INCOME TAX OFFICER-17(1)(1), MUMBAI vs. ANANTAM, MUMBAI

Aggrieved, the assessee filed appeal before the ld.CIT(A) and claimed that the impugned transactions were genuine as it had purchased fabrics from M/s R.K. Impex and M/s R.M. Textiles by paying purchase amount through account payee cheque to the suppliers in regular course of business activities. The goods so purchased were also sold to the buyers in usual course of business activities. It is claimed to have been fully explained that no bogus purchases was made from the aforementioned two entities by furnishing the relevant documentary evidences like purchase invoices, sales invoices, banking transaction reflecting payment to the suppliers and receipt from the buyers of the goods so purchased establishing genuine purchase from the above two entities during the assessment proceedings. The AO had not pointed out any defect in the audited books of account where the said purchase was duly accounted. Only dispute is purchase from the aforementioned two entities. No question was raised on the sales of the same goods. The assessee alleged that the AO had neither provided opportunity to it to P a g e | 5 A.Y. 2016-17 Anantam, Mumbai cross examine the above suppliers nor found out any independent evidences from his individual enquiry establishing the fact that the appellant is indulged in bogus purchase. The ld.CIT(A) observed that the claim of the assessee was not only substantiated by the Purchase Invoices and Sales Invoices but also the banking transaction endorsed its claim that the impugned purchase was genuine and made in course of normal business activities. The statements of bank account maintained with Indian Overseas Bank in the name of the appellant also reflected that the payment to the above two suppliers and receipts from the buyers was transacted through banking channel. Pursuant to the Audited statements of accounts, the name of impugned suppliers was duly accounted under the head of Sundry Creditors. The due payment to the suppliers was transferred in subsequent years. It is further observed by him that although the proprietor of the said suppliers, in his statement, confirmed that they had not engaged in actual business activities with any of the One World Group entities and failed to furnish sales bills made to One World Group entities, he had not told anything about the assessee regarding bogus sales made to it. It is well settled principle by various appellate authority and Hon’ble court that where the assessee maintains quantitative reconciliation between purchases and sales and substantiates purchase and sales with invoices, bank P a g e | 6 A.Y. 2016-17 Anantam, Mumbai statements, and ledger entries, no need to treat the same as bogus purchase. Even where purchases involved accommodation entries, if payments were through banking channels, the AO cannot treat full bogus purchases as income. The other hand, the AO failed to establish the impugned purchase as bogus through any independent enquiry and proper verification. The AO totally relied upon the information received from the Investigation Wing. Even, he had not conducted any cross examination to verify the veracity of the information. Accordingly, the entire addition of Rs.1,69,96,367/- as bogus purchase was deleted.

Before us,the ld.DR that the addition was justified as the impugned transactions were bogus purchases as revealed in the search and seizure operations. The assessee failed to produce the delivery challans. The ld.CIT(A) completely overlooked the findings of the Investigation report which showed that the transactions were merely accommodation entries.

The ld.AR contested the arguments. He submitted a Paper book containing 719 pages containing partywise purchase and sale/purchase bills/sales invoices/ledger account of R.K.Impex and copy of bank statement showing payments. Submissions were stated to have been made on various dates before the AO. He reiterated the same P a g e | 7 A.Y. 2016-17 Anantam, Mumbai contentions as made before the lower authorities, claiming that all required documents to establish the genuineness of the purchases had been produced and filed during the assessment proceedings as well as before appellant authority. Further the assessee had earlier explained has purchased goods on “landed in warehouse” terms wherein LRs as per the trade practice goes are not received by them from the supplier. The respondent sells on “ex- warehouse” terms wherein the customer arranges for loading and pick up.

We have carefully perused the records and heard the rival arguments. We find that the assessee before the AO made detailed submissions filing necessary details and replies as is evident from the Paper book submitted by the ld.AR before us which contained entire relevant details and evidences. However, the AO failed to point out any infirmity therein as also the book results. He merely placed reliance on the Investigation wing report without making any independent inquiry or investigation into the matter at all. Therefore, he failed to bring on record any corroborative evidence to buttress the findings of the Investigation wing information passed on to him. It is not discernible from the records that the assessee was allowed the copy of the statements of the alleged entry provider or for the matter any opportunity of cross examination was granted to the assessee to rebut P a g e | 8 A.Y. 2016-17 Anantam, Mumbai the same. Therefore, we do not find any merit in the grounds of appeal of the Revenue alleging that impugned transactions were bogus or its case was covered by the jurisdictional High Case cited above. Accordingly, we do not find any infirmity in the conclusions drawn by the ld.CIT(A) which is therefore, upheld. Thus, the grounds of appeal being devoid of any merit are dismissed.

In the result, the appeal of the Revenue is dismissed.