2019 (11) TMI 708 - AT - Income Tax

ITAT Mumbai reverses decision on tax disallowances, emphasizes importance of incriminating material

The Appellate Tribunal ITAT Mumbai overturned the Commissioner of Income-Tax (Appeals)'s decision to delete disallowances made by the Assessing Officer ... Assessment u/s 153A - assessee obtained accommodation purchase bills of high magnitude so as to evade taxes which stood corroborated by the statements of various suppliers / associated persons as recorded u/s 132(4) - HELD THAT:- We are unable to subscribe to approach adopted by first appellate authority in deleting the impugned additions. It is noted that the additions were deleted merely on the basis of remand report that no incriminating material was found during the search operations overlooking the fact that computer back up was seized during the search operation along with incriminating material. Nothing has been brought on record regarding the content of the seized material which would corroborate the findings that no incriminating material was found for the year under consideration. Search proceedings were triggered against the assessee in the background of the fact that the assessee obtained accommodation purchase bills of high magnitude so as to evade taxes which stood corroborated by the statements of various suppliers / associated persons as recorded u/s 132(4) on the date of search. Nothing on record would suggest that any of such statement was ever retracted by any one of them subsequently and therefore, these statements, in our considered opinion, had substantial evidentiary value and the onus was squarely on assessee to prove that the transactions were genuine. No such onus was ever discharged by the assessee. Assessee failed to produce books of accounts and file requisite documentary evidences at the time of search proceedings, assessment proceedings as well as during appellate proceedings and merely harped on the point that no incriminating material was found in the search proceedings. The incriminating material was always to be seen with reference to the books of account being maintained by the assessee and the books of accounts were never produced. The findings of AO that few bank accounts were not even reflected in the financial statement, would also assume importance, in this regard. Director of the assessee company, in statement u/s 132(4), sought time to furnish requisite information / documentary evidences to prove the genuineness of the transactions but failed to produce the same also could not refute the allegations that it obtained bogus bills from various suppliers. Therefore, we are unable to subscribe to the approach adopted by learned first appellate authority. Hence, we deem it fit to setaside the order of learned first appellate authority and restore the matter back to Ld. CIT(A) for appreciation of factual matrix in the light of investigation being carried out by Ld. AO and re-adjudicate the same in accordance with law. The assessee, in turn, is directed to substantiate its claim that no additions would be warranted for the year under consideration. Issues:1. Allowance of relief to the assessee based on the deletion of disallowance made by the Assessing Officer.2. Interpretation of the order by the Commissioner of Income-Tax (Appeals) and its impact on the appeal of the assessee.Issue 1 - Relief to the Assessee:The Appellate Tribunal ITAT Mumbai dealt with an appeal by the revenue for Assessment Year 2008-09 contesting the order of the Commissioner of Income-Tax (Appeals). The revenue challenged the deletion of disallowances made by the Assessing Officer under section 153A of the Income Tax Act. The additions were related to alleged bogus purchases, unexplained share premium, and unexplained loans. The search proceedings revealed incriminating documents and statements indicating the use of bogus bills to evade taxes. The Assessing Officer made additions based on these findings. However, the Commissioner of Income-Tax (Appeals) deleted the additions, citing the absence of incriminating material specific to the assessment year in question. The Appellate Tribunal disagreed with this approach, emphasizing the importance of the seized material and statements made during the search. The Tribunal found that the assessee failed to prove the genuineness of transactions and directed a re-adjudication by the Commissioner of Income-Tax (Appeals) based on the investigation conducted by the Assessing Officer.Issue 2 - Interpretation of the Order:The Commissioner of Income-Tax (Appeals) allowed the appeal of the assessee based on the absence of incriminating material for the relevant assessment year. The Tribunal, however, noted that the search operations were initiated due to suspicions of tax evasion through accommodation purchase bills. Statements recorded during the search implicated the assessee in using bogus bills. The Tribunal highlighted the failure of the assessee to produce books of accounts or provide documentary evidence to substantiate transactions' genuineness. The Tribunal disagreed with the Commissioner's decision and remanded the matter for re-evaluation. The Tribunal also distinguished a previous decision in the assessee's favor for a different assessment year, emphasizing the specific circumstances of the current case. Ultimately, the appeal was allowed for statistical purposes, indicating a reversal of the Commissioner's order in favor of the revenue.This detailed analysis of the judgment highlights the key issues, arguments presented, findings, and the Tribunal's decision, providing a comprehensive understanding of the legal aspects involved in the case.