2. Relief Despite Similar Cases:
The Revenue argued that the CIT(A) provided full relief to the assessee, contrary to other cases where only the profit margin embedded in the purchase amount was taxed. The Tribunal referenced previous decisions, including CIT Vs. Bholanath Poly Fab Pvt. Ltd. and CIT Vs. Simit Seth, where it was established that purchases might be from bogus parties, but the purchases themselves were not entirely bogus. The Tribunal found that in the assessee's own case for AY 2010-11, the ITAT had deleted similar additions, and the AO had not disputed the material usage or stock records. Thus, the CIT(A)'s decision to delete the entire disallowance was upheld.

3. Admission by Hawala Dealers:
The Revenue contended that the CIT(A) failed to appreciate that the Hawala dealers admitted to not selling any material. The Tribunal noted that the AO had not conducted thorough investigations, such as verifying the bank accounts of suppliers for immediate cash withdrawals. The Tribunal emphasized that suspicion alone could not replace concrete evidence. The CIT(A) and Tribunal both found that the assessee provided substantial evidence, including bank statements, invoices, and stock reconciliation, supporting the genuineness of the purchases. The Tribunal upheld the CIT(A)'s decision, finding no legal infirmity in the order.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the disallowance of ?33,34,760/- on account of alleged bogus purchases for AY 2009-10. The Tribunal found that the AO did not provide sufficient evidence to support the disallowance and upheld the CIT(A)'s reliance on the assessee's previous favorable ITAT ruling for AY 2010-11. The Tribunal reiterated that suspicion could not replace evidence and confirmed the genuineness of the assessee's claims based on the provided documentation. The appeal was dismissed, and the order pronounced in the open court on 11.10.2017.