2008 (3) TMI 323 - HC - Income Tax

Additions for bogus purchases and undisclosed income upheld where alleged suppliers untraceable and cheque payments routed back in cash

HC upheld the Tribunal's order sustaining additions for unexplained purchases and undisclosed income in favor of the revenue. The apparent sellers who ... Assessment - Undisclosed sources - inflated purchase price - HELD THAT:- Apparent sellers who had issued sale bills were not traceable. That goods were received from the parties other than the persons who had issued bills for such goods. Though the purchases are shown to have been made by making payment thereof by Account Payee Cheques, the cheques have been deposited in Bank Accounts ostensibly in the name of the apparent sellers, thereafter entire amounts have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount from the bank Accounts - In the aforesaid set of facts and circumstances of the case, the impugned order of the Tribunal is an order which is made in accordance with law and does not require any interference – decided in favor of revenue. Issues Involved:1. Rejection of evidence in the form of certificates and statements.2. Basis of purchases of tin plates (weight vs. number of component parts).3. Addition of the value of tins to the income of the assessee.4. Suppression of production of tins.5. Rejection of evidence supporting the basis of purchases.6. Perversity of Tribunal's conclusions.7. Inflation of purchase prices and disallowance of 25% of purchases.8. Conduit pipes between assessee and sellers of raw materials.9. Confirmation of the addition of 25% of the amounts claimed in respect of bogus and sham purchases.Detailed Analysis:1. Rejection of Evidence:The Tribunal rejected the evidence in the form of certificates and statements filed during the assessment proceedings. This issue was resolved by referencing a previous decision in the assessee's own case for the Assessment Year 1982-83, where similar evidence was found insufficient.2. Basis of Purchases of Tin Plates:The Tribunal held that the purchases of tin plates for manufacturing were made based on the number of component parts rather than weight. This finding was also based on the precedent set in the assessee's case for the previous assessment year.3. Addition of the Value of Tins to Income:The Tribunal justified adding the value of 4266 tins in A.Y. 1983-84 and 3012 tins in A.Y. 1984-85 to the assessee's income. This was again consistent with the decision for the earlier assessment year.4. Suppression of Production:The Tribunal found evidence to justify the suppression of production of 4266 tins in A.Y. 1983-84 and 3012 tins in A.Y. 1984-85. This conclusion was supported by the findings in the assessee's case for the previous year.5. Rejection of Evidence Supporting the Basis of Purchases:The Tribunal rejected the evidence led by the appellant in support of the contention that purchases were made based on weight. This rejection was in line with the Tribunal's earlier decision.6. Perversity of Tribunal's Conclusions:The Tribunal's conclusions were challenged as perverse, meaning no reasonable person could have reached these conclusions based on the evidence. However, the Tribunal's decision was upheld based on the precedent from the previous assessment year.7. Inflation of Purchase Prices:The Tribunal held that the assessee had inflated the prices to the extent of 25% for purchases from certain parties. This finding was based on the fact that the parties were not traceable, and the payments were made through cheques which were withdrawn by unknown persons.8. Conduit Pipes Between Assessee and Sellers:The Tribunal found that the parties from whom purchases were made acted as conduit pipes between the assessee and the actual sellers of raw materials. This conclusion was drawn from the fact that the sellers were not traceable and the payments were withdrawn by unknown persons.9. Confirmation of Addition of 25% of Amounts Claimed:The Tribunal confirmed the addition of 25% of the amounts claimed in respect of bogus and sham purchases. The Tribunal agreed with the Commissioner (Appeals) that the purchases were genuine to the extent of 75%, but 25% of the purchase price was inflated.Conclusion:The High Court upheld the Tribunal's findings on all issues. The questions raised by the assessee were answered in the negative (in favor of the assessee and against the revenue), while the questions raised by the revenue were answered in the affirmative (in favor of the revenue and against the assessee). The Reference was disposed of with no order as to costs.