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TMI Blog2018 (3) TMI 2034X X X X Extracts X X X X X X X X Extracts X X X X ..... these five parties had not paid VAT collected on the sales made to the assessee. 5. Before the AO, assessee furnished following documents to substantiate the genuineness of the purchases. 1. Photocopies of Purchase bills 2. Reconciliation of Stock Statement showing inward & outward movement of materials 3. Bank Statements depicting transactions made by way of Account Payee cheques & through banking channel only 4. Ledger Accounts of parties 5. Itemwise Quantitative details of purchases and sales. 6. However, AO made the addition of the purchases on the ground that VAT authorities have treated the sales as non-genuine since these suppliers had not paid VAT on the sales effected by them. Accordingly AO made addition of Rs. 2,16,32,006/-. 7. By the impugned order, CIT(A) deleted the addition after observing as under:- "6.3.2. I have considered the stand of the AO in the assessment order as well as the submissions of the appellant. I have also considered the judicial pronouncements referred and relied upon by the appellant. 6.3.2. The addition has been made on the basis of information received from Investigation Wing based on the internal inquiries carried out by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have given false statement to save them from the action of the Sales Tax Department. I find that the AO cannot make any addition just on the basis of presumption. Suspicion, however strong cannot take place of proof. This principle is reflected in the following judicial pronouncements; * Umacharan Shaw & Bros v. CIT (37 ITR 271) (SC) * Dhakeshwari Cotton Mills v. CIT (26 ITR 775) (SC) * SbeoNarainDuli Chand v. CIT (72 ITR 766) (All.) 6.3.4. It has been explained by the appellant that during the assessment proceedings, the assessee had requested the AO to give them copies of all the materials/ information/evidences, on the basis of which the AO has formed his opinion to make disallowance of above referred purchases. However, no such materials were supplied to the assessee before using the same against it. The submission of the appellant is that this was a clear violation of principles of natural justice and therefore the addition made by the AO and the impugned assessment order is unconstitutional and void. The appellant had submitted copies of purchase bills, Ledger A/c, bank statements reflecting entries of payments made for the above purchases to the above referred p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spicious dealers before Sales-tax authorities, were not supplied to the assessee for effective countering. Similarly, copies of Return of Income, Profit & Loss A/c, Bank statements and copy of ledger account in the books of accounts of such suspicious dealers have not been requisitioned by the AO and put across assessee for cross-verification or rebuttal. Since these were not provided to the appellant by the AO, this has led to violation of natural justice and non-providing of opportunity for cross examination and countering the conclusions of Sales-tax Department of Govt. of Maharashtra as well as the alleged suspicious dealer. 6.3.6. It has been vehemently argued by the assessee that the AO did not appreciate the evidence adduced by the appellant to substantiate his purchases from the said parties, including details such as details of bill-wise purchases; ledger accounts of the parties in question; copies of all purchase invoices and delivery challans of all the parties, copies of bank statements substantiating payments made by the assessee to the parties in question, and various other documents and details substantiating our purchases from the parties in question. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of hawala dealers party as per the department. The said parties have been treated as hawala dealers on the basis of information and materials collected the back of the assessee. The said information and materials have been used against the assessee, that too, without giving any copy thereof and without giving it any opportunity to cross examine the said parties. The impugned assessment order is therefore in violation of principles of natural justice and hence bad in law on that score alone. iii) The appellant has asked for copies of various relevant documents found basis of addition. However, the AO has chosen to proceed without providing copy of any such documents. The AO has chosen to believe the statements of suspicious dealers to be sacrosanct which was taken behind the back of the assessee by the Sales-tax authorities, while ignoring the documents adduced before him/her by the assessee. iv) the Courts have laid down that while the AO has full freedom to collect evidences "on the back" of the appellant, his/her rights to use such material in the assessee order is not unfettered. Before using such material gathered through private enquiry in the assessment, the said materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bounded