TaxTMI 
TaxTMI 
2017 (8) TMI 741
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....the assessee has inflated purchased by taking accommodation entries. Survey officials came to the opinion that the assessee has inflated purchases on the basis of certain information provided by the Sales Tax Department i.e. Sales Tax Department had reported that certain dealers were providing only accommodation entries/bills without actually supplying the material. Accordingly, assessments of both years under consideration were reopened by issuing notices u/s. 148 of the Act. 4. For the sake of convenience, we discuss below the facts relating to A.Y. 2009-10. M/s. Trishul Enterprises was identified as one of such dealers and the assessee had purchased materials from it. During the course of assessment proceedings, the assessee was asked to furnish details of bills, vouchers, lager copy of transactions, transport bills, delivery challans, octroi paid details, evidence for consumption of these items and payments etc. The assessee was also asked to produce the suppliers before the Assessing Officer. Accordingly, the assessee produced Mr. Prakash M. Shah, Proprietor of M/s. Trishul Enterprises before the Assessing Officer and a statement u/s. 131 of the Act was also recorded from him....
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....ed with the explanations and contentions of the assessee and accordingly deleted the addition in both the years. For the sake of convenience, we extract below the operative portion of the order passed by Ld CIT(A) in AY 2009-10, wherein he had followed the decision rendered in AY 2008-09:- Point no. 1 : Addition of Rs. 104,26688- u/s. 69C on account of peak of credit purchases (covered by Ground no. 2) The issue in dispute is the same and identical as exists for A.Y. 2008-09. The appeal for A.Y. 08-09 has been decided vide my appellate order no. Appeal No. CIT(A)-12/DCIT 6(2)(1)/04/2013-14 dated 30/3/2015 and decided the issue. For ease of reference, findings are reproduced as under : "On careful consideration of facts stated in assessment order and written submissions of the Ld AR., as well as judicial pronouncements relied upon and reproduced in proceeding paras, it immensely transpires that the grievance of the assessee is sustainable on merit. The A.0. had made addition on the basis of information provided by the sales tax department who treated certain dealer as bogus as they have not paid taxes to government and issued sale bills. However, the assessee produced concern p....
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....nished all evidences including concerned seller. Therefore, I find no reason to treat impugned purchases as bogus. Accordingly, the addition made by the A.0. is not tenable in the eyes of law either factually or legally. Hence addition made by the A.0. stand deleted and relevant grounds stand allowed". I find no reason to deviate from these findings and accordingly, addition made by the A.O. stand deleted and relevant ground stand allowed. 7. Thus, the learned CIT(A) deleted the addition on identical reasons in both the years under consideration. The Revenue is aggrieved by the decision rendered by the learned CIT(A) in both the years. 8. We heard the parties and perused the record. The learned D.R contended that the proprietor of M/s. Trishul Enterprises has expressed the ignorance about the business activities and so called agent Mr. Suresh Amritlal Parekh did not furnish any documentary evidence to support his claim that he has supplied materials to the assessee. He submitted that the Sales Tax Department has reported that M/s. Trishul Enterprises was providing only accommodation entries without supplying the material. Learned Departmental Representative submitted that the ....
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....sing Officer has simply placed reliance on the report given by the Sales Tax Department and he did not bring any material on record to disprove the claim of the assessee. We noticed that the Tribunal has considered the identical issue in the case of Videocon Industries Ltd. (supra), wherein the said assessee had also purchased material from M/s. Trishul Enterprises. After analyzing the facts prevailing in that case, the Tribunal came to the conclusion that there is no material to suspect the genuineness of the purchases made by the Videocon Industries Ltd. The only difference between the case of the assessee and Videocon Industries Ltd. is that later party has conceived the material in its production, whereas the assessee-herein has sold the same to other party. It is admitted fact that the Assessing Officer did not disbelieve the genuineness of the sales in the instant case. For the sake of convenience, we extract below the operative portion of the order passed by the Coordinate Bench of the Tribunal in the case of Videocon Industries Ltd. (supra):- 28. We have carefully considered the entire gamut of facts, perused the relevant finding given in the impugned orders as well as the....
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....on he has also explained and clarified his earlier statement and admitted that what has been said is correct but he admitted and clarified that material has been actually procured and delivered from the grey market to the assessee company. In the earlier statement also he has confirmed the supply of material in his sworn affidavit dated 08.01.2013 filed before ADIT, Kolhapur. He has also admitted to deal in number of corporate houses and he is in the business of supply of electronic items and material for several years. However, when confronted to specific supplies made to Videocon Industries group, he duly confirmed that physical goods were actually supplied which were procured from grey market and bills for purchases other than actual suppliers were given to the assessee. This aspect of the matter has been confirmed by him twice, once in his affidavit dated 08.03.2013 and other in his statement before the AO on 12.03.2015. The assessee to prove the genuineness of the purchases, that is, the purchase of materials have actually been supplied to the assessee had given the item wise details and utilisation of such materials in the manufacturing and how the same has been inventorised ....
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.... 29. From the aforesaid additions it is quite ostensible that firstly it has been accounted for in the books of account and majority of the material purchased are either part of addition to the plant and machinery or it has been charged to capital WIP account or shown as inventory in the Balance Sheet. There is no immediate effect on inflation of expenditure which can lead to an impression that assessee has tried to suppress its profit by entering into alleged bogus transactions with hawala dealers, which is generally resorted to by traders and such suppression of profit is often offset by applying some GP rate to factor in the profit element. The revenue cannot resort to approbate and reprobate on the statement of Shri Suresh A. Parekh, that is, it cannot chose to rely upon the first set of statements recorded in the year examination conducted by the AO himself in the course of the assessment proceedings. Even if we agree that purchases have been made by the assessee through Shri Suresh A. Parekh who has arranged the supply of material from grey market and have issued accommodation bill, but in that case also so far as the assessee is concerned, the purchases canno....
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....tal WIP account and only a part of it has been shown as inventory in the Balance Sheet and raw material consumables which has been charged to the P&L Account. There is no direct impact of suppression of profit, at least on the amount which has been charged to capital WIP account or addition made to plant and machinery. Thus, we are of the opinion that the entire purchase cannot be disallowed by the department solely on the basis of first statement of Shri Suresh A. Parekh. As regards the submission and contention of the Ld. CIT, DR that there is lack of documentation in respect of purchases made from the hawala operators because supply of goods could not be proved, in this regard, one has to see the other attended facts and circumstances also which are that, the purchase of materials are backed by firstly, entry in the gate pass at factory premises; and secondly, entry in the books of account and manufacturing account showing item wise material purchase, material consumed, addition in the plant and machinery, inventory of parts etc. Once the factum of material consumed in the manufacturing or inventory is not disputed then no addition of purchases can be made even if the material h....