TMI Blog2021 (3) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... against the disallowance of 25% of purchases less the Gross Profit already declared by the assessee, as non-genuine/bogus by the Assessing Officer. 2. Briefly stated the facts are that, assessee engaged in the business of Reseller in all types of Ferrous and non-ferrous metals filed return of income on 30.09.2009 and 30.09.2011 declaring income of ₹ 1,37,330/- and ₹ 3,12,570/- for the A. Ys: 2009-10 and A. Y. 2011-12 respectively, and the returns were 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 various dealers who are 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 various parties referred in Assessment Order. In response assessee submitted that the purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) observed as under:- 8. Decision 8.1 I have considered the submission of the appellant, carefully gone through the order of the AO, perused the material placed on record, and referred to the case laws relied upon by the appellant and the AO. 8.2 The main thrust of the arguments of the AR is that it has produced all the details before the AO with regard to genuineness of the purchases, however, the AO has merely relied on the information received from the STA, and made the additions to the income of the appellant on account of bogus purchases, hence, the additions are unsustainable. 8.3 The various issues raised by the appellant under the above ground of appeal are now discussed and decided as under: 8.4 Whether a transaction of purchase is genuine or not is always a question of fact and in making an assessment the ITO is not fettered by the technical rules of evidence, the ITO may act on material which may not, strictly speaking, be accepted as evidence in Indian Evidence Act in Court of Law as held in the case of Dhakeswari Cotton Mills Ltd. Vs. CIT (1954) 26 ITR 775 (SC) and it is open to him to collect materials to facilitate assessment even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of assessment and/or review. Thus, the STA clearly differentiated the genuine dealers from the havala dealers. Therefore, when STA has taken the view that the purchases are bogus and if appellant has accepted the same, the burden is on the appellant to prove that purchases are genuine. The appellant has not placed any evidence on record viz, the assessment orders under State VAT laws - of self or the supplying dealer, to show that the assessment has been made in the case of the supplying dealer or default has been made good by the supplying dealer or the appellant has been given 'input tax credit' subsequently which can prove that the stated transactions were genuine. 8.7 It is trite that onus lies on the assessee to prove the genuineness of any expenditure which is claimed as deduction in computing its taxable income. Prima facie onus to prove genuineness of purchases is on assessee. [CIT v. Korlay Trading Co Ltd. (1998) 232 ITR 820(Cal.)(HC)]. Therefore, the onus in the present case squarely lies on the appellant to prove the genuineness of purchase. Further, when the facts lay within the special knowledge of the assessee which it failed to establish, a sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2009-10) (2015) 67 SOT 0052 (Mumbai) (URO) has held that transportation of good to the site is one of the deciding factor to be considered for resolving the issue. However, the appellant has not produced any supporting documents or any independent third-party evidence viz, delivery challan transport bills, octroi bills, which could prove the movement of the alleged material purchased. 8.10 Another argument of the appellant in support of the genuineness of the purchase transaction is that all the payments are made through account payee cheques and payment transactions can be verified from copy of bank statement as submitted before the AO. In my view such an argument is fallacious. There are judicial precedents on this issue wherein 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed to the assessee. However, the appellant could not establish the genuineness of the transaction either on the basis evidence in support of delivery of goods, or by producing the parties from whom the purchase were made. Hence the purchase transaction cannot be considered as genuine. 8.14 Nonetheless, from the facts recorded above in this case, it has emerged that the material in question was really received because without receiving such material the corresponding sales would not have been possible. However, the material was not received from the parties from whom it is shown to have been purchased as there is no independent third party evidence on record which can support the transaction. Thus, an inference can be drawn 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 as compared to the rate at which they may charge in case the dealer has to give a genuine sale invoice in respect of that sale and supply the goods. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le ITAT, Mumbai Bench in the decision in ITA No. 6555/Mum/2017 for AY 2009-10 in the case of M/s. Muhta Markfin (P) Limited Vs. ITO-5(2)(3), has held as under: We are of the considered view that as the profit element accounted for by the assessee in its regular books of accounts pertains to the profit which it would have made from selling the goods under consideration, therefore, the same would have no bearing on the qualification of the monetary benefit involved in making of purchases by the assessee at a lower price from the open/grey market, as in comparison to purchases made from registered dealer . 8.19 In view of the above, the profit embedded in the accommodation entries of bogus purchases amounting to ₹ 35,95,479/- is estimated 12.5 % on such purchases and an addition of ₹ 4,49,435/- is sustained for AY 2010-11. The appellant gets relief of ₹ 2,98,425/- (₹ 7,47,860/- minus 4,49,435/4 8.20 For AY 2011-12, the profit embedded in the accommodation entries of bogus purchases amounting to ₹ 1,20,70,170/- is estimated 12.5 % on such purchases and an addition of ₹ 15,08,771/- is sustained for AY 2011-12. The appellant gets relief ..... X X X X Extracts X X X X X X X X Extracts X X X X
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