duty of the Assessing Officer to enquire from the sales-tax department as to whether those sales tax registration nos. were allotted to non-existent persons or existing ones and whether the sales tax was collected and deposited and deposited into the Government exchequer or not, and if yes, by whom Such an inquiry should have been made by the department in order to know the truth, Failure to do so on the part of the Assessing Officer indicated that his observations and findings in respect of sales tax registration nos. were not based on solid material and cogent evidence. The assessee had furnished all the details and particulars of purchase and sales item-wise, amount-wise, quantity-wise, quantity-wise, stock folio-wise and had linkage and correlation between the purchases and sales. The assessee had explained that goods were purchased, materials were consumed and thereafter respective sales were effected but the Assessing Officer/had rejected this contention only on the ground that as seller nonexistent, there could not have been any purchases. The Assessing Officer had not analysed data and figures of production with reference to the stock register and purchases, produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly supported by books of account and unless and until they were controverted/:or their contents were disbelieved or disturbed by pointing out defects or by proving the defects with positive evidence, purchases could not be declared to be bogus. Thus the Assessing Officer was not justified in declaring the purchases to be bogus for the reasons given by him. The assessment order would show that the Assessing Officer was not sure of making a well-determined addition on account of bogus purchases. Firstly, he presumed the bogus purchases but when he was confronted with sales to a Government department along with purchases, he switched over to the presumption of concealed stock. But again, when he found that on the basis of the actual facts and figures, he might not succeed in applying the theory of concealed stock, he jumped to the third presumption of inflated expenses. The Commissioner (Appeal) had taken the fourth stand that the assessee might have shown bogus purchases in earlier years which were detected in the instant year. However, bogus purchases of earlier years could not be added to the total income of the instant year. Before the Tribunal the department had taken a fif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dverse finding from the Sales-tax authorities on this score have been received by the AO nor such enquiries were conducted by the AO in respect of facts narrated above. (v) In the case of the appellant, the AO has used general information collected by the Economic Intelligence Unit of the Sales-tax department. No copy of whatever information received has been given to the appellant. No opportunity has been given to the appellant to rebut the same. The said information is used against the appellant and the purchases have been straightway treated as bogus. The AO has not allowed the appellant to cross examine the said parties. Under the circumstances the circumstances the addition / disallowance made by the AO, to the income of the appellant, treating purchases from the parties in question as bogus, cannot withstand the test of judicial scrutiny. In this regard, reference is made to and reliance is placed on the judgement of the Punjab High Court in the case of Chiranjilal Steel Rolling Mills vs. CIT (841TR 222), where it has been held as under; "The only material before the Income-tax Officer on the basis of which the addition was made to the income of the assessee-firm was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries related. The nature of the transactions between the parties was also to be investigated, in order to find out whether the assessee ]iad any occasion to pass on cash to G when the case of the assessee was that they used to sell iron and steel goods manufactured by Tatas. There was no material on the record for the Income-tax Officer to reach the conclusion that the amount in question had been passed on by the assessee-firm in cash to G. The Income-tax Officer also did not have the advantage of seeing the UchantiBhai, entries from which had been supplied to him, in order to find out whether that Bahi was a reliable document. He had admittedly not recovered it from G nor was it shown on this record as to who recovered it from that firm. No official of the sales tax department was examined to know about this fact. It was also significant that in appeal the appellate authority under the Sales Tax Act agreed to accept from SM the sum of Rs. 3,100 instead of Rs. 18,000 which had been imposed by way of sales fax on the basis of that Uchantibahi,, which clearly showed that even the appellant authority was not convinced that Mr.Uchantibahi was a genuine book which could be explicitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, stating it broadly and without intending it to be