2017 (3) TMI 1710 - AT - Income Tax

Tribunal upholds CIT(A) decision on Section 69C addition, emphasizes thorough investigation

Dy. Commissioner of Income Tax 25 (1), Mumbai Versus Shri Sanjay Hirachand Dhokad

The Tribunal upheld the Commissioner of Income Tax (Appeals) decision to delete the addition of Rs. 4,99,27,664/- under Section 69C of the Income Tax Act, ... Addition invoking the provisions of section 69C by treating the purchase are non-genuine - assessee failed to produce the parties for verification and also failed to establish the genuineness of the purchases however claimed to make the payment to the parties through cheques - Held that:- Merely the name of the parties to whom the transaction was done by the assessee have been reflected in the official website of the Sales Tax Department, Government of Maharashtra www.mahavat.gov.in. is not itself to prove the sufficient case in connection with the bogus purchase against the assessee. Moreover, the appellant has shown the Gross Profit and Net Profit which were duly accepted by the Assessing Officer, therefore in absence of the rejection of any book resulted into such huge addition of ₹ 4,99,27,664/- was not tenable in the eyes of law. CIT(A) while deciding the matter of controversy has also placed reliance upon the law settled by in the case of M/s.Nikunj EXIMP Pvt. Ltd. (2013 (1) TMI 88 - BOMBAY HIGH COURT). CIT(A) has decided the matter of controversy after considering the case of the assessee from every angle. Nothing came into the notice that the finding of the CIT(A) is required to be interfere with. In view of the discussion made above we are of the view that the CIT(A) has passed the order judiciously and correctly which does not require to be interfere with at this appellate stage. - Decided against revenue. Issues Involved:1. Deletion of addition of Rs. 4,99,27,664/- made under Section 69C of the Income Tax Act, 1961.2. Reliance on judgments without appreciating differing facts.3. Non-delivery of notices under Section 133(6) and findings from spot verification.4. Assessee's failure to produce parties for verification.5. Failure to rebut findings of the Sales Tax Department regarding bogus purchases.6. Misleading submissions about non-availability of information provided by the Sales Tax Department.7. Lack of opportunity for cross-examination.8. Failure to request summons under Section 131 of the Income Tax Act, 1961.Detailed Analysis:Issue 1: Deletion of Addition under Section 69CThe primary issue revolves around the deletion of an addition amounting to Rs. 4,99,27,664/- made by the Assessing Officer (AO) under Section 69C of the Income Tax Act, 1961, treating the purchases as non-genuine. The AO based this on the fact that the parties from whom the purchases were made were listed as suspicious dealers on the Maharashtra Sales Tax Department's website, issuing bills without actual delivery of goods. Despite notices under Section 133(6) being served, the AO found no business activity at the addresses provided. The assessee failed to produce these parties for verification, leading the AO to add the entire purchase amount to the assessee's income.Issue 2: Reliance on JudgmentsThe Revenue contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in relying on the judgment in CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd., without appreciating that the facts of the appellant's case differed. The CIT(A) found that the assessee had discharged the burden of proving the genuineness of the purchases, and the AO failed to disprove this claim.Issue 3: Non-delivery of Notices and Spot VerificationThe AO issued notices under Section 133(6) to the parties, which were returned undelivered. Spot verification revealed no business activity at the given addresses. Despite this, the CIT(A) noted that the AO did not issue further summons to these parties, and the assessee had provided sufficient evidence, including payment details through account payee cheques.Issue 4: Failure to Produce Parties for VerificationThe AO's addition was partly based on the assessee's failure to produce the parties for verification. However, the CIT(A) observed that the assessee had provided addresses and payment details, and the AO did not pursue further verification or cross-examination.Issue 5: Rebuttal of Sales Tax Department FindingsThe AO relied on the Sales Tax Department's findings of bogus purchases. The CIT(A) noted that the assessee was not given an opportunity to rebut these findings, and the statements recorded by the Sales Tax Department were not furnished to the assessee, violating natural justice principles.Issue 6: Misleading SubmissionsThe Revenue argued that the assessee misled by claiming non-receipt of information from the Sales Tax Department. The CIT(A) found that the AO did not provide the assessee with the statements recorded by the Sales Tax Department, hindering the assessee's ability to rebut the findings.Issue 7: Opportunity for Cross-examinationThe CIT(A) concluded that the AO failed to provide an opportunity for cross-examination. The assessee did not request cross-examination, but the CIT(A) emphasized the importance of this opportunity for a fair assessment.Issue 8: Request for Summons under Section 131The Revenue contended that the CIT(A) erred in concluding that the AO failed to comply with the assessee's request for issuing summons under Section 131. The CIT(A) found no such request was made, but highlighted the AO's responsibility to verify transactions thoroughly.Conclusion:The CIT(A) deleted the addition, stating that the assessee had discharged the burden of proving the genuineness of the purchases, and the AO failed to disprove this. The CIT(A) emphasized that suspicion alone could not justify the addition, especially when payments were made through account payee cheques. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not conduct a thorough investigation and failed to discredit the evidence provided by the assessee. The appeal by the Revenue was dismissed, affirming the CIT(A)'s order.