K.S. Softnet Solutions Pvt. Ltd Vs ACIT (ITAT Delhi)
ITAT Delhi held that unless there was specific material collected to rebut the submissions of assessee then merely on basis of inference from the circumstances, the purchase could not have been held to be bogus.
Facts- The assessee company is engaged in the business of trading and development of software and hardware, also construction of road and civil contracts in the shape of E-Check post. Based on the search conducted by VAT Department of Mumbai at the addresses of some concerns, it was found that the purchase bills issued by these concerns to various parties including the assessee company were bogus and non genuine.
These parties used to issue the bogus invoices to various persons after charging the commission varying from 0.05% to 0.15% of the invoice amount. The assessee company is one of the beneficiary companies who had found to have procured the invoices from these concerns after paying the commissions as per information received from the VAT Department, Mumbai.
Accordingly, a show cause notice dated 21.03.2013 was issued to the assessee to explain as to why purchase invoices procured from the following entities should not be treated as non genuine and bogus and explain as to why the books of accounts should not be rejected within the meaning of section 145(3) of the Act.
AO made addition of Rs. 53,88,909/-. CIT(A) dismissed the appeal of the assesse. Being aggrieved, the present appeal is filed.
Conclusion- Thus, what can be concluded is that in spite of Ld. AO having been given opportunity, he was unable to lay hand on any material evidence to rebut the submissions of assessee. The order of Ld. AO and the examination of facts and circumstances by Ld. CIT(A) indicate as if a presumption of truth was attached to all proceedings of VAT department, Mumbai and the onus was on assessee to rebut the same. Rather once Ld. CIT(A) had called for specific report from Ld AO then unless there was specific material collected to rebut the submissions of assessee then merely on basis of inference from the circumstances, the purchase could not have been held to be bogus, by the Ld CIT(A).
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal has been filed by the Assessee against order dated 01.12.2016 in appeal no. Del/CIT(A)-5/0134/2013-14 passed u/s 250 of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) by Commissioner of Income Tax (Appeals)-5, Delhi (hereinafter referred to as the First Appellate Authority in short ‘Ld. F.A.A.’) in regard to the appeal before it arising out of assessment order dated 11.03.2014 u/s 143(3) of the Income Tax Act, 1961 passed by Dy. Commissioner of Income Tax, Spl. Circle 5(1), New Delhi (hereinafter referred to as the Ld. Assessing Officer or in short ‘Ld. AO’).
2. The facts in brief are the assessee company is engaged in the business of trading and development of software and hardware, also construction of road and civil contracts in the shape of E-Check post. It is also trading in allied materials. Return of income of Rs. 84,16,530/- was filed and the case was selected for scrutiny. During the assessment proceedings, an information was received from the DIT(lnvestigation)-l, Delhi vide letter F.No. DIT [lnv]-l/MVAT/Del/2012-13/70 dated 26.02.2013 forwarding information received from the VAT Department, Mumbai. The said information was received in this office containing details of such companies who had procured bogus invoices from certain parties. On perusal of information revealed that the assessee company was one of the company who had procured the bills from the following proprietary concerns namely,
1. M/s Asian Steel ( TIN-27860346038v/c(Prop-Dushyant Singh) for Rs.35,09,387/-
2. M/s Suraj Tube Corporation ( TIN-275503044371v/c(Prop.Shri Suresh Singh) for Rs.6,08,044/-
3. M/s Chanchal Tube Corporation ( TIN-27460355491 v/c)(Prop – Shri Shivanand Singh) for Rs.12,71,478/-
2.1 The background is that a search was conducted by VAT Department of Mumbai at the addresses of above concern and it was found that the purchase bills issued by these concerns to various parties including the assessee company were bogus and non genuine. These parties used to issue the bogus invoices to various persons after charging the commission varying from 0.05% to 0.15% of the invoice amount. The assessee company is one of the beneficiary companies who had found to have procured the invoices from these concerns after paying the commissions as per information received from the VAT Department, Mumbai. In this regard, copy of affidavit of the proprietor of these concerns has also been forwarded along with the copy of statement recorded during the search proceedings.
2.2 Accordingly, a show cause notice dated 21.03.2013 was issued to the assessee to explain as to why purchase invoices procured from the following entities should not be treated as non genuine and bogus and explain as to why the books of accounts should not be rejected within the meaning of section 145(3) of the Act.
3. However Ld. AO being not satisfied of the submissions made addition of Rs. 53,88,909/- and in appeal the same were sustained by Ld. CIT(A) while dismissing the appeal and accordingly the assessee is before this Tribunal raising following grounds :-
“1. The Id CIT (A) without appreciating the correct facts of the case is not justified in law and facts and circumstances of the case in confirming the action of ld. assessing officer in disturbing the trading results declared by the appellant company without invoking the provision of section 145(3) of the I.T.Act.
2. The ld. CIT(A) without appreciating the correct facts of the case is not justified in law and facts and circumstances of the case in confirming the addition of Rs. 53,88,909/-/- made by Id assessing officer on account of alleged bogus purchases in the total income of the appellant company only on the basis of information received from investigation unit without pointing out any defect in the explanation/documents furnished and confronting any adverse material and conducting any independent enquiry by ld. assessing officer and thus addition so made against the principal of natural
3. Appellant has every right to make, add, delete, modify or alter any grounds of appeal at the time of hearing.”
4. Heard and perused the record.
5. On behalf of the assessee it has been submitted that the Ld. CIT(A) has confirmed the conclusion of Ld. AO for various reasons without taking into consideration the averments and evidence of the assessee which have been summarized on behalf of the assessee as follows :-
“6. The Ld. CIT(A) confirmed the conclusions of the AO for various reasons are referred herein below. The said conclusions as well as Assessee’s rebuttal thereof, based on facts and material on record, are as under :-