exhaustive, it may be observed that rules of natural justice require that a party should have the opportunity of adducing all relevant evidence on which he relies, that the evidence of the opponent should be taken in his presence find that he should be given the opportunity of crossexamining the withness examined by that party and that no material should be relied against him without Ins being an opportunity of explaining them, (Union of India vs. T R Verma AIR 1957 SC 882). (vii) In the case of State of Kerala vs. K T ShaduliYusuff (1977) 39 STC 478, 481 (SC), the Hon'ble Supreme Court has pointed out that the law is well settled that tax authorities entrusted with the power to make assessment of tax discharge quasi judicial functions and they are bound to observe principles of natural justice in reaching their conclusion. (viii) Hon'ble Supreme Court, in the case of State of Mysore vs. Shiva Basappa Shivappa Markapur AIR 1963 SC 375 and Hon'ble Delhi High Court in the case of Indian Pan Works vs. Chief Commissioner (1969) 24 STC 44 (Del), Hon'ble Kerala High Court in the case of A S Suresh Chenoy vs. WTO 149 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 134, 184 (Guj) have observed that aquasi judicial decision rendered or an order made in violation of the audialterampartem rule in null and void and the order impugned in such a case can be struck down as invalid on that score alone." 6.3.10. It has not been disproved by the AO that the suspicious parties in question were, at the time when the purchase were made, were holding a valid and lawful registration MVAT Act 2002 and the CST Act. The Sales Tax Department issues a registration certificate after strict verification of identity of the party, its place of business and place of residence, Bank account proof, Ration Card, Rent Receipts, Electric Bills and such various other documents. And after the registration certificate is issued. The officers of the department personally visit the place of business of the party, called advisory visit, and verify not only the place of business but also the original documents and bank statements, books of accounts, stock position, whether the party has filed the VAT returns or not and also verify the correctness of the VAT returns filed etc.. If the advisory visit team reports any falsehood or otherwise anything suspicious, they are bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me were rejected by the AO for any good reasons. It has been explained by the appellant that although all the facts and evidences, bills, vouchers, books of accounts, bank statements etc. were adduced by the appellant during the assessment proceedings and verified by the AO, but the later those to make the disallowance of purchases from these parties, that too without rejecting the books of accounts and without disbelieving any sales of the appellant. The AO made additions on the basis of information of alleged Hawala dealers provided by the Sales Tax department on the basis of declaration/affidavits which were collected behind the back of the appellant and no copy thereof/ was given to the appellant either before or after using the said materials against the assessee and the assessee was also not provided any opportunity to cross-verify the various facts recorded in the books of accounts, bank statements etc. of the alleged hawala dealers. That the books of accounts of the appellant have not been rejected. The sales of the appellant have not been doubted. No infirmity is pointed out in the evidences adduced by the appellant. Hence merely because the suppliers have not appeared bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that a disallowance, without any valid reasons and without pointing out excessiveness or infirmity is not justified. Reliance is made and reference is placed on Neha Proteins Ltd. v. Asst. CIT 83 TTJ (Jd.)236, Speed Carries v. ITO (1987) 27 TTJ (Ahd) 387, Beta NaphtholOvt Ltd. v. Asst. CIT 50 TTf (Ind.) 375, Jupiter Textiles v. ITO (2002) 77 TTJ (Jd) 735.) Hence the disallowance made in the case of the appellant by the AO without pointing out any excessiveness or infirmity cannot be held as justifiable. 6.3.14. The AO has the ample authority vested by law in him/her, to issue summons to the parties and enforce attendance and requisite compliance. But the notices u/s 133(6) or 131 were not enforced uppn the said parHt^whirh the AO could have done by calling further information from the Sales-tax authorities regarding initial details of initial team visits of Sales-tax authorities before granting Sales-tax registration number or the KYC of banks obtained by the Sales-tax authorities before granting Sales-tax registration number. The AO could have taken action to serve the summons as provided under Order 5, Rule 17 of Code of Civil Procedure. Thus, the AO cannot fasten the blame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny immediate cash withdrawal from their account. We find that no such exercise was done. