ASHOK KUMAR,DELHI vs. ACIT, CIRCLE- 36(1), NEW DELHI

Facts in brief qua the issue in dispute are that out of the total purchases, purchases made from following parties were questioned by the Assessing Officer:

M/s Micro International at H. No. 125, Ground Floor, Khasra No. 760, Village Siraspur, Delhi - 1100042.

M/s Apex Traders, at 72/136, Siraspur, New Delhi - 110042. 3. M/s Silver Line (India) at Flat NO. 113, 1st Floor, House No. 1, 13- Block, Panchwati, Azadpur, Delhi - 110033. 4. M/s Reema Ploymers Pvt. Ltd. at 208, Nitika Tower - I, Commercial Complex, Azadpur, Delhi-110033.

The Assessing Officer observed that notices issued under section 133(6) of the Act were returned back in case of the first two parties. In case of party at Serial No. 3, no reply was received back. The reply received in case of fourth party was not found tenable by the Assessing Officer. In view of the observations, the Assessing Officer asked the assessee to produce those parties. But, the assessee failed to produce those parties and filed only document available in his books of accounts i.e. purchase bills and ledger accounts of those parties in the books of the assessee. Regarding the purchase bills, the Assessing Officer observed that same were identically computer-generated and appeared not to be genuine. Therefore, again the Assessing Officer asked the assessee to produce those parties to whom notice under section 133(6) of the Act was issued. The Assessing Officer also attempted to verify the genuineness of the parties through Inspector of his office. The Inspector reported that M/s Micro International and M/s Apex Traders could not be located as no such addresses existed. Regarding M/s Silver Line (India), the Inspector reported that an NGO named “Pehala Kadam” was running its operation at the given address for last 2 ½ year and said party did not exist at that address. 4.1 The Authorised Representative of the assessee was confronted with the report of the Inspector and the assessee was again asked to produce those parties. The assessee insisted that purchases were made from dealers registered with VAT Department of Delhi, who must have verified their addresses. As the assessee failed to produce those parties, and purchase bills were not found genuine by the Assessing Officer, he disallowed the purchases amounting to ₹ 48,01,597 from following three parties: Sl. Name of the Party Amount of No. Purchases in Rs. 1. M/s. Micro International 20,74,222 2. M/s. Apex Traders 4,10,550

Before us, the learned Counsel of the assessee submitted that the lower authorities are not justified in sustaining the disallowance of purchases, where corresponding sales have not been doubted. According to him, it is undisputed that no sales can be made without corresponding purchases, no purchases can be disallowed in the case of the assessee without disturbing the sales. He submitted that there is very marginal decrease in the gross profit and net profit in the year under consideration as compared to earlier year. The learned Counsel also submitted that no books of accounts have been rejected by the Assessing Officer. He submitted that merely because the supplier had not appeared before the Assessing Officer, it cannot be concluded that purchases were not made by the assessee and in support of the above proposition, he relied on the decision of the Hon’ble Bombay High Court in the case of CIT Vs Nikunj Eximp Enterprises (P) Ltd in ITA 5604 of 2010.

The Learned DR, on the other hand, relied on the order of the lower authorities and submitted that the assessee has not supported corresponding sales with the help of the stock register. He submitted that in the case relied upon by the assessee, the tax payer filed letter from the suppliers with stock reconciliation, however, in the instant case, neither confirmation, nor any stock reconciliation statements has been filed and therefore, the case relied upon is distinguishable.

We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In the instant case, the Assessing Officer has disallowed the purchases of Rs. 48,01,597 shown by the assessee from three parties. According to the Assessing Officer, the bills issued by those parties are computer-generated identical bills and in his opinion same were not genuine. Further, on verification through notice under section 133(6) of the Act and through Inspector of his office, those parties were found not in existence at the addresses provided by the assessee. Therefore, for verification of the purchases, the Assessing Officer asked the assessee to produce all the parties before him. But the assessee only supplied copy of purchase bills and ledger accounts of those parties in the books of accounts maintained by the assessee. The fact of returned back of the notice u/s 133(6) and parties not found during verification by the Inspector were duly informed to the assessee, however, no attempt was made by the assessee to provide their current addresses to the Assessing Officer and the assessee only reiterated that those parties were duly registered with VAT and the Assessing Officer might obtain their address from banks or Registrar of Companies. Despite specifically being asked to produce those parties for verification of their purchases, no attempt was made by the assessee to produce those parties. The Ld. CIT(A) has also observed that no quantitative details of purchases and sales were provided by the assessee. In such circumstances, we are of the opinion that the purchases claimed by the assessee are not free from doubt. The assessee has to demonstrate sales corresponding to the purchases. In the case relied upon by the assessee, the sales were made to government department and thus sales were not doubted, but the instant case it has not been brought on record, whether the sales are made to the government Department or export sales. If the sales corresponding to the purchases are not demonstrated, then possibility of the entire purchases being doubtful cannot be denied. If the corresponding sales are demonstrated, then even if delivery of goods from purchase parties is not established, then possibility of purchase of goods in cash from another parties, cannot be denied. In the facts and circumstances of the case, we are of the opinion that without reconciliation of purchases and corresponding sales with the help of the stock register, sustaining the disallowance of entire purchases is not justified. Therefore, we restore this issue back to the file of the Assessing Officer for deciding afresh with the direction to the assessee to file stock reconsideration statement along with relevant invoices of sales, documents in support of delivery of the goods from purchase parties. 7.1 The assessee shall also produce relevant purchase parties along with their confirmation. The Assessing Officer may carry out inquiries as deemed fit in the facts and circumstances of the case and pass order after providing adequate opportunity of being heard to the assessee. The ground raised