Search Results For: Bogus purchases


ITO vs. K. Ramakrishna Reddy (ITAT Hyderabad)

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DATE: May 29, 2018 (Date of pronouncement)
DATE: June 11, 2018 (Date of publication)
AY: 2007-08
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Bogus Long-term capital gains: As neither the statement of Mukhesh Choksi was provided to the assessee nor cross-examination was allowed and it was not even placed on record, the action of the AO in treating the LTCG and STCG as income from other sources was not warranted

A.O. was of the opinion that capital gains declared by the assessee was bogus. In this regard, A.O. also observed that he received information from the office of Chief Commissioner of Income Tax, Mumbai that M/s. Alliance Intermediaries and Network Pvt Ltd., one of the group companies of Mr. Mukesh Choksi, and also other companies of this group have provided accommodation entries to various persons, including the assessee. Though the assessee has furnished purchase bills of shares, cash receipts for payment of share purchases, account copies of M/s. Alliance Intermediaries and Network Pvt Ltd, the A.O. noticed that the Intermediary i.e., M/s. Alliance Intermediaries and Network Pvt Ltd., was proved to have neither affiliated to Mumbai Stock Exchange nor affiliated to National Stock Exchange which clearly indicates that the transactions were never carried out.

PCIT vs. Manzil Dineshkumar Shah (Gujarat High Court)

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DATE: May 7, 2018 (Date of pronouncement)
DATE: May 29, 2018 (Date of publication)
AY: 2009-10
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S. 147: Even a s. 143(1) assessment cannot be reopened without proper 'reason to believe'. If the reasons state that the information received from the VAT Dept that the assessee entered into bogus purchases "needed deep verification", it means the AO is reopening for doing a 'fishing or roving inquiry' without proper reason to believe, which is not permissible

It is equally well settled that the notice of reopening can be supported on the basis of reasons recorded by the Assessing Officer. He cannot supplement such reasons. The third principle of law which is equally well settled and which would apply in the present case is that reopening of the assessment would not be permitted for a fishing or a roving inquiry. This can as well be seen as part of the first requirement of the Assessing Officer having reason to believe that income chargeable to tax has escaped assessment. In other words, notice of reopening which is issued barely for making fishing inquiry, would not satisfy this requirement

Soman Sun Citi vs. JCIT (ITAT Mumbai)

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DATE: October 23, 2018 (Date of pronouncement)
DATE: May 15, 2018 (Date of publication)
AY: 2011-12
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S. 69C Bogus Purchases (100% disallowance confirmed): The right of cross-examination is not absolute. No prejudice is caused to the assessee by non granting of cross examination if the assessee has not discharged the primary onus. The fact that purchase bills are produced and payment is made through banking channels is not sufficient if the other evidence is lacking

No prejudice is caused to the assessee by non granting of opportunity of cross examination by the authorities below as right of cross examination is not absolute as in the instant case even primary onus that fell on the assessee did not stood discharged. Had assessee discharged its primary onus, but still the authorities proceed to prejudice assessee based solely on the incriminating statements/affidavits of third parties recorded at the back of the assessee, the right of the assessee to cross examine these third parties will become absolute. It is not a case that the authorities below have merely/solely relied on the statement/affidavit of third parties namely hawala dealers recorded at the back of the assessee to cause prejudice to the assessee rather primary onus that lay on the assessee was not discharged by the assessee

Shantivijay Jewels Ltd vs. DCIT (ITAT Mumbai)

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DATE: April 13, 2018 (Date of pronouncement)
DATE: April 19, 2018 (Date of publication)
AY: 2011-12
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Bogus Purchases: The fact that the supplier admitted to issuing bogus bills does not necessarily mean that he had issued accommodation bills to the assessee. There is subtle but very important difference in issuing bogus bills and issuing accommodation bills to a particular party. The difference becomes very important when a supplier in his affidavit admits supply of goods. As far as sales are concerned there is no doubt about the genuineness of such sales. It is also a fact that suppliers were paying VAT and were filing their returns of income. In response to the notices issued by the AO u/s 133(6) of the Act, the supplier admitted the genuineness of the transaction. Accordingly, the purchases cannot be treated as bogus