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. As far as the case of Western Extrusion (supra) is concerned, we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But, in the case before us, there is nothing, in the AO, about the cash trial. Secondly/ proof of movement of goods is not in doubt. Therefore, considering the peculiar facts and circumstances of the case under appeal, we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on file to endorse the view taken by the AO. So, confirming the order of the FAA, we decide ground no. 1 against the AO" (ii) Further reference is made to the case of NJkunj Eximp Enterprises Pvt. Ltd. ITA NO: 5604 of 2030 dated 17/12/2012 (216 Taxman 171), wherein the Honourable Mumbai High Court has held as under:- We have considered the submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... known". Accordingly, the AO issued show cause notice to the assessee as to why the purchases from these parties should not be treated as non genuine and the same should not be added back. In response to the said notice, the assessee furnished ledger copy of purchases, signed by the respective parties and copies of sample purchase bills along with a few delivery challans and claimed that the purchases are genuine. However, the AO further inquired this matter through on the spot field inquires by the Inspector, who submitted that none of the parties exists at the given address and the inquiries with the nearby shops revealed that nobody is aware about these parties. The report of the Inspector forms part of the assessment order. On the basis of detailed enquires, the AO came to the conclusion that the assessee has managed to obtain the signatures of these parties, but actually these parties does not exists at the given address. The AO has further observed that (i) the receiver's signature are not affixed on the delivery challans of the purchase from these parties, (ii) the mode of transport for delivery of these goods is not mentioned on the purchase bills of these parties wherea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. He also agreed with the view taken by the AO that assessee has not explained the sources for making such purchases and hence the aggregate amount of purchases is liable to be assessed as unexplained expenditure under the provisions of section 69C of the Act. Accordingly, the Id. CIT(A) confirmed the addition made by AO on this issue. 6. We have heard the rival contentions on this issue and perused the record. The- AO placed reliance on the written submissions furnished before the Id. CIT(A) whereas the ld.:DR:placed strong reliance on the orders of authorities below. We notice that the assessee has furnished following reply in response to the remand report furnished byAO: "3.2 in this respect, the appellant's submissions made during the appeal proceedings are as under: " We are in receipt of the remand report dated 21.12.2012 on 31.12.2012 1. The assessee had filed written submissions, paper book and application for additional evidence u/R 46A before your honour The matter was remanded to the AO for a report vide letter dated 12.9.2012. The assessee had filed further details being ledger account of sundry creditors subsequently paid duly highlighted in the bank statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CST in case of Shivam Metals 273-275 6 Letters from RBS bank for clearing of cheques in names of 5 parties, dated 6.8.2012, U.8.12;25.6,12,18.7.12,17.7.12 276.303 7 Bank statement duly certifying the payments been made to parties 304 8 Certificate from depart of sales tax showing cancellation of registration by the parties 305-309 9 Ledger account of Hamali and cartage exp. Along with vouchers 310-318 F. The details of purchase and sales were submitted this once the sales are accepted the purchases cannot be doubted. Without prejudice to above once payment are made by account payee cheques no disallowance could be made merely because parties are not found. The additional evidence produce in form of bank certificate and E returns sales tax prove the existence of the parties G. Further payments were made by account payee cheques. This fact would over shadoiv all other short coming a. Mather & Platt (India) Ltd. vs CIT 168 ITR 493 Cat Assessee made payments to its two commission agents through bank draft and account payee cheque respectively. During assessment proceedings, summons u/s 131 were issued after four years of aforementioned transaction to each of said commission agents cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been explained, payment are made by account payee cheques, transactions are recorded in books, no addition can be made.. ITO V/s Suhana Trading 92 ITD 212 (M.um)(para 98) Where a quantitative tally of sales is furnished, even if purchasers are not available, no addition could be made merely on assumptions or presumptions or surmises or conjectures. C, CIT V/s Leaders Valves (P) Ltd 206 CTR 463(P&H) Commissioner (A) deleted additions made by AO on account of bogus purchase from seven parties as also addition in trading account