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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: SHRI SANJAY GARG & SHRI ASHWANI TANEJA
Per Sanjay Garg, Judicial Member:
The above titled cross appeals, one by the assessee and the other by the Revenue have been preferred against the order dated 30.12.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.
ITA No.1223/M/2014 & 2 Shri Jigar Vinaychandra Shah 2. The assessee in this appeal has agitated the action of the Ld. CIT(A) in sustaining the addition at the rate of 15% of the purchases allegedly made by the assessee from suspicious dealers whose names were listed in the website of the Sales Tax Department.
The Revenue, on the other hand, has agitated the action of the Ld. CIT(A) in restricting the addition to the 15% of the purchases as against the total addition of Rs.1,07,71,713/- made by the Assessing Officer (hereinafter referred to as the AO) holding the purchases made by the assessee from the suspicious dealers as bogus and adding the same into the income of the assessee as unexplained expenditure.
The brief facts of the case are that the AO during the assessment proceedings noted that the assessee had debited purchases of Rs.14,36,61,735/- in the P& L account of his proprietary concern M/s Hinendra Impex. The AO noted that the assessee had made purchases from certain parties whose names were listed in the list of suspicious dealers as provided in the official website of Sales Tax Department, Government of Maharashtra, who were allegedly providing accommodation entries without doing actual business. The AO relied upon the statement taken by the Sales Tax Department from some of the above listed parties and concluded that the purchases made by the assessee in respect of the above stated amount were bogus. He therefore added the amount of Rs.1,07,71,713/- as unexplained expenditure into the income of the assessee. Being aggrieved by the above addition, the assessee preferred appeal before the Ld. CIT(A).
The Ld. CIT(A), considering the overall facts and circumstances of the case and the evidences furnished by the assessee observed that AO had not doubted the factum of sales being made with respect to the purchases made by the assessee and also that the payments were made by cheque into the accounts of the respective parties. There was no evidence before the AO to suggest that ITA No.1223/M/2014 & 3 Shri Jigar Vinaychandra Shah those cheques have come back to the assessee. He however further observed that the assessee could not prove the genuineness of the purchases made from the 12 parties whose names were listed in the list of Sales Tax Department. He therefore held that the component of the purchases should be treated as unexplained investment and since it was a part of the books of account and a part of the business of the assessee, profit thereupon should be brought to tax. He therefore held that 15% of such purchases be added to the income of the assessee and thereby profit declared be increased. The assessee thus has come in appeal before us agitating the sustaining of addition @ 15% of the purchases whereas the revenue has come in appeal against the relief granted by the CIT(A) to the assessee.
The Ld. A.R. of the assessee, before us, has submitted that the statement if any, of the suspicious dealers were allegedly made before the Sales Tax Authorities, however, no such statement had been recorded in this respect by the Income Tax Authorities. The assessee was not given opportunity to confront the said persons by way of cross examination. All the payments were made through cheques which were reflected in the bank statements of the respective parties. The assessee had produced all the details such as ledger accounts, copies of purchase bills, copies of bank statements, monthly quantitative statements and inventory of closing stock. He has further contended that even the sales made from these purchases and the profit thereupon was accepted by the AO. He has also relied upon the decision of the Hon’ble Bombay High Court in the case of “CIT v. M/s. Nikunj Eximp Enterprises Pvt. Ltd.” of 2010 decided on 17.12.2012 and further of the Hon’ble Calcutta High Court in the case of “Diagnostics v. CIT” (2012) 20 taxmann.com 692 (Cal.). The Ld. D.R. on the other hand, has relied upon the findings of the assessing officer.
ITA No.1223/M/2014 & 4 Shri Jigar Vinaychandra Shah 7. We have considered the rival submissions. We find that the additions in this case have been made on the ground that name of certain suppliers figured in the list of suspicious dealers in the website of sales Tax department. Except that, no evidence has been pointed out by the AO which may prove that the assessee has indulged in the bogus purchases. The AO has not doubted the sales made by the assessee. The expenditure is duly accounted in the books of accounts by the assessee. It is not the case of the AO that the goods were purchased by the assessee at a lesser rate or that someone has supplied the goods to the assessee for free. When it is not so, solely on the basis of unconfronted and general statements of alleged suppliers made before sales tax authorities, addition u/s 69C under the circumstances on account of purchases is not warranted at all. The Hon’ble Gujarat High Court in the case of “CIT vs. M.K. Brothers” (1987) 163 ITR 249 has held that where there was nothing to indicate that the amount given by the assessee for the purchases made had come back to the assessee in any other form and where there was no evidence that the said concerns gave bogus vouchers to the assessee and even the statements made by the alleged suppliers in no way implicate the transaction with the assessee then under such circumstances it cannot be said that entries for the purchase of goods made in the books of account of the assessee were bogus and no addition in this respect can be made. The Ld. A.R. of the assessee has relied upon the decision of the Hon’ble Bombay High Court in the case of “CIT vs. Nikunj Enterprises (P.) Ltd.” (2013) 35 taxman.com 384 (Bombay) wherein the Hon’ble Bombay High Court has upheld the findings of the tribunal that where the assessee filed letters of confirmation of suppliers, copies of bank statement showing entries of payment through account payee cheques to suppliers and stock reconciliation statements, sale of purchased goods was not doubted, the transactions were supported with evidences and confirmations, in such an event merely because the suppliers have not appeared before the AO or the Ld. CIT(A), one cannot conclude that the purchases were not genuine.
ITA No.1223/M/2014 & 5 Shri Jigar Vinaychandra Shah Even when it is not the case of the Revenue that sales turnover of the assessee has decreased or the net profit ratio is less than the earlier assessment years or the subsequent assessment years, then, in our view, making addition on assumption that the assessee would have booked a lesser profit has no justification. In view of the above, we do not find any merit in the action of the lower authorities in making/sustaining the impugned additions and the same are accordingly ordered to be deleted.
In the result, the appeal of the assessee is hereby allowed, whereas, the appeal of the Revenue is hereby dismissed.
Order pronounced in the open court on 22.01.2016.