Tribunal affirms deletion of alleged bogus purchases, stresses need for corroborative evidence

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 66,76,237/- made by the AO on account of alleged bogus purchases, emphasizing the need for corroborative evidence beyond third-party statements. The Tribunal found the assessee had sufficiently proven the genuineness of the transactions through submitted documents, leading to the dismissal of the Revenue's appeal.

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Issues Involved:
1. Acceptance of bogus purchases.
2. Deletion of addition made on account of bogus purchases amounting to Rs. 66,76,411/-.
3. Admission of fresh evidence without allowing the Assessing Officer (AO) to examine it as required under Rule 46A.

Issue-wise Detailed Analysis:

1. Acceptance of Bogus Purchases:
The Revenue contended that the CIT(A) erred in law and on facts by accepting the bogus purchase entries in the assessee's books which could not be verified during the assessment proceedings. The AO had issued notices under Section 133(6) of the Income Tax Act to verify the genuineness of the purchases, but these notices were returned with the postal remark "not known." Additionally, the AO relied on statements from the Sales Tax Department, Mumbai, where parties admitted to providing accommodation entries and charging a fee for such services. Consequently, the AO concluded that the purchases were bogus and added Rs. 66,76,237/- to the total income of the assessee.

2. Deletion of Addition Made on Account of Bogus Purchases:
The CIT(A) deleted the addition made by the AO, observing that the assessee had submitted various documents to support the genuineness of the transactions, including VAT returns, cheques, bank statements, and confirmations from the parties involved. The CIT(A) noted that the assessee's total purchases were Rs. 1,44,80,582/-, of which Rs. 66,76,237/- were considered non-genuine by the AO. The CIT(A) found it implausible that 47% of the total purchases were non-genuine, especially when the sales were not disputed and substantial sales were made to reputed concerns. The CIT(A) also pointed out that the payments were made through account payee cheques, and there was no evidence to suggest that the assessee received back the amount in cash. Furthermore, the statements from the Sales Tax Department were general and did not specifically implicate the assessee. The CIT(A) concluded that the assessee had discharged his onus to prove the genuineness of the transactions, leading to the deletion of the addition.

3. Admission of Fresh Evidence Without Allowing AO to Examine It:
The Revenue argued that the CIT(A) entertained fresh evidence without allowing the AO to examine it, as required under Rule 46A. However, the Tribunal noted that the CIT(A) had considered the documents submitted by the assessee during the assessment proceedings, including VAT returns, cheques, bank statements, and confirmations from the parties. The Tribunal also observed that the Revenue did not provide any material evidence to counter the assessee's submissions or to prove that the CIT(A) had admitted any additional documents in contravention of Rule 46A.

Tribunal's Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO, emphasizing that no addition can be made merely based on third-party statements from the Sales Tax Department without corroborative evidence. The Tribunal also referred to various judicial precedents where similar additions were deleted due to lack of concrete evidence. The Tribunal dismissed the Revenue's appeal, finding no infirmity in the CIT(A)'s order.

Final Order:
The appeal of the Revenue was dismissed, and the order pronounced in the Court on 01st November 2018 at Ahmedabad.

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