2014 (9) TMI 100 - AT - Income Tax

Tribunal overturns addition of Rs. 19.4 crore based on bogus purchases, citing inadequate evidence and speculative assessment.

ACIT, Central Circle-1, New Delhi Versus M/s Odeon Builders Pvt. Ltd.,

The Tribunal upheld the CIT(A)'s decision to delete an addition of Rs. 19,39,60,866/- based on bogus purchases. The Tribunal found that the assessee ... Assessment u/s 153A - Additions towards Bogus purchases deleted – Held that:- The assessee has been carrying out development activity for Sun city Group of Companies and has on the basis of most of the receipts received from the Sun city Group returned an income of ₹ 6.16 crore odd on 13/9/2008 - the assessee along with Sun city Group of cases was subjected to search u/s 132 on 25/9/2008 proceedings u/s 153A were initiated and in response to notice u/s 153A, the same income was returned by the assessee on 7/9/2009 – AO was of the view that neither the purchases made by M/s Padmesh Realtors is correct nor has anything been sold to the assessee - the statement not confronted of Mrs. Kamini Gupta has no relevance in the absence of any evidence to the contrary - the factum of Padmesh Realtors having been examined in the content of CCD of ₹ 600 crore Deutsche Bank, Singapore has already been in the knowledge of the AO and Investigation Wing - This fact cannot be ignored as the existence was in the know of the department all along the fact coupled with documents of Statutory Authorities; coupled with NOC filed for Registration purposes of Mrs. Kamini Gupta conclude the issue against the Revenue in the absence of any rebuttal on facts and evidence. Availability of go-down facilities – Held that:- Nothing has been placed to show that the person was closely linked either to Kumar Ice Factory or M/s Padmesh Realtors and on the contrary has consistently been described as a stranger by the assessee who has instead placed on record before the AO the correct address of M/s Kumar Ice Factory who had 2000 square meters of area which was allowed by the owner to be used as godown by M/s Padmesh Realtors for their storage of material - the statement of an unconcerned person and enquiry at the wrong address is the only basis of the allegation that M/s Padmesh Realtors did not have godown facilities the same has no relevance in the face of documents issued by Statutory Authorities listed in the impugned order and discussed at length in the earlier part of this order - In the absence of any contrary evidence, we find ourselves unable to come any other conclusion than the conclusion arrived at by the CIT(A). The assessee and the Sun city Group of companies were subjected to search and nothing incriminating except these two documents qua the assessee have been found - The arguments that signatures in invoices appear to be different is not backed by any document in support of the claim - The onus placed upon the assessee stands discharged - a decision is an authority specifically on what it is called upon to decide on the facts available on record as such referring to decisions in order to hold that remand is not warranted in the peculiar facts and circumstances of the case is not necessary as before the said discretion is exercised in revenue's favour there must be some argument or fact on record warranting such a decision - no fact or evidence has been placed on record in order to canvass that facts have not been in correctly appreciated - The documents available on record remain unrebutted – Decided against Revenue. Issues Involved:1. Deletion of addition on account of bogus purchases.2. Use of M/s Padmesh Realtors Pvt. Ltd. as a conduit to inflate expenses.3. Non-appreciation of findings from inquiries conducted by the department.4. Erroneous and untenable order of the CIT(A).Issue-wise Detailed Analysis:1. Deletion of Addition on Account of Bogus Purchases:The Revenue contested the deletion of an addition of Rs. 19,39,60,866/- made by the Assessing Officer (AO) on account of bogus purchases. The AO based his conclusion on documents seized during a search, which he categorized as 'Core documents' showing sales by M/s Padmesh Realtors Pvt. Ltd. to the assessee. The AO's inquiries suggested that M/s Padmesh Realtors Pvt. Ltd. made purchases from non-existent companies. Summons issued to these companies returned unserved, except for Ishwar & Sons Timber Traders. The AO noted that the assessee failed to explain the mode of transportation and storage of goods, leading to the conclusion that the purchases were fictitious.2. Use of M/s Padmesh Realtors Pvt. Ltd. as a Conduit to Inflate Expenses:The AO concluded that M/s Padmesh Realtors Pvt. Ltd. was used by the assessee to inflate expenses, as the company did not have any godown facilities and the addresses provided were found to be false. The AO observed that payments made by the assessee to M/s Padmesh Realtors Pvt. Ltd. were further transferred to other accounts, suggesting a fictitious arrangement to inflate purchases.3. Non-appreciation of Findings from Inquiries Conducted by the Department:The AO's findings were based on inquiries where the existence of M/s Padmesh Realtors Pvt. Ltd. and its suppliers was doubted. The AO noted that summons issued to the suppliers returned unserved, and statements from individuals at the provided addresses denied knowledge of the companies. The AO relied on these inquiries to conclude that the purchases were bogus.4. Erroneous and Untenable Order of the CIT(A):The CIT(A) deleted the addition, finding that the assessee had provided sufficient evidence to substantiate the genuineness of the purchases. The CIT(A) noted that the AO did not confront the assessee with the statements of third parties and relied on inquiries conducted at the back of the assessee. The CIT(A) observed that the assessee had filed various documents, including purchase invoices, transportation bills, confirmed copies of accounts, and bank statements, demonstrating the genuineness of the transactions. The CIT(A) also noted that the trading results of the assessee were consistent with previous years, and the AO's conclusion would result in an abnormal Gross Profit rate.Conclusion:The Tribunal upheld the CIT(A)'s order, noting that the assessee had discharged its onus by providing documentary evidence supporting the genuineness of the purchases. The Tribunal found that the AO's reliance on third-party statements and incomplete inquiries was insufficient to discredit the assessee's evidence. The Tribunal emphasized that the AO did not provide the assessee with an opportunity to cross-examine the individuals whose statements were relied upon. The Tribunal concluded that the addition made by the AO was based on suspicion and conjecture, and the CIT(A) rightly deleted the addition. The appeal of the Revenue was dismissed.