TMI Blog2022 (8) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee by placing on record invoices of the suppliers which clearly make a reference of the names, weight, quality and quantity, transportation vehicle numbers, names of drivers, bank statements of the assessee showing the payments made, confirmations of brokers, delivery of the goods at the CCI which is a government body and loading of the goods into railway wagons for which bills had been issued by the railways that were cleared by the assessee, the A.O without dislodging the authenticity of the aforesaid documents could not have held the purchases in question as bogus. As regards the infirmities in the vehicle registration numbers as was relied upon by the A.O for supporting his conviction that the assesee had only obtained bogus bills and not made any genuine purchases of the goods in question, we find that the assesee qua the said issue vide his letter filed before the CIT(Appeals), had came forth with necessary clarifications and correct vehicle numbers which matched with the weighment slips at CCI. On a perusal of the aforesaid factual position, we are of the considered view that now when the assessee had corrected the mistakes and provided the correct vehicle numbers whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pporting documents/materials there was no justification on his part in drawing adverse inferences as regards the authenticity of the purchases in question. We, thus, in terms of our aforesaid observations, finding no infirmity in the well-reasoned view taken by the CIT(Appeals) as regards the authenticity of the purchases claimed by the assessee to have been made from the aforesaid suppliers/brokers, uphold his view to the said extent. Thus concluded that the assessee had made genuine purchases, which thereafter, were proved to the hilt to have been sold to the aforementioned buyers i.e., both for export and domestic sales, therefore, finding no basis for drawing of adverse inferences as regards the authenticity of the sale transactions by the A.O., we concur with the well-reasoned view of the CIT(Appeals) who had rightly vacated the said addition - Decided against revenue. - ITA No. 99/RPR/2018 - - - Dated:- 26-7-2022 - SHRI RAVISH SOOD , JUDICIAL MEMBER AND SHRI RATHOD KAMLESH JAYANTBHAI , ACCOUNTANT MEMBER Assessee by : Shri Nikhilesh Begani , AR Revenue by : Shri P. K Mishra , CIT DR ORDER PER RAVISH SOOD, JM: The present appeal filed by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of this instant case of this assessee? 7. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was justified in ignoring the ratio of the Hon'ble Delhi High Court in the case of CIT vs Arun Malhotra 47 TAxmann.com 385 (Delhi) / [2014] 363 ITR 195, as the same ration of this decision is squarely applicable to the facts and circumstances of this instant case of this assessee? 8. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was justified in accepting the fresh evidence produced by the assessee without allowing the AO/TPO, proper opportunity to examine the same, thereby violating the provision on law under Rule 46A of I T Rules? 9. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was justified in giving a finding which is cont4rary to the evidence on record as the findings of the Sales Tax Department, Chhattisgarh, nonexistence of the alleged entity at the given address, cancellation of registration of alleged entity before the purchases and non-transportation of the material through vehicle as mentioned in purchase bill as relied upon by the AO in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viz. (i) statements of the proprietors of bogus concerns recorded u/s.131 of the Act; (ii) enquiries in respect of vehicles through which transportation of rice was claimed to have been carried out; (iii) enquiries in respect of bogus concerns so carried out by the Commercial Tax Department; (iv) statements u/s.131 of the Act of the brokers through whom the assessee had claimed to have made purchases from the aforesaid tainted concerns; and (v) difference in the signatures of the owners of the concerns through whom purchases were claimed to have been made as in comparison to that appearing on the purchase bills and statements recorded on oath, the A.O being of the view that the assessee had failed to fortify his claim of having made genuine purchases of Rs.10,17,58,794/- from the aforementioned 17 parties, thus, after rejecting its books of account u/s. 145(3) of the Act dubbed the impugned purchase transactions as bogus and added the entire amount of Rs.10,17,58,794/- to the returned income of the assessee. 4. Also, being of the view that now when the assessee had not made any genuine purchases in question, therefore, there was no question of sale of the same, the A.O held the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. AR to drive home his contentions. 