We find that DJ had admitted of issuing bogus bills. But, nowhere he had admitted that he had issued accommodation bills to the assessee. In our opinion, there is subtle but very important difference in issuing bogus bills and issuing accommodation bills to a particular party. The difference becomes very important when a supplier in his affidavit admits supply of goods.In this matter, the assessee had made no local sales and goods were exported, as stated earlier. So, as far as sales are concerned there is no doubt about the genuineness of such sales. It is also a fact that suppliers were paying VAT and were filing their returns of income.In response to the notices issued by the AO,under section 133(6) of the Act, the supplier had admitted the genuineness of the transaction

Prabhat Gupta vs. ITO (ITAT Mumbai)

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DATE: December 21, 2017 (Date of pronouncement)
DATE: March 9, 2018 (Date of publication)
AY: 2009-10, 2010-11
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Bogus Purchases: The fact that s. 133(6) notices could not be served upon the alleged vendors and they were not physically available at the given addresses does not falsify the claim of the assessee that the purchases are genuine if the assessee has produced other evidence and made payments through banking channels

Anyhow, after receipt of the information from DGIT(Inv.) Mumbai, the Assessing Officer issued the notice u/s 133(6) of the Act to all the parties but the said noticed were not served upon the said parties. The Assessing Officer also deputed the tax inspector to verify the genuineness of the claim and to know about the existence said 20 parties but the 17 parties were not available at the given address. However, notices served upon the Sampart Steel, Revika Trade Impex P. Ltd., Jindal Corporation but these parties nowhere submitted the required information. Sufficient evidence has been submitted by the assessee before the AO

M/s. Fancy Wear vs. ITO (ITAT Mumbai)

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DATE: September 20, 2017 (Date of pronouncement)
DATE: September 27, 2017 (Date of publication)
AY: 2010-11, 2011-12
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S. 69C Bogus purchases: If the AO has not rejected the books of accounts and has only doubted the genuineness of the suppliers but not the genuineness of the purchases and if the payments are made by account payee cheques, s. 69C is not attracted. S. 69C cannot be applied where all purchase and sales transactions are part of regular books of accounts. The basic precondition for invoking s. 69C is that the expenditure incurred by the assessee should be out of books of accounts

The AO or the FAA have not rejected the books of accounts of the assessee nor have doubted the purchases made by it. The recognised principles of accountancy and tax jurisprudence hold that no sales can take place without purchases. Thus, the case under appeal is not about non genuineness of purchases itself, but it is about non genuineness of suppliers. Whether provisions of section 69C of the Act can be applied in the matters where all the purchase and sales transactions part of regular books of accounts. Basic precondition for invoking the section 69C is that the expenditure incurred by the assessee should be out of books of accounts. Here, the payments to the suppliers, as stated earlier, have been made by cheques. So, it cannot be held that expenses were incurred by the assessee outside the books of accounts. Section 69C was introduced in to the statute with a specific purpose

Uttam Value Steels Limited vs. ACIT (ITAT Mumbai)

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DATE: May 22, 2017 (Date of pronouncement)
DATE: September 23, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 271(1)(c) penalty: Voluntary disclosure of Rs. 557.50 crores. Entire law on levy of penalty discussed in the context of declaration made during survey, bogus purchases, bogus share capital, accommodation entries, non-application of mind by the AO etc. All important judgements incl Kaushalya 216 ITR 660 (Bom), MAK Data 358 ITR 593 (SC) explained/ ditinguished

A survey action u/s 133A was taken by the Investigation Wing against the assessee on 19/12/2012. The survey took place at the office premises as well as at the factory premises where the manufacturing activity is carried on. Not a single piece of paper is found either from the office premises or from the factory premises which could prove or indicate or suggest that the assessee has earned unaccounted income. However, during course of survey, statement of Director of Company Shri Babu Lal was recorded on 21/12/2012, wherein he offered income earned during the course of business. No iota of proof is also found regarding the manufacturing results disclosed by the assessee. The Investigation Wing has not issued a -single letter or a show cause or a questionnaire after conduct of the survey to the assessee pointing out any discrepancy or defect in the books of account or regarding detection of unaccounted income. The assessee on its own voluntarily filed a letter dated 27/12/2012 on 07/01/2013 with the Investigation Wing offering the income of Rs.557.50 crores for A.V. 2007-08 to 2010-11. As no incriminating material/document was found, the assessee was left with no choice but to state that the said income was generated on account of difference in yield, when in fact and in substance there was no defect or error in the yield which is disclosed by the assessee in the regular books of accounts. The assessee thereafter filed the return of income disclosing the income offered in the letter dated 27/12/2012 on 15/01/2013 and filed a copy of the same with the Investigation Wing. Notice u/s 148 was issued on 25/11/2013 received by the assessee on 27/11/2013. The assessee filed a letter stating that the return filed voluntarily on 15/01/2013 may be treated as return in response to notice u/s 148. The assessments for the impugned assessment years were framed u/s 147 r.w.S. 143(3) of the Income Tax Act(“the Act”). The impugned penalty in respect of impugned assessment years were imposed by the ACIT, Central Circle-41, Mumbai(“AO”) u/s.271(1)(c) of the IT Act.

