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DATE: January 29, 2020 (Date of pronouncement)
DATE: July 3, 2020 (Date of publication)
AY: 2010-11
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CITATION:
S. 69C Bogus Purchases: (i) The onus is on the revenue to prove that the income really belongs to the assessee (ii) The assessee has filed copies of purchase/ sale invoices, challan cum tax invoices, stock ledger showing entry/exit of materials purchased, bank statements to show payment for purchases were made through banking channels, etc., to establish genuineness of purchases (iii) The AO has not brought on record any material evidence to show that the purchases were bogus (iv) Mere reliance by the AO on information obtained from Sales Tax Department or statements of persons made before the Sales Tax Department is not sufficient to treat the purchases as bogus (v) If the AO doubts the genuineness of the purchases, he has to do further enquiries and give an opportunity to the assessee to examine/cross-examine the parties vis-a-vis the statements made by them before the Sales Tax Department. Without causing such further enquiries in respect of the purchases, it is not open to the AO to make addition u/s 69C

The AO did not doubt the sales and stock records maintained by the assessee. By submitting confirmation letters, copies of invoices, bank statement, payment order, payment by account payee cheques etc., assessee had proved that sale and purchases had taken place. By highlighting the fact that all the payments against the purchases were made through banking channel by way of account payee cheques, the source of expenditure was fully established by the assessee beyond any doubt. During appellate proceedings the assessee had furnished complete quantitative details of the items of goods purchased during the year under consideration and their corresponding sales.

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DATE: April 24, 2020 (Date of pronouncement)
DATE: April 24, 2020 (Date of publication)
AY: 1998-99
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CITATION:
S. 68 Bogus Purchases: Though the assessee failed to prove the genuineness of the purchases during the assessment proceedings, he filed affidavits and statements of the dealers in penalty proceedings. That evidence fully supports the claim of the assessee. The CIT (A) accepted the explanation of the assessee and recorded a clear finding of fact that there was no concealment of income or furnishing of any inaccurate particulars of income by the assessee. Consequently, the quantum addition will also have to be deleted

Indeed, at the time of assessment, the appellant/assessee had failed to produce any explanation or evidence in support of the entries regarding purchases made from unregistered dealers. In the penalty proceedings, however, the appellant/assessee produced affidavits of 13 unregistered dealers out of whom 12 were examined by the Officer. The Officer recorded their statements and did not find any infirmity therein including about their credentials. The dealers stood by the assertion made by the appellant/assessee about the purchases on credit from them; and which explanation has been accepted by the appellate authority in paragraphs 17 and 19 of the order dated 13.1.2011. 15. To put it differently, the factual basis on which the Officer formed his opinion in the assessment order dated 30.11.2000 (for assessment year 19981999), in regard to addition of Rs.2,26,000/( Rupees two lakhs twenty six thousand only), stands dispelled by the affidavits and statements of the concerned unregistered dealers in penalty proceedings. That evidence fully supports the claim of the appellant/assessee.

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DATE: February 10, 2020 (Date of pronouncement)
DATE: February 15, 2020 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Bogus Purchases: Though the assessee has not proved the genuineness of the purchases and sales, yet if the AO has accepted the sales, the entire purchases cannot be disallowed. Only the profit element embedded in purchases would be subjected to tax and not the entire amount (Bholanath Polyfab 355 ITR 290 (Guj) followed, Kaveri Rice Mills 157 Taxman 376 (All) & La Medica 250 ITR 575 (Del) referred)

Having found that the purchases corresponded to sales which were reflected in the returns of the assessee in sales tax proceedings and in addition, were also recorded in the books of accounts with payments made through account payee cheques, the purchases were accepted by the two appellate authorities and following judicial dictum decided to add the profit percentage on such purchases to the income of the assessee. While the CIT (A) had assessed profit at 2% which was added to the income of the assessee, Tribunal made further addition of 3% profit, thereby protecting the interest of the Revenue

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DATE: January 8, 2020 (Date of pronouncement)
DATE: January 18, 2020 (Date of publication)
AY: 2009-10
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S. 68/ 69C Bogus purchases: Even if the purchases made by the assessee are to be treated as bogus, it does not mean that entire amount can be disallowed. As the AO did not dispute the consumption of the raw materials and completion of work, only a percentage of net profit on total turnover can be estimated (Mohommad Haji Adam & Paramshakti Distributors followed)

Assuming that the purchasers from whom the purchases were made were bogus, in view of the finding of fact that the material was consumed, the question would be of extending the percentage of net profit on total turnover. This would be a matter of calculations by the concerned authority

