|CORAM:||B. R. Baskaran (AM), Sanjay Garg (JM)|
|CATCH WORDS:||Bogus purchases, Bogus Sales|
|DATE:||March 5, 2015 (Date of pronouncement)|
|DATE:||April 24, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|Bogus purchases: Fact that suppliers names appear in the list of hawala dealers of the sales-tax dept and that assessee is unable to produce them does not mean that the purchases are bogus if the payment is through banking channels & GP ratio becomes abnormally high|
I have also taken into consideration the decision of jurisdictional High Court and ITAT i.e. The Commissioner of Income Tax – 1 Mumbai Vs Nikunj Eximp Enterprises Pvt, Ltd. Appeal No ITA No. 5604 of 2010 (Hon. Mumbai High Court) and Balaji Textile Industries (P) Ltd. Vs Income Tax Officer (1994) 49 lTD (Bom) 177. While in the case of Nikunj Eximp Enterprises, the Hon’ble Bombay High Court in its latest judgment has held that once the Sales are accepted, the Purchases cannot be treated as ingenuine in those cases where the appellant had submitted all details of purchases and payments were made by cheques, merely because the sellers/suppliers could not be produced before the A.O. by the assessee. Further, I have also gone through the judgment in case Balaji Textile Industries (P) Ltd. Vs Income Tax Officer by Hon. ITAT, Mumbai (1994) 49 lTD (BOM) 177 which was made as long back as 1994 and which still holds good in which was held that- “Issuing printed bills for selling the textile goods to the assessee-company at Bhiwandi was not a conclusive proof but it was a prima fade proof to arrive to a correct conclusion that the assessee purchased certain goods from certain parties at Bhiwandi. The assessee sold those goods to ‘S’ and adjusted the sale proceeds against the loan taken by it from that party. The assessee’s books of account and the books of account of ‘S’ in which the entries of sale and adjustment were made, could not be discarded merely by saying that they were not genuine entries though neither the Assessing Officer nor the Commissioner (Appeals) opined anything in respect of those entries. Further, the purchase of the goods in the month of March 1985 did not make any difference. The assessee might not have carried on any business activities prior to March 1985, but that did not mean that the assessee was not entitled to carry on the business activity in March 1985. They could not be compelled to carry on the business activity throughout the year. There were no good reasons to disbelieve the sales made by the assessee to ‘S’. No sales were likely to be effected if there were no purchases. A sale could be made if the goods were available with the seller. From all these facts on record, a reasonable and convincing inference which could be drawn, was that the assessee purchased the textile goods, sold them and adjusted the same towards the loan taken by it. Therefore, the assessee was entitled to get the entire deduction.” I have also taken into consideration, the G.P Ratio/G.P. Margin of the appellant in the previous A.Y. as well as subsequent Assessment Year. If the addition made by the A.O. is accepted, then G.P. Ratio of the appellant during the present A.Y.will become abnormally high and therefore that is not acceptable because it onus of the A.O. by bringing adequate material on record to prove that such a high G.P. ratio exists in the nature of business carried out by the appellant. Further, it has to be appreciated that (i)Payments were through banking channel and by Cheque, (ii) Notices coming back, does not mean, those Parties are bogus, they are just denying their business to avoid sales tax/VAT etc, (iii) Statement by third parties cannot be concluded adversely in isolation and without corroborating evidences against appellant ,(iv) No cross examination has been offered by AO to the appellant to cross examine the relevant parties (who are deemed to be witness or approver being used by AO against the appellant) whose name appear in the website www.mahavat.gov.in and (v) Failure to produce parties cannot be treated adversely against appellant.