TaxTMI 
TaxTMI 
2014 (11) TMI 295
X X X X Extracts X X X X
X X X X Extracts X X X X
....AO completed the assessment by determining total income of the assessee at Rs. 2,08,58,870/- by making various additions. The assessee challenged the additions by preferring an appeal before the ld. CIT(A), but the same was partly allowed. Still aggrieved, the assessee has filed this appeal before us. 4. The first issue relates to the disallowance of purchases made. The facts relating to the same are stated as under by the ld. CIT(A) : "3. Ground No.1 is against the addition of Rs. 1,74,01,436/- on account of bogus purchases. Brief facts in this regard are that during the assessment proceedings, inquiries were made u/s 133(6) from various parties from where the assessee has shown purchase of metals. The notice issued to the five parties ie. M/s Montex Industries, M/s Roshan Steel Impex, M/s Mokesh Metal and Tubes, M/s Viraj Steel and Alloys and M/s Shivam Metals Industries returned back by the postal authorities with a remark "not known". Accordingly, the AO issued show cause notice to the assessee as to why the purchases from these parties should not be treated as non genuine and the same should not be added back. In response to the said notice, the assessee furnished ledger cop....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion of the Delhi Bench of the Tribunal in the case of DCIT V/s Phoolwati Devi (2009) 314 ITR AT I (Delhi) and also the decision of Hon'ble Supreme Court in the case of Suman Dayal V/s CIT (1995) 214 ITR 801 (SC). Accordingly, the AO stood by the assessment order. The AO further observed that if at all the purchases were considered to have been made from any other party, the same would have been sourced out of undisclosed income of the assessee, in which case the provisions of sec. 69C of the Act would be attracted. Even though the assessee furnished a detailed reply in response to the remand report and also placed reliance on various case law, yet the ld. CIT(A) concurred with the view taken by the AO. The ld. CIT(A) also concurred with the view of AO that the assessee would have made purchases from the grey market and such purchases would have made in cash resulting in violation of the provisions of section 40(A)(3) of the Act. He also agreed with the view taken by AO that assessee has not explained the sources for making such purchases and hence the aggregate amount of purchases is liable to be assessed as unexplained expenditure under the provisions of section 69C of the Act. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arties were not in existence at the address. D. The assessee submits that the parties confirmation bear their PAN Nos. and invoice copy bears their VAT No. and address. The payments were made by account payee cheque. Thus the assessee had discharged the primary onus of proof by proving the identity of party and genuineness of the transactions . E. The assessee has filed additional evidences in paper book-II as under : 1 TIN allotment letter in case of Montex Inds. 265-266 2 Acknowledgment of filing E returns with sales tax department along with registration under CST in case of Rohan Steel Impex. 267-268 3 Acknowledgment of filing E returns with sales tax challans in case of Moksh Metal Tubes 269-270 4 Acknowledgment of filing E returns with sales tax and certificate of registration under CST and VAT in case of Viraj Steel Alloys 271-272 5 Acknowledgment of filing E returns with sales tax and certificate of registration under CST in case of Shivam Metals 273-275 6 Letters from RBS bank for clearing of cheques in names of 5 parties, dated 6.8.2012, 14.8.12, 25.6.12, 18.7.12, 17.7.12 276-303 7 Bank statement duly certifying the payments been made to parties 304 8 Certificat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ht to be pointed out by authorities while disallowing expenditure incurred by assessee and, hence, disallowance of payment by way of hire charges made to "VF" was not justified-Held, yes. H. The assessee further submits that the details of total purchase and total sales quantity wise and date wise was furnished before the AO. I. It may also not be out of place to mention that the parties are filing E-return of sales-tax and the acknowledgement are produce. In view of the above facts the assessee has discharged the onus of proof, therefore no addition should be made . Without prejudice to above if at all the addition can be sustained then it should be at net profit ratio in respect of purchase. J. Further once quantitative tally of sales is furnished, the same should be accepted (pg.78-107 of the written submissions). It is not open for AO to disregard the same. a. Babulal C Borana V/s ITO 282 ITR 251 (Bom) Where the identity of the persons from whom goods are purchases has been explained, payment are made by account payee cheques, transactions are recorded in books, no addition can be made. b. ITO V/s Surana Trading 92 ITD 212 (Mum)(para 98) Where a quantitative tally of sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bogus or that any part of those payments came back to assessee-Held, yes. K. In the remand report, the ld.AO has mentioned that notices u/s 133(6) were issued to Bank of Baroda, V P Road Branch and ABN AMRO, Fort Branch. In response to the said notices, Bank of Baroda had provided, the details of four parties i.e. M/s Montex Industries, M/s Viraj Steel and Alloys, M/s Shivam Metal Industries and M/s Rohan Steel Impex since these partiers were having account with the said bank. The ld. AO has also mentioned that the Bank statements of the above parties provided by the Bank of Baroda, should that there was an immediate cash withdrawal against the cheque deposits. Your honour's attention is drawn to the fact that Bank of Baroda had provided the necessary details of the four parties with respect to the date of opening account numbers, bank statements etc. The existence of these parties is thus justified by an external indirect confirmation obtained by the ld. AO. Since the banks have mandated the KYC documents, the existence of these parties cannot be rules out merely on the report of the Inspector. The assessee cannot be penalized if the other party enters in any dubious transiti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r anything can be implied. Addition cannot be sustained on the basis of preponderance of probabilities. Suspicion however strong it may be cannot form basis of addition. Addition cannot be made merely on suspicion surmises and conjectures in the hands of the assessee." 7. A perusal of the orders passed by the tax authorities would show that they have suspected the genuineness of the purchases only for the reason that the above said five parties were not available in the given addresses. It is pertinent to note that the AO himself, during the course of remand proceedings, have obtained the bank statements of the above said five parties. It is in the common knowledge of everybody that the bank account, now a days, could be opened only on submission of proper documents. Further the assessee has furnished the Sales tax documents of the above said five parties and also their income tax details to prove their existence. Thus, it is seen that the assessee has furnished many documents to prove the existence of the parties and they have not been controverted by the assessing officer. 8. Be that as it may, another important factor the bank account copies collected by the assessing officer ....