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DATE: December 6, 2019 (Date of pronouncement)
DATE: December 21, 2019 (Date of publication)
AY: 2008-09
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S. 68/ 69C: In case of bogus purchases where sales are accepted, the addition can be made only to the extent of difference between the GP declared by the assessee on normal purchases vis a vis bogus purchases. The AO is directed to restrict the addition to the extent of lower GP declared by the assessee in respect of bogus purchases as compared to G.P. on normal purchases

It is clear from the above decisions that in case of bogus purchases where sales are accepted, the addition is required to be made only to the extent of difference between the GP declared by the assessee on normal purchases vis a vis bogus purchases

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DATE: October 31, 2019 (Date of pronouncement)
DATE: November 9, 2019 (Date of publication)
AY: 2012-13 to 2017-18
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S. 68/ 69C: Bogus share capital + Bogus purchases: Photocopies of blank share transfer forms, blank signed receipts etc necessary for transfer of shares found with assessee are not admissible as evidence u/s 61 of Evidence Act and not incriminating in nature. On merits, all investors are assessed & have filed confirmations with trail of funds. AO did not make further inquiry into the documentary evidences or verify the trail of source of funds. As regards bogus purchases, the AO cannot blow hot & cold by disallowing the purchases from a party as bogus while treating sales to same party as genuine

Assessee produced sufficient documentary evidences before the A.O. to prove that money routed from the assessee itself which came back to the assessee in the form of share capital/premium, therefore, assessee proved identity of the Investors, their creditworthiness and genuineness of the transaction in the matter and as such have been able to prove ingredients of Section 68 of the I.T. Act. The A.O. however did not make any further enquiry on the documentary evidences filed by the assessee. The A.O. did not verify the trail of the source of funds received by assessee through various entities as explained above. The A.O. thus, failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between the Investor Companies and the assessee company despite the fact that in the deviation report the A.O. expressed doubts in making addition into the matter. It may also be noted here that no cash have been reported to have been deposited in the accounts of the assessee, the Investor Companies and other related parties

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DATE: August 21, 2019 (Date of pronouncement)
DATE: October 23, 2019 (Date of publication)
AY: -
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CITATION:
S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination

The entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Returnthe entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return

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DATE: April 10, 2019 (Date of pronouncement)
DATE: September 6, 2019 (Date of publication)
AY: 2007-08
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CITATION:
Bogus purchases in s. 153D search assessment: There is serious suspicion about the conduct of the assessee in taking additional ground challenging the issue of approval u/s 153D for the first time before the Tribunal. The assessee is making an attempt is derail the issue on merits and to escape on technical ground. The affidavits filed by the AOs coupled with circumstantial evidences available in the assessment folders clearly establish the fact of obtaining necessary approval u/s 153D though copy of approval letter is not available in the assessment record. Argument that only profit can be assessed is not correct. 100% addition u/s 69C towards bogus purchases confirmed (NK Proteins 292 CTR 354 (SC) followed)

When assessee goes to question the administrative procedure, rather contending its case on merits, that too, after a lapse of 4 to 5 years, then obviously, a doubt arises about intend of the assessee in taking this ground and such an attempt is derail the issue on merits and to escape on technical ground. Therefore, we are of the considered view that there is no merit in the additional ground taken by the assessee challenging validity of assessment order passed by the AO u/s 143(3) r.w.s. 153A of the Income-tax Act, 1961.

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DATE: July 15, 2019 (Date of pronouncement)
DATE: July 27, 2019 (Date of publication)
AY: 2005-06
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CITATION:
S. 68 Bogus Purchases: Despite admission by the assessee that the purchases were mere accommodation entries, the entire expenditure cannot be disallowed. Only the profit embedded in the purchases covered by the bogus bills can be taxed. The GP rate disclosed by the assessee cannot be disturbed in the absence of incriminating material to discard the book results

The Department had not rejected the instance of the purchases since the sales out of purchase of such raw material was accounted for and accepted. With above position, the Tribunal applied the principle of taxing the profit embedded in such purchases covered by the bogus bills, instead of disallowing the entire expenditure. We do not find any error in the view of the Tribunal.

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DATE: May 16, 2019 (Date of pronouncement)
DATE: June 19, 2019 (Date of publication)
AY: 2009-10
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CITATION:
Bogus Purchases: The CIT(A) is not justified in enhancing the assessment to disallow 100% of the bogus purchases. The only addition which can be made is to account for profit element embedded in the purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases (PCIT vs. Mohommad Haji Adam (Bom HC) followed

The assessee was in possession of primary purchase documents and the payments to the suppliers was through banking channels. The assessee had established corresponding sales before Ld. AO. The books of accounts were audited wherein quantitative details of stock was provided. We are of the considered opinion that there could be no sale without actual purchase of material keeping in view the fact that the assessee was engaged in trading activities. At the same time, the assessee failed to produce even a single supplier to confirm the purchase transactions. The delivery of material could not be substantiated.

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