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TMI Blog2024 (1) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... s made sales of the same licenses purchased from M/s. SAR Engineering Ltd. which are also reflected in the bank statements, that the amount received from the parties to whom the same licenses were sold. Another important piece of evidence was that assessee had filed customer wise VAT sales return not only in the case of assessee itself but also of SAR Engineering Ltd., which goes to show that the purchase and sales have been accepted by the VAT department. Once the source of purchases are from the books duly corroborated by inward stock register, quantity details of licenses purchased and corresponding details of sales made to various parties, then it cannot be held that purchases are bogus. The entire case of the ld. AO hinges upon the fact that in the earlier years assessee had admitted that certain purchases made from three parties were not genuine. However, nothing has been stated for the current assessment year, nor even in the earlier years, M/s. SAR Engineering Ltd. was amongst the three parties. The AO has drawn adverse inference based on some admission in the earlier year of some other party to doubt otherwise genuine purchases made from another party in this year. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in law, the Ld CIT(A) has erred to held that the transaction done through account payee cheque are genuine whereas assessee itself vide affidavit dated 22.09.2009 admitted that certain purchases of DFIA/DFRC licenses from three parties during AY 2008-09 to 2010-11 may not be considered genuine purchases even when it was done through account payee cheque and purchase were duly reflected in the books of account 4. On the facts and in the circumstances of the case and in law, the CIT (A) has erred to decide against the Ld AO without providing an opportunity of being heard when admitting additional ground. 5. The appellant craves leave to amend or alter any ground or add a new ground that may be necessary at the time of hearing. 2. Thus, in the grounds of appeal Revenue has challenged the deletion of addition made on disallowance of Rs. 2,51,76,570/- being purchase made from M/s. SAR Engineering Ltd.; and secondly, ld. CIT(A) has erred in deciding against the AO without providing an opportunity of being heard when admitting the additional ground. 3. The brief facts are that assessee has filed return of income on 28/09/2011 declaring total income of Rs. 95,29,250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is seen that amount of Rs. 1,07,04,569/- is received from Mota Trading Private Limited in F.Y.-2010-11, which represents purchase/expense booked by Mota Trading Private Limited from SAR Engineering Ltd. 6. In view of the inquires conducted, M/s. SAR Engineering Ltd. appears to be a non-genuine entity and accordingly, the purchase/expenses booked by Mota Trading Private Limited from this entity are prima-facie non-genuine. 7. The information received was examined along with return of income of the assessee. In view of the above facts and circumstances of the case, I have reason to believe that the income of the assessee M/s. Mota Trading Private Limited chargeable to tax for the AY. 2011-12 amounting to at least Rs. 1,07,04,569/- has escaped assessment due to failure of the assessee to disclose fully and truly all material facts necessary for the assessment in this case in terms of the provisions of section 147 of the IT Act. 4. Thereafter, assessee raised objection against reopening vide letter dated 26/08/2017 and the same was rejected by the ld. AO vide letter dated 19/09/2017. The ld.AO noted that assessee has entered into transaction in M/s. SAR Engineering L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ems vs. JCIT (2006) 206 CTR (SC) 585: 288 ITR 10 (SC), has held that even payment by account payee cheque is not sufficient to establish the genuineness of purchases. D. In fact, self-interest talks in all sorts of tongues and plays all sorts of roles. The indifference of not producing the party which issued the bill(s) is indicative of the truth. The Revenue is not doubting all the purchases but doubting only those purchases for which the genuineness could not be proved. One cannot lose sight of the fact that dark deeds are performed under the cover of darkness and direct evidence can never be available. Sometimes, the facts speak loud and clear. After carefully going through the submissions of the assessee as well as the data/details/ documents available on record, it becomes crystal clear that; (a) The primary onus is on the assessee to establish the genuineness of the purchases claimed by it; (b) Since the primary facts are in the knowledge of the assessee, it is the duty of the assessee to provide the correct address or contact modes of the alleged suppliers: (c) If the investigation done by the Department leads to doubt regarding the genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) before whom the validity of reopening was also challenged apart from the merits. The assessee s submissions and the material placed on record have been discussed in detail in the impugned order. On merits, the assessee had stated as under:- I (B) Disallowance of purchases- Rs. 2,51,76,570/- Your honour would appreciate that the appellant had during the course of assessment proceedings filed various details and explanations to prove that the purchases made from Ms SAR Engineering Limited are genuine. In this regard, the appellant had filed the following details: Ledger account of M/s. SAR Engineering Ltd. In the books of the appellant duly confirmed by them (Refer page 57 of paper book) Copies of purchase bills for licenses purchased from M/s. SAR Engineering Ltd, along with copy of covering letter for transfer of license duly attested by the Bank Manager (Refer pages 68 to 159 of paper book) Copies of Bank Statements showing various payments by crossed account payee cheques made to M/s. SAR Engineering Ltd. (Refer pages 58 to 65 of paper book) Copy of stock register highlighting the purchases from M/s. SAR Engineering Ltd. (Refer pages 160 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the purchases made by the appellant were bogus. 