8. As is discernible from the assessment order, information received by the A.O from the Commercial Tax Department, Chhattisgarh a/w. that which had surfaced in the course of survey proceedings conducted on the rice millers and traders of rice and Kanki from 15.03.2016 to 18.03.2016, revealed, that the assessee had claimed to have made purchases aggregating to Rs.10,17,58,794/- from the following 17 tainted parties: S. No. Name of Traders Quantity (in M.T.) Amount ( in Rs.) 1. Shri Zin Mata Rice Mill, Raipur 1011.600 1,97,02,510.00 2. Shyam Agro, Raipur 580.580 89,63,359.00 3. Shri Krishna Processers 835.760 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 131 of the Act of the brokers through whom the assessee had claimed to have made purchases from the aforesaid tainted concerns; and (v) difference in the signatures of the owners of the concerns through whom purchases were claimed to have been made as were discernible from the purchase bills, as against that put by them in their respective statements recorded on oath, concluded, that the assessee had not made any genuine purchases and only procured accommodation bills. For the sake of clarity the observations of the A.O on the basis of which he had held the impugned purchases made by the assessee as bogus/non-genuine are culled out as under: 1. The assessee could not establish the business activity of the concerns from purchases has been shown. 2. The assessee could not provide any other address or business premise of the concerns till date. But it is observed that the assessee has made the payment in the next financial years also. 3. The assessee could not provide the details of transportation bilti etc. It is also observed the vehicle mentioned at the respective bills were non-transport vehicles such as motorcycle, tractors, car etc. It is well known fact, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had not stated anything about the above finding. He could not provide any explanation how he had purchased the material from a cancelled concern. Thus, it is clear that the assessee had not purchased any material from such concern. The asseessee had taken the bogus bill from such concern. 8. It is also observed that the assessee had shown the purchase for M/s Samleshwari Foods, Raipur but TIN (22131103722) mentioned at the said bill was registered in name of M/s Shubh Laxmi Traders, Raipur. In the same way the assessee had shown the purchase from M/ s Sanjeevani Agro Produce, Raipur but TIN (22343605770) mentioned at bill was registered in the name of M/s Bhagwati Trading Co. The assessee was asked to explain the reason of such discrepancy. The assessee stated that the bill are being provided by the broker. The same is not being looked after by him. But as discussed above, the brokers also stated that the details of such broker are being provided by the assessee. The asseessee's plea is not acceptable as the assessee had shown the purchases. It's the sole responsibility of the owner of the concern to look after the matter in respect of all activities of bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding some bogus concerns who were providing bogus bills which involved no physical transfer and sale and purchase of goods. The Income Tax Department also conducted surveys wherein it was detected that many concerns were showing bogus purchases on the basis of bogus bills. The AO relied on the statements recorded by the investigation wing and also himself recorded the statements of eight suppliers, four brokers and one transporter and after gathering material came to the conclusion that the purchases shown by the appellant was bogus and accordingly disallowed the same along with the relatable quantum of sales. There was no survey conducted in the appellant's own case but the statements recorded from the brokers and suppliers form basis for the disallowances made by the AO. 15. During the appeal proceedings the Id. Counsels appearing on behalf of the appellant brought to my notice that the appellant is trader of rice and neither owns or has taken on rent any ware house or godown or depot for receipt despatch or storage of rice and as per terms and conditions the sales of rice is on free on-rail / road (F.O.R. on destination) basis where the loading, arrangements of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same line of business. It was submitted that this aspect was never questioned or disputed by the AO who only had doubts regarding the purchases from billing concerns. Letters of confirmation from the brokers indicate the names of concerns from whom rice has been procured by them and details of PAN, brokerage, names and addresses of concerns reveal the quantity and quality of rice purchased along with the truck number for unloading at the CCI. It was explained that the appellant would not be having full knowledge about these concerns which was known to the brokers in detail and any shortcoming on the part of the supplier cannot be fastened on the appellant. In this context the payments of cheques, deduction of tax at source as per provisions of section 194H and reflection of transactions in the quarterly transaction statements was brought to my notice in the assessment records. My attention was drawn to the accounts confirmations showing rice sales which was ultimately exported to foreign ports/ countries by the following buyers (i) K. N. Resources Pvt. Ltd. K.N.Building, Subhash Road, Ganjpara, Raipur (C.G.) - PAN:AACCK5983B, (ii) Outspan India Pvt. Ltd. A/c. Olam Agro (I) Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from the Sales Tax / VAT / Commercial Tax Department. regarding concerns involved in bogus billing or registered as hawala dealers or accommodation entry providers without conduct independent enquiry by the AO could not be used against the appellant drawing a parallel with the bogus transactions with such concerns by the appellant. In this context the appellant relied on judicial pronouncements that have been reproduced in their written submissions reproduced herein above. 