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Facts
The assessee, proprietor of M/s. Chokhani Pharma Vet, filed an income return for AY 2011-12. The AO reopened the assessment based on information that the assessee made purchases from M/s. Sai Traders, whose TIN was allegedly cancelled and was a hawala operator. The AO added Rs. 63,86,750/- for alleged bogus purchases.
Held
The Tribunal held that the assessee provided purchase bills, delivery challans, and reconciled purchases with sales. The assessee also explained that no transport charges were incurred as goods were delivered directly. The claim that M/s. Sai Traders' TIN was cancelled was contested with an appellate order from the Sales Tax Department, suggesting the information provided to the AO was incorrect.
Key Issues
Whether purchases are genuine when the supplier's TIN is alleged to be cancelled and the AO makes additions based on unverified information, and if tax authorities can take a different stand than the Sales Tax Department.
Sections Cited
148
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Income Tax Appellate Tribunal, MUMBAI “A” BENCH : MUMBAI
Before: SHRI B.R. BASKARAN & SHRI ANIKESH BANERJEE
O R D E R PER B.R. BASKARAN, A.M :
The assessee has filed this appeal challenging the order dt.05-11-2024 passed by the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟] and it relates to AY. 2011-12. The assessee is aggrieved by the decision of the Ld.CIT(A) in confirming the addition relating to alleged bogus purchases of Rs.63,86,750/- made from M/s. Sai Traders.
The facts are stated in brief. The assessee is the proprietor of M/s. Chokhani Pharma Vet, deals in the business of animal feed supplements. He filed his original return of income for the year under consideration on 30-09-2011 declaring a total income of Rs.20,39,370/-. Subsequently, the AO received information that the assessee has made purchases from a concern, named, M/s. Sai Traders, a proprietary concern of Shri Rajendra Drolia and his TIN number has been cancelled by the VAT Department. It was also informed by the ADIT that Shri Rajendra Drolia is a hawala operator, having no genuineness business and he was providing only accommodation entries. Accordingly, the AO reopened the assessment of the year under consideration by issuing notice u/s 148 of the Act. During the year under consideration, the assessee had purchased goods to the tune of Rs. 63,86,750/- from M/s Sai traders.
During the course of assessment proceedings, the AO noticed certain deficiencies in the purchases made from M/s. Sai Traders. It was noticed that the goods have been purchased from the above said concern between 16-11-2011 to 18-03-2011. However, the serial number of purchase invoices was found to be consecutively numbered. Further, the purchase bills did not refer to the order details of the assessee and it did not contain delivery details also. The AO also noticed that the transport charges and octroi charges are not debited to the Profit & Loss Account. Accordingly, the AO took the view that the purchases are bogus in nature and accordingly added the entire amount of Rs. 63,86,750/- to the total income of the assessee. The Ld.CIT(A) confirmed the same and hence, the assessee has filed this appeal.
The Ld.AR submitted that the purchases made from M/s. Sai Traders are duly supported by the purchase bills issued by them. With regard to the consecutive numbering, the Ld.AR submitted that the purchase bills are issued by M/s. Sai Traders and hence, the assessee could not know the method of numbering of the invoices. He further submitted that the assessee has, in fact, produced the delivery challans before the AO. In this regard, he invited our attention to the copies of delivery challans placed in the paper book. He further submitted that the goods were supplied by M/s. Sai Traders directly to the godown of the assessee and hence, the assessee did not incur any transport charges. He submitted that the assessee has reconciled the impugned purchases with the corresponding sales. He further submitted that the VAT Department has accepted the sales turnover reported by the assessee.
The Ld.AR submitted that the AO has reopened the assessment on the main reason that the TIN number of M/s. Sai Traders has been cancelled by the Sales Tax Department. He submitted a copy of appellate order dt. 15-06-2018 passed in the hands of M/s. Sai Traders by the appellate authority under the MVAT Act, 2002. Had the TIN number was cancelled, there was no necessity for M/s. Sai Traders to file appeal before the Sales Tax Department. Accordingly, the Ld.AR submitted that the information supplied by the ADIT that the TIN number of M/s. Sai Traders has been cancelled is incorrect and, on that count, alone, the impugned reopening of assessment is not valid. He further submitted that the income tax authorities cannot take a different stand contrary to the stand taken by the Sales Tax Department on same set of facts. In support of this proposition, he placed reliance on the decision rendered by the Hon‟ble Bombay High Court in the case of PCIT vs. SVD Resins &Plastics (P.) Ltd. [2024] 166 taxmann.com 242 (Bombay). The Ld.AR further submitted that the above said decision was followed by the Hon‟ble Bombay High Court in the case of Ashok Kumar Rungta vs. ITO, [2024] 167 taxmann.com 429 (Bombay). Accordingly, the Ld.AR submitted that the assessee has discharged his responsibility to prove the purchases by furnishing all the documents and hence, the tax authorities are not justified in making the disallowance by fully relying upon the report given by the ADIT.
The Ld.DR, on the contrary, supported the order passed by the AO and also reiterated the facts that the purchase invoices are consecutively numbered and they are not supported by the lorry receipts.
Having heard the rival submissions, we are of the view that there is merit in the submissions made by the Ld.AR. We notice that the AO has reopened the assessment on the basis of information given by the ADIT that the TIN number of M/s. Sai Traders has been cancelled by the Sales Tax Department. However, the assessee has furnished a copy of the appellate order passed in the hands of M/s. Sai Traders, which was passed after reopening of the assessment, in order to show that the TIN number of M/s. Sai Traders has not been cancelled. Be that as it may, we notice that the assessee has furnished all the documents to prove the purchases made from M/s Sai Traders. With regard to the allegation of non-availability of bills for transport charges, we notice that the assessee has explained that it did not incur any transport charges, since the goods were delivered directly to the godown of the assessee. The assessee has also reconciled the sales with the purchases. The Sales turnover reported by the assessee has been accepted by the VAT department. We further notice that the AO did not make any enquiry with regard to the purchases made from M/s. Sai Traders in order to ascertain the veracity of the above said explanations and evidences furnished by the assessee. We notice that the AO did not find any deficiency in any of the documents furnished by the assessee, but proceeded to make addition on the basis of unverified information given by the ADIT (Investigation Wing). Since the assessee has proved the claim of purchases with necessary evidences, we are of the view that the impugned disallowance could not be sustained. Accordingly, we set aside the order passed by the Ld.CIT(A) and direct the AO to delete the disallowance of purchases made by him.
In the result, the appeal filed by the assessee is allowed.