besides allowing triple shift allowance on machinery etc Tribunal concurred, with analysis and conclusion drawn by Commissioner (A) on appreciation of material on record, after taking notice of fact that trading results of assessee had all along been accepted and purchases oj scrap from seven parties could also be not termed as bogus for reason that in subsequent assessment year purchase from those very parties stood accepted by department to a very substantial extent- Tribunal also took notice of Revenue's contradictory stand in as much as firstly specific additions were made in assessment on account of alleged bogus purchase and then assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion obtained by the Id. AO. Since the banks have mandated the KYC documents, the existence of these parties cannot be rules out merely on the report of the Inspector. The assessee cannot be penalized if the other party enters in any dubious transactions. The assessee as a purchase is concerned with the goods and the only obligation remains is to make the payment. Since the assessee does not have to recover money from these parties, hence he is not required to confirm on their creditworthiness. Moreover the assessee cannot sit over and investigate the genuineness of the party or their business transaction. The assessee as a business man taken due care in getting necessary details which were produced before your as well as the A 0 du ring assessment as well as remand proceedings. L. As regard attraction of provision of section 40(3) is concerned it is applicable to cash payments. The said section stales as under : "where the assesse incurs any expenditure in respect of which payment or aggregate of payment made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank drafts exceeds twenty thousand rupees, no deduction shall be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties and they have not been controverted by the assessing officer. 8. Be that as it may, another important factor the bank account copies collected by the assessing officer shows that the assesses had made the payments to the above said parties by way of account payee cheques. Thus, it is seen that the transactions have been routed through the bank accounts. Further, it is not the case of the assessing officer that the assessee has indulged in accounting of bogus purchases. Wlien the assessee submitted that he could not have effected the sales without making corresponding purchases, the AO has taken the view that the assessee could have effected purchases in the grey http://www.itatonline.org 10J.T.A. No,2826/Mum/2013 market, which conclusion is, in fact, not supported by any material. Under this impression only, the AO has further expressed the view that the assessee would have purchased the materials by paying cash thus violating the provisions of sec. 40A(3) of the Act, which is again based on only surmises. In the absence of any material to support the said view, we are unable to agree with the view taken by the tax authorities that the purchases amount is liable to be disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce these parties. However, the assessee failed to furnish the details called for. Hence, by placing the reliance on the statements given by these parties before the Sales Tax Department, the AO took the view that the purchases to the tune of Rs. 28.08 lakhs have to be treated as unexplained expenditure. Accordingly, he assessed the same u/s 69C of the Act. 4. The Id. CIT(A) deleted the addition and hence the Revenue is in appeal before the Tribunal. 5. The Id, DR strongly placed reliance on the order of Assessing Officer. 6. On the other hand, the Id. AR submitted that the additions made in the case of some other assesses on identical reasons have been deleted by the Co-ordinate Benches of the Tribunal in the-following cases: a) Ramesh Kumar and Co\$/s AOT in ITA No. 2959/Mum/2014 (AY-20W-11) dated 28.11.2014; b) DCIT V/s Shri Rajeev G. Kalathil in ITA No. 6727/Mum/2012 (AY-2009-10) dated 20.8.2014;and c) Shri Ganpatraj A Sanghavi V/s ACIT in ITA No. 2826/Mum/2013 (AY-2009-10) dated 5,11.2014 In all the above said cases, the Coordinate Benches of the Tribunal has held that the AO was not justified in making the addition on the basis of statements given by the third par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of the goods in the month of March 1935 did not make any difference. The assessee might not have carried on any business activities prior to March 1985, but that did not mean that the assessee was not entitled to carry on the business activity in March 1985. They could not be compelled to carry on the business activity throughout the year. There were no good reasons to disbelieve the sales made by the assessee to 'S'. No sales were likely to be effected if there were no purchases. A sale could be made if the goods were available with the seller. From all these facts on record, a reasonable and convincing inference which could be drawn, was that the assessee purchased the