TMI Blog2020 (9) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of trading of Iron and Steel. The return of income for the year under consideration was filed by it on 14.10.2010 declaring a total income of ₹ 60,13,020/-. As per the information gathered by the Assessing Officer from the Sales Tax Authorities, the assessee had made certain purchases from 8 parties which were indulging in providing accommodation entries by issuing bogus bills. During the course of assessment proceedings, the Assessing Officer issued notices u/s 133(6) of the Income Tax Act, 1961 to the said 8 parties requiring them to appear for examination before him along with books of account and other supporting documents so as to establish the genuineness of the purchases claimed to be made by the assessee from the said 8 parties. The said notices issued u/s 133(6), however, were returned back unserved by the Postal Authority with the remarks Left without intimation . This position was confronted by the Assessing Officer to the assessee and the assessee was called upon by the Assessing Officer to produce the said parties for examination along with relevant documentary evidence. The assessee failed to comply with this requirement of the Assessing Officer. He, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny merit in the submissions made on behalf of the assessee for the following reasons given in paragraph no.6 to 8 of his assessment order :- 6. I have carefully considered the submission made by the assessee. It is interesting to note the defense put forward by the assessee in this regard. There is no whisper in the submission of the assessee about the genuineness of the transaction with the parties named above. What the assessee is contending IS that in spite of the bogus nature of purchases, the A.O. is not entitled to make any addition on this account. The assessee was given an opportunity to produce all the 8 parties in person for examination to prove the genuineness of the purchase transaction claimed to have been made by the assessee. It is a fact that the assessee has not accepted the offer of producing these parties in person. Notice issued u/s 133(6) of the I.T. Act have been returned by the postal authorities unserved. This raises serious doubt about genuineness of transactions purportedly entered into by the assessee. The contention that payments have been made through banking channels to these parties and hence the transactions should be considered as genuine, hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question that needs to be answered is whether the purchases so made leads to making addition to the total income. It is the contention of the assessee that for every sale there is a corresponding purchase and that sale cannot happen without corresponding purchase. The assessee has stopped short of saying that in spite of the nature of purchase i.e. whether genuine or not, if it leads to corresponding sale, no addition can be made. On the first blush, this argument appears attractive and reasonable. The pitfall in approving of such argument is that purchase shown to have been made by passing only the book entries from a particular party would also stand on the same footing as genuine purchase from a recognized party. Surely, that is not the case. The inference that has to be drawn under these circumstances is that the assessee must have made purchases goods from the open market for whatever benefit or compulsion the causes of which are best known to him only and not disclosed in the books or records. However, pertaining to such purchases made from the open market parties outside the books, but shown as made from the hawala dealers, the assessee has failed to furnish the details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate proceedings before the ld. CIT(A), the submissions made before the Assessing Officer during the course of assessment proceedings were reiterated on behalf of the assessee. The ld. CIT(A) found merit in the said submissions and restricted the addition of ₹ 2,29,12,188/- made by the Assessing Officer on account of alleged bogus purchases of ₹ 6,87,365/- for the following reasons given in para 4.1.3 of his impugned order :- 4.1.3. The assessment order and the appellant's submissions have been gone through. It is a fact that the appellant is a trader in Iron and Steel products. The purchases made by the firm are not consumed as a raw material for manufacturing purpose. All the purchases are either sold or held as a stock. There is no material difference in the quantitative analyses of the purchases and sales. As the sales have been accepted to be true and genuine, there ought to be purchases for effecting the sales. Some of the suppliers have been found to be hawala dealers by the sales tax department. These alleged hawala suppliers have not remitted the sales tax collected from the appellant on the sales made to it to the Maharashtra Sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 69C, When the Ld.CIT(A) has himself stated that the assessee has accepted the purchase parties as bogus (Para 4.1.3). 2. Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in confirming 3% of bogus purchases treating the same as unaccounted payments towards commission for obtaining bogus bills. 3. Whether, on the facts and in the circumstances of the case, the CIT(A) failed to appreciate that there has to be corresponding purchases made from the open market not recorded in the books for making effective sale. As assessee has failed to furnish the details regarding source of expenditure incurred in purchase of goods, the AO has rightly invoked provision of section 69C of the I.T.Act. 4. The appellant craves leave to add, amend or alter any of the above grounds of appeal. 7. We have heard the rival arguments of both the sides and also perused the relevant material available on record. It is observed that all the purchases made by the assessee from the concerned 8 parties aggregating to ₹ 2,29,12,188/- were duly recorded in the books of account of the assessee and even the same were settled by making payments throug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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