2018 (5) TMI 254 - AT - Income Tax

Addition on bogus purchases - Held that - The assessee being an exporter of leather goods has explained the reason why bills from some parties were blank and later filled up, which has been accepted by the Tribunal since there was no quantitative discrepancy as held by the Ld. CIT(A). CIT(A) in A.Y. 2010-11 has taken note of the fact that even on the date of survey, the alleged blank bills did contain the quantity duly received by the assessee and only the rates were not mentioned in those bills at the time of survey and the reasons have been furnished elaborately by the assessee which has been found to be justifiable by the Tribunal and by CIT(A). Since all the purchases made by the assessee are duly backed by the corresponding export and the sales figures have been accepted, then purchase cannot be discarded. Therefore, we taking note of the Tribunal s decision for the preceding assessment year is inclined to allow the appeal of the assessee and direct the A.O. to delete the addition. - Decided in favour of assessee.

Summary

Issues:
Appeal against addition of alleged bogus purchases for A.Y. 2011-12.

Detailed Analysis:
The appellant contested the addition of ?2,85,81,227 on account of alleged bogus purchases for A.Y. 2011-12. The basis of this addition was a survey conducted in the business premise of the assessee for the preceding assessment year 2010-11. The Assessing Officer (A.O.) classified certain purchases as blank bills, leading to the addition of ?1,67,13,174 for three parties - National Enterprises, Priyanka Enterprises, and Shivam Enterprises. However, the CIT(A) deleted this addition. In a related case for A.Y. 2010-11, the Tribunal confirmed that the purchases from these parties were genuine, supported by stock register entries and explanations regarding bill details being filled later after verification. The Tribunal also noted that the parties had received payments via account payee cheques, confirming the genuineness of transactions. The A.O. for A.Y. 2011-12 conducted further enquiries, disbelieving the existence and transactions of the parties, but cross-examination revealed the parties' genuineness and transactions. The A.O.'s findings were deemed baseless, as all payments were reflected in bank statements, and the parties had indisputable transactions with the assessee. The Tribunal found no quantitative discrepancies in stock registers and upheld the genuineness of purchases. Therefore, the addition for bogus purchases was deleted for A.Y. 2011-12.

In the appeal for A.Y. 2011-12, the Tribunal considered the findings of the A.Y. 2010-11 case where no quantitative discrepancies were found in purchases recorded during the survey. The appellant, an exporter of leather goods, explained the reason for blank bills, which was accepted due to no quantitative discrepancies. The Tribunal upheld the genuineness of purchases backed by corresponding exports. As a result, the appeal was allowed, directing the A.O. to delete the addition for A.Y. 2011-12.

In conclusion, the Tribunal's decision was based on the findings from the A.Y. 2010-11 case, where the genuineness of purchases from the disputed parties was established through stock register entries, explanations, and cross-examination. The Tribunal upheld the appellant's explanations and directed the deletion of the addition for alleged bogus purchases for A.Y. 2011-12.