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2016 (7) TMI 688 - ITAT DELHI

2016 (7) TMI 688 - ITAT DELHI - TMI - Bogus purchase - genuineness & the creditworthiness of the relevant purchase parties not proved - Held that:- The purchases from the supplier parties are not established, however, simultaneously, the sales corresponding to the purchases are not doubted and this obvious contradiction get resolved only when the assessee purchases goods in cash from the open market and supply to the buyer parties. The presumption in such circumstances is that purchases have b .....

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cash purchases. In such circumstances, only the peak of the unexplained cash utilized in cash purchases can be added to the income of the assessee. Accordingly, we restore the matter back to the file of the Assessing Officer with the direction to compute the peak of the unexplained cash utilized in making cash purchases. - ITA Nos. 512 & 2811/Del/2010; 482/Del/2013 - Dated:- 20-5-2016 - Sh. I. C. Sudhir, Judicial Member And Sh. O. P. Kant, Accountant Member For the Appellant : Sh. Smt. Anima Ba .....

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up the ITA No. 512/Del/2010. The grounds of appeal raised by the revenue are as under: 1. Learned Commissioner of Income Tax(Appeals) erred in law and on the facts and circumstances of the case in deleting the additions of ₹ 1,44,53,981/- made by the Assessing Officer on account of bogus purchase. 2. Learned Commissioner of Income Tax(Appeals) failed to appreciate that the genuineness & the creditworthiness of the relevant purchase parties could not be substantiated. 3. The appellant .....

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ar under consideration, the assessee filed return of income declaring total income of ₹ 18,42,973/- on 30/11/2006. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short the Act ) was issued and served within stipulated period. In the course of scrutiny proceedings, the Assessing Officer (in short the AO ) observed that out of the total purchases of ₹ 6,75,46,178/- purchases of ₹ 1,50,46,781/- was made from local .....

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-147, Lajpat Nagar. ₹ 24,36,380/- 7 M/s G. Health Care H. No. F-193, Hari Nagar Extn. Part-II, Badarpur ₹ 5,92,800/- 8 M/s Reliance Medicare H.No. A-126, Defence Colony Rs, 6,29,998/- 9 M/s Parag Surgical Instrment Co. H. No, P-29, Triloki Colony, Kotla Mubarakpur ₹ 20,20,000/- 10. M/s Sharma Enterprises, Q-305, Janak Park, New Delhi-18 ₹ 24,79,375/- Total ₹ 1,50,46,781/- 4. For verification of the parties, the AO sent his Office Inspector at the addresses of the ab .....

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s. On 11/12/2008, the AO confronted the assessee with the result of the inspector s report and asked to produce Principal Officers of the firms/concerns along with copies of their purchase bills against supplies to the assessee, their Permanent Account Number (PAN), income tax returns and their statement of bank accounts in which check issued by the assessee company were credited. However, the assessee could not produce the parties except M/s. G. Healthcare (party at serial No. 7 of the above ta .....

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ty of Inspector s report which were not accepted by the AO on the ground that he had visited all places and reported that those places were located in residential areas and at one place i.e. Reliance Medicare, he even reported name of the occupant Sh. Sunil Bagga. The AO further asked the assessee to produce documents of entire cycle of placing purchase orders to those parties till the delivery to the assessee, which included purchase orders containing specifications of the items, rates and proo .....

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he supplier parties were maintained. The AO collected copy of bank statements/account opening forms etc. from banks and he found that in these bank accounts only cheques from the assessee were credited and most of the amount was withdrawn either by self cheques or bearer cheques after a few days of presenting cheques received from the assessee and almost all the bank accounts were either closed or remain non-operative after 31st March 2006. In these bank accounts no cheque payments for purchases .....

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f accounts were bogus and fictitious and created to route its own money back through banking channel and thus held purchases of ₹ 1,44,53,981/- as unexplained and from undisclosed sources. 5. Aggrieved, the assessee filed appeal before the Ld. Commissioner of Income-tax(Appeals). The submissions made by the assessee before the Commissioner of Income-tax(Appeals) in brief are as under: 1. the assessee mainly purchased Sutures of Chinese/Korean/Taiwanese origin from the local suppliers as th .....

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on the close of the accounting year as per the books of accounts, which were not rejected by the Assessing Officer. 3. Major portion of the alleged bogus purchases was actually sold during the year itself and the remaining items of ₹ 6, 89, 306/-formed part of the closing stock declared by the assessee on 31st of March 2006 . The profit accrued on the sale of those item was duly declared in the net profit by the assessee and also subjected to income tax. The cost of the remaining items wa .....

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hose premises, but no such witness was produced for cross-examination by the assessing officer. The inspector did not examine any occupant of the building in his verification process. 7. The suppliers were petty person and peoples engaging such supply businesses need not to hold shop or sign board and they could conveniently operate from the residential premises, since most of the business was conducted over phone by them. 8. The assessee was aware of the main suppliers of those goods but could .....

