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TMI Blog2024 (8) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT (A) was not correct in reducing the gross profit already returned by the assessee at 4.74% from 12%, as the gross profit returned by the assessee in relation to the sales made by the assessee, did not have bearing on the purchases of the assessee, qua the bills procured by the assessee, by making savings in VAT etc. It is on such premise the revenue s appeal has been allowed, by making a direction to the AO to assess the income from such transaction at 12.5% in each of the assessment years, on the purchases so made by the assessee. The assessee has happily accepted such finding as this has benefited the assessee, looked from any angle. In a given case if the Income Tax Authorities are of the view that there are questionable and / or bogus purchases, in that event, it is the solemn obligation and duty of the Income Tax Authorities and more particularly of the AO to undertake all necessary enquiry including to procure all the information on such transactions from the other departments / authorities so as to ascertain the correct facts and bring such transactions to tax. If such approach is not adopted, it may also lead to assessee getting away with a bonanza of tax evasion and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said amount under Section 69C of the Act on the ground of there being unexplained payments qua the disputed purchases. 4. Such order passed by the A.O. was challenged by the assessee in appeal before the Commissioner of Income Tax (Appeals) [for short, CIT (A) ] wherein the assessee contended that the AO has not rejected the books of accounts by invoking the provisions of Section 145 (3), hence, the A.O. was not justified in invoking the provisions of Section 69C. It was also assessee s case that during the hearing in question as well as the preceding two years, the assessee had declared gross profit for the assessment year 2007-2008 at 4.23% and for the assessment year 2008-2009 at 4.28%. It was also contended that for the subsequent assessment year 2009-2010 a gross profit of 4.74 % was declared in respect of the disputed purchase the disclosed gross profit was 0.27% which was lower by 4.47% than the normal gross profit margin of 4.74% in respect of other accepted genuine transactions. It was also contended that if the disallowance is sustained, there will be an abnormal increase in the gross profit at 17.81% which was almost impossible in trading activity of chemicals and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Mr. Suresh Kumar is not in a position to dispute that the assessee had furnished all the relevant documents in so far as the purchases are concerned namely the ledger accounts, confirmation of suppliers, purchase bills, delivery statements and other documentary evidence, despite which the A.O. on the basis of information received from the Sales Tax Department had decided to make additions of the said amounts on the ground that the purchases were presumed to be doubtful. Mr. Suresh Kumar is also not in a position to point out anything from the orders passed by the AO and/or from the order passed by the CIT (A) as to whether the information which was received by the department qua the transactions of the assessee was specific to the assessee s transactions as questioned by the department. Mr. Suresh Kumar has fairly stated that notices were issued to some of the suppliers. He also states that the suppliers were not independently examined nor their evidence was recorded. Mr. Suresh Kumar would accordingly submit that the Court needs to consider the present appeal on the questions of law as raised. 9. On the other hand, learned counsel for the assessee has opposed these appeals. He s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bogus. Such information, if available, was required to be supplied to the assessee to invite the response on the same and thereafter take an appropriate decision. Unless such specific information was available on record, it is difficult to accept that the AO was correct in his approach to question such purchases, on such general information as may be available from the Sales Tax Department, in making the impugned additions. This for the reason that the same supplier could have acted differently so as to generate bogus purchases qua some parties, whereas this may not be the position qua the others. Thus, unless there is a case to case verification, it would be difficult to paint all transactions of such supplier to all the parties as bogus transactions. 12. In our opinion, a full addition could be made only on the basis of proper proof of bogus purchases being available as the law would recognise before the AO, of a nature which would unequivocally indicate that the transactions were wholly bogus. In the absence of such proof, by no stretch of imagination, a conclusion could be arrived, that the entire expenditure claimed by the petitioner qua such transactions need to be added, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, qua the bills procured by the assessee, by making savings in VAT etc. It is on such premise the revenue s appeal has been allowed, by making a direction to the AO to assess the income from such transaction at 12.5% in each of the assessment years, on the purchases so made by the assessee. 16. The assessee has happily accepted such finding as this has benefited the assessee, looked from any angle. However, in a given case if the Income Tax Authorities are of the view that there are questionable and / or bogus purchases, in that event, it is the solemn obligation and duty of the Income Tax Authorities and more particularly of the A.O. to undertake all necessary enquiry including to procure all the information on such transactions from the other departments / authorities so as to ascertain the correct facts and bring such transactions to tax. If such approach is not adopted, it may also lead to assessee getting away with a bonanza of tax evasion and the real income would remain to be taxed on account of a defective approach being followed by the department. 17. The decision in Mohammad Haji Adam Company (supra) as relied on behalf of assessee is also quite apposite in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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