2018 (4) TMI 640 - AT - Income Tax

Tribunal overturns disallowance of alleged bogus diamond purchases, rules in favor of assessee

Shri Gautam Kumar Pincha Versus I.T.O. Ward 34 (4), Kolkata

The Tribunal ruled in favor of the assessee, overturning the disallowance of Rs. 4,57,600/- for alleged bogus purchases of diamonds from M/s. Nazar Impex ... Bogus purchases - Held that:- During the course of assessment proceedings, it was explained by the assessee in reply to the query raised by the A.O. that purchase of diamonds made from M/s. Nazar Impex Pvt. Ltd. vide bill No. In IPLS/PD/JUL/16/10-11 dated 14.07.2010 was genuine. It was also pointed out that the payment against the said bill was settled by account payee cheque and the quantity of diamond purchased was not only entered into the stock register, but even corresponding sale of the same was duly recorded. The relevant documentary evidence was also filed by the assessee before the A.O. to support and substantiate his explanation. As rightly contended by the learned counsel for the assessee, the authorities below however brushed aside this cogent evidence produced by the assessee and treated the purchase of diamonds by the assessee from M/s. Nazar Impex Pvt. Ltd. as bogus merely on the ground that there was some delay in payment by the assessee against the said purchase. No enquiry whatsoever was made by them to verify the claim of the assessee for the purchase of diamond in question from M/s. Nazar Impex Pvt. Ltd. which was duly supported by the relevant documentary evidence. - Decided in favour of assessee. Issues Involved:1. Addition of Rs. 4,57,600/- on account of alleged bogus purchases of diamonds.Detailed Analysis:1. Alleged Bogus Purchases of Diamonds:The assessee, engaged in the business of manufacturing and trading ornaments and jewellery, filed a return of income declaring Rs. 7,59,290/-. The assessment was reopened following a search and seizure action involving the Sanjay Choudhury Group, Mumbai, which was found to provide accommodation entries for bogus sales. The modus operandi involved benami concerns, including M/s. Nazar Impex Pvt. Ltd., issuing bogus sales bills to regularize purchases in the books.The assessee had purchased diamonds worth Rs. 4,57,600/- from M/s. Nazar Impex Pvt. Ltd. on 24.07.2010. During reassessment, the assessee denied the allegation of bogus purchases, providing detailed explanations and documentary evidence, including stock entries and payment records through account payee cheques. However, the A.O. rejected the explanation, emphasizing the improbability of a seller from Surat offering a 21-day credit to an unknown buyer in Kolkata, thus treating the purchase as bogus.On appeal, the Ld. CIT(A) upheld the A.O.'s decision, citing:- Authentic information from the Investigation Wing.- The improbability of delayed payment to an unknown seller.- Lack of transportation evidence for the diamonds.- Diminished evidentiary value of bank payments without corresponding goods transfer documents.- The appellant's failure to discharge the onus of proof of delivery.The assessee further appealed to the Tribunal, reiterating the genuineness of the purchases supported by documentary evidence, including bills, stock records, and payment proofs. The Tribunal noted that the authorities had disregarded this evidence and relied solely on the delay in payment and information from the Investigation Wing without independent verification.Referring to the precedent set in the case of Manoj Begani vs. ACIT, where the Tribunal allowed similar claims based on documentary evidence, the Tribunal found that the authorities had failed to conduct a proper enquiry and had unjustifiably treated the purchases as bogus. The Tribunal emphasized that the assessee had provided sufficient evidence to substantiate the genuineness of the purchases, including stock entries and payment records.Conclusion:The Tribunal ruled in favor of the assessee, deleting the disallowance of Rs. 4,57,600/- made by the A.O. and confirmed by the Ld. CIT(A), thereby treating the purchase of diamonds from M/s. Nazar Impex Pvt. Ltd. as genuine. The appeal was allowed, and the order was pronounced in the Open Court on 11th April 2018.