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DATE: February 11, 2019 (Date of pronouncement)
DATE: April 23, 2019 (Date of publication)
AY: -
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S. 68/69 Bogus Purchases: Even if the purchases are bogus, the entire purchase amount cannot be added. As the department had not disputed the assessee's sales & there was no discrepancy between the purchases and the sales, the purchases cannot be rejected without disturbing the sales in case of a trader. The addition has to be restricted to the extent of the G.P. rate on purchases at the same rate of other genuine purchases (N.K .Industries 292 CTR 354 (Guj), N. K. Proteins 250 TM 22 (SC) distinguished)

In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee’s additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee’s sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases

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DATE: June 19, 2018 (Date of pronouncement)
DATE: February 23, 2019 (Date of publication)
AY: 2009-10
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S. 68 Bogus transactions: The AO cannot treat losses from off market commodity transactions as bogus and inadmissible in the eyes of the law if the transactions through the broker are duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. To hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. The fact that the broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus

To hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the commodity exchanged have not only been explained but also substantiated from the confirmation of the party. Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus

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DATE: January 17, 2019 (Date of pronouncement)
DATE: January 19, 2019 (Date of publication)
AY: 2011-12
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S. 147 Reopening of Bogus Sales/ Purchases: If the AO disallowed 2.5% of alleged bogus purchases during the regular assessment, he cannot reopen on the ground that as per N. K. Proteins Ltd 2017-TIOL-23-SC-IT the entire amount should have been disallowed as this amounts to change of opinion

In other words, during the previous reassessment proceedings, the Assessing Officer examined the alleged bogus sales of the assessee, taxed 2.25% thereof as assessee’s additional income and passed the order of assessment accordingly. The Assessing Officer now believes that taxing 2.25% of the sales, was an error and instead the entire amount should have been added to the assessee’s income. This would be a mere change of opinion

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DATE: December 12, 2018 (Date of pronouncement)
DATE: December 22, 2018 (Date of publication)
AY: 2011-12
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Bogus Purchases: The fact that the vendors are not available at the given address is not sufficient to treat the purchases as bogus if the assessee has discharged primary onus and substantiated the purchases through documentary evidence and payment is made through banking channels. None of these documents have been proved to be false or untrue and thus the initial burden cast on the assessee was duly discharged

It is an admitted fact that during the course of search nothing adverse was found from the premises of the assessee regarding the purchases made from the four parties concerned. Only during post search enquiry it was found that those four parties are not available at the given address. However, it is a fact that the payments have been made through banking channel and the assessee had substantiated the purchases by providing documents such as purchase invoices, copy of the ledger accounts, evidences for having made payments through banking channels, C Form issued to the suppliers, copy of VAT return duly reflecting the said purchases, etc

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DATE: November 14, 2018 (Date of pronouncement)
DATE: November 28, 2018 (Date of publication)
AY: 2011-12
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Bogus expenditure: A statement recorded u/s 133A under fear/ coercion cannot be relied upon by the AO if it is not corroborated by documentary evidence. The assessee is entitled to retract such statement. The AO is bound to give the assessee an opportunity to controvert evidence and cross examine the evidence on which the department places its reliance. A failure in providing the same can result in the order being a nullity (All judgements considered)

Retraction being on affidavit was legal and valid and was not belated. Further retraction was supported by explanation of impounded documents to the Survey team. The impounded document did not contain any information which was not recorded in the books of accounts. Hence, in view of retraction and such retraction based on concrete evidence, no addition can be made on the basis of statement taken during survey without bringing on record some corroborative materials

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DATE: September 4, 2018 (Date of pronouncement)
DATE: September 15, 2018 (Date of publication)
AY: 2014-15
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S. 276(C)(1) Prosecution for bogus transaction: If a stay application is filed before the CIT(A) to seek a stay of the assessment order, during the pendency of such application, the criminal prosecution should not be launched and, if it has been already launched, the same shall not proceed

In the event, the petitioner seeks a stay of the order passed by the Assessment Officer by making a stay application, then, during the pendency of such application, the criminal prosecution should not be launched and, if it has been already launched, the same shall not proceed. Thus, the ad interim stay granted by this Court would continue till the disposal of the application for stay by the First Appellate Authority

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DATE: July 30, 2018 (Date of pronouncement)
DATE: August 3, 2018 (Date of publication)
AY: 2005-06, 2006-07, 2007-08, 2008-09, 2009-10
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S. 68 Bogus share capital: If copies of the share application form, share allotment Register and Bank Statements showing receipt of funds are on record and if all the shareholders have filed Affidavits declaring the fact that they are investing in the assessee-Company by issuing of cheques from their Accounts, the assessee has fulfilled the requirement of proving genuineness of the transaction, identity and creditworthiness of the shareholders/investors and addition cannot be made u/s 68

So far as the identity is concerned, we find that the persons who invested in the shares of the respondent-assessee had PAN numbers allotted to them which was made available by the respondent to the Assessing Officer. Besides, the shareholders had also filed Affidavits before the Assessing Officer pointing out that they had invested in the shares of the respondent assessee out of their own bank accounts. Copies of acknowledgement of Return of Income of the shareholders was also filed. The respondent also requested the Assessing Officer to summon the shareholders. These evidences have not been shown to be incorrect. Therefore, this objection with regard to identity of the shareholders not being established does not survive

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DATE: May 4, 2018 (Date of pronouncement)
DATE: June 30, 2018 (Date of publication)
AY: -
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CITATION:
S. 69 Bogus Purchases: Purchases cannot be treated as Bogus if (a) they are duly supported by bills, (b) all payments are made by account payee cheques, (c) the supplier has confirmed the transactions, (d) there is no evidence to show that the purchase consideration has come back to the assessee in cash, (e) the sales out of purchases have been accepted & (f) the supplier has accounted for the purchases made by the assessee and paid taxes thereon

It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises

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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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CITATION:
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.

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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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CITATION:
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

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