Addition for Bogus Purchase cannot be made merely based on information received from Sales Tax Department

ITO Vs. Prompt Toys (P.) Ltd. (ITAT Mumbai)

The assessing officer made addition towards purchases on the basis of information received from Maharashtra Sales-tax department which informed that the parties are involved in providing accommodation entries without any business activity. According to the assessing officer, notices issued under section 133(6) were returned unserved with remark “not known” or “unclaimed”. Therefore, the assessing officer opined that though the assessee has furnished certain evidences to justify purchases from above parties, failed to prove the genuineness of purchases in the backdrop of clear findings of Maharashtra Sales-tax department that the parties are involved in providing accommodation entries. It is the contention of the assessee that purchases from above parties are genuine in nature as its purchases are supported by valid purchase bills, delivery challans and payment for such purchases has been made through proper banking channels. The assessee further contended that additions cannot be made towards purchases merely on the basis of third party information ignoring the evidences filed to justify purchases. The assessee further contended before the lower authorities that the assessing officer neither pointed out any error or discrepancy in the books of account nor did make out any case of sales made outside the books of account. In the absence of any finding as to incorrectness of books of account, addition cannot be made towards bogus purchases.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-