DCIT, CIRCLE-2(1)(2), SURAT vs. M/S. SHANTAI EXIM LIMITED, SURAT

On the other hand, the ld.CIT-DR for the Revenue supported the order of AO.

We have considered the submission of both the parties. We find that the AO while passing the assessment order made addition on account of bogus purchase of Rs.38.81 crore. Initially, the additions were upheld by the ld.CIT(A), however, on further appeal before the Tribunal, the entire addition on account of bogus purchase was deleted by our predecessor by passing the following order: “7. We have considered the rival submissions and perused the material available on record. The Hon’ble Gujarat High Court in the case of Pr. CIT vs., Tejua Rohitkumar Kapadia [2018] 91 taxmann.com 324 (Gujarat) held as under : “Where purchases made by assessee-trader were duly supported by bills and payments were made by account payee cheque, seller also confirmed transaction and there was no evidence to show that amount was recycled back to assessee, Assessing Officer was not justified in treating said purchases as bogus under section 69C.” 7.1. The aforesaid Judgment has been confirmed by the Hon’ble Supreme Court reported [2018] in 94 taxmann.com 325 (SC). The ITAT, Delhi Bench, in the case 3 (AY 2012-13) Shantai Exim Limited, Surat of Bhatia Diamonds Pvt., Ltd., vs., ITO, Ward-4(4), New Delhi, vide Order Dated 24.06.2019 in para-8 following its earlier order in the case of same assessee, in which it was held in para-8 as under : “8. We have considered the submissions of both the parties and gone through the material on record. It is an admitted fact that an identical issue have been considered by ITAT, Delhi SMC-Bench in the case of the same assessee in preceding A.Y. 2011-2012 and similar addition have been deleted on merits and this fact is also stated by the Ld. D.R. that facts are identical in assessment year under appeal as have been considered in A.Y. 2011-2012. In the present case also, two of the parties have denied making any sales to the assessee. No entries of such sales have been recorded in the books of account. Two parties have admitted to have made sales to the assessee and filed reply under section 133(6) of the I.T. Act, 1961, supported by bill and Affidavit, on which, no adverse inference have been drawn by the A.O. All the payments of purchases have been made through banking channel which have not been doubted by the authorities below. The assessee also filed the quantitative details of opening stock, purchase goods, manufacture, sales made and closing stock at Page-25 of the PB which also supports the explanation of assessee that he has made genuine purchases which have been sold later on. These facts clearly show that there was no basis for the authorities below to consider it to be a case of bogus purchases. It is also an admitted fact that statement of Shri Rajendra Jain was not provided to assessee nor statement was subjected to cross-examination on behalf of the assessee. He has also retracted from his earlier statement. Therefore, there was no basis to make any addition against the assessee. The issue is, therefore, covered by the Order of ITAT, Delhi SMC-Bench in the case of same assessee for the A.Y. 2011-2012 Dated 05.04.2019 (supra). In view of the above, we set aside the Orders of the authorities below and delete the entire addition. Ground Nos. 3 to 7 of the appeal of the Assessee are accordingly allowed.” 7.2. In the case of M/s. Nangalia Fabrics Pvt. Ltd., (supra), the Hon’ble Gujarat High Court confirmed the findings of the Tribunal in which the Tribunal accepted the submissions of the assessee that purchases are supported by bills, entries in the books of account and payments are made by cheque and quantitative details provided. The Hon’ble Gujarat High Court in the case of M.K. Brothers (supra), held that “amounts representing purchases could not be added as income as there was no evidence to conclude that the transactions were bogus.” Considering the facts of the case in the light of above decisions, it is clear that assessee made purchases from Damor family concerns which are duly supported by bills and vouchers. All the payments are made to Damor family concerns through account (AY 2012-13) Shantai Exim Limited, Surat payee cheques. The Damor family concerns have confirmed all the transactions with the assessee before the authorities below. The Damor family concerns have filed their income tax returns reflecting the transaction with the assessee, and also have got their books of account audited by an independent auditor. The assessee undisputedly made the exports of all the finished purchase goods which includes impugned purchases which have not been doubted by assessing officer. Without purchases, assessee could not have made the exports. The explanation of assessee as regards exports supported by all the documentary evidences which have not been disputed. The assessee filed confirmation statement of all the purchase parties. The assessing officer in the remand proceeding also examined the purchase parties and their auditor, who have confirmed the genuineness of the transaction. There is no evidence on record to prove that amount of purchases given to Damor family have come back to the assessee. In survey, no incrementing material was found to prove that assessee made bogus purchases. Whatever evidence was found during the course of survey i.e., bills and invoices of purchases have already been recorded in the books of account. The sellers are also assessed to tax and have declared the transaction in their returns which have been accepted by the Revenue Department. The seller party have also replied to the notice under section 133(6) of the Income Tax Act. The assessing officer did not reject books of account of assessee under section 145 of the Income-Tax Act. If the aforesaid addition is confirmed, according to explanation of assessee, it would give gross profit rate of 41.4 % which is impossible to earn in this line of trade. The assessing officer accepted in the remand report that assessee maintained stock quantitative details, in which, no deficiency have been pointed-out. The assessing officer analysed the KYC documents of bank statements of Damor family and their bank statements and nothing adverse was found against them or against the assessee. The assessee produced complete details before the authorities below in which no deficiency have been pointed-out. The assessee need not to prove source of the source i.e., purchase made by the purchaser parties i.e., Damor concerns. The assessee also established common practice in Textile Sector in Surat for supply of goods at door step of consumer. Thus, the initial burden upon assessee to prove the genuine purchases have been discharged by assessee. The assessee has fully discharged its onus of proving the purchases by giving names, addresses, confirmation, PAN, bills and invoices, details of payment by account payee cheques, ITRs and Audit reports of its suppliers. Merely because further suppliers to Damor family did not respond to the notice of the assessing officer is no ground to reject the explanation of assessee. Since in the case of assessee no incriminating material was found to prove bogus purchases, therefore, the decision in the case of M/s. M.K. Proteins Limited (supra), would not apply. It may also be noted here that in A.Y. 2010-11 the assessing officer accepted similar purchases in the scrutiny assessment order under section 143(3) of the Income Tax Act on the identical facts. Similarly, seized material was also considered in that year. The Ld. CIT, Surat, however, did not agree with the assessment order of the