CA Sandeep Kanoi
ITAT Mumbai has in the case of Shri Rajeev G. Kalathil Vs. DCIT held that Purchases can not be termed as bogus by the AO merely because the supplier was listed as a hawala dealer by the Vat authorities.
First ground of appeal is about deleting an addition of Rs.13,69,417/- on account of non-genuine purchases.During the course of assessment proceedings,notices u/s. 133(6)of the Act were sent to some of the sundry creditors on random basis.However,notice in the cases of M/s D K Enterprises (DKE)and N B Enterprises(NBE)were returned back by the postal authorities with the “Not Known” remarks.Therefore,he was asked give correct addresses or in the alternative to explain as to why the purchases of Rs.5,05,259 from NBE and Rs. 8,64,158/- from DKE totaling to Rs. 13,69,417 should not be treated as bogus purchase. He was also asked to submit sample bills of those parties.The assessee submitted a letter dated 05-12- 2011 as under:
“……. we tried to communicate them but there is no response at all from parties. Further our person visited at parties’ places as per address on our record, but parties are not available on respective places. Please find enclosed herewith letters from our banker stating the payment details to respective parties in subsequent year …”
The sample bills submitted contained TIN numbers of the vendors.The same were verified in the Maharashtra sales tax department official website www.mahavat.gov.in.The website had specifically put up the name of NBE with TIN number as ‘Hawala Dealer’ who issued bill without delivery of goods.As regards DKE,the website search did not yield any results for the TIN numbers shown in the bills.The AO concluded that the TIN number shown in DKE bill itself was bogus.After considering the submissions of the assessee,the AO held that same was not acceptable ,that merely payment to parties through banking channel did not prove the genuineness of purchase or genuineness of expenses made by the assessee.He made an addition of Rs. 13.69 lakhs (Rs.5.05 lakhs +Rs.8.65 lakhs)to the total income of the assessee.
Aggrieved by the order of the AO, assessee preferred an appeal before the First Appellate Authority(FAA).Before him it was argued that assessee had filed copies of bills of purchase from DKE and NBE,that both the suppliers were registered dealers and were carrying proper VAT and registration No.s,that ledger accounts of the parties in assessee’s books showed bills accounted for,that payment was made by cheques,that a certificate from the banker giving details of cheque payment to the said parties was also furnished.Copies of the consignment,received from the Government approved transport contractors showing that material purchased was actually delivered at the site was furnished before the AO. It was also argued that some of the material purchased from the said parties were lying part of closing stock as on 31.03.2009 as per the statement submitted on record.After considering the assessment order and the submissions made by the assessee,FAA held that the transactions were supported by proper documentary evidences, that the payments made to the parties by the assessee were in confirmation with bank certificate,that the suppliers was shown as default under the Maharashtra VAT Act could not be sufficient evidences to hold that the purchases were non-genuine, that the AO had not brought any independent and reliable evidences against the assessee to prove the non-genuineness of the purchases, that there was no evidence regarding cash received back from the suppliers.Finally,he deleted the addition made by the AO .
Before us,Departmental Representative argued that both the suppliers were not produced before the AO by the assessee,that one of them was declared hawala dealer by VAT department, that because of cheque payment made to the supplier transaction cannot be taken as genuine.He relied upon the order of the G Bench of Mumbai Tribunal delivered in the case of Western Extrusion Industries.(ITA/6579/Mum/2010-dated 13.11.2013).Authrorised representative (AR) contended that payments made by the assessee were supported by the banker’s statement, that goods received by the assessee from the supplie was part of closing stock,that the transporter had admitted the transportation of goods to the site.He relied upon the case of Babula Borana (282 ITR251),Nikunj Eximp Enterprises (P) Ltd. (216Taxman171)delivered by the Hon’ble Bombay High Court.
Wehave heard the rival submissions and perused the material before us.We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end.But,he left the job at initial point itself.Suspicion of highest degree cannot take place of evidence.He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account.We find that no such exercise was done.Transportation of good to the site is one of the deciding factor to be considered for resolving the issue.The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock.As far as the case of Western Extrusion Industries. (supra)is concerned,we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods.But,in the case before us,there is nothing,in the order of the AO,about the cash traial.Secondly,proof of movement of goods is not in doubt. Thererfore,considering the peculiar facts and circumstances of the case under appeal,we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on file to endorse the view taken by the AO.So,confirming the order of the FAA,we decide ground no.1 against the AO.