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light of the nature of business activities which those suppliers were engaged in. 9. The hospitals cannot buy these goods from said importers and or their petty agents or retailers and perforce take supplies from the established suppliers like the assessee. 10. Only because the said addresses were found in predominantly residential areas and also since no banners or boards were on display, an adverse conclusion was drawn by the Assessing Officer that no business activity could possibly be carri .....

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otographs, identity proofs, residence proof etc. were duly filed by the suppliers. 14. The goods were actually supplied at the office of the assessee by those vendors without levy of any additional transportation charges at the goods were not heavy or bulky for which an tempo etc were to be specially hired for delivery. No purchase orders were issued for procuring goods locally. 15. If the said parties were not forthcoming in filing their particulars of income arising from the sales made to the .....

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tion. 17. Regarding certain discrepancy in PAN the assessing officer was required to carry out enquiries and the confirmation letters of the said vendors which contained their respective PAN s were obtained from those parties by the assessee, thus, the appellant could not be faulted for incorrectness or otherwise of the PAN s of the suppliers, 18. it was wrong to say that the assessee company introduced own concealed money from undisclosed sources into the business activity under the garb of pur .....

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ounts of the suppliers and the assessee company and verify whether the purchases held as bogus were in fact sold to the hospitals. In compliance, the Assessing Officer reported that bank accounts of M/s Advanced Surgical, M/s Alok Surgical and M/s Bhalla Surgical were introduced by one company, namely, M/s Aerobridge Cargo Services Private Limited, which also had a current account with the same branch, however, the name and whereabouts of the director could not be gathered from the introduction .....

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by the Assessing Officer in the remand report. 7. In view of the above submissions of the assessee, the Ld. Commissioner of Income-tax(Appeals) was of the view that impugned items had been accepted as sold by the Assessing Officer then their existence cannot be put to any questions simultaneously and as a corollary the purchase of said items cannot be held as bogus. Ld. Commissioner of Income-tax (Appeals) also admitted that even if the goods in question had not been bought from the impugned sup .....

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e the assessee was not responsible for discrepancy in PAN s details. He further observed that merely the suppliers situated in residential areas and no sign boards of the suppliers business found hanging anywhere, it cannot be concluded that no business particularly of the supply nature could be conducted from those premises. The learned Commissioner of Income-tax( Appeals) after considering the submissions of the assessee held the impugned local purchases of ₹ 1, 44, 53, 981 as genuine an .....

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e fact of purchases made from them. She insisted that the material fact of purchases of alleged suppliers has not been proved and in absence of purchases, the alleged suppliers cannot supply goods to the assessee and they were supplies only on papers and goods have been procured in cash from somewhere else. 10. On the other hand, the Ld. Authorized Representative (in short the AR ) of the assessee relying on the order of the Ld. Commissioner of Income- tax(Appeals), submitted that when the sales .....

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f their purchases, bank statements of the suppliers revealed that they were having transaction of sale to the assessee only and no corresponding payment for purchases were appearing in bank statements, the assessee provided wrong Permanent Account Number (PAN) of the suppliers, and Inspector enquiry revealed that addresses of the suppliers were located mostly in residential areas and no business activities from those places were reported by the persons in neighborhood. 12. The ld. Commissioner o .....

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ntioned by the suppliers in their confirmations, and therefore assessee cannot be held responsible for the inconsistency in PANs. 13. We find that in the circumstances, when sales are not doubted and no inconsistency in item-wise inventory is found, but, on the other hand, the purchases from supplier parties are not getting substantiated with necessary documentary evidence, the logical presumption will be that the assessee had made actual purchases from one set of parties in cash and obtained pu .....

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by some persons but those did not issue bills and used to transact in cash. The relevant submission of the assessee summarized by the learned Commissioner of Income-tax(Appeals) in his order in para 5.11 are as under : 3.4 In this regard the appellant further submits that it is also aware of the said main suppliers but cannot purchases material straight from then as they either do not give bills for supplies or they take payments in cash only and not by cheque or drafts. Probably it may be that .....

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toon published in the newspaper Times of India dated 29.09.2008, which is self-explanatory and also supports the said fact now well seen and already appreciated by all. Further they are located either in Kolkata or in Chennai and to send anybody there to pick up the purchases is also quite cumbersome. Therefore, assistance was sought from the persons in New Delhi for such supplies. Thus, it has been claimed that the observations of the Inspector in his report are not material in the light of the .....

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eir bank accounts after getting cheques from the assessee and no proof of purchases or payment for purchases by these parties, not having any correct PAN s, etc. facts and circumstances goes to establish that these parties are only supplier on paper and issued only bills to the assessee without supplying the goods. It is impossible for these parties to supply goods without corresponding purchases. Whether transactions of purchase are genuine, is a question of fact and the primary onus was on the .....

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