ACIT 22(3), MUMBAI vs. SANJAY O. GOEL LEGAL HEIR, MUMBAI

This appeal by Revenue is directed against the order of the CIT(A)-34, Mumbai dated 12.03.2015 for A.Y. 2010-11. Since none was present for the assessee, when the case was called for hearing, we proceed to dispose off this appeal with the assistance of the learned D.R. and the material on record.

Sr.No. Name of alleged supplier Amount (`) 1 Shiv Industries 4,67,888/- 2 Sidhivinayak Steels 1,84,950/- 3 Krish Corporation 3,82,500/- 4 Sagar Enterprises 1,51,313/- 5 Asian Steel 2,53,125/- 6 Siddhi Enterprises 3,76,875/- 7 Atlas International (I) 33,750/- 8 Deep Enterprises 1,15,650/- 9 Surat Tube Corporation 1,38,128/- 10 Shriti Enterprises 1,56,937/- 11 Skand Industries 3,87,000/- 12 Chanchal Tube Corporation 1,80,675/- 13 Manav Impex 35,625/- 14 Arihant Traders 2,97,451/- 15 Amee Enterprises 2,92,500/- Total 34,54,367/- 2.2. To ascertain the genuineness of the aforesaid purchases (supra), the assessee was required to show cause as to why the said purchases amounting to `34,54,367/- should not be treated as unexplained. In reply thereto, the assessee submitted that the purchases from the above 15 parties (supra) are genuine; reflected in the assessee’s books of account; supported by purchase bills, the copies of which were filed, payments for which were made through normal banking channels, delivery of materials received and onward sales of the same were made to various sugar factories, public refineries in Maharashtra and Gujarat; which sales can be identified with purchases made. In order to ascertain the genuineness of these purchases, the AO issued notices to these parties to which there was no response. AO also recorded statement of the late assessee’s son and Legal Heir, Shri Sagar Sanjay Goel, under section 131 of the Act. The AO

Late Sanjay O. Goel did not accept the explanation put forth by the assessee and brushed aside the evidence/details placed before him, as he was of the view that the assessee’s explanation did not prove the purchases were genuine and also for the reason that the assessee failed to produce those parties from whom purchases were made for examination in this regard. In that view of the matter, the AO treated the aforesaid purchases amounting to `34,54,367/- as bogus and brought the same to tax in the assessee’s hands. The assessment was accordingly completed under section 143(3) of the Act vide order dated 20.03.2013, wherein the income of the assessee was determined at `53,44,750/-; which included the addition of `34,54,367/- on account of bogus purchases. 2.3 Aggrieved by the order of assessment dated 20.03.2013 for A.Y. 2010-11, the assessee preferred an appeal before the CIT(A)-34, Mumbai. The learned CIT(A), after considering the submissions of the assessee, evidence on record and the AO’s views in the matter, allowed the assessee’s appeal following the decision of the Coordinate Bench of the Tribunal in the case of Rajeev G. Kalathil (ITA No. 6727/Mum/2012 dated 20.08.2014 for A.Y. 2009-10) holding that addition made solely on the basis of information received from Sales Tax Department, in such cases where the AO has not carried out any independent inquiries and/or not taken the inquiry to its logical end cannot be sustained. 3.1 Revenue, being aggrieved by the order of the CIT(A)-34, Mumbai dated 12.03.2015 for A.Y. 2010-11, has preferred this appeal wherein it has raised the following grounds: - “(1) On the facts and under the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.34,54,367/- for A.Y. 2011-12 on account of bogus purchases without appreciating the fact that there was specific and verifiable information from the Sales Tax Department that the assessee had resorted to bogus purchases and on being confronted, failed to produce evidence in respect of the purchases. (2) The appellant prays that the order of the CIT(A) on the above ground be set side and that of the AO be restored. (3) The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

