2016 (11) TMI 1359 - AT - Income Tax

Tribunal overturns AO's excessive tax assessment due to lack of evidence, CIT(A) restriction deemed unjustified.

M/s Rich and Royal Versus ACIT, Circle-3, Kalyan

The Tribunal allowed the appeal, finding the AO's addition of Rs. 79,68,784/- lacked sufficient evidence. The CIT(A)'s 25% restriction lacked ... Bogus purchases - Held that:- As decided in assessee's own case for immediately preceding A.Y.2005-06 the sale of the assessee is not disputed by AO and ld CIT(A). Thus, evidences are sufficient to show that actual delivery of goods was received by assessee from the said parties. While making the submission, DR for Revenue has not countered any of the evidence placed on record by the assessee. With these observations, we hold that AO made the addition on the basis of mere presumption and the ld CIT (A) also sustained the 25% of addition without giving any reasoning. Therefore, keeping in view the pacularity of facts and circumstances of the case, the entire addition made by the AO deserves to be deleted. Hence, this Ground of appeal raised by the assessee is allowed. Issues Involved:1. Legitimacy of the reopening of the assessment.2. Validity of the addition of Rs. 79,68,784/- on account of bogus purchases.3. Justification of the CIT(A)'s decision to restrict the addition to 25% of the bogus purchases.Issue-wise Detailed Analysis:1. Legitimacy of the reopening of the assessment:The reopening of the assessment was based on the information that the assessee had engaged in transactions with parties that were providing accommodation bills. The Tribunal noted that the assessee did not contest the reopening before them, indicating an acceptance of the procedural correctness of the reopening.2. Validity of the addition of Rs. 79,68,784/- on account of bogus purchases:The Assessing Officer (AO) disallowed the entire amount of Rs. 79,68,784/- from three parties—M/s Manoj Mills, M/s Astha Silk Industries, and M/s Shree Ram Sales & Synthetics—on the grounds that these purchases were bogus. The AO's conclusion was primarily based on the statement of Mr. Rakesh Kumar Gupta, who allegedly admitted to providing accommodation bills. However, the Tribunal found that the AO did not provide sufficient evidence to substantiate the claim that the purchases were not genuine. The Tribunal noted that the payments for the purchases were made through cross-account payee cheques and were reflected in the bank statements. Furthermore, the Tribunal emphasized that the AO did not bring any material evidence to prove that the payments were received back in cash by the assessee. The Tribunal also referenced previous decisions where similar additions were deleted, highlighting the lack of concrete evidence against the assessee.3. Justification of the CIT(A)'s decision to restrict the addition to 25% of the bogus purchases:The CIT(A) restricted the addition to 25% of the aggregate purchases without providing a clear rationale for this specific percentage. The Tribunal criticized this approach, noting that neither the AO nor the CIT(A) disputed that the payments were made by cheques or that the sales were genuine. The Tribunal found that the CIT(A) did not provide any reasoning for restricting the addition to 25%. Given the lack of evidence and the precedents from similar cases, the Tribunal concluded that the entire addition made by the AO was based on mere presumption and should be deleted.Conclusion:The Tribunal allowed the appeal of the assessee, following the reasoning and decisions from similar cases. The Tribunal found that the AO's addition of Rs. 79,68,784/- was not substantiated by sufficient evidence and that the CIT(A)'s restriction to 25% was arbitrary and without basis. Consequently, the Tribunal deleted the entire addition, ruling in favor of the assessee.Order Pronouncement:The appeal of the assessee was allowed, and the order was pronounced in the open court on 19/09/2016.