Case Law Details
Non-appearance of the supplier in absence of any other corroborate evidence cannot be sole basis to justify the stand of the Revenue that a transaction of purchase is bogus
Additions to the income of an assessee while making assessment or reassessment treating purchases for the business as bogus one has remained common issue in many cases. Recently, in Beauty Tax (Earlier Florals India) vs. DCIT [ITA No.508/JP/2016, decided on 10.04.2017], a similar situation arose.
Facts & Decision in Brief:
During the course of assessment proceedings for A.Y 2008-09, the AO observed that the name of one Mahaveer Textile Mills figured in list of creditors where the amount exceeded Rs. 10 lacs. Information under section 133(6) of the Income Tax Act, 1961 (for short ‘the Act’) was called for from Mahaveer Textile Mills and, thereafter, summons were issued under section 131 of the Act calling for the personal appearance of the said party. On non-complaince by Mahveer Textile Mills, the assessee was asked to produce the said party along with certain documents. However, as the assessee could not produce the said party, the entire purchase transaction was held to be non- genuine and purchases of Rs. 13,39,969 was treated as bogus and added to the income of the assessee. The assessee carried the matter in appeal before CIT(A) and submitted that it has purchased raw material from Mahaveer Textile Mill worth of Rs. 13,39,969 in F.Y 2006-07 and the payment was still outstanding. During the course of appellate proceeding for AY 2008-09, the appellant provided statement of accounts, bills signed by the supplier, confirmation of account by the supplier. The CIT(A) without going into the merits of the case noted that since purchases do not pertain to A.Y 2008-09 but pertain to previous A.Y 2007-08, the disallowance of purchases worth Rs. 13,39,969 was deleted. The Revenue did not appeal against the said order passed by the CIT(A) for AY 2008-09. However, based on the said findings of the CIT(A), the assessment proceedings for AY 2007-08 were reopened by issuance of notice under section 148 of the Act and thereafter the reassessment was completed bringing the said amount of Rs. 13,69,962 to tax in the impunged A.Y 2007-08.
The supplier was from Delhi and he denied to visit Jaipur for attendance purpose and he sent requisite confirmation by registered post.
Amount outstanding against supplier had been paid by account payee cheque in April, May, 2015 and there was no outstanding against the supplier. Copy of Bank Statement showing clearance of cheques for payment to Mahaveer Textiles were produced.
The AO drew reference to the assessment proceeding for AY 2008-09 and finally held that the assessee was accorded ample opportunity to produce the party so as to establish genuineness of the transactions claimed to have been made with the said party. However, the assessee failed to prove the genuineness of the expenses claimed by it inspite of providing all the reasonable opportunity. The AO finally held that in view of conclusive evidence brought on record, it can be safely held that the expenses of Rs. 13,39,969 debited by the assessee as payable to Mahaveer Textile Mills are bogus which deserves to be disallowed and was added back to the declared income to the assessee.
On appeal before ITAT, reliance was placed by assessee on following case laws where purchases made have been treated as genuine and additions made on account of purchase have been directed to be deleted:
- DCIT vs. Gems Paradise [ITA No. 700/JP/2009]
- Sambhav Gems Ltd vs. ACIT [36 TW 254 (JP)]
- Vaibhav Gems Ltd vs. ACIT [ITA No. 654/JP/06, dated 13.10.2006]
- Shri Badri Narain Modi vs. DCIT [ITA No. 50/JP/04, dated 29.09.2006-39] TW 105
- Shree Narain International vs. ACIT [ITA No. 472/JP/05, dated 31.05.2007]
- Shri Paras Mal Jain vs. DCIT [ITA No. 40/JP/05-36 TW 67(JP)]
The DR relied on the order of the lower authorities.
The learned Members of the ITAT heard the rival submissions and pursued the material available on record. It was noted that the AO has blindly followed the findings given in assessment proceedings for A.Y for 2008-09 while bringing the subject transaction with Mahaveer Textiles to tax in the year under consideration. There were other transactions (other than the transaction with Mahaveer textiles) which were held to be bogus in nature by the AO in AY 2008-09 and subsequently, even the said transactions had not been held as bogus and additions were ultimately deleted by the Coordinate Bench. The AO had referred to certain conclusive evidences brought on record to treat the subject transaction as bogus but any such evidence which had not been brought on record by the AO either during the course of assessment proceedings for AY 2008-09 or the reassessment proceedings for the impunged AY 2007-08. The only grievance of the AO was that the assessee had failed to produce the party so as to establish genuineness of the transaction and secondly, no payment had been made to the party till the year end. The CIT(A) while confirming the disallowance had stated that though confirmation had been obtained from the party, however, a simple confirmation was not sufficient to establish the fact of purchase without elaborating what more is required from the assessee to justify its claim. Regarding non appearance of the supplier, the assessee had submitted that the supplier was based in Delhi and he had denied coming to Jaipur but at the same time, he had sent its requisite confirmation directly to the Department by the registered post. Further the amount outstanding against the said purchases had been paid by account payee cheque in April and May, 2015 and there was no outstanding amount against the said supplier. Regarding the other details submitted by the assessee, namely copy of Ledger amount and purchase bill of Mahaveer Textiles, copy of the confirmation of the amount sent by Mahaveer Textile Mills to the Department and the fact that the materials so purchased form part of the turnover and which had been exported, there was no finding by the AO as to reasons for non-acceptance of the said documents and in absence of that, the stand taken by the Revenue could not be accepted. In the result the purchases made from Mahaveer Textiles had not been proved to be bogus by the Revenue and the said additions could not be sustained in the eye of law in absence of any conclusive evidence brought on record.
Merely non-appearance of the supplier in absence of any other corroborate evidence cannot be a basis to justify the stand of the Revenue that the transaction of purchase is bogus.
