Brief Facts of the Case and Question
Brief Facts: Assessee, an individual,proprietor of M/s. Hydro Pure System,is engaged in the business of installation,erection and servicing of water purifying systems.He is deriving income from business and other sources. He filed his return of income on 28.9.10,declaring total income of Rs.18.40 lacs .The AO completed the assessment u/s.143(3) of the Act on 1/3/ 2013,determining the income of the assessee at Rs.1,56,05,880/
Question Raised:
On Account of Bogus Purchases if supplier is treated as hawala dealer by Vat Authorities Does this form as valid ground for invoking provisions of section 69C
Contention of the Assessee:
The assessee was not satisfied with the act of assessing officere,the assessee filed a letter dt.12.2.2013 and argued that the purchases made by him were genuine, that purchase of material was duly recorded in the books of account, that the parties concerned had submitted relevant supporting documents, i.e. sales tax confirmation and copies sales tax return, that those documents were submitted during assessment proceedings ,that there was no change in the GP ratio, that material purchased during the year was used in production of equipments.
Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate authority(FAA).Before him, it was contented that all material purchase and issuance made were duly recorded and accounted for in inward and outward movement register, that the assessee submitted material register before the AO showing the receipt of material from the parties mentioned in the show cause notice. He also furnished copies of invoice and L/R of receipt of inward material purchased, bank statement showing payment made by cross Account payee cheques to the above mentioned parties, copies of VAT returns, IT returns and confirmation of the impugned parties along with their MVAT reports and acknowledgements. It was argued that the AO had not treated the purchases bogus, that he was merely relying on the list of the suspicious dealers published by the VAT department
Contention of Revenue:
During the assessment proceedings the AO directed assessee to furnish a list of persons from whom he had made purchases. He found that following parties from whom the assessee had shown purchases were appearing in the list of “suspicious dealers” who were indulged in issuing only bills without delivery of any goods/material for a commission as per the official website of sales tax department
