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TMI Blog2016 (2) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... filed return of income for assessment year 2003-04 on 21.10.2003 declaring total income of Rs. 1,09,218/-. The original assessment came to be completed under section 143(3) of the Act on 10.3.2006 whereby the Assessing Officer disallowed 25% of the purchases of Rs. 73,29,278/-, that is, Rs. 18,32,319/-, claimed to have been made by the assessee as bogus purchases and added the same to the income of the assessee. 5. The assessee carried the matter in appeal before the Commissioner (Appeals), who confirmed the disallowance. The assessee carried the matter in further appeal before the Income Tax Appellate Tribunal, which, by an order dated 5.9.2008 restored the issue to the file of the Assessing Officer to decide the matter in terms of the Tribunal's previous order in the case of the assessee relating to assessment year 2001- 02, wherein the following observations were made :- "We have carefully considered the arguments of both the sides and perused the material placed before us. We find that the assessee in his written submissions before the AO has mentioned that the assessee has maintained day to day quantitative register in which such purchases are recorded. He has also ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. The assessee carried the matter in appeal before the Commissioner (Appeals), who did not agree with the Assessing Officer and held thus:- "6. DECISION: I have considered the assessment order and the submission of the appellant as enumerated above. I do not agree with the A.O.'s action as far as the above addition is concerned due to the following reasons: i. The mandatory requirement for payment of expenditure by an account payee cheque drawn on a bank or account payee bank draft in Section 40A(3) of the I.T. Act has come w.e.f. 13.7.2006 whereas the appellant's case pertains to A.Y. 2003-04. ii. The A.O. has not found any defect in the books of account including the day to day stock register maintained by the appellant. It means purchases and sales are genuine. iii. The A.O. had not found any instance where the cheques issued by the appellant has been encashed on behalf of the appellant, for coming to the conclusion that purchases are bogus (as per observation of ITAT). iv. In the assessee's own case for A.Y. 2001-2002 and other related case i.e. Smt. A. Haji Ibrahim Fazalwala for A.Y. 2001-02 no addition was made on the same issue (payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, which raises serious doubt about the genuineness of the purchases made by the assessee. It was submitted that the Tribunal has rightly held that it was for the assessee to name the party from whom the purchases were made, the amount paid and the cheque number. That the assessee having failed to do so, the Assessing Officer had rightly held that the assessee has not proved the genuineness of the purchases and that the Tribunal was wholly justified in confirming the order passed by the Assessing Officer. 9. The facts are not in dispute. In the first round of the proceedings, the Assessing Officer had disallowed 25% of the purchases of Rs. 73,29,278/- amounting to Rs. 18,32,319/- on the ground that the assessee had made bogus purchases. The matter travelled upto the Tribunal, which restored the matter to the file of the Assessing Officer with certain directions and guidelines as reproduced hereinabove. From the directions issued by the Tribunal vide its order dated 5.9.2008, it is evident that for the purposes of ascertaining the genuineness of the purchases, the Assessing Officer had been called upon to ascertain the following: firstly, as to whether the seller had given the cheq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial No.5, Rs. 50,140/- and serial No.6, Rs. 52,451/- cash payment made towards purchases totalling to Rs. 1,02,591/-, out of which 20% of such amount of Rs. 20,518/- can be disallowed. The Assessing Officer after considering the reply filed by the assessee has observed that the assessee has issued cross cheques instead of account payee cheques. Some of the cheques are endorsed by the seller to other parties. Some of the cheques appear to have been routed through other proprietary concern of the assessee; for instance, the cheque issued in favour of M/s. A. K. Textiles was withdrawn by the proprietor named "Aaisha", vide cheque No.446893 dated 3.6.2002 drawn on Central Bank of Surat. In the same pattern, the other cheque dated 4.6.2002, bearing No.446894 in the name of A.K. Textile in which proprietor's name was shown as Mr. Feroz. The same pattern was repeated by the assessee when it had withdrawn Rs. 50,027/- vide cheque No.446892 issued in favour of Anukul Textile. The Assessing Officer disbelieved that the proprietor had utilised his account through A.K. Textile. He further noted that in the same pattern the assessee had withdrawn an amount of Rs. 50,027/- vide cheque No.44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the assessee had produced purchase bills from a concern, namely, 'A' to procure the goods from another concern, namely, 'B'. How to verify the genuineness of the payments and the goods procured by him? In the opinion of this court, the aforesaid finding of the Tribunal is totally contrary to the record of the case, inasmuch as, it is not even the case of the Assessing Officer that the assessee has produced purchase bills from one concern and procured the goods from another concern. In fact, it is the case of the Assessing Officer that the assessee has not produced the bills of purchases. The Tribunal after referring to the observations made in its previous order has observed that it was for the assessee to compile the details in a tabular form exhibiting the names of the parties from whom the purchases were made, the amount paid and the cheque number, whereas the assessee has failed to do so. How that amount was ultimately credited to that party is to be established by the assessee. The Tribunal further observed that for the sake of example, the first narration made by the Assessing Officer in paragraph No.4 of his order is Anamika Fabrics. A payment of Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the amount had been withdrawn on behalf of the assessee or on behalf of the purchaser. This was the nature of exercise which was required to be carried out by the Assessing Officer. Clearly, therefore the Tribunal has proceeded on an erroneous footing contrary to the directions issued in its previous order. 13. Referring to the observations made by the Commissioner (Appeals) to the effect that the Assessing Officer has not found any instance whether the cheque issued by the assessee has been encashed on behalf of the assessee, the Tribunal has expressed the view that it was for the assessee to establish how the payment was made to the ultimate seller of the goods. At the cost of reiteration it may be stated that it is not the case of the assessee that the party to whom the seller endorsed the cheque was the ultimate seller. The assessee had made payment towards the purchases by way of crossed cheque to the seller, who may have endorsed the same to any other party with whom he had transactions. However, in the absence of any finding recorded by the Assessing Officer that the cheque was ultimately encashed by or on behalf of the assessee, there was no reason to doubt the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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