2016 (6) TMI 1032 - HC - Income Tax

Court upholds income addition for unproven purchases, emphasizing lack of evidence.

M/s. Kalyani Medical Stores Versus Commissioner of Income Tax, Burdwan & Another

The Court confirmed the addition to the assessee's income due to unproven purchases, emphasizing the lack of evidence to establish their genuineness. ... Bogus purchases - whether the assessee failed to establish the genuineness of the purchases from JKDPL as claimed by it? - Held that:- We have enquired of Mr.Biswas and from his submission we understand that the purchase bills of less than ₹ 20,000/- were not produced. The payments, according to him, were made all in cash. The stock register was not produced. The absence of these documents go to suggest that the purchase from JKDPL may be a bogus purchase. In any event the view taken by the assessing officer, CIT(A) and the learned Tribunal is not an impossible view. If the assessee chooses to withhold the best evidence and relies on the secondary evidence even assuming that any secondary piece of evidence was adduced then the presumption in law shall be against the assessee. The question of any lapse on the part of the Tribunal in accepting the sales at a sum of ₹ 1,18,82,877/- did not arise because the aforesaid figure was furnished by the assessee himself. The assessee admits that the sale was for the aforesaid sum. What the assessee has done is that he tried to reduce the profit by showing artificial purchases. When the assessee was unable to show genuineness of those purchases the amount of profit is bound to be increased. - Decided against the assessee. Issues:1. Disputed purchases in trading account.2. Addition of unproved purchases by assessing officer.3. Appeal by assessee against CIT's decision.4. Tribunal's order restoring matter to assessing officer.5. Failure to prove purchases from JKDPL.6. Reduction of addition by CIT(A).7. Tribunal's confirmation of addition.8. Assessee's appeal against Tribunal's decision.9. Questions formulated at the time of admission of the appeal.10. Lack of secondary evidence for purchases.11. Non-production of purchase bills.12. Payments made in cash.13. Absence of stock register.14. Possibility of bogus purchase.15. Presumption against assessee under Indian Evidence Act.16. Affirmative answers against the assessee on questions raised.17. Acceptance of sales figure by the assessee.18. Attempt to reduce profit through artificial purchases.19. Increase in profit due to unproven purchases.20. Dismissal of the appeal.Analysis:1. The case involved disputed purchases in the trading account of the assessee, where the assessing officer added a sum to the income due to unproven purchases. The CIT(A) reduced the addition, but the Tribunal confirmed it based on the failure to establish the genuineness of purchases from JKDPL.2. The Tribunal's order restored the matter to the assessing officer for further proof of purchases worth a specific amount. Despite the opportunity granted, the assessee failed to provide satisfactory evidence, leading to the re-addition of the sum to the income.3. The assessee appealed against the Tribunal's decision, questioning the justification of confirming the addition as bogus expenditure without primary evidence. The Tribunal's finding highlighted the failure to prove the purchases, leading to the dismissal of the appeal.4. The lack of secondary evidence for purchases, non-production of purchase bills, cash payments, and absence of a stock register raised doubts about the authenticity of the transactions, suggesting the possibility of a bogus purchase.5. The Court emphasized the presumption against the assessee under the Indian Evidence Act when crucial evidence is withheld, leading to an unfavorable inference. The affirmative answers against the assessee on the raised questions reinforced the Tribunal's decision to confirm the addition.6. The acceptance of the sales figure by the assessee did not mitigate the impact of unproven purchases, which artificially reduced profits. The Tribunal's decision to increase the profit due to unproven purchases was upheld, resulting in the dismissal of the appeal.