textile goods, sold them and adjusted the same towards the loan taken by it. Therefore, the assessee was entitled to get the entire deduction." I have also taken into consideration, the G.P Ratio/G.P. Margin of the appellant in the previous A.Y. as well as subsequent Assessment Year. If the addition made by the A.O. is accepted, then G.P. Ratio of the appellant during the present A.Y. will become abnormally high and therefore that is not acceptable because it onus of the A.O. by bringing adeauate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as unexplained expenditure. Accordingly, he assessed the same u/s 69C of the Act. 11. The Ld. CIT(A) deleted the addition and hence the Revenue is in appeal before the Tribunal, 12. The Id. DR strongly reliance on the order of Assessing Officer. 13. On the other hand, the Ld. AR submitted that the addition made in the case other assesses on identical reasons have been deleted by the Co-ordinate Benches of the Tribunal in the following case : a) ramesh Kumar and Co V/s ACIT in ITA No. 2959/Mum/2014(AY -2010-11) dated 28/11/2014; b) DCIT V/s Shri Rajeev G. Kalathil in ITA No. 6727/Mum/2012(AY-2009-10) dated 20/08/2014; and c) Shri Ganpatraj A. Sanghavi V/s ACIT in ITA No. 2826/Mum/2013(AY-2009-10) dated 05/11/2014. In all the above said case, the Co-ordinate Benches of the Tribunal has held that the AO was not justified in making the addition on the basis of statement given by the third parties before the Sales Tax Department, without conducting any other investigation. In the instant case also, the assessing officer has made the impugned addition on the basis of statement given by the parties before the Sales tax department. We notice that the Id. CIT (A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o indulging in providing accommodation entries. Simply on the basis of statement given by the third party, that they were also proving accommodation entries as well, the conduct of the assessee cannot be doubted and held to be sham. 18. The assessee had conducted business, this is proved by various books of account produced before the AO which were original and primary books and not even the afterthought of the assessee, which has been acknowledged by the AO. 19. In such a circumstance, we cannot sustain the addition as made by the AO. We, therefore, sustain the order of the CIT(A), deleting the addition made, consequentially, the grounds as raised by the department are rejected. 20. In the result, the appeal, as filed by the department is dismissed." (vii) In the case of P arm it Textiles Vs ITO, ITA No. 4012 to 4015 & 4020 to 4021/.the jurisdictional ITAT of Mumbai as held as under:- "3. The common ground raised by the department in their appeals for the assessment years 2002-03 to 2007-08. ITA No. 4012 to 4015/M/12 and ITA Nos. 4020 to 4021/M/2012 are interlinked and directly related to outcome of the second ground in Assessee's appeal which we will see herein afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases made from such parties on account of bogus purchases made in cash from the open market out of unaccounted cash in view of the decision held in Ahmedabad Hon'ble ITAT's C-Bench decision decided in tire case Vijay Proteins ltd. Vs ACIT 58 ITD 428." Briefly stated, the facts of the case are that the Assessee the Assessee is engaged in the trading of textile goods. During the course of assessment proceeding the A.O. observed that the Assessee has purchased goods A.Ys02-03 to 07-08. Interdict, from certain concerns belonging to one Shri Rakeshkumar Gupta and his family members. AO further observed that the departments has surveyed the business premises of the Rakeshkuniar Gupta on 13/02/2009. During the course of survey a statement of Shri Rakeshkumar Gupta was recorded in which he has stated that he has issued bogus bills to various parties and was involved in issuing accommodation bills. The AO further observed that Shri Rakeshkumar Gupta Later on retracted from his statement. The Assessee was asked to justify the genuineness of purchases made from made from Shri Rakeshkumar Gupta and his family members. The Assessee filed a confirmation and an affidavit of Shri Rake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be relevant to reproduce the letter received by the AO from Shri Rakesh Kumar Gupta, which is also reproduced in the assessment order. "1 am in receipt of your summons u/s 131 of the l.T. Act 1961 in the case of M/s. Jintendra Harshad Kumar Textiles Pvt. Ltd. asking me to attend before your goodself with the details of my account with the said M/s. Jitendra Harshad Textiles Pvt. Ltd. As you are aware that my assessing officer had recorded alleged statement u/s 133A and 131 of the I.T. Act. 1961 1 have been receiving witness summons from all four corner of the city on the ground that I have given accommodation bill through I have denied the content of the statements recorded by A.O. u/s 133A & 131 vide my letter date 27/04/2009 and my affidavit dated 20/02/2009 submitted to ward 14(3)(2). It is physically impossible for me to attend before various income tax authorities, as I am not feeling well, it will not possible for me to attend before your goodself in response to your above mentioned summons. As regards M/s. Jitendra Harshad Kumar Textiles Pvt Ltd is concerned. 