16. With the above material on record regarding purchases I am of the view that the purchases with their description in the invoices, along with the names of suppliers, weight, quality and quantity, transportation vehicle numbers, names of drivers, bank statements of the appellant showing the payments made, confirmation of brokers and delivery at the CCI which is a government body and loaded into railway wagons and for which bills have been issued by the railways which has been paid by the appellant as is evident from the railway receipts and such payments have been debited in the P L account claimed as freight payments cannot be overlooked and purchases be treated as bogus. From the Commission bills o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icles. I observe from the assessment records that vide their letter submitted to the AO on 20/12/2016 necessary clarifications were made by the appellant and the vehicle numbers were corrected which matched with the weighment slips at the CI showing that the vehicles in which the material was transported to the container depot were trucks and goods carriers. The weighment slips and bills are enclosed with the impugned letter filed on 20.12.2016 in the assessment records. 18. The cancellation/ registration of suppliers by the Commercial Tax Department relied upon by the Ld.AO in drawing adverse inference against the appellant does not indicate that business of the suppliers had completely closed down as there are evidences of material being supplied to the appellant through the brokers. From the findings recorded by the Ld. A at page no:16 of the assessment order the cancellation of registration of most of the s pliers (except at Si. No: 2,4,12 14 mentioned therein) had been done by the commercial Tax department much after the end of the relevant financial year in which the appellant had purchased rice from them. Even the suppliers whose Registrations were, cancelled during or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct and specific admission by the suppliers or brokers that they had provided bogus bills to the appellant and the material and the details mentioned in the commission bills or in the invoices were false and fabricated pertaining to the appellant. I have not come across an instance where the suppliers and brokers have stated that the bills and invoices in possession of the appellant provided by them are bogus and fabricated against which no transaction had taken place. One of the brokers Shri Navratan Jain in reply to question no: 27 replied that he could not confirm whether Shyam Agro one of the suppliers had issued bogus bills or not as the same was not in his knowledge. Similarly in reply to question no: 15 the other broker Shri Ajay Shrivastava has confirmed that purchases of rice and transportation are being done but full and complete details could not be confirmed by him. Though bogus billing may be prevalent in this line of business no direct evidences indicting the appellant is seen from the statements recorded of various persons in the assessment order. It is also true that if a supplier or broker is known to be giving bogus bills it would not automatically lead to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had no bank account with Nagrik Sahakari Bank Raipur at any point of time. Regarding observations of the AO the appellant did not own or operate any godowns or mills it was clarified by the counsels that the appellant had submitted all along that he never had any godowns and the material was supplied to the Container Corporation of India and hence his business did not require maintenance of godowns and ware houses. 22. I observe that the AO has not controverted the material submitted during the course of assessment proceedings pertaining to purchases of material, vehicle registration numbers which was clarified during the assessment proceedings, Bank details, transportation details of trucks and Container Corporation of India, Custom clearance details, export and domestic sale documents and confirmation from the exporters along with their copies of accounts. Instead of discussing the modus operandi of the firms involved in bogus billing / purchases as in the statements recorded and relying on reports the AO ought to have returned a finding that the bills and invoices submitted to him or unearthed by him were bogus and did not reflect the affairs of the appellant. The bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d no. 2 is allowed. 