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Facts
The assessee declared total income of Rs.79,32,713/- for AY 2011-12. The Assessing Officer (AO) questioned purchases amounting to Rs.1,41,18,907/- from three parties, as notices under section 133(6) were returned unserved or received no reply. The AO treated these purchases as bogus.
Held
The Tribunal noted that the assessee failed to prove the genuineness of the purchases and that the lower authorities did not adequately consider the remand proceedings. The Tribunal decided to give the assessee one more opportunity to establish its case.
Key Issues
Whether the purchases made by the assessee were genuine, and whether the Ld. Commissioner properly considered the remand proceedings and submissions.
Sections Cited
250, 143(1), 133(6), 142(2), 271(1)(c)
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI OMKARESHWAR CHIDARA
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 21.03.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2011-12.
In the instant case, the Assessee had declared its total income at Rs.79,32,713/- by filing its return of income on 29.09.2011 which was 2 M/s. Ashish Enterprises processed under section 143(1) of the Act. Subsequently the case of the Assessee was selected for scrutiny and therefore statutory notices were issued to the Assessee, in response to which the Assessee from time to time attended the assessment proceedings and filed the relevant details as called for.
On perusing the financials of the Assessee, it was observed by the Assessing Officer (AO) that the Assessee is engaged in the business of Civil & Interior Decorator and during the year under consideration has undertaken a job of interior and allied works for Oracle Financial Services Software Limited and claimed certain expenses on account of alleged purchases made from various parties including from the following parties:
Sr. Name of the TIN Remarks Amount of No. purchase alleged party purchases 1 Concepta 27120753184V Left Rs.42,24,074/- 2 Raj Traders 27810590863V Not known Rs.1671036/- 3 Shreeram 27770533558V Served but Rs.82,23,797/- Enterprises no reply TOTAL Rs.1,41,18,907/-
In order to verify the purchases made from the parties the AO issued notices under section 133(6) of the Act to some of the parties from amongst the list provided by the Assessee. However, the notices issued to the aforesaid parties returned un-served by the postal authorities or no reply was received. Thereafter by issuing the notice under section 142(2) of the Act on 07.03.2014, an opportunity was provided to the Assessee to prove the genuineness of the purchases, in response to the notice the Assessee vide letter dated 14.03.2014 filed copies of the purchase invoices and bank statement. Thereafter, again a final opportunity was granted to the Assessee vide show cause notice dated 14.03.2014. In response to the same, the Assessee filed its submission. The AO though considered the submissions of the Assessee, however, not found the same as acceptable and therefore
3 M/s. Ashish Enterprises treated the alleged purchases of Rs.1,41,18,907/- as bogus purchases by holding as under: “4.1.4. The submissions put forth by the assessee have been carefully considered. However, the assessee's contention that the purchases should not be treated as bogus is not acceptable in view of the following facts: i) The burden of proving that the purchases made by the assessee from the above listed party are genuine purchases lies on the assessee. ii) The notice u/s 133(6) issued to above parties have returned undelivered on the addresses provided by the assessee or no reply is received from parties. The assessee has not provided any satisfactory explanation for not being able to contact these parties or provide any conclusive evidence establishing the genuineness of these purchases. iii) The mode of transportation is not mentioned in the purchase invoices submitted and the assessee has not submitted proof for transportation of goods or stock register to support its claim. iv) The assessee has not been able to explain why the party to whom the notice u/s 133(6) was served has not replied. The assessee submitted that they have contacted the party and they will reply soon. But till the date of passing of this order, no reply has been received. v) The assessee has not produced the above parties for verification and expressed his inability to do so. The assessee has not submitted any evidence of their existence apart from obtaining a stereotyped set of documents. vi) The mere contention that the parties are not enlisted as hawala dealers and, therefore, purchases are genuine cannot be accepted.
4.1.5. It would be proper to bring out relevant legal position on the issues in this case. Merely because the funds have moved through banking channel and the entities concerned have arranged the paperwork, the transaction cannot be held as genuine. In the case of M/s Kachwala Gems V/s JCIT dated 10/12/2003, which has been affirmed by the Supreme Court In the case of M/s Kachwala Gems Vs JCIT (2006) 206 CTR (SC) 585, 288 ITR 10(SC), It was held that payment by account payee cheque is not sufficient to establish the genuineness of purchases. Further, in the case of CIT Vs Prashant (P) (1994) 121 CTR (Cal) 20. the Calcutta High Court has held that even payment by account payee cheque is not sacrosanct and it would not make an otherwise non-genuine transaction genuine.
4 M/s. Ashish Enterprises 4.1.6. In the case of CIT Vs. La Medica (2001) 250 ITR 575, while deciding the matter favor of the Revenue, the Hon'ble Delhi High Court observed that the party had failed to produce evidence to prove bonafides of the seller from whom it claimed to have purchased raw material and it was for this reason that the AO treated the value of raw material as assessee's income from undisclosed sources. In that case, the AAC was of the view that though circumstances were unclear, fact remained that goods were pledged with bank after alleged purchase and. therefore, non production sellers could not be a basis for doubting genuineness of purchases and/or to infer that ever fictitious purchases. Although the Tribunal had upheld deletion of the addition, the Delhi High Court has, vide order dated 15th March, 2001, upheld the Revenue appeal. The Court held that neither the Tribunal nor the AO can hold that if genuineness of the purchases from a particular party is not proved, the assessee may have made purchases from some undisclosed supplier unless the assessee makes such a claim. If no such claim is made, addition of the amount shown as paid by cheque or draft to the bogus suppliers required to ben made in the case of the assessee particularly in a case where quantitative details are not there.