1 have already given my affidavit wherein I have specifically stated that I have sold the good to M/s. Jitendra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) The Hon'ble jurisdictional Bombay High Court in the case of CIT Vs. Nikunj Eximp Enterprises P. Ltd., as reported in (2015) 372 ITR 619(Bom) on similar issue of bogus purchases, have also deleted the additions made by the AO on account of so-called bogus purchases and held as under: "2. The following question of law has been formulated for consideration of this court. Whether on the facts and in the circumstance of the case and in law the Tribunal was right in deleting the addition made by the Assessing Officer of Rs. 1,33,41,917/- towards bogus purchases even through the suppliers were non-existent and one of the parties had categorically denied having any business dealings with the Assesses Company" 3. The respondent -assesses had filed its return of income of the Assessment Year 2001-02 declaring a total income of Rs. 42.08 Iocs. The Assessing Officer inter-alia disallowed an expenditure of Rs. l.33 crores on account of non-genuine purchase from 7 parties alongwith other disallowance. The Assessing Officer by order dated 25/03/2004 assessed the respondent-assessee to an income or Rs. l.87 crores. 4. Being aggrieved an appeal was filed by the respondent-assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d indicate that the purchases were in/act made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the seller and the canvassing agents have not ben produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchase of Rs. 1.33 crores was not bogus. No fault can be found with the order dated 30/04/2010 of the Tribunal. 9. In view of the above, we find that question as formulated is not a substantial question of law. Therefore the appeal is dismissed no order as to costs." 6.3.16. It is well settled that no disallowance can be made as a leap in the dark. The AO is not entitled to make a guess without evidence. The assessment of any particular year cannot be based on mere suspicion or bare guess, but on a legitimate material from which a reasonable inference of any expenditure being of the disallowable nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i where various legal issues arising out of additions of similar nature have been thread-bare discussed and also other decision of Hon'ble ITAT/High Courts/Supreme Court, it will be difficult to sustain the additions made by the AO only on the ground that the suppliers of the materials/goods were defaulters in not paying VAT to the Sales-tax Department of Maharashtra or the suspicious dealers were not produced before the AO during the assessment proceedings. The claim of the appellant is that they have made the entire payment through banking channel. In fact, when the appellant was directed, they have produced chart of such payment through banking channel. Further, the AO has failed to substantiate that the assessee made payment through banking channel and received it back in cash. If the suppliers have not paid VAT charges to/the Govt. of Maharashtra, but taken the same from the purchasers (here assesseen'su.ch differential amount needs to be added in the hands of dealer and they are liable for any action by the Govt. of Maharashtra for their such defaults. Under the Income Tax Act, 1961 what can be taxed, is the real income. Even through the transaction is not verifiabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the orders of the authorities below and found from record that AO has made addition on the basis of information by the Sales Tax Department with respect to the purchases made by assessee from various parties. AO found that out of entire supplies, goods purchased from five parties had not paid VAT collected on the sales made to the assessee. Accordingly, he added purchase amount in the income of the assessee. To substantiate the genuineness of purchases, assessee filed various documents before the AO. AO did not agree with the same by observing that VAT authorities have treated sales as non-genuine one. In an appeal filed before the CIT(A), he observed that addition was made only on the basis of information from Investigation Wing vis-à-vis Sales Tax Department. He further observed that the assessee has requested the AO to give them copies of all the materials/ information/ evidences, on the basis of which AO has formed his opinion to make disallowance of such referred purchases. No such materials were supplied to the assessee before using the same against it. The CIT(A) further observed that no infirmity has been pointed out in the documents submitted by the assessee. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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