TaxTMI 
TaxTMI 
2017 (12) TMI 1000
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that bogus purchase bills were being issued by some of the dealers to several companies. Some of the beneficiaries of such bogus bills issued by the entry operators in Mumbai were persons from Kolkata and a list of such persons was also received. The assessee's name was also found as a beneficiary in such list. There were in all four purchases which were considered as bogus based on the information received from DGIT(Investigation) Mumbai, by the AO. In A.Y.2010-11 two purchases from M/s. Divya Enterprise of Rs. 12,76,205 and M/s. Kamal Traders of Rs. 20,54,707/- were considered as bogus. In all sum of Rs. 33,30,912/- was considered as bogus purchases for A.Y.2010-11. 4. As far as A.Y.2011-12 is concerned there were four bogus purchases from the following parties : i) M/s. Tushar Enterprise : Rs.3,15,172/- ii) Arihant Sales Corporation : Rs.2,97,710/- iii) Divya Enterprise : Rs.32,67,888/- iv) Kamal Traders : Rs.34,03,534/- In all the bogus purchases for this year was Rs.72,84,304/-. 5. The AO while concluding the assessment u/s 147 of the Act in his order dated 30.03.2015 for both the assessment years issued notice u/s 143(2) and 142(1) of the Act calling up....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f further enquiries and / or evidences. The relevant pan of the submission of the assessee dated 5-9-2014 is reproduced below : " .....It is needless to point out that here the goods were purchased from the above party in small quantity vide challans which were carried inward to our godown through HAND' CARTS / LORRIES, The cartage charges were paid in cash to Thelawallas ( hand cart pullers) .. The assessee relied mainly on the issue that sale was also made to the corresponding purchases and also referred to several case laws in this 'regards .The assessee also submitted copies of stock register showing inward quantities, outward quantities,. Closing quantities in support of his quantitative purchases and sales. Copies of sales. bills were produced. It cannot be ruled out that, .considering the nature of goods with which the assessee Company traded during the relevant year are generally purchased by a trader from the wholesale market of the city where the price remains competitive but transactions are made in kachcha bills. The traders get the option to suppress both purchase and corresponding sales / turnover. In this case the assessee made sales to government an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to Thelawallas ( hand cart pullers) .. The assessee relied mainly on the issue that sale was also made to the corresponding purchases and also referred to several case laws in this 'regards .The assessee also submitted copies of stock register showing inward quantities, outward quantities,. Closing quantities in support of his quantitative purchases and sales. Copies of sales. bills were produced. It cannot be ruled out that, .considering the nature of goods with which the assessee Company traded during the relevant year are generally purchased by a trader from the wholesale market of the city where the price remains competitive but transactions are made in kachcha bills. The traders get the option to suppress both purchase and corresponding sales / turnover. In this case the assessee made sales to government and other reputed organizations and perhaps did not get chance to suppress sales. As a result . there was necessity for the assessee co. to introduce purchase bills to manage its profit to a desired and consistent rate .The attempt of the assessee co failed due to detection or the concerned sales tax authority and communication in this regard by office by the DGIT (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee submitted that the purchases were made from the four parties in course of its business of trading for re-sale. The Assessee pointed out that it furnished the details of corresponding sales of the purchases made from the four parties and filed evidence being corresponding sale bills and challans etc. The assessee also furnished a statement showing the source of the funds against the purchases made from the aforesaid four parties The Assessee pointed out that it produced its audited books of accounts including Cash Book, Bank Statements and Stock Register and claimed that when the sales are not doubted and accepted as genuine then the corresponding purchases have to be accepted. 9. The assessee pointed out that the Assessing Officer, on examination of the documents and evidence and the books of accounts found that there was no discrepancy in the stock of the goods and on the basis of the evidence and material on record he came to a conclusion that addition of 3% of disputed purchases alone should be added as income. The assessee argued that the aforesaid view of the Assessing Officer is a possible view and in tune with the facts of the case and decisions rendered by judicial....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly, he assessed the same u/s 69C of the Act. On appeal before Ld. CIT(A), deleted the addition made under section 69C of the Act relying on the decision of Hon'ble Bombay High Court in the case of ClT vs. Nikunj Eximp Enterprises Pvt. Ltd [2013] 35 Taxmann.com 215 (Cal) wherein the High Court held that when purchases were all supported by bills and once the sales are accepted the purchases cannot treated as ingenuine. The addition made under section 69C was deleted. (ii) CIT vs. Radhika Creation [2011] 10 taxmann.com 138 (Delhi) - In this case the issue before Hon'ble Delhi High Court was as to whether addition could be made under section 69C of the Act in respect of expenditures debited in the books of accounts but were found to be unauthenticated. The Hon'ble Delhi High Court held that the focus of section 69C is on source of expenditure and not an authenticity of expenditure itself and. therefore when expenditure in question was shown in regular books of account of assessee, the Tribunal was justified in deleting the addition by holding that source of expenditure was explained. 11. The assessee thus submitted that the Assessing Officer was wholly justified in not ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue. if, in the opinion of the Principal Commissioner or Commissioner. (a) The order is passed without making inquiries or verification which, should have been made; (b) The order is passed allowing any relief without inquiring into the claim; (c) The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) The order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. This amendment takes effect from 1-6-2015. 12 Having regard to the facts and circumstances of the case and in the light of the aforesaid decisions of Hon'ble Supreme Court and Hon'ble High Court and in accordance with the amendment made in Section-263 of the Act with effect from 01.06.2015, I hold that the impugned assessment order dated 30.03.2015 passed by the A.O. is erroneous in so far as it is prejudicial to the interests of the revenue. I further hold, after giving the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial principles . 19. The other submissions made before the CIT were reiterated. 20. The ld. DR, on the other hand, relied on the order of the CIT. According to him the AO has passively accepted the submissions of the assessee. He ought to have added the entire value of bogus purchase or should have made enquiries on this line. Failure to do so rendered his order erroneous and prejudicial to the interest of the revenue. 21. We have given a very careful consideration to the rival submissions. First aspect which we need to see is as to what was the enquiry made by the AO while completing the order of assessments for A.Y.2010-11 and 2011-12 which assessments were reopened based on the information received from DGIT (Mumbai) about the assessee having obtained bogus receipts from parties in Mumbai evidencing purchases. In a Notice dated 22/07/2014 for A.Y.2011-12 (copy at page 22 to 23 of paper book) the AO called upon the assessee to give quantitative details of purchases and sales and details of opening and closing stock. In A.Y. 2010-11 and 2011-12 the AO has acknowledged in the order of Assessment that during the course of assessment proceedings the assessee filed various submissi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lesser price and the bogus bills were obtained to show higher purchase price and reduce the profit margin as per the books of accounts. The AO adopted this course and estimated the possible suppression of Revenue. The course adopted by the AO was therefore a possible view in law. 24. In the impugned order the CIT is of the opinion that the AO ought to have invoked the provisions of sec.69C of the Act and ought to have added the entire value of bogus purchases and that he failed to make enquiries while completing the assessment on the applicability of the provisions of Sec.69C of the Act to the facts and circumstances of the assessee's case . Section 69C of the Act provides that where, in any financial year, the assessee has incurred an expenditure and he offers no explanation about the source of such expenditure or part thereof or the explanation, if it is offered by him, is not, in the opinion of the AO, satisfactory., the amount covered by that expenditure or part thereof, may be deemed to be income of the assessee for such financial year. In the present case, the assessee has shown the expenditure on purchases in the books of accounts and explained the source of payment through....