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TMI Blog2025 (1) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... jal Ashok Shah. The CIT further erred in confirming the action of the AO to re-open the assessment by issuing notice u/s. 148 of the Income tax Act, 1961 ("the Act"). 2. On the facts and in the circumstances of the case and in law, the CIT erred in confirming the addition of Rs. 3,62,45,000/- made by the AO under section 69C of the Act by stating that the transactions are only paper transactions that the appellant has taken accommodation entries, by merely relying on the information received from investigation wing and without conducting any independent enquiry. The Learned CIT further erred in not considering the decisions of various High Courts and Tribunals cited by the appellant. 3. On the facts and in the circumstances of the case and in law, the CIT failed to appreciate the fact that if the sales of the vendor are not proven to be bogus, then the corresponding purchases of the appellant cannot be considered as bogus and also that if sales in the appellant's own case are accepted, the purchases made by the appellant could not be considered as bogus. As such no addition can be made under Sec 69C of the Act." 3. The brief facts of the case are that the assessee is a fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot practically possible to track the utilisation of a particular stock of gold purchased from a particular vendor. In support of its submission, the assessee furnished the quantity details of stock in the tax audit report in Form 3CD. Further, in reply to the show cause notice, the assessee also submitted that the vendor Mr. Bijal Ashok Shah, after the conclusion of the survey on 17/01/2017, immediately filed an affidavit on 24/01/2017 for retraction of the statement given by him during the survey. Accordingly, the assessee submitted that the statement recorded during the survey has been retracted, therefore it loses its evidentiary value and the same cannot be used for initiating any tax proceedings. 4. The Assessing Officer ("AO") vide order dated 27/05/2023 passed under section 147 read with section 144B of the Act disagreed with the submissions of the assessee and made an addition of INR 3,62,45,000 under section 69C read with section 115BBE of the Act, by observing as follows: - "4.5. Pointwise rebuttal of reply of the assessee including analysis if any case laws relied upon. 4.5(i). As far as the rebuttal of the statement of the vendor is concerned, it may be noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cited. The AO in the assessment order held that during the course of search evidences were found persons were examined on oath which established that Sri BijalAshok Shah, Proprietor of M/s. Swastic Corporation, using to give accommodation entries in the nature of bogus purchase to various beneficiaries. During the course of appellate proceedings, the appellant had filed the following documents which were already submitted before the AO to prove the genuineness of the transactions - (a) details of transactions made with the swastika corporation and copy of purchase invoices pertaining to transactions with swastic corporation. (b) ledger of swastic corporation in the books of the appellant and ledger of appellant in the books of swastic corporation. (c) copy of ledger of relevant bank account for F.Y. 2015-16 from the books of appellant highlighting the relevant payments made to swastic corporation. (d) copy of relevant bank statement of swastic corporation highlighting the relevant receipts form the appellant towards sale of goods. (e) copy of stock register showing receipt of goods purchased from swastic corporation. 5.3.1 The appellant produced bank account statement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this landmark decision the Hon'ble Apex court noted with concern the coulourable devices of tax planning. Therefore, information available with the department found to be genuine in view of that the onus of proof be genuineness of the transaction was on the assessee which it has failed to discharge. It clearly proves that these transactions are only paper transactions and hence helping only in accommodation entries. 5.3.4 During the course of appellate proceedings, the appellant filed a copy of the transactions made with Swatic Corporation. As per the statement, the appellant had purchased gold bars from M/s Swatic corporation in 26 instances around 64,008.80 gms of gold worth of Rs. 17,04,51,239/-. However, it is seen from the statement recorded on oath from Sr. Bijal Ashok Shah, he confessed only three transactions are non-genuine which were stated to be Dt:27.01.2015 31.07.2015 & 02.02.2016. During the course of assessment proceedings also the appellant with regard to the documentation of delivery of goods and bills, it is submitted that it is a general industry practice to only receive tax-invoice at the time of delivery of goods. The appellant has taken the accommodat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 26 instances. However, in the statement recorded during the course of survey action, Mr. Bijal Ashok Shah confessed that only 3 transactions are non-genuine, details of which are as follows: - Sr. No. Date of Entry Amount (in INR) 1. 27/01/2015 1,03,40,000 2. 31/07/2015 74,25,000 3. 02/02/2016 1,84,80,000 Total 3,62,45,000 9. At the outset it is evident that the first transaction on 27/01/2015 of INR 1,03,40,000 pertains to the financial year 2014-15, therefore, we are of the considered view that no addition in respect of the aforesaid transaction can be made in the year under consideration. As regards the other two transactions on 31/07/2015 and 02/02/2016, which fall in the year under consideration, it is evident from the record that during the assessment proceedings, the assessee was asked to furnish documentation regarding the delivery of goods and bills. However, the assessee submitted that the tax invoices were received only at the time of delivery of goods as per the general industry practice. We find that even in the appellate proceedings before the learned CIT(A), the assessee could not furnish documents to prove the delivery of goods by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not in dispute. Even before us, no such details as mentioned above are available on record. Therefore, from the material available on record it is evident that the assessee has failed to prove the genuineness of the aforenoted two purchases made from M/s Swastik Corporation. Thus, it appears to be a case of bogus bills arranged from the aforesaid entities and materials purchased from somewhere else at a lower cost. Thus, we are of the considered view that a reasonable disallowance of the purchases would meet the possibility of revenue leakage. 12. As regards the quantification of the profit element embedded in making such bogus/unsubstantiated purchases by the assessee, we find that the Hon'ble Jurisdictional High Court in PCIT v/s M. Haji Adam & Co. (ITA number 1004 of 2016 dated 11/2/2019) held that the addition in respect of bogus purchases is to be limited to the extent of bringing the gross profit rate on such purchases at the same rate as of other genuine purchases. Thus, respectfully following the aforesaid decision of the Hon'ble Jurisdictional High Court in M. Haji Adam & Co. (supra), we set aside the impugned order passed by the learned CIT(A) and restore the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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