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Posted on by itatbar
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DATE: February 29, 2016 (Date of pronouncement)
DATE: May 21, 2016 (Date of publication)
AY: 2009-10
FILE: Click here to view full post with file download link
CITATION:
Bogus purchase and sale of shares: Law explained as to on whom the onus is to show that the purchase and sale of shares are bogus and the circumstances required to be proved by the AO

The purchase of shares in the immediately preceding year was accepted by the Department in an order u/s 147 r.w.s 143(3) of the Act. The shares were evidenced by entries in the demat statement and consideration was received through banking channel. There was no clinching material to say that the impugned transaction was bogus. Also, the statement recorded during the search on M/s Alliance Intermediaries & Network Pvt. Ltd. does not contain any infirmity qua the impugned transaction. Therefore, the addition as income from undisclosed income was liable to be deleted

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Posted on by editor
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DATE: May 13, 2016 (Date of pronouncement)
DATE: May 19, 2016 (Date of publication)
AY: 2007-08
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CITATION:
S. 271(1)(c) penalty on Bogus Purchases: If the assessment order in the quantum proceedings is altered by an appellate authority in a significant way, the very basis of initiation of the penalty proceedings is rendered non-existent and the AO cannot continue the penalty proceedings on the basis of the same notice

Once the assessment order of the AO in the quantum proceedings was altered by the CIT (A) in a significant way, the very basis of initiation of the penalty proceedings was rendered non-existent. The AO could not have thereafter continued the penalty proceedings on the basis of the same notice. Also, the Court concurs with the CIT (A) and the ITAT that once the finding of the AO on bogus purchases was set aside, it could not be said that there was any concealment of facts or furnishing of inaccurate particulars by the Assessee that warranted the imposition of penalty under Section 271 (1) (c) of the Act

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Posted on by editor
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DATE: February 24, 2016 (Date of pronouncement)
DATE: May 6, 2016 (Date of publication)
AY: 2010-11
FILE: Click here to view full post with file download link
CITATION:
Bogus Purchases: Purchases cannot be treated as bogus is (i) assessee has furnished quantitative reconciliation, (ii) Gross Profit rate is comparable to earlier & subsequent years, (iii) suppliers are income-tax assessees and their sales have not been treated as bogus by their AOs, (iv) payments are by account payee cheques and other documentary evidences are available

Another crucial fact which commands consideration is, all the suppliers are income tax assessees and as per the evidence produced on record they have disclosed these sale transactions in the books of account as well as return filed by them. However, no adverse inference has been drawn in respect of sales made by them by concerned Assessing Officers to the effect that they are not genuine parties or they are providing accommodation bills only. At least, no such fact is forthcoming from assessment order nor the department has filed any paper book before us to demonstrate that there is any adverse material in the possession of the Department to establish that concerned suppliers are non-genuine and are providing accommodation bills. In contrast, enough documentary evidences by way of purchase bills, sales bills, ledger copies of suppliers, etc., along with the fact that payments were made through cheque has been brought on record by assessee to demonstrate that purchases made from the concerned suppliers are genuine

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Posted on by editor
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DATE: March 9, 2016 (Date of pronouncement)
DATE: March 30, 2016 (Date of publication)
AY: 2009-10
FILE: Click here to view full post with file download link
CITATION:
Bogus Purchases: Theory that transaction "defies human probabilities" cannot be applied to purchases in isolation but has to be applied to the entire transaction in the light of documentary evidence produced by the assessee

The tax authorities have not accepted the claim of purchases of diamonds from TTPL on the reasoning that the said transaction defies the human probabilities. The tax authorities have, accordingly, rejected the various evidences furnished by the assessee in support of claim of purchases. We also notice that the tax authorities have arrived at such a conclusion only by considering the purchase transaction and did not prefer to examine the claim of export of same goods in the succeeding year and re-import of the same goods thereafter. In our view, the surrounding circumstances and human probabilities attached to a transaction should be examined by considering the transactions as a whole. Examination of part of transactions alone in the context of human probabilities/surrounding circumstances, some times, would give misleading results

