9911796707
TMI Blog2016 (7) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax(Appeals) failed to appreciate that the genuineness & the creditworthiness of the relevant purchase parties could not be substantiated. 3. The appellant craves to amend modify, alter, add or forego any ground of appeal at any time before or during the hearing of this appeal. 3. The facts in brief as culled out from the records are that the assessee, a domestic company, was engaged in business of trading in surgical items, equipments (primarily 'Sutures') which were imported mainly from the USA and European countries and also procured locally products of Chinese/Korean/Taiwanese origin and further supplied to Government/other hospitals. For the year under consideration, the assessee filed return of income declaring total income of Rs. 18,42,973/- on 30/11/2006. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short 'the Act') was issued and served within stipulated period. In the course of scrutiny proceedings, the Assessing Officer (in short 'the AO') observed that out of the total purchases of Rs. 6,75,46,178/- purchases of Rs. 1,50,46,781/- was made from local suppliers, the details of which are as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose parties. The assessee raised objections in respect of authenticity of Inspector's report which were not accepted by the AO on the ground that he had visited all places and reported that those places were located in residential areas and at one place i.e. Reliance Medicare, he even reported name of the occupant Sh. Sunil Bagga. The AO further asked the assessee to produce documents of entire cycle of placing purchase orders to those parties till the delivery to the assessee, which included purchase orders containing specifications of the items, rates and proof in support of transportation or mode of delivery. According to the AO, the assessee failed to produce these documents in respect of parties other than M/s. G. Healthcare. The contention of the assessee that the purchase of those parties were appearing in the stock list, was not accepted by the AO, on the ground that same did not explain the entire cycle of transaction. Further the AO carried out enquiries through notice under Section 133(6) of the Act from the banks in which bank accounts of the supplier parties were maintained. The AO collected copy of bank statements/account opening forms etc. from banks and he found tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore nullifying any impact on the profit/loss arising thereon. 4. The sales corresponding to these purchases were not doubted by the Assessing Officer. 5. The goods were received by the assessee from vendors at its business place and the payments had been made through account payee cheques. 6. The inspector's report did not contain the name and addresses of the witnesses on the basis of who the statement he concluded that no such businesses ever existed on those premises, but no such witness was produced for cross-examination by the assessing officer. The inspector did not examine any occupant of the building in his verification process. 7. The suppliers were petty person and peoples engaging such supply businesses need not to hold shop or sign board and they could conveniently operate from the residential premises, since most of the business was conducted over phone by them. 8. The assessee was aware of the main suppliers of those goods but could not purchase material directly from them as either they do not give bills for supplies more they take payments in cash and not by check or draft and it may be probably that their sources of imports were not par. Further t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the confirmation letters of the said vendors which contained their respective PAN's were obtained from those parties by the assessee, thus, the appellant could not be faulted for incorrectness or otherwise of the PAN's of the suppliers, 18. it was wrong to say that the assessee company introduced own concealed money from undisclosed sources into the business activity under the garb of purchase by reducing the profit by booking bogus purchases, as the assessee had already declared around 14% gross profit at Rs. 21, 77, 167/-on the sale of the impugned purchase items as well as declared closing stock of Rs. 6, 89, 306 for unsold stock as on 31/03/2006. 6. The Ld. Commissioner of Income-tax(Appeals), forwarded photocopies of the replies of the assessee to the AO calling for a remand report on the issue whether there was any connection between the introducers of the bank accounts of the suppliers and the assessee company and verify whether the purchases held as bogus were in fact sold to the hospitals. In compliance, the Assessing Officer reported that bank accounts of M/s Advanced Surgical, M/s Alok Surgical and M/s Bhalla Surgical were introduced by one company, namely, M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Representative (in short 'Sr. DR') relying on the order of the Assessing Officer submitted that the assessee neither provided current addresses or whereabouts of the supplier parties nor produced those parties along with their books of accounts and vouchers etc. which could establish the fact of purchases made from them. She insisted that the material fact of purchases of alleged suppliers has not been proved and in absence of purchases, the alleged suppliers cannot supply goods to the assessee and they were supplies only on papers and goods have been procured in cash from somewhere else. 10. On the other hand, the Ld. Authorized Representative (in short 'the AR') of the assessee relying on the order of the Ld. Commissioner of Income- tax(Appeals), submitted that when the sales are not doubted by the AO, how the sales can be done without the corresponding purchases of the goods. He further reiterated the submissions made before the learned Commissioner of Income-tax (Appeals). 11. We have heard the rival submissions and perused the material on record including the paper book containing pages 1 to 362. The main findings of the ld. AO in respect of the purchases from the local sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain suppliers but cannot purchases material straight from then as they either do not give bills for supplies or they take payments in cash only and not by cheque or drafts. Probably it may be that their sources of imports are not above par. It is well known that from China goods are being delivered by the suppliers to the importers in India on COD basis inclusive of India import duties etc. and at highly competitive and cheaper raters. It is stated that it is well known that practically all types of Chinese origin goods are available in Indian markets at a much cheaper price, which is far less than the cost of production in India. In this regard the appellant encloses a photocopy of a cartoon published in the newspaper Times of India dated 29.09.2008, which is self-explanatory and also supports the said fact now well seen and already appreciated by all. Further they are located either in Kolkata or in Chennai and to send anybody there to pick up the purchases is also quite cumbersome. Therefore, assistance was sought from the persons in New Delhi for such supplies. Thus, it has been claimed that the observations of the Inspector in his report are not material in the light of the na ..... X X X X Extracts X X X X X X X X Extracts X X X X
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