INCOME TAX OFFICER WARD 10-3, NEW DELHI, NEW DELHI vs. GRAPE MARKETING PVT LTD, DELHI

Brief facts of the case are that the assessee filed return of income for the A.Y under consideration on 07.11.2019 at an income of Rs.

The Investigation Wing informed the AO that the assessee had made purchases from two concerns, namely M/s Usha Trading and M/s Kumar Sales which were bogus and that they are being operated by entry operators Suresh Kumar Agarwal and Anuj Bukardiwala. Ultimately, the AO added the purchase made from M/s Usha Trading of Rs 1,75,94,841/- and from M/s Kumar Sales of Rs 61,30,874/- as bogus purchase and assessed the total income of the assessee at Rs 2,26,26,362/- u/s 147.

The assessee went in appeal before the CIT(A), who deleted the addition on the basis of the fact that the Assessing Officer had not examined the documents such bills of purchase; copies of GRs of transporters; C Forms issued by the Sales Tax Department; evidence of payment through banking channels filed by the assessee and also did not make any further verification/enquiry.

Aggrieved by the action of the ld. CIT(A), the Revenue is in appeal before us.

Before us, the ld. DR vehemently argued that the assessee had not responded to the summons u/s 131 of the Act and, therefore, the Page 3 of 9 to veracity of purchases made. the Assessing Officer wanted to make enquiry regarding bogus accommodation entry issue through summon proceedings u/s 131 of the Act but the same was not completed as assessee did not appear and, therefore, onus is on the assessee to prove the genuineness which he failed.

Further, the ld DR argued that the ld. CIT(A) only relied on the audit report, sales tax copy C Form and payment made through bank but these are only self- serving documents and, therefore, cannot be believed. The ld DR argued that the bogus accommodation entry needs to be inquired/examined by the Assessing Officer and notice u/s 131 of the Act was issued to the assessee for that purpose only and assessee failed to appear. Therefore, the ld. CIT(A) ignored this and decided the cases based on incomplete inquiry.

The ld. DR relied on the decision of High Court of Chhattisgarh in the case of Bharat Krishi Kendra v. Union Of India [2022] 136 taxmann.com 245 (Chhattisgarh) which held that:

Per contra, the ld. counsel for the assessee contended that the Assessing Officer made the addition only on the basis of the fact that he had some information that the assessee had done bogus purchases. The ld. counsel for the assessee emphasized that the Assessing Officer has found no fault in any of the documents filed by the assessee and preferred not to make any further verification/enquiry. Thus, when the nature of transaction is duly explained during the assessment as well as when the same is fully supported by the relevant documents and details the same could not be doubted and, therefore, no addition on the basis of the same could be made. Further, the ld. counsel for the assessee relied on case laws and judgements which hold that when the various documents which prove the genuineness of transaction are available, no addition could be made. The assessee filed various documentary evidence to prove the genuineness of purchases and also requested the adverse material collected by the Assessing Officer including the copy of statement recorded. An opportunity to cross examine was also requested. The Assessing Officer neither commented on the documents filed by the assessee nor replied to its demand for material and cross examination and made the addition.

The ld. counsel for the assessee continued by saying that making an allegation is one thing and sustaining the addition is another and there is a wide difference between the two. On the basis of allegation, the Assessing Officer can carry out the investigation but the addition can be sustained only when there are sufficient evidences to support the allegation, in the absence of which no addition on account of unexplained credits can be made as held by ITAT Delhi in the case of ITO vs. M/s. Canton Software Pvt. Ltd. CO No. 230/Del/2017. Thus, it is very clear that the Assessing Officer has failed Page 6 of 9 ignored the provisions of law and various judicial pronouncements in this regard and made the addition with closed eyes which is untenable in the eyes of law and thus liable to be deleted.

We have heard the rival submissions and have perused the relevant material on record. We find from the facts of the instant case, that the AO received an Investigation Report where it was stated that the assessee is indulging in activity of bogus purchase as the parties from whom purchases are made is being operated by the entry operators. We find from the assessment order that the AO had made several efforts to examine the veracity of the information. The AO issued notices on 30.08.2019; 11.10.2019; 05.11.2019,14.11.2019 and finally a show cause notice on 05.12.2019 along with notice u/s 131 of the Act. We also find that the assessee did not comply with the above notices and even ignored the notice u/s 131 of the Act. The assessee, instead of respecting the summons u/s 131 of the Act and joining the investigation on the serious charge of purchases being arranged from entry operators, filed the details on mail on 17.11.2019. The AO, burdened with time constraint of passing the assessment order before time barring date, passed the assessment order on the same date without examining the documents/evidences produced. The assessee has to share the Page 7 of 9 opportunities given to it, as discussed above, to establish the veracity of its activities.

Considering the facts of the case in totality, we are of the considered view that the CIT(A) fell in error in not establishing the facts of the case by calling a remand report from the AO, especially when one of the parties, Jitendra Kumar, proprietor of M/s Kumar Sales, had admitted on oath to the fact of providing accommodation entries. In view of the discussion as above, we deem it fit to remit the issue of bogus purchases to the file of the AO to examine it and adjudicate afresh. Needless to state that the AO shall provide adequate opportunities to the assessee to present its case with documents/evidence. The Assessee is also directed to avail the opportunities and furnish documents/evidences as required. Ground of the Revenue is allowed for statistical purposes. is allowed for statistical purposes.