PCIT Vs Max Flex and Imaging Systems Ltd (Bombay High Court)
The Bombay High Court dismissed the Revenue’s appeal against the order of the Income Tax Appellate Tribunal restricting the addition on alleged bogus purchases to 12.5% of the purchase value for Assessment Year 2006-07. The Assessing Officer had reopened assessments for AYs 2006-07 to 2009-10 by issuing notices under Section 148 of the Income Tax Act, 1961 on the basis of information received from the Sales Tax Department that certain dealers were allegedly providing accommodation entries and that the assessee was a beneficiary of such dealers.
For AY 2006-07, the AO disallowed purchases of Rs. 26,96,787/- and added the entire amount to the assessee’s income. The CIT(A) sustained the addition, while the ITAT partly reversed the addition by restricting the disallowance to 12.5% of the purchases. The High Court noted that the CIT(A) and ITAT had concurrently found that the assessee furnished ledger accounts of the concerned parties, purchase bills, bank statements, proof of payments through cheques and other evidence supporting the transactions.
The Court also noted that the AO had relied principally on information from the Sales Tax Department without disclosing to the assessee the nature of the information received and had not issued notices under Section 133(6) to the suppliers for further enquiries. Importantly, the AO had not disputed the sales made by the assessee from the corresponding purchases.