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Posted on by editor
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DATE: January 1, 2016 (Date of pronouncement)
DATE: January 13, 2016 (Date of publication)
AY: 2009-10
FILE: Click here to view full post with file download link
CITATION:
Bogus Sales/ Purchases: Addition solely on the basis of information received from the sales-tax department is not sustainable. Suspicion of the highest degree cannot take the place of evidence

AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done

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Posted on by editor
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DATE: October 28, 2015 (Date of pronouncement)
DATE: October 30, 2015 (Date of publication)
AY: 2001-02 to 2005-06
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CITATION:
The AO cannot treat a transaction as bogus only on the basis of suspicion or surmise. He has to bring material on record to support his finding that there has been collusion/connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by Contract Notes and demat statements and Account Payee Cheques cannot be treated as bogus

Where the payments are made by Account Payee Cheques and the existence of the brokers is not disputed the assessee cannot be punished for the default of the brokers and share transactions cannot be held to be bogus. When purchase and sale of shares were supported by proper Contract Notes, deliveries of shares were received through demat accounts maintained with various agencies, the shares were purchased and sold through recognised broker and the sale considerations were received by Account Payee Cheques, the transactions cannot be treated as bogus. Assessment cannot be made on the basis of suspicion or surmise. The AO has not brought any material on record to support his finding that there has been collusion/connivance between the broker and the appellant for the introduction of its unaccounted money

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Posted on by editor
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DATE: July 31, 2015 (Date of pronouncement)
DATE: August 6, 2015 (Date of publication)
AY: 2006-07
FILE: Click here to view full post with file download link
CITATION:
Bogus sales and purchases: Reliance on statement of supplier who confesses to providing accommodation entries without giving assessee right of cross-examination violates principles of natural justice and the addition has to be deleted in toto

The reassessment order is as a result of violation of the natural principle of audi alteram partem. A statement recorded at the back of a party cannot be used against such party without confronting such statement to the party. Hence, on this score alone, the reassessment order is unsustainable in the eye of law and we hereby cancel the same

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Posted on by editor
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DATE: June 19, 2015 (Date of pronouncement)
DATE: July 21, 2015 (Date of publication)
AY: 2011-12
FILE: Click here to view full post with file download link
CITATION:
Bogus purchases: Manner of computing profits in the case of bogus purchases by an assessee who is not a dealer in the goods but has consumed the goods in his business explained

As per our considered view, since the purchases so made were not sold by the assessee, the AO was not justified in estimating 15% profit on such bogus purchases. However, such bogus purchases/expenses were going to reduce the assessee’s profits by the equal amount of such expenses and not only by 15% as taken by the AO. It was not a case where purchases so made were actually sold by the assessee. Where assessee is found to have sold the goods out of the bogus purchases, under those circumstances it is reasonable to estimate profit out of such sales so as to make appropriate addition. However, in the instant case the assessee was engaged in the business of hotel wherein the expenditure alleged to be incurred on plumbing, electrical items, furniture, printing and stationary etc appears to have reduced directly the profit earned by assessee

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Posted on by editor
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DATE: March 5, 2015 (Date of pronouncement)
DATE: April 24, 2015 (Date of publication)
AY: 2010-11
FILE: Click here to view full post with file download link
CITATION:
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

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

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Posted on by editor
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DATE: February 4, 2015 (Date of pronouncement)
DATE: February 12, 2015 (Date of publication)
AY: 2006-07
FILE: Click here to view full post with file download link
CITATION:
Unaccounted Sales: The entire unaccounted sales cannot be assessed as undisclosed income particularly if the purchases have been accounted for. Only the net profit on such unaccounted sales can be taken as income

The CIT(A) and Tribunal have came to the concurrent finding that the purchases have been recorded and only some of the sales are unaccounted. Thus, in the above view, both the authorities held that it is not the entire sales consideration which is to be brought to tax but only the profit attributable on the total unrecorded sales consideration which alone can be subject to income tax. The view taken by the authorities is a reasonable and a possible view

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