2018 (12) TMI 623 - AT - Income Tax

Bogus purchases addition - notices u/s 133(6) and local inquiries were conducted after 3 to 5 years from the year of purchases - Held that - Nothing is left for the AO to make any addition against the assessee. It may also be noted here, that the AO recorded in the Assessment order when notice u/s 133(6) have been issued against the aforesaid parties but the notice return un-served with the remarks left without address . The parties existed at the address given by the assessee and that such enquiry letters have been issued after about 5 years of end of the assessment year. Therefore, same should not be considered adverse in nature against the assessee. Further, such reports and report of the Inspector for making local enquiry, according to the assessee have not been confronted to the assessee. Therefore, such material cannot be used in evidence against the assessee. AO did not make any further efforts to locate the seller parties for their appearance to examine the issue. The GP/NP rate is reasonably declared by the assessee. If the purchases are excluded, the Profit Rate would be very abnormal and would not be according to the norms of the industry. AO did not bring any evidence on record, if any heavy cash or heavy cash transactions are conducted by assessee. The AO merely on presumption noted that Sh. Vinod Parashar has made cash withdrawals which were returned to the assessee. There is no basis for making such an allegation against the assessee. It is well settled law that presumptions howsoever may be high but it cannot take placed on legal proof. Decided in favour of the assessee.

Summary

Issues Involved:
1. Deletion of addition on account of bogus purchases for A.Y. 2006-07.
2. Deletion of addition on account of bogus purchases for A.Y. 2007-08.
3. Deletion of addition on account of bogus purchases for A.Y. 2008-09.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Bogus Purchases for A.Y. 2006-07:
The Revenue challenged the deletion of an addition of ?1,39,41,577/- on account of bogus purchases. The assessee, engaged in manufacturing auto electric parts, had its return processed u/s 143(1) and subsequently reassessed u/s 147 based on a survey u/s 133A at the premises of M/s. Vinod Parashar & Associates. The survey revealed that Vinod Parashar provided bogus bills to various parties, including the assessee. Notices u/s 133(6) to concerned parties returned unserved, and local inquiries indicated these parties were no longer at the given addresses.

The assessee provided extensive documentary evidence, including ledger accounts, purchase invoices, bank statements, stock registers, and VAT forms, to prove the genuineness of the purchases. The AO, however, relied on the statement of Vinod Parashar, who admitted to issuing bogus invoices, and noted cash withdrawals from the bank accounts of the concerned parties.

The CIT(A) found that the actual purchases from M/s Om Industrial Corporation amounted to ?68,09,000/-, not ?1,22,54,000/- as claimed by the AO. The CIT(A) also considered purchases from Vikas Enterprises and Techno Enterprises, concluding that the purchases were genuine based on various records and the fact that the VAT and Excise Departments had accepted the transactions. The CIT(A) emphasized that the statement of Vinod Parashar recorded during the survey was not admissible as evidence since it was not subjected to cross-examination, citing the Supreme Court's decision in CIT vs. S. Khader Khan Sons.

The Tribunal upheld the CIT(A)'s findings, noting that the AO did not rebut the documentary evidence provided by the assessee. The Tribunal also highlighted that the purchases were supported by banking transactions, VAT forms, and production records, and the assessee's books of accounts were not rejected. The Tribunal dismissed the Revenue's appeal, confirming that the purchases were genuine.

2. Deletion of Addition on Account of Bogus Purchases for A.Y. 2007-08:
The Revenue challenged the deletion of an addition of ?2,38,25,575/- on account of bogus purchases. The issue and findings were identical to those in A.Y. 2006-07. The CIT(A) followed the same reasoning and evidence to conclude that the purchases were genuine. The Tribunal, following its decision for A.Y. 2006-07, dismissed the Revenue's appeal for A.Y. 2007-08, confirming the genuineness of the purchases.

3. Deletion of Addition on Account of Bogus Purchases for A.Y. 2008-09:
The Revenue challenged the deletion of an addition of ?60,61,480/- on account of bogus purchases. The issue and findings were consistent with those in A.Y. 2006-07 and A.Y. 2007-08. The CIT(A) applied the same rationale and evidence to determine that the purchases were genuine. The Tribunal, in line with its decisions for the previous years, dismissed the Revenue's appeal for A.Y. 2008-09, affirming the genuineness of the purchases.

Conclusion:
The Tribunal dismissed all the Departmental appeals for A.Y. 2006-07, 2007-08, and 2008-09, upholding the CIT(A)'s findings that the purchases were genuine and not bogus. The Tribunal emphasized the importance of documentary evidence, the inadmissibility of statements recorded during surveys without cross-examination, and the consistency of the assessee's records with VAT and Excise Department filings.