Sales accepted in supplier books cannot be bogus purchase of buyer

Brief of the case :

The ITAT bench Mumbai in the above cited case held that when the department has not disputed the sales transactions disclosed by the supplier in its books who is an income tax assessee then it cannot assume the same as bogus purchases made by the buyer more so when the transaction has been supported by proper documentary evidences and payments aremade to suppliers through proper banking channels.

Facts of the case:

• The assessee company filed its return of income on 08^th Oct,2010 declaring a total income of Rs. 18.68 crores. In the course of assessment proceedings. AO after verifying books of accounts found that the assessee has shown Share Application Money received of Rs. 100 crores from five companies based at Mumbai.
• AO officer in order to verify the genuiness of entries in the books of assessee issued notices to all these companies from whom share application money shown to be received. The AO noted that in case of Elpro Properties assessee shown as purchase from it Rs. 10.13  crores till March 2011 but assessee paid only 13,265/- and the balance Rs.10 crores was converted into share application money. Likewise , in the case of Cyra Capital Limited assessee shown as purchase made of Rs. 30.13 crores but has paid R13,237/- only and the balance Rs.  crores converted into share application money.
• AO having doubt of such big share application money conversion, conducted a survey u/s 133A of the Act in the business premises of the assessee. On the basis of statement recorded in survey , AO came to conclusion that purchases claimed to be made from five parties are bogus which are shown for having accommodation entries just to evade tax.
• Accordingly, AO added entire purchases made from these parties Rs. 118,64,12,141/- and added back same to assessee’s income.
• On appeal to CIT(A) , it was held by him that when the AO has not doubted the sales made by the assessee ,he cannot treat purchases as bogus as in the absence of such purchases , assessee could not have effected sales of such goods. Further, the purchases made by assessee has been duly reported by sellers in their books who are also income tax assessees which has been shown by them in their return of income and books.
• Accordingly ., disallowance made by AO was deleted by CIT(A). Aggrieved assessee is in appeal before ITAT.
  

Held by ITAT:

• ITAT observed that in response to the notices issued under 133(6) to the suppliers whom AO doubted to have be bogus one appeared before the AO and confirmed effecting sales to assessee. Further , the AO also enquired the directors of these companies and on perusal of statement recorded from directors there is nothing on record to suggest that sale and purchase transaction b/w assessee and these companies are non-genuine.
• On the contrary ,suppliers have submitted copies of their audited books of accounts wherein they have considered the sales made to assessee in their books and tax returns. Further , the assessee produced purchases and sales bills and other documentary evidences in support of purchases effected by it from all suppliers. And it is also not in dispute that payment made to the suppliers through proper banking channels.
• The department has not disputed the sales made by suppliers to assessee. Therefore, when the sales effected by the suppliers are accepted in their hands , the purchases made from them by the assessee cannot be held to be non-genuine.
• In these circumstances , department has failed to bring any substantive material to counter the findings of the CIT(A) ,the tribunal decided not to disturb the order of CIT(A).
• Accordingly , the appeal of revenue was dismissed.