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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI SANJAY GARG & SHRI ASHWANI TANEJA
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 23.05.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.
The Revenue has agitated the action of the Ld. CIT(A) in deleting the addition of Rs.1,07,61,920/- made by the Assessing Officer (hereinafter referred to as the AO) on account of unexplained expenditure under section 69C relating to the purchase of goods.
The brief facts of the case are that the assessee is engaged in the business of manufacturing of flexible plastic materials and is also involved in trading activities. During the assessment proceedings, the AO noted that the 2 M/s. Uni Packs (India) assessee had made purchases to the tune of Rs.1,07,61,920/- from two 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 said amount 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, deleted the additions so made by the AO. Being aggrieved by the above deletion, the Revenue has come in appeal before us.
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 3 M/s. Uni Packs (India) 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 lower authorities.
We have considered the rival submissions. We find that the additions in this case have been made on the ground that name of the two 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. Even we find that the AO himself has admitted the purchases and sales as genuine. The following lines from the assessment order are relevant in this respect. “The purchases of the assessee, per se, are not the issue here and these alleged purchases are not being treated as bogus. The Sales Tax Department has come down hard on the pernicious practices indulged in by these unscrupulous traders figuring in the list of suspicious dealers and it is evident that the assessee has not purchased the goods from these alleged suppliers. It is equally true that the goods, have somehow entered in the assessee's regular business. The assessee has been unable to give any convincing or cogent explanation as to how these goods happened to come in his possession. The assessee has, thus, incurred expenditure on such purchases which is not explained. The purchases are not being treated as bogus or sham rather the expenditure incurred on such purchases is treated as unexplained.”
When the AO himself has not doubted the purchase and sale transaction and all the expenditure has been duly accounted in the books of account, then it can not be said to be a case of unexplained expenditure. 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 or that the assessee has booked a bogus expenditure. 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 are not warranted at all. 4 M/s. Uni Packs (India) 7. So far as the legal aspect is concerned, the Ld. AR has brought our attention to the decision of the Hon’ble Gujarat High Court in the case of “CIT vs. M.K. Brothers” (1987) 163 ITR 249 wherein it has been 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 can not conclude that the purchases were not genuine.
In view of the above discussion, there is no merit in the appeal of the Revenue and the same is accordingly dismissed.
Order pronounced in the open court on 16.12.2015.