10. The ld. CIT(A) in so far as the validity of reopening was concerned, has held that the entire proceedings u/s. 147/148 is invalid and has quashed the assessment as per his discussion from pages 17 to 20, after referring to various decisions. 11. Further on merits also he discussed the issue in detail holding as under:- It is a fact that all the payments to the suppliers have been made through banking channels. No evidences has been brought on record proving that the suppliers had withdrawn cash immediately after deposits of cheques of the assesses Otherwise a probable presumption could have been reached that the money trail proved returning of money to the assessed from the suppliers. We are aware that payment by cheques in itself is not conclusive. But, the surrounding circumstances are such that prove that the AO had made upheld the addition not on evidence but on surmises and suspicion. It is said that suspicion of highest degree cannot take place evidence and in the case under consideration the AO have not brought sufficient material that could justify huge addition made to the income of the assessee. In my op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 69C of the Act can be applied in the matters where all the purchase and sales transactions part of regular books of accounts. Basic precondition for invoking the section 69C is that the expenditure incurred by the assessee should be out of books of accounts. Here, the payments to the suppliers, as stated earlier, have been made by cheques. So, it cannot be held that expenses were incurred by the assessee outside the books of accounts. Section 69C was introduced in to the statute with a specific purpose. A bare reading of the section makes it clear that if the assessee incurred any expenditure, but offered no explanation about the source of such expenditure or part thereof, or the explanation so offered is not satisfactory, such expenditure may be deemed to be the income of the assessee. The assessee has offered satisfactory explanation about the source of the expenditure in the case before us. In the case of Parekh Corporation Ul Building (32 CCH 129) the Tribunal has discussed the applicability of provisions of section 69C of the Act and has held as under: In so far as the application of 69C is concerned, we find that the same cannot be attracted because section 69C applies her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and not only that, he also drew our attention to corresponding sales made to various parties of licenses purchased from M/s. SAR Engineering Ltd. He also drew our attention to VAT audit report of M/s. SAR Engineering Ltd. that it has claimed credit of VAT on purchases made by them against VAT charged. He further submitted that it is not a case of any entry provider who has provided any accommodation entry for purchase bills and assessee has been regularly purchasing the licenses with the same party in the earlier years and trading with these licenses in wherein the transaction with the said party has been accepted. Therefore, the order of the ld. CIT (A) deserves to be upheld. 14. We have heard rival submissions and perused the relevant finding given in the impugned orders as well as material placed before us. The assessee is engaged in trading of import licenses which was sanctioned to the exporters against exported goods. These licenses are transferable for import of prescribed items. The assessee has brought his import licenses like DFRC/DFIA/DEPB licenses from various parties including SAR Engineering Ltd. During the year assessee has made purchases of these licenses for R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing has been stated for the current assessment year, nor even in the earlier years, M/s. SAR Engineering Ltd. was amongst the three parties. The AO has drawn adverse inference based on some admission in the earlier year of some other party to doubt otherwise genuine purchases made from another party in this year. There is no substance or any concrete finding based on material for doubting the purchases made from SAR Engineering Ltd. and accordingly such reasons are unsustainable. Accordingly, the finding and the observation given by the ld. CIT (A) are upheld and addition has been deleted. 16. One more aspect is that the Revenue in the grounds of appeal has merely challenged that ld. AO was not given opportunity while admitting the additional ground. It has not been specified which additional ground has been admitted. If it is for challenging the validity of reopening u/s 147/148, then it cannot be reckoned as additional ground, because assessee has raised objections against reopening u/s. 147/148 which the ld. AO has rejected in his letter disposing of the objection. Assessee has raised this ground before the ld. CIT (A) as it was also raised before the ld. AO, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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