TaxTMI 
TaxTMI 
2013 (9) TMI 362
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess of providing accommodation entries by issuing purchase bills which included M/s. Kumar Bansal Traders Pvt. Ltd. and M/s. Varun Trading Company. According to AO the raw materials used in assessee's business were available in cash market and it was difficult to purchase them in regular market. To overcome this difficulty, assessee employed a modus operandi of purchasing raw materials in cash and obtaining accommodation bills supported with payments by cheques. Assessee was found to have purchased goods aggregating to Rs. 22,48,71,920/- by the bills issued by M/s. Kumar Bansal Traders Pvt. Ltd. and M/s. Varun Trading Company from these entities operated by Mr. Atul Bansal. Besides many other issues also cropped up during the course of assessment proceedings. The case was sent to Addl. Commissioner of Income Tax, Range - 12, New Delhi for directions under Section 144A of IT Act. 2.1. The Addl. CIT, after hearing the assessee, issued following directions to AO in this behalf: - (i) The assessee has shown purchases from M/s. Kumar Bansal Trader Pvt. Ltd. And M/s. Varun Trading Company amounting to Rs. 22,48,71,920/- which were found to be bogus in the form of accommodation entr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nnot have direct link. But its purchases and sales have been accepted by the Excise and Trade department. The other evidence such as, the freight receipts for bringing the goods inside the factory by citing the vehicle no. etc... their entry in stock register, purchases against Form no. ST-38 issued by the Excise and Trade Department of the purchases and sales of the assessee company are the evidences which cannot be ignored. These evidences had clearly shown the authenticity of the purchases. Furthermore, the sale have been accepted expenditure corresponding to it have also to be accepted in view of the simple reason and analogy that the income figure as a result of sales has not been questioned and accepted, the outgo figure in the form of purchases has to be accepted as such unless there is definite material finding on record to establish otherwise. 4.3. In the present case, the AO has not disputed/doubted the genuineness of purchases made by the appellant to the tune o Rs. 22,48,71,920/- of materials for sale. Admittedly the rate of purchases of goods had also been accepted by the AO as that of the prevailing market rate of those days in the case of similar items or material....
X X X X Extracts X X X X
X X X X Extracts X X X X
....est paid by the assessee to the sales tax department on arrears of sales tax/purchase tax is an admissible deduction (Western India State Motors 167 ITR 395 (Raj)/CIT Vs. Western Indian State Motors 174 ITR 116/(Raj)/CIT vs. Lachhman Das Mathura 124 ITR 411(ALL)/CIT Vs. Chodavaram Co-op Sugars Ltd. 163 ITR 420 (AP)/CIT vs. Shri Sarvaraya Sugars Ltd 163 ITR 429 (AP)/Mahalaxmi Sugar Mills Co. Ltd. Vs. CIT 157 ITR 683 (Del). Moreover, the stated decisions have reinforced the above view in favour of the appellant company. Accordingly the addition of Rs. 405405/- is directed to be deleted. 3.3 Aggrieved revenue is before us. 4. Ground no. 3 raises issue about interest on FDR to be excluded from computation of deduction u/s 80IB is conceded by assessee to be covered against it by Supreme Court Judgment in the case of Liberty India 317 ITR 218, therefore, this ground of the revenue is allowed and not dealt any further. 5. Ld. DR relied on the order of AO and contents that the AO has rightly relied on ITAT Judgment in the case of Vijay proteins (supra) and disallowed of 25% of the purchase amount from accommodation entities. Consequent to survey the facts emerged that said two con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xplanatory that the material has really gone from Delhi to my Agartala factory which is around 3,500 K.M. from Delhi. One more thing I want to say is that after August 2003 all the material is being sent from Delhi to Guwati by Indian Railway and from Guwati to Agartala with the help of reputed local transporters which are registered with the Govt. of Assam is fearful that material can be unloaded in Guwati city also. To avoid this they have take bank guarantee equipment to the amount to sales tax for the material in transit from Guwati to Agartala. Regarding the ale of finished goods from Agartala I want to explain that for any sale transaction, the mode of transport used is Indian Air Lines which is govt. carrier also all the ales from any of my concerns is made to genuine and established parties which are in this trade for any decades, as far as mode of transport used for sending raw material to Agartala and bringing finished goods from Agartala in M/s Global business India (P) Ltd. it is air transport only for which genuine and officially recognize proofs are available. This I have explained in detailed just to show that both my sales and purchase are genuine and unchallenge....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny is showing purchases of raw material, are in fact accommodation entry providers, who have provided accommodation entry in the form of purchase bills of raw material to the assessee company. Once it has been held by investigation report that the two suppliers are only accommodation entry providers, then the purchases shown from these to suppliers cannot be held to be genuine purchases. Even if raw material, represented by purchase bills issued by two accommodation entry providers, have been actually received by some other supplier and used in production, the assessee will not get full deduction in respect of said purchase amount, as the purchase bills produced by the assessee from said two accommodation entry providers, have been found to be fabricated and fictitious and, therefore, to this extent the books of account maintained by the assessee company to work out true and fair taxable profits of the assessee company." Thus only the Investigation wing report has been held to be a clinching evidence to sustain the additions. Similarly it has been alleged that two suppliers were not found at the given address. Without bringing on record type of efforts undertaken to find them, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Leader Valves Pvt. Ltd. 285 ITR 435 rendered on the facts similar to assessee i.e addition on account of alleged bogus purchases. It is held that such unverifiable adjustments to gross profit were rightly deleted by ITAT. xii. AO relied on ITAT judgment in the case of Ahmedabad bench decision in the case of Vijay Proteins however Hon'ble Gujrat High Court on similar type of issue has taken a different view in the case of Dy CIT v. Adinath Industries 252 ITR 476 holding as under: "It appeared that 'GI' was supplying materials not only to the assessee but to others. In case of AI, the amount paid to GI was disallowed. However, the Tribunal on appreciation of evidence deleted the entire disallowance which had been upheld by the High Court and by the Apex Court. In AI, against the decision of the High Court, special leave petition was preferred by the revenue and the same had been rejected. The Tribunal had considered that aspect also. In the instant case, details about purchase were furnished. Transactions were through a broker whose bill was produced. All details from the stage of receipt to production were produced. For further verification the assessee produced gate pass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de Departments record and forms, quantity of purchases and sales have been accepted by AO. Even if books of accounts are partly rejected the book results and GP being satisfactory additions cannot be made on these shaky assumptions. 7. We have heard rival contentions and perused the material available on record. As the facts emerge the information of Investigation Wing of the department is held to be clinching evidence by the Adl. CIT whose directions were binding on the AO. In our considered view: i. An information supplied by an agency of the department cannot be held as clinching evidence without independent inquiry and corroboration. An information may be useful for further investigations or corroboration but on its own, it cannot be held as clinching evidence. ii. No light has been shed by AO as to what happened in the assessments of Shri Atul Bansal and his accommodation entities. Similarly statement of Director Shri Sanjay Jain stating the facts about verification of purchases has not been controverted. iii. Quantities of purchases and sales and value of sales has been accepted by AO, thus to this extent nothing adverse has been found in the books of accounts. ....