10. Also, as observed by us hereinabove, the CIT(Appeals) after referring to the supporting documentary evidence that was filed by the assessee to substantiate the genuineness of the sales which were held by the A.O as bogus, had vacated the said adverse inferences and deleted the consequential addition of Rs.11.29 crore by observing as under: 23. Coming to ground no. 3 pertaining to sales the AO has made proportionate disallowance of sales relating to the purchases which he had held as bogus. I find that the sales of rice by the appellant in terms of quantity and monitoring is supported by documentary evidences which were filed during the assessment proceedings. The copies of accounts of the exporters / distilleries showing sales made, confirmation of accounts and accounts statements of the appellant in the books of accounts of the exporters are strong material proof of sales made by the appellant. There is therefore no concrete basis for making the addition on account of sales in the light of the documents submitted by the appellant in support thereof during the assessment proceedings. Accordingly, the addition on account of is deleted and this groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee having carried out genuine sales to the aforementioned parties. On the basis of the aforesaid facts, now when the evidence placed on record by the assessee proves to the hilt delivery of goods in question at the destination point i.e., Container Depot, CCI, a Govt. of India undertaking, therefore, we are unable to comprehend that as to on what basis the AO had concluded that the purchases claimed by the assessee were to be held as bogus. 12. At this stage, we may herein observe, that as noticed by the CIT(Appeals) the invoices issued by the seller concerns mentioned the requisite details, viz. TIN, names, addresses, statutory details, description of goods, total number of bags, invoice amounts and bank account details etc. Also, as noticed by the CIT(Appeals) the purchase bills did also bear the truck numbers, names of the drivers and that of the brokers. Fact that the weighment slips of the weigh bridges issued at the CCI before entering the CCI s Container Depot as mentioned on the invoices seizes the issue in question and irrefutably evidences the authenticity of the assessee s claim of having delivered the goods purchased to the aforementioned parties i.e., r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouses and distilleries duly confirming the transactions in terms of both value and receipt of quantity of rice sold by the assessee a/w. Form No. 'H' relating to exports, bills of lading and reports of technical surveyors duly substantiates the assessee s claim of having sold the goods in question to the export houses and distilleries. Backed by the aforesaid facts, we concur with the view taken by the CIT(Appeals) that in absence of purchase of goods in question there could not have been any corresponding sales by the assessee to the aforementioned parties. 14. Adverting to the view taken by the A.O that as the assessee had claimed to have procured goods from 17 tainted parties who were involved in the business of providing bogus bills and accommodation entries, therefore, corresponding purchase transactions were to be held as bogus, we are afraid could not have been summarily so held by him by discarding the substantial documentary evidences that were filed by the assessee in support of the authenticity of the purchase transactions in question. On a perusal of the orders of the lower authorities, we find that in case of 9 concerns (out of 17 concerns) neither any state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department prior to the impugned purchases claimed by the assessee, but then on the said standalone basis it could not have been inferred that the business of the said suppliers was completely closed down, because there was evidence that goods were supplied by the said parties to the assessee through the brokers. Apart from that, as observed by the CIT(Appeals), we find that except for in the case of 4 suppliers registrations in the case of the remaining suppliers was cancelled by the Commercial Tax Department much after the end of the relevant financial year in which the assessee had purchased rice from them. Also, we concur with the view taken by the CIT(Appeals) that for the reason that the suppliers in question had not shown rice sales in their sales tax returns filed with the Commercial Tax Department, adverse inferences as regards the genuineness of the assessee s claim of having purchased goods from them could not have justifiably been drawn, specifically when supporting documentary evidence was placed on record by the assessee. We are, also, in agreement with the view taken by the CIT(Appeals) that now when the assessee had made payments to the suppliers through banking ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export sales and domestic sales documents, confirmation from exporters a/w. copies of account, but had chosen to focus more on the modus operandi adopted by the firms/brokers for providing bogus bills/accommodation entries, therefore, in absence of dislodging of the aforesaid supporting documents/materials there was no justification on his part in drawing adverse inferences as regards the authenticity of the purchases in question. 16. We, thus, in terms of our aforesaid observations, finding no infirmity in the well-reasoned view taken by the CIT(Appeals) as regards the authenticity of the purchases claimed by the assessee to have been made from the aforesaid suppliers/brokers, uphold his view to the said extent. 17. Adverting to the authenticity of the sale of goods in question, we find that the A.O holding a conviction that as the assessee had merely procured bogus purchase bills and had not made any genuine purchase of goods in question, therefore, there could be no occasion of having carried out any corresponding sales of the same, had thus on a pro-rata basis disallowed the corresponding sales and recharacterized the same as unexplained credits in the books of accounts o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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