4.1.7. Further in the case of Shreelekha Banerjee and Others Vs CIT (1963) 49 ITR 112 (SC), the Hon'ble Apex Court had categorically held that the department can ask an assessee to produce books of accounts or documents/ evidences pertaining to the explanation filed, if any, and examine the same.
4.1.8. Thus, it is clear that the settled position in law is that the onus lay upon the assessee to prove the genuineness of the purchase transaction claimed by the assessee as genuine. However, this onus has not been discharged by the assessee.
4.1.9. In view of the aforementioned facts, the alleged purchases aggregating to 1,41,18,907/- enlisted above are treated as bogus. By inflating purchases, the assessee has not only concealed its income but has also filed inaccurate particulars thereof. Penalty proceeding u/s 271(1)(c) are initiated separately on this issue.”
The Assessee, being aggrieved, challenged the aforesaid addition before the Ld. Commissioner by filing first appeal, who vide impugned order dismissed the appeal of the Assessee, against which the Assessee is in appeal before us and has submitted that in the instant case the remand proceedings were conducted by the AO and vide notice dated 18.10.2019, the Assessee was requested to appear before him on 23.10.2019 at 2:30 P.M. along with books of accounts etc. and in response to the same the Assessee filed the details on 27.02.2020
5 M/s. Ashish Enterprises along with the documents to substantiate its claim. It is a fact that M/s. Raj Traders & M/s. Shreeram Enterprises by sending email respectively on 27.02.2020 & 28.02.2020 submitted the relevant documents along with attachments, which goes to show that the said parties tried to justify the alleged bogus purchases. Whereas the Ld. Commissioner in the impugned order except acknowledging “written submissions of the Assessee” has not mentioned anything about the same and also failed to take into consideration the remand proceedings. The Ld. Commissioner even otherwise did not bother himself to find out the outcome of the remand proceedings, which reflect non- application of mind. The Ld. Commissioner simply brushed aside the details submitted by the aforesaid parties and by writing that notices under section 133(6) of the Act were issued but no response was received before completion of the assessment proceedings, therefore, the AO was compelled to treat the alleged transactions as bogus and added the relevant amount of Rs.1,41,18,907/- in the total income of the Assessee and the Assessee could not discharge its onus and therefore it has no reason to interfere with the action of the AO. The Assessee therefore submitted that the Ld. Commissioner did not apply his independent mind to the issue involved and therefore the impugned order is liable to be set aside. At last, the Assessee further submitted that if the contention qua quashing of the impugned order is not acceptable then the opportunity may be given to the Assessee to substantiate its claim before the Ld. Commissioner by remanding the case accordingly.
The Ld. D.R. though vehemnatlly argued in support of impugned order, however honestly conceded with the contention of the Ld. Amicus Curiae qua non-consideration of the remand proceedings as well as written submissions of the Assessee by the Ld. Commissioner.
We have heard the parties and given thoughtful considerations to the contention raised by them and perused the material available on record. Admittedly the notices issued under section 133(6) of the Act
6 M/s. Ashish Enterprises were returned undelivered on the addresses provided by the Assessee or no reply has been received from the aforesaid parties. Even otherwise, the assessee also failed to provide any satisfactory explanation for not being able to contact the aforesaid parties. The parties from whom the Assessee allegedly made bogus purchases also failed to appear before the AO. It is admitted fact that vide notice dated 18.10.2019 the Assessee was asked to appear in the remand proceedings on 23.10.2019 at 12:30 P.M. which remained un-complied with. From the reply dated 27.02.2020 it appears that the alleged reply dated 27.02.2020 (page No.81 to 96 of paper book) in fact belongs to M/s. Raj Traders, M/s. Shreeram Enterprises & M/s. Concepta from which the Assessee had allegedly purchased the material. Even otherwise there is no acknowledgment qua reply submitted by M/s. Raj Traders, M/s. Shreeram Enterprises & M/s. Concepta allegedly submitted in response to the notice dated 18.10.019. The Assessee also failed to demonstrate the connection of reply dated 27.02.2020 by M/s. Raj Traders with the notice dated 18.10.2019 and therefore the Assessee’s contentions are not tenable. However it is not in controversy that remand proceedings were conducted but there nothing appears in the impugned order qua remand proceedings and therefore considering again the peculiar facts and circumstances of the case and the documents filed by the Assessee and the submissions made by the parties, we are of the considered view that for substantial justice, it would be appropriate as suggested by the Ld. Amicus Curiae, to give one more opportunity to the Assessee for establishing its case before the Ld. Commissioner, hence for the just decision of the case, the case is remanded to the file Ld. Commissioner for decision afresh by calling the remand report, if deems fit. Suffice to say, the Ld. Commissioner shall afford reasonable opportunity to the assessee to substantiate its claim.
We also direct the Assessee to cooperate with the appellate proceedings and to file the relevant submissions/documents which would be essential and required by the Ld. Commissioner for proper
Thus, the case is remanded accordingly.
In the result, the appeal filed by the assessee, stands allowed for statistical purposes.
Order pronounced in the open court on 31.07.2024.