Indian Ion Exchange & Chemicals Limited Vs ITO (ITAT Ahmedabad)
Assessee is engaged in trading of water treatment plants. It filed return declaring income of ₹25,93,822. Later, reassessment was initiated u/s 147 based on information that Assessee had obtained accommodation entries of bogus purchases of ₹92,20,100 from M/s Siddh Syndicate, controlled by entry operator Shri Mahendra Shantilal Patel. AO treated the entire purchases as bogus & added ₹92,20,100 to income. CIT(A)/NFAC confirmed the addition.
Before Tribunal, Assessee did not press the ground challenging reopening u/s 148. On merits, it argued that it had submitted purchase bills, ledger accounts, & bank payments. It also correlated purchases with sales & filed a reconciliation statement. The gross profit (GP) for the year was 12.63%, significantly higher than 9.29% in the previous year, which indicated genuine trading. It contended that no cross-examination of the entry provider’s statement was allowed, violating natural justice. Reliance was placed on Gujarat High Court decisions (Premkumar B. Rathi, Simit P. Sheth, Bholanath Polyfab, Kesari Exports) holding that only profit element in bogus purchases can be taxed, not the entire amount.
Revenue argued that M/s Siddh Syndicate was conclusively found to be a bogus billing entity; the entry provider admitted u/s 132(4) that he issued only bills & returned cash. Assessee failed to produce delivery challans, transport details, vehicle numbers or any proof of physical movement of goods.
