Tribunal rules in favor of assessee, deletes addition under section 68 of I.T. Act

The Tribunal set aside the lower authorities' orders and deleted the addition of Rs. 52,63,386/- under section 68 of the I.T. Act, ruling in favor of the assessee. The Tribunal found that the purchases were genuine, supported by invoices and affidavits, and made through banking channels. It noted inconsistencies in the statements of the entry providers and their retraction, ultimately concluding that there was no basis to treat the purchases as bogus.

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Issues Involved:
1. Reopening of the assessment.
2. Addition under section 68 of the I.T. Act, 1961, on account of unexplained purchases.

Issue-Wise Detailed Analysis:

1. Reopening of the Assessment:
The Assessee did not press Ground Nos. 1 and 2 regarding the reopening of the assessment, and therefore, these grounds were dismissed as not pressed.

2. Addition under Section 68 of the I.T. Act, 1961:
On Ground Nos. 3 to 7, the assessee challenged the addition of Rs. 52,63,386/- under section 68 on account of unexplained purchases. The facts of the case reveal that the assessee company filed a return declaring NIL income, and the case was reopened under section 148. The main issue involved was the alleged involvement of the assessee in transactions with entry providers, namely Shri Rajendra Jain, Shri Sanjay Choudhary, and Shri Dharminchand Jain, who were accused of providing accommodation entries in the nature of bogus sales and unsecured loans.

The A.O. noted that the assessee made purchases from these parties, and during the search, statements from Shri Rajendra Jain and Shri Surendra Jain admitted to providing accommodation entries to the assessee. The details of the transactions were as follows:

| S. No | Name of concern operated by Rajendra Jain Group | Name of the beneficiary company | Amount (Rs.) |
|------|-----------------------------------------------|---------------------------------|--------------|
| 1. | Arihant Exports [AFLPP5405N] | M/s. Bhatia Diamonds Pvt. Ltd. | Rs. 20,63,326 |
| 2. | Karnawat Impex Pvt. Ltd. [AADCK1927A] | M/s. Bhatia Diamonds Pvt. Ltd. | Rs. 5,60,930 |
| 3. | Kriya Impex Pvt. Ltd. [AADCK1926B] | M/s. Bhatia Diamonds Pvt. Ltd. | Rs. 6,37,882 |
| 4. | AVI Exports [ABIPJ5587A] | M/s. Bhatia Diamonds Pvt. Ltd. | Rs. 20,01,248 |
| | | Total | Rs. 52,63,386 |

The A.O. concluded that the assessee introduced undisclosed income of Rs. 52,63,386/- through these transactions. The assessee contended that purchases were made only from Arihant Exports and AVI Exports, and provided invoices and affidavits confirming the transactions. However, the A.O. noted that two other parties, Karnawat Impex Pvt. Ltd. and Kriya Impex Pvt. Ltd., denied any transactions with the assessee. The A.O. also noted that Shri Rajendra Jain retracted his statement, but rejected the assessee's claim of genuine purchases and made the addition under section 68.

The Tribunal considered the submissions and noted that in a similar case for A.Y. 2011-2012, the ITAT, Delhi SMC-Bench, had deleted a similar addition. The Tribunal observed that the statement of Shri Rajendra Jain was not provided to the assessee for cross-examination, and he had retracted his statement. The Tribunal also noted that the payments for purchases were made through banking channels, and the parties confirmed the transactions. The Tribunal found that there was no basis for the authorities to consider the purchases as bogus and deleted the entire addition.

Conclusion:
The Tribunal set aside the orders of the authorities below and deleted the addition of Rs. 52,63,386/- under section 68, allowing the appeal of the assessee. The decision was pronounced in the open court.

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