2023 (9) TMI 1686 - AT - Income Tax

Income Tax Tribunal Rejects Bogus Purchase Claims, Upholds Assessment Order with Rs. 55,54,382 Addition to Taxable Income

Pushpa Saluja, New Delhi Versus Income Tax Officer, Ward 45 (4), New Delhi

AT upheld the AO's addition of Rs. 55,54,382/- as bogus purchases. The tribunal found significant discrepancies in creditor details, unserved summons, and ... Bogus purchases - no confirmation of sundry creditors given - AO issued summons U/s 131 to the four parties but Summons in respect of three parties were returned unserved with the remarks “No such person/ No such address/ Incomplete address” - HELD THAT:- There is no dispute that specific requests were made by the AO, during the course of the scrutiny assessment proceedings to furnish confirmations from the impugned parties but no confirmation was filed by the assessee nor any such confirmation is filed before us. Even the copy of ledger account has not been filed in the case of Dawar Exclusive. It is also an undisputed fact that the Prop. of Dawar Exclusive has categorically denied of having done any transaction with the assessee. There is a gross mismatch between the ITR details filed by the assessee in respect of impugned parties as pointed out by the AO mentioned elsewhere. As assessee has miserably failed to establish the genuineness of the purchases. Since, the purchases have been treated as bogus it would be a futile exercises to make addition again in respect of the corresponding sales. Considering the facts of the case from all possible angles, we are inclined to confirm the assessment. Decided against assessee. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Appellate Tribunal (AT) in this appeal are:Whether the addition of Rs. 55,54,382/- made by the Assessing Officer (AO) treating the purchases as bogus was justified.Whether the assessee successfully established the genuineness of the purchases from the four sundry creditors-M/s Ambey Fabric, M/s Unique Creations, M/s Meenu Fashion, and M/s Dawar Exclusive-despite the discrepancies noted by the AO.Whether the failure to produce confirmations from the sundry creditors and the adverse statements recorded under summons U/s 131 of the Income Tax Act, 1961, justify treating the purchases as bogus.Whether the reliance placed by the assessee on precedents from other High Courts is applicable in the facts and circumstances of the present case.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Justification for Addition of Rs. 55,54,382/- as Bogus PurchasesRelevant legal framework and precedents: The addition under scrutiny arises under the provisions of the Income Tax Act, 1961, where the AO is empowered to disallow expenditures or additions if purchases are found to be bogus or non-genuine. Rule 18(6) of the ITAT Rules was also considered in evaluating the evidence.Court's interpretation and reasoning: The AT observed that the AO had conducted a detailed investigation, including issuing summons U/s 131 to the alleged creditors. The AO found that three summons were returned unserved with remarks such as 'No such person/No such address/Incomplete address,' and the proprietor of Dawar Exclusive appeared and denied any transactions with the assessee.Key evidence and findings: The AO noted discrepancies in the PAN details and addresses of the sundry creditors. The PANs for the proprietors of Ambey Fabric, Unique Creations, and Meenu Fashion were generated after the date of filing returns and were linked to different jurisdictions than those claimed by the assessee. The addresses on the income tax returns of these parties did not match the addresses provided by the assessee's authorized representative. The AO also observed that the bills and documents appeared to be fabricated to accommodate the assessee's proprietorship concern, M/s Om India Inc.Application of law to facts: The failure to produce confirmations from creditors, the adverse statement of the proprietor of Dawar Exclusive denying transactions, and the discrepancies in PAN and address details led the AO to conclude that the purchases were fabricated. The AT upheld this finding, noting that the assessee failed to provide any plausible explanation or documentary evidence to prove the genuineness of the purchases.Treatment of competing arguments: The assessee argued that the books of account were audited by a Chartered Accountant and no defects were pointed out, and that the sales corresponding to these purchases were accepted. The assessee also cited precedents from the Bombay and Gujarat High Courts to support the genuineness of purchases. The AT, however, declined to rely on these precedents without knowing their factual matrix and emphasized the specific facts of the present case which indicated fabrication.Conclusions: The AT concluded that the addition of Rs. 55,54,382/- as bogus purchases was justified and confirmed the order of the CIT(A) and AO.Issue 2: Failure to Produce Confirmations and Impact of Statements Recorded Under Summons U/s 131Relevant legal framework: Under the Income Tax Act, summons U/s 131 empower the AO to summon any person to produce evidence or give statements relevant to the assessment. Non-cooperation or adverse statements can lead to adverse inferences.Court's interpretation and reasoning: The summons issued to the four parties resulted in three being untraceable or non-existent at the given addresses, and the proprietor of Dawar Exclusive denying any transactions. The AT viewed this as a significant adverse fact against the assessee's claim of genuine purchases.Key evidence and findings: The AO's inability to verify the existence of three parties and the denial by the fourth party were crucial in forming the conclusion of bogus purchases.Application of law to facts: The failure to produce confirmations and the adverse statements under oath justified the AO's and CIT(A)'s findings. The AT held that such non-cooperation and adverse evidence warranted the addition.Treatment of competing arguments: The assessee contended that a voluminous paper book and audited accounts were filed, but no confirmations were produced. The AT found the absence of confirmations and ledger copies particularly for Dawar Exclusive to be fatal to the assessee's case.Conclusions: The AT upheld the adverse inference drawn by the AO and CIT(A) and confirmed the addition based on the failure to produce confirmations and adverse statements.Issue 3: Applicability of Precedents Relied Upon by the AssesseeRelevant legal framework: Precedents from High Courts can guide the interpretation of law but must be applied in light of the facts of each case.Court's interpretation and reasoning: The AT noted that the assessee relied on decisions from the Bombay and Gujarat High Courts to argue for the genuineness of purchases. However, the AT explicitly stated it was unaware of the facts of those cases and therefore could not rely on them to draw support.Application of law to facts: The AT emphasized that the facts of the present case, including the failure to produce confirmations, adverse statements, and discrepancies in PAN and addresses, distinguished it from the cases cited.Conclusions: The AT declined to extend the benefit of the cited precedents to the assessee and decided the matter strictly on the facts before it.3. SIGNIFICANT HOLDINGSThe Tribunal held:'Since, the purchases have been treated as bogus it would be a futile exercise to make addition again in respect of the corresponding sales.''The facts as discussed hereinabove, go on to show that the assessee has miserably failed to establish the genuineness of the purchases.''There is a gross mismatch between the ITR details filed by the assessee in respect of impugned parties as pointed out by the AO.''The proprietor of Dawar Exclusive has categorically denied having done any transaction with the assessee.''Considering the facts of the case from all possible angles, we are inclined to confirm the assessment.'Core principles established include:The genuineness of purchases must be established by credible documentary evidence, including confirmations from creditors.Adverse statements recorded under summons U/s 131 and failure to produce confirmations or ledger accounts can justify treating purchases as bogus.Discrepancies in PAN data and addresses of creditors are material and can be relied upon to draw adverse inferences.Precedents must be applied with caution and cannot override the specific facts and evidence of the case at hand.The final determination was the dismissal of the assessee's appeal and confirmation of the addition of Rs. 55,54,382/- as bogus purchases for AY 2014-15.