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TMI Blog2016 (7) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... can be added to the income of the assessee. Accordingly, we restore the matter back to the file of the Assessing Officer with the direction to compute the peak of the unexplained cash utilized in making cash purchases. - ITA Nos. 512 & 2811/Del/2010; 482/Del/2013 - - - Dated:- 20-5-2016 - Sh. I. C. Sudhir, Judicial Member And Sh. O. P. Kant, Accountant Member For the Appellant : Sh. Smt. Anima Barnwal, Sr. DR For the Respondent : Sh. V.K. Bindal Ms. Sweety Kothari, Advocates ORDER Per O. P. Kant, A. M. These three appeals of the Revenue are directed against three separate orders of the Commissioner of Income-tax (Appeals) for assessment years 2006-07 to 2008-09 respectively. Since the common issue of disallowances of purchases is involved in all the three appeals, same are heard together and decided by this consolidated order. ITA No. 512/Del/2010 for AY: 2006-07 2. First, we take up the ITA No. 512/Del/2010. The grounds of appeal raised by the revenue are as under: 1. Learned Commissioner of Income Tax(Appeals) erred in law and on the facts and circumstances of the case in deleting the additions of ₹ 1,44,53,981/- made by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -126, Defence Colony Rs, 6,29,998/- 9 M/s Parag Surgical Instrment Co. H. No, P-29, Triloki Colony, Kotla Mubarakpur ₹ 20,20,000/- 10. M/s Sharma Enterprises, Q-305, Janak Park, New Delhi-18 ₹ 24,79,375/- Total ₹ 1,50,46,781/- 4. For verification of the parties, the AO sent his Office Inspector at the addresses of the above local suppliers. The Inspector after verification of the places at the addresses reported that he could not locate the party at serial No. 9 in the about table i.e. M/s Parag Surgical Instruments Company, P-29, Triloky colony, Kotla Mubarakpur. In respect of the other parties, he reported that the places were located in residential areas and no indication of any shop or business establishment was found and local enquiries revealed that no business activity was carried out from those addresses. On 11/12/2008, the AO confronted the assessee with the result of the inspector s report and asked to produce Principal Officers of the firms/concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re very technical nature and manufactured by large companies. The AO attempted to verify the Permanent Account Number (PAN) of the suppliers provided in their confirmations furnished by the assessee from the database of the Income Tax Department, however, in not a single case, PAN provided were belonging to the respective suppliers. In view of the above findings, the AO observed that except M/s. G Healthcare, the local purchases shown in books of accounts were bogus and fictitious and created to route its own money back through banking channel and thus held purchases of ₹ 1,44,53,981/- as unexplained and from undisclosed sources. 5. Aggrieved, the assessee filed appeal before the Ld. Commissioner of Income-tax(Appeals). The submissions made by the assessee before the Commissioner of Income-tax(Appeals) in brief are as under: 1. the assessee mainly purchased Sutures of Chinese/Korean/Taiwanese origin from the local suppliers as the same were substantially cheaper than the ones imported directly from the USA and Europe and the demand of these products was not at large as compared to the superior quality items therefore the assessee preferred to buy them from these pett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot buy these goods from said importers and or their petty agents or retailers and perforce take supplies from the established suppliers like the assessee. 10. Only because the said addresses were found in predominantly residential areas and also since no banners or boards were on display, an adverse conclusion was drawn by the Assessing Officer that no business activity could possibly be carried out from those premises. 11. On producing the party M/s G Healthcare, it was accepted as genuine supplier, however, said party was also could not be located at the address by the inspector. 12. Without admitting, presuming that the said parties or not the actual supplier but only the name lender, but since the goods were also sold by the assessee then there must be some source of supplies. 13. The identity of the suppliers got confirmed from the said bank accounts itself where the address, photographs, identity proofs, residence proof etc. were duly filed by the suppliers. 14. The goods were actually supplied at the office of the assessee by those vendors without levy of any additional transportation charges at the goods were not heavy or bulky for which an tempo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax(Appeals) also forwarded details of quantity-wise purchase and sales in respect of the local supplies and other documents with the direction to verify whether purchases held bogus had in fact been sold, item-wise to the hospital etc. but according to the learned Commissioner of Income-tax( Appeals), no specific adverse comment was made by the Assessing Officer in the remand report. 7. In view of the above submissions of the assessee, the Ld. Commissioner of Income-tax(Appeals) was of the view that impugned items had been accepted as sold by the Assessing Officer then their existence cannot be put to any questions simultaneously and as a corollary the purchase of said items cannot be held as bogus. Ld. Commissioner of Income-tax (Appeals) also admitted that even if the goods in question had not been bought from the impugned suppliers, but definitely same had been bought from someone somewhere else against a price. He further observed that no cash was introduced in the books of accounts of the assessee during the year which could suggest that money was rooted back to the books of the assessee. He further observed that the impugned bank accounts cannot be said to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Account Number (PAN) of the suppliers, and Inspector enquiry revealed that addresses of the suppliers were located mostly in residential areas and no business activities from those places were reported by the persons in neighborhood. 12. The ld. Commissioner of Income-tax(Appeals), after considering the submission of the assessee concluded that in absence of purchase, no sales can be made and, therefore, since sales corresponding to the local purchases have not been doubted, logically the purchases have been made by the assessee. He has also observed that there was no cash introduced in the books of accounts of assessee. As regard to inconsistency in the PAN s of the suppliers, the Ld. Commissioner of Income-tax(Appeals) held that though PANs were mentioned by the suppliers in their confirmations, and therefore assessee cannot be held responsible for the inconsistency in PANs. 13. We find that in the circumstances, when sales are not doubted and no inconsistency in item-wise inventory is found, but, on the other hand, the purchases from supplier parties are not getting substantiated with necessary documentary evidence, the logical presumption will be that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission, whereas obtained bills from the so-called local suppliers parties. Non-production of the parties along with evidence in support of their purchases, cash withdrawals in their bank accounts after getting cheques from the assessee and no proof of purchases or payment for purchases by these parties, not having any correct PAN s, etc. facts and circumstances goes to establish that these parties are only supplier on paper and issued only bills to the assessee without supplying the goods. It is impossible for these parties to supply goods without corresponding purchases. Whether transactions of purchase are genuine, is a question of fact and the primary onus was on the assessee to prove the genuineness of the purchases, which in the facts of the above case is not discharged by the assessee. The assessee cannot take the plea that it was not responsible for failure of suppliers in substantiating their purchases . 16. Thus, in the facts and circumstances of the case in hand, we hold that the purchases from the said supplier parties are not established, however, simultaneously, the sales corresponding to the purchases are not doubted and this obvious contradiction get resolved ..... X X X X Extracts X X X X X X X X Extracts X X X X
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