2020 (1) TMI 566 - AT - Income Tax

Bogus purchases u/s 69C - Disallowance of depreciation - HELD THAT - On a perusal of the order of the Ld.CIT(A) we find that Ld. CIT(A) held that the genuineness of the purchases is not proved. However, entire purchases cannot be disallowed and only depreciation is to be disallowed as the assessee has capitalised the purchases in its books of accounts and claimed only depreciation. On a perusal of the order of the Ld.CIT(A) we do not see any valid reason to interfere in the decision of the Ld. CIT(A), since the genuineness of the purchases could not be verified as the suppliers were not traceable in the addresses given as reported by the Inspector on his physical inspection, Ld. CIT(A) has rightly disallowed only to the extent to the deprecation on such purchases and deleting the rest of the disallowance of purchases. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the assessee. Reopening of assessment - HELD THAT - Since no arguments have been advanced by the Ld. Counsel for the assessee thus, this ground is not adjudicated. Bogus purchases - assessee has obtained accommodation entries from dealer namely M/s.Raj Traders which is listed in the Sales Tax Department website and declared as hawala entry provider by the Sales Tax Department and provided accommodation entries without delivery of goods - HELD THAT - Addition was made solely based on the information from the Sales Tax Department and its website showing the dealer namely M/s. Raj Traders as accommodation entry provider. There is nothing on record to suggest that the purchases made by the assessee from M/s. Raj Traders is non-genuine except relying on the Sales Tax Department website showing M/s. Raj Traders as hawala dealer. Neither the Assessing Officer nor the Ld. CIT(A) made enquires with the dealer to prove that the purchases made by the assessee are not genuine. AO did not issue notice u/s. 133(6) of the Act to the dealer to verify the genuineness of the transactions. It has been noticed earlier in the A.Y. 2009-10 the Assessing Officer deputed the Inspector to verify the genuineness of the transactions with the dealers. However, in the year under consideration no such efforts have been made by the Assessing Officer. He simply relied on the Sales Tax Department website wherein M/s. Raj Traders was said to have been shown as hawala dealer. Without making any enquires, without proving that the evidences furnished by the assessee in the form of purchases orders, invoices, bank statements, ledger copies, etc., are not genuine the addition could not have been made solely based on the Sales Tax Department website, especially when the sales were accepted by the Assessing Officer and without there being any purchases there cannot be any sales. Thus, we direct the Assessing Officer to delete the addition made towards purchases from M/s. Raj Traders.

Summary

Issues:
1. Disallowance of purchases from M/s. Mehul Traders and M/s. Rahul Traders for A.Y. 2009-10.
2. Reopening of assessment and addition of purchases from M/s. Raj Traders for A.Y. 2011-12.

Analysis:
1. Disallowance of Purchases for A.Y. 2009-10:
- The Assessing Officer disallowed purchases from M/s. Mehul Traders and M/s. Rahul Traders due to unverifiable genuineness.
- Inspector's report stated inability to locate both traders' premises, leading to disallowance of purchases.
- Ld. CIT(A) upheld disallowance of depreciation but deleted the rest, considering capitalization in books.
- Tribunal affirmed Ld. CIT(A)'s decision, emphasizing unverified purchases' depreciation disallowance.

2. Reopening of Assessment for A.Y. 2011-12 and Addition of Purchases from M/s. Raj Traders:
- Assessing Officer treated purchases from M/s. Raj Traders as non-genuine based on Sales Tax Department's hawala entry provider declaration.
- Assessee provided purchase-related documents, but Ld. CIT(A) sustained addition relying on Sales Tax Department's website.
- Tribunal noted lack of independent enquiry by authorities, solely relying on website information.
- No evidence suggested purchases' non-genuineness, directing deletion of the addition from M/s. Raj Traders.

Conclusion:
The Tribunal dismissed the appeal for A.Y. 2009-10 but partly allowed the appeal for A.Y. 2011-12, directing the deletion of the addition made towards purchases from M/s. Raj Traders. The judgments emphasized the necessity of verifying genuineness through proper enquiries rather than solely relying on external declarations, ensuring fair assessment practices.