TMI Blog2020 (12) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... s non-genuine/bogus by the Assessing Officer. 2. Briefly stated the facts are that, the assessee an individual engaged in the business of manufacturing and trading in pens and ball pens, filed return of income on 28.09.2011 for the A.Y.2011-12 declaring income of ₹.4,22,440/- and the return was processed u/s. 143(1) of the Act. Subsequently, Assessing Officer received information from the DGIT (Inv.,), Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. The assessments were reopened U/s. 147 of the Act based on the information received from DGIT(Inv.) Mumbai, that the assessee has availed accommodation entries from M/s. Royal Enterprises which is said to be providing accommodation entries without there being transportation of any goods. In the reassessment proceedings, the assessee was required to prove the genuineness of the purchases made from the above party and produce the party before the Assessing Officer. In response, assessee vide letter dated 18.02.2016 submitted that the purchases made are genuine and M/s. Royal Enterprises had closed his domestic business and settled abroad. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant has also submitted explanation before the AO to substantiate the genuineness of the purchases. Under similar circumstances the Hon'ble High Court of Madras, in the case of T. Devasahaya Nadar vs. CIT (1964) 51 ITR 20 (Mad), has held that: It cannot be laid down as a general proposition of law that the IT Department rely upon any evidence which has not been subjected to cross-examination. An ITO occupies the position of a quasi-judicial Tribunal and is not bound by the rules of the Evidence Act, but he must act in consonance with natural justice, and one such rule is that he should not use any material against an assessee without giving the assessee an opportunity to meet it He is not bound to divulge the source of his information. There is no denial of natural justice if the ITO refuses to produce an information for cross-examination though if a witness is examined in the presence of the assessee, the assessee must be allowed to cross-examine him. 7.13 In the light of above decision, a conclusion can be drawn that adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee and if a witness ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein it is held that the transaction cannot be held to be genuine merely because the payment is made by cheques. The Hon'ble High Court of Karnataka in the case of CIT Ors. vs. Saravana Constructions (P.) Ltd. (2012) 72 DTR 0258, has held that there is no presumption that merely because the payment is made by cheque, it is a genuine transaction. First it has to be found out whether the transaction in question is genuine and only thereafter, the assessee would be entitled to the benefit of disallowance The Hon'ble jurisdictional High Court of Bombay in the case of Naresh K. Pahuja vs. Income Tax Appellate Tribunal: (2015) 375 ITR 0526 (Bom) has held that mere routing of a gift through a banking channel would not by itself establish that the gift is genuine and the genuineness or non-genuineness of the gift would have to be established by other evidence. And the Hon'ble Supreme Court of India in the case of CIT vs. P. Mohanakala Ors. (2007) 291 ITR 0278 has held that The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such material were purchased from different sources which were exclusively within the knowledge of appellant and none else. It is well known that if purchases are made from open market without insisting from the genuine bills, the suppliers may be willing to sell those products at a much lower rate compared to the rate which they may charge in case the dealer has to give a genuine sale invoice in respect of that sale and supply the goods. There may be various factors due to which there is bound to be a substantial difference between the purchase price of unaccounted material and rate of purchase of accounted for goods. There may be a saving on account of sales-tax and other taxes and duties which may be leviable in respect of manufacture of sale of goods in question. The suppliers or the manufacturers make a substantial saving in the income-tax in respect of income from sale of unaccounted goods produced and sold by them. This may also be one of the factors due to which the seller may be willing to charge lower rates for unaccounted goods as compared to accounted for goods. 7.20 Apparently, the motive behind obtaining bogus bills is inflation of purchase price so as to s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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