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TMI Blog2018 (3) TMI 2046X X X X Extracts X X X X X X X X Extracts X X X X ..... yee cheques, which stand cleared to the credit of the bank account of such suppliers. While we agree with the reasoning of the Ld. Departmental Representative that payment by account payee cheques by itself does not prove genuineness of the transaction but in the instant case more is required to prove that the transaction was bogus. We say so for the reason that in the present case, the existence of paintings in the possession of the assessee, of-course, except one which has been sold, is not in dispute. The statement of the stated suppliers/sellers does not prove that the consideration going out of the assessee s bank account has come back to the assessee in the form of cash. Quite clearly, even the statement given by the stated suppliers/sellers only say that cash was returned by them to the person who gave them the cheques; there is uniformity in the statements on the aforesaid aspect. At this point, we may like to emphasize that it was for the Revenue to establish the link, if any, between the person who is stated to have received back the cash from the stated suppliers/sellers and the assessee. The only prudent inference that can be drawn is that the paintings in question have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f paintings: Rs. 1,74,37,500/- 1. On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) - 38, Mumbai ( CIT(A ) erred in upholding the order of the Deputy Commissioner of Income Tax, Central Circle 42, Mumbai ( AO ) in making an addition to total income on account of purchases of paintings from different parties on the alleged ground that the same were bogus in nature. 2. In doing so, he erred in relying upon the statements of the parties from whom paintings were purchased which supports only one part of the transaction. 3. He failed to appreciate and ought to have held that: i. The purchases were genuine and department did not have any material on record to prove that purchases were bogus. ii. The paintings which were purchased during the year were either sold during the year or are lying in the closing stock of the Appellant and would therefore not affect the profits of the year. iii. The Appellant had produced Ledger, purchase Bill, payment proof bank confirmation, and sales tax registration in support that the aforesaid purchases were genuine. 3. A perusal of the Grounds of appeal reveals that the solitary dispute arises with res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintings came to light in the course of search and the subsequent investigation carried out by the Investigation Wing. In particular, the Assessing Officer has referred to the statements recorded of the stated suppliers of the paintings by the Investigation Wing as referred in para-8 of the assessment order. In the course of hearing also, the Ld. Representative for the assessee as well as the Ld. Departmental Representative have taken us through a portion of such statements, copies of which have been placed in the Paper Book. The gist of the statements noted by the Assessing Officer in para-8, and which is in consonance with the reading of the statements made at the time of hearing, is that the said persons denied having supplied any paintings to the assessee company. However, the persons admitted having received payments through account payee cheques drawn by the assessee and deposited in their bank account. The persons uniformly deposed that money was withdrawn after clearing of cheques and after retaining their commission, the balance of the cash was given back to the person, who give them the cheque. At this stage, we may reproduce hereinafter, the answer given by one of such p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o produce the parties from whom the paintings were claimed to be purchased; and that the summons under section 131 of the Act were also issued to such parties. The Assessing Officer records that in response to summons, only one Mr. Rashesh Shah appeared and confirmed that he had indeed sold the paintings mentioned at item-2 3 of the earlier tabulation. The said statement of Mr. Rashesh Shah was not given any credence by the Assessing Officer on the ground that he did not furnish his bank statement when asked for; and, secondly, for the reason that in an earlier deposition before the Investigation Wing on 30/05/2007, the said person had denied having sold any paintings to the assessee and refused to accept that the relevant bills were issued by him. For all the said reasons, the Assessing Officer treated the entire amount of purchase as unexplained. At this stage, we may clarify with reference to the tabulation that out of five paintings, four are claimed to be in stock at the end of the year, and one of them i.e. the paining at item No. 1 was sold during the year for a consideration of Rs. 16,87,500/-, whose purchase price was stated at Rs. 11,25,000/- and accordingly, the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting business in the name of their several business entities. The CIT(A) also concluded that the statements of the sellers were reliable to conclude that cash corresponding to the value of the cheques issued minus the commission, has come back to the assessee through the broker. Thus, in sum and substance, the CIT(A) affirmed the conclusion of the Assessing Officer. In this background assessee is in further appeal before us. 5. Before us, the Ld. Representative for the assessee vehemently pointed out that the lower authorities have totally misdirected themselves in treating the purchases as unproved. It is sought to be canvassed that the factum of paintings being in the possession of the assessee is not doubted, inasmuch as, the paintings were physically found at the time of search, except of-course, in relation to one of the painting, which had been sold. The Ld. Representative for the assessee pointed out that so far as the instant year is concerned, qua the four paintings which are in stock, there is no net debit in Profit and loss account which reduces the taxable income, inasmuch as , whatever purchase price is debited, the same has been carried forward as closing stock. In r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n doubted and, therefore, qua the corresponding purchase of Rs. 11,25,000/-, no adverse view can be taken. In this manner, the addition has been sought to be assailed. 6. On the other hand, the Ld. Departmental Representative has primarily relied upon the stand of the authorities below, which we have already noted in some detail in earlier paras and is not being repeated for the sake of brevity. In nutshell, the Ld. Departmental Representative pointed out that the search proceedings revealed that assessee and its group concerns were in possession of valuable art works, whose source of acquisition could not be fully explained. It is pointed out that the statement of the sellers bring out that the transaction of purchase of paintings as claimed by the assessee were not proved. The Ld. Departmental Representative relied upon the judgment of the Hon ble Calcutta High Court in the case of CIT vs. Precision Finance Pvt. Ltd., 208 ITR 465 (Cal), for the proposition that a transaction could not be said to be genuine merely because the payments have been made by account payee cheques. 7. We have carefully considered the rival submissions. In the instant, the case made out by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated suppliers/sellers cannot be doubted, inasmuch as, the consideration has flown from the assessee to such parties by account payee cheques, which stand cleared to the credit of the bank account of such suppliers. While we agree with the reasoning of the Ld. Departmental Representative that payment by account payee cheques by itself does not prove genuineness of the transaction but in the instant case more is required to prove that the transaction was bogus. We say so for the reason that in the present case, the existence of paintings in the possession of the assessee, of-course, except one which has been sold, is not in dispute. The statement of the stated suppliers/sellers does not prove that the consideration going out of the assessee s bank account has come back to the assessee in the form of cash. Quite clearly, even the statement given by the stated suppliers/sellers only say that cash was returned by them to the person who gave them the cheques; there is uniformity in the statements on the aforesaid aspect. At this point, we may like to emphasize that it was for the Revenue to establish the link, if any, between the person who is stated to have received back the cash fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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