ACIT vs. Steel Line (India) (ITAT Mumbai)

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DATE: August 29, 2017 (Date of pronouncement)
DATE: September 4, 2017 (Date of publication)
AY: 2009-10 to 2011-12
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CITATION:
Bogus Purchases: If the AO has not disputed the genuineness of sales and the quantitative details and the day to day stock register maintained by the assessee, a trader, he cannot make an addition in respect of peak balance of the bogus purchases. He can only determine the element of profit embedded in the bogus purchases. On facts, the addition is restricted to 2% of the bogus purchase

AO has not disputed the quantitative details and also day to day stock register maintained by the assessee. Assessee company being a trader of goods, AO not having doubted the genuineness of sales, could not have gone ahead and made addition in respect of peak balance on such purchases. Accordingly, CIT(A) concluded that issue boil down to find out the element of profit embedded in bogus purchases which the assessee would have made. When the corresponding sales have not been doubted and the quantitative details of purchases and sales vis-a-vis stock was available, we deem it appropriate considering the entirety of facts and circumstances of the case to restrict the addition to the extent of 2% of such bogus purchase. Accordingly, the order of both the lower authorities are modified and AO is directed to restrict the addition to the extent of 2% on such purchases.

CIT vs. M/s Carpet Mahal (Rajasthan High Court)

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DATE: May 10, 2017 (Date of pronouncement)
DATE: May 25, 2017 (Date of publication)
AY: -
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Bogus purchases: In view of the Supreme Court’s order in Vijay Proteins Ltd vs. CIT whereby the verdicts of the Gujarat High Court in Sanjay Oilcake Industries vs. CIT 316 ITR 274 (Guj) and N.K. Industries Ltd vs. Dy. CIT were confirmed, the AO has to accept the law and verify whether the transaction is genuine or not on the basis of the aforesaid three judgments

Considering the law declared by the Supreme Court in the case of Vijay Proteins Ltd. Vs. Commissioner of Income Tax, Special Leave to Appeal decided on 06.04.2015 whereby the Supreme Court has dismissed the SLP and confirmed the order dated 09.12.2014 passed by the Gujarat High Court and other decisions of the High Court of Gujarat in the case of Sanjay Oilcake Industries Vs. Commissioner of Income Tax (2009) 316 ITR 274 (Guj) and N.K. Industries Ltd. Vs. Dy. C.I.T., Tax Appeal No.240/2003 decided on 20.06.2016, the parties are bound by the principle of law pronounced in the aforesaid three judgments

Geolife Organics vs. ACIT (ITAT Mumbai)

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DATE: May 5, 2017 (Date of pronouncement)
DATE: May 23, 2017 (Date of publication)
AY: 2009-10
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CITATION:
S. 69C Bogus purchases: (i) The AO is not entitled to treat the purchases as bogus merely on the basis of information from the sales-tax dept. He has to make independent inquiry, (ii) Fact that the vendors did not respond to s. 133(6) notices & the assessee did not produce them is not sufficient if the documentation is in order and payments are through banking channels

It is evident from the assessment order that on the basis of information obtained from the Sales Tax Department, Assessing Officer issued notices under section 133(6). As the assessee failed to produce the concerned parties, the Assessing Officer, primarily relying upon the information obtained from the Sales Tax Department held the purchases to be bogus and added 12.5% profit in addition to the normal profit declared by the assessee. Though, it may be a fact that assessee was not able to produce the concerned parties before the Assessing Officer, for whatever may be the reason, fact remains that during assessment proceedings itself the assessee had produced confirmed ledger copies of concerned parties, bank account statement, purchase bills, delivery challans, etc., to prove the genuineness of the purchases. It is also a fact on record that the Assessing Officer has not doubted the sales effected by the assessee. Thus, it is logical to conclude that without corresponding purchases being effected the assessee could not have made the sales. Moreover, the Assessing Officer has not brought any material on record to conclusively establish the fact that purchases are bogus

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