Late Sanjay O. Goel 3.2 The learned D.R. was heard in support of the grounds raised. It was contended that since the 15 parties from whom purchases were made by the assessee, in the year under consideration, did not respond to notices issued under section 133(6) of the Act issued by the AO and documentary evidence to support the purchases from these parties could not be verified, the genuineness of the said purchases is not established. Therefore, the AO was justified in treating the said purchases as bogus and bringing the same to tax in the assessee’s hands. 3.3.1 We have heard the learned D.R. for Revenue and perused and carefully considered the material on record; including the judicial pronouncements relied upon by the authorities below. On an appreciation of the material on record, it is evident from the order of assessment that it is on the basis of information received from the Sales Tax Department, Government of Maharashtra, that the AO issued the show cause notice to the assessee to explain the genuineness of the said purchases and issued notices under section 133(6) of the Act to the aforesaid 15 persons from whom the said purchases were made in the year under consideration, to which there was no response. It is seen that the AO primarily relying on the information received from Sales Tax Department and statements/ deposition given before the Sales Tax Department by these parties, held the said purchases to be bogus. While it may be true that these parties did not appear before the AO for whatever reasons, the fact remains that the learned A.R. of the assessee/Legal Heir had submitted copies of purchase bills to evidence purchases for which payments were made by account payee cheques through normal banking channels as reflected in the bank statement and in books of account alongwith corresponding sales with book profit thereon; evidence of moving out of the these goods, etc. It is a fact evident from the record that the AO has not doubted the sales affected by the assessee and therefore it is in order to conclude that without corresponding purchases being made, the assessee could not have effected sales. 3.3.2 In our considered view, the AO has not brought on record any material evidence to conclusively prove that the said purchases are bogus.

Late Sanjay O. Goel Mere reliance by the AO on information obtained from the Sales Tax Department or the sworn statement of the parties before the Sales Tax Department, without affording the assessee any opportunity to cross examine those witnesses in this regard or the fact that these parties did not respond to notice under section 133(6) of the Act, would not in itself suffice to treat the purchases as bogus and make the addition. If the AO doubted the genuineness of this said purchases, it was incumbent upon him to cause further inquiries in the matter to ascertain the genuineness or otherwise of the transactions. Without causing any further enquires in respect of the said purchases, the AO cannot make the said addition on account of bogus purchases by merely relying on information obtained from the Sales Tax Department, the statement/affidavit of third parties without the assessee being afforded any opportunity of cross examination of that persons and for non-response to notices under section 133(6) of the Act. 3.3.3 In the factual matrix of the case, where the AO failed to cause any enquiry to be made to establish his suspicions that the said purchases are bogus, the assessee has brought on record documentary evidences to establish the genuineness of the purchase transactions, the action of the AO in ignoring these evidences cannot be accepted. Further, the Hon'ble Bombay High Court in the case of CIT vs. Ashish International (ITA No. 4299 of 2009 (Bom) has held that the genuineness of the statements relied upon by Revenue is not established when the assessee disputes the correctness of those statements and has not been afforded adequate opportunity to cross examine these parties. Moreover, as correctly observed by the learned CIT(A), when the payment for the said purchases to the concerned parties is through proper banking channels and there is no evidence brought on record by the AO to establish that the said payments were routed back to the assessee, the addition made by the AO as bogus purchases is unsustainable. We are fortified in this view of ours by the decisions of, inter alia, the Hon'ble Bombay High Court in the cases of CIT vs. Nikunj Eximp Enterprises P. Ltd. (372 ITR 619) (Bom), Ashish International (supra) and the decision of the Coordinate Bench of this Tribunal in the case of Rajeev G. Kalathil (ITA No. 6727/Mum/2012 dated

Late Sanjay O. Goel 20.08.2014 for A.Y. 2009-10). In the factual matrix of the case, as discussed above, we find no requirement for interference in the order of the learned CIT(A) and consequently uphold the same. Therefore, Revenue’s grounds raised at 1 to 3) are dismissed.