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TMI Blog2024 (10) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. 2. Income Tax Appeal No.1753 of 2018 relates to Assessment Year 2009-10; Income Tax Appeal No.2780 of 2018 relates to Assessment Year 2010-11; and Income Tax Appeal No.1759 of 2018 relates to Assessment Year 2011-12. 3. The questions of law raised by the Appellant-Assessee are manifold. Mr. N.M. Porwal, Learned Counsel appearing on behalf of the Appellant-Assessee submitted that he would only be pressing four out of the seven questions raised in these Appeals. However, at the heart of these questions, lies a single issue, namely, whether the ITAT was right in upholding the findings of the CIT-A, by disallowing 10% of the total purchases alleged to have been bogus, and adding such sum to the income of the Appellant-Assessee for the relevant Assessment Years. 4. The Appellant-Assessee wants this Court to hold that all the purchases were genuine and must be allowed as legitimate expenses. The Respondent-Revenue had wanted this Court to hold that all the expenses ought to have been treated as bogus and that the ITAT was wrong in disallowing only 10% of such expenses. It is a matter of record that Income Tax Appeal No. 1349 of 2018, filed by the Revenue against the very same Im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts of the case relied upon by the revenue are different from the facts of the present case. Under these circumstances we uphold the findings of the Ld. CIT(A) and sustain the addition to the extent of 10% of the total bogus purchases made by the assessee during the financial year relevant to the assessment year under consideration." [Emphasis Supplied] 7. It is evident that the ITAT has returned firm findings that the Respondent-Revenue had accepted the sales effected by the Appellant. The ITAT has also returned a finding that the sales are backed by compliance with indirect tax requirements such as sales tax returns and VAT audit reports. The ITAT has also held that it cannot be said that goods have not been sold by the Assessee. Most importantly, the ITAT has returned a firm finding that the adverse findings contained in the AO Order were not based on any cogent and convincing evidence. 8. Once such a view has been arrived at by the ITAT, which is the last forum for finding of fact, namely, that the AO Order disallowing 100% of the purchases under cloud, is not based on any cogent and convincing evidence, it would follow that the AO Order has been judicially found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing 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 sellers and the canvassing agents have not been 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 purchases of Rs. 1.33 crores was not bogus. No fault can be found with the order dated 30.04.2010 of the Tribunal." [Emphasis Supplied] 12. In the case at hand, indeed, the sales are not under cloud. The only ground for suspecting the purchases is that they were from suspect persons on the basis of input from the investigation wing and sales tax authorities. The ground in the instant case too is that the persons from whom the purchases were made had not been produced before the Assessing Officer. The ITAT has endorsed the CIT-A's acceptance of the sales tax returns and the VAT audit report. The ITAT has returned a firm finding that there is no cogent or convincing evidence in the AO Order. Against such backdrop, the ITAT believed that the factual pattern of the matter at hand is similar to the factual context of Nikunj. That being the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deal with a similar issue in the case of Principal Commissioner of Income-tax-1 Vs. SVD Resins & Plastics (P.) Ltd. [2024] 166 taxmann.com 242 (Bombay), where, repelling a challenge by the Revenue, to a decision of the ITAT curtailing the disallowance of allegedly bogus purchases to 12.5%, the following observations were made:- "11. We may observe that in the facts of the present case, the basic premise on the part of the A.O. so as to form an opinion that the disputed purchases were not having nexus with the corresponding sales, appears to be not correct. It is seen that what was available with the department was merely information received by it in pursuance of notices issued under section 133 (6) of the Act, as responded by some of the suppliers. However, an unimpeachable situation that such suppliers could be labeled to be not genuine qua the assessee or qua the transaction entered with the assessee by such suppliers, was not available on the record of the assessment proceedings. It is an admitted position that during the assessment proceedings, the assessee filed all necessary documents in support of the returns on which the ledger accounts were prepared, including confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogus, needs to be arrived only after the A.O. consults the Sales Tax Department and a thorough enquiry in regard to such specific transactions being bogus, is also the conclusion of the Sales Tax Department. In a given case in the absence of a cohesive and coordinated approach of the A.O. with the Sales Tax Authorities, it would be difficult to come to a concrete conclusion in regard to such purchase/sales transactions being bogus merely on the basis of general information so as to discard such expenditure and add the same to the assessee's income. 14. Any half hearted approach on the part of the AO to make additions on the issue of bogus purchases would not be conducive. It also cannot be on the basis of superficial inquiry being conducted in a manner not known to law in its attempt to weed out any evasion of tax on bogus transactions. The bogus transactions are in the nature of a camouflage and/or a dishonest attempt on the part of the assessee to avoid tax, resulting in addition to the assessee's income. It is for such reason, the approach of the AO is required to be well considered approach and in making such additions, he is expected to adhere to the lawful norms an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orms a minor fraction of total volume of the assessee company and it is stated that there is no day to day involvement of the management. It was further submitted that the assessee is having strict internal controls. Hence we are of the view that the AO has not made a proper ground in support of the disallowance. Accordingly we set aside the order passed by Ld. CIT (A) on this issue and direct the AO to delete the addition of Rs.3,23,944/-." 18. Thus, we find that according to the Tribunal the assessing officer had merely relied upon information received from the Sales Tax Department, Government of Maharashtra without carrying out any independent enquiry. Tribunal had recorded a finding that assessing officer had failed to show that the purchased materials were bogus and held that there was no justification to doubt genuineness of the purchases made by the respondent - assessee. 19. We are in agreement with the views expressed by the Tribunal. Merely on suspicion based on information received from another authority, the assessing officer ought not to have made the additions without carrying out independent enquiry and without affording due opportunity to the respondent-assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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