×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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03-06-2019, Deepak Shankar Panaskar, Section 271(1)(c), 271, Tribunal Pune
These two appeals by the Revenue are directed against the orders of the Commissioner of Income Tax (Appeals)-2, Nashik, deleting addition made in respect of bogus purchases and deleting penalty levied u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on the addition made in respect of bogus purchases. ITA No.203/PUN/2017 by Revenue is directed against the order of Commissioner of Income Tax(Appeals)-2, Nashik dated 02.11.2016 in quantum appeal and ITA No.204/PUN/2017 by Revenue is directed against the order of Commissioner of Income Tax(Appeals)-2, Nashik dated 04.11.2016 deleting penalty levied u/s.271(1)(c) of the Act.
2. The brief facts of the case as emanating from records are: The assessee is engaged in manufacturing of electrical equipments and is a Government Contractor. Information was received from Sales Tax Department that the assessee is engaged in bogus purchases. Survey action u/s.133A of the Act was carried out in the case of assessee on 22.08.2013. During the course of survey, statement of Shri Sagar Shankar Panaskar, brother of assessee was recorded on oath u/s.131 of the Act, wherein he admitted that in absence of supporting bills, octroi receipts and transport receipts etc., genuineness of the purchases made from eight parties aggregating to Rs.85,98,876/- could not be proved. The Assessing Officer made addition of entire Rs.85,98,876/- on account of bogus purchases. Further, the Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the Act for ‘furnishing inaccurate particulars of income’.
3. Aggrieved against the assessment order dated 30.01.2015 passed u/s.143(3) of the Act, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax(Appeals) upheld the purchase of goods from bogus parties. However, the Commissioner of Income Tax (Appeals) restricted the addition to 10% of the alleged bogus purchases i.e.8,59,887/- and deleted the remaining addition. Against the findings of the Commissioner of Income Tax (Appeals), the Revenue is in appeal before the Tribunal by raising following grounds:
“1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-2, Nashik was justified in deleting the addition of Rs.77,38,989/- made by the Assessing Officer on the issue of alleged bogus purchases?
2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-2, Nashik was justified in ignoring the facts that the AO had brought on record credible evidence to prove that the purchases are not genuine?
3. The appellant prays leave to add, alter, clarify/amend and or withdraw any grounds of appeal as and when the occasion demands.”
4. Shri Pankaj Garg representing the Department submitted that the assessee had failed to furnish supporting documents to show trail of goods. The assessee neither furnished invoices, octroi receipts and transport receipts nor the assessee was maintaining stock register. Further, the assessee could not prove genuineness of the suppliers. No confirmations were filed by the assessee from suppliers of goods. In the statement recorded u/s.131 of the Act, Shri Sagar Shankar Panaskar, brother of assessee admitted that the genuineness of the purchases could not be proved. Thus, the Assessing Officer rightly made addition of entire bogus purchases. The ld. DR in support of his contentions placed reliance on the decision of Pune Bench of the Tribunal in the case of Mukeshkumar Pukhraj Mehta Vs. The Income Tax Officer in ITA No.2026/PUN/2014 for assessment year 2010-11 decided on 03.11.2015.
5. On the other hand, Shri Sanket Joshi appearing on behalf of the assessee vehemently defended the impugned order. The ld. AR of the assessee submitted that the assessee had made payments for the purchases of goods held to be bogus purchases through cheque. The Assessing Officer has not been able to show that the amount paid by cheque was immediately withdrawn by suppliers and were paid back to the assessee. No efforts were made by the Assessing Officer to find out genuineness of the suppliers and verify the authenticity of the transactions. The assessee had furnished copies of VAT challens. Further, the sales made by assessee were not disputed by the Assessing Officer and books of account were not rejected. Thus, without purchases there cannot be sales. The ld. AR submitted that the entire purchases cannot be added as bogus purchases where sales are not questioned.
6. We have heard the submissions made by representatives of rival sides and have perused the orders of the Authorities below. The Revenue in appeal has assailed the findings of Commissioner of Income Tax (Appeals) in restricting addition made on account of bogus purchases to 10% of the bogus purchases. It is an undisputed fact that Revenue has accepted the total turnover of the assessee. The total turnover of the assessee during impugned period is Rs 1,15,71,310/-, whereas, the alleged bogus purchases disallowed by the Assessing Officer are Rs.85,98,876/-. Without purchases, there cannot be sales. The books of account of the assessee have also not been rejected by the Assessing Officer before making addition of the entire alleged bogus purchases. Undoubtedly, the primary onus to prove genuineness of purchase transactions is on the assessee and he should have in first place furnished cogent evidences to prove the genuineness of the purchases and suppliers. No confirmations were filed by the assessee from suppliers. We also observe that at the time of assessment proceedings, the Assessing Officer has also not exercised his power to summon the Vendors u/s. 133(6) of the Act. If the assessee had failed to produce Vendors, the Assessing Officer could have summoned them. Thus, there