AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 504
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....ppeals of assessee is against the order of CIT(A) confirming the action of the AO in disallowing the entire bogus purchases merely on the basis of list of suspicious dealers provided by Maharashtra Sales Tax Department i.e. in AY 2010-11 amounts of Rs. 4,59,25,643/-, in AY 2011-12 amount of Rs. 7,52,77,374/- and in AY 2012-13 an amount of Rs. 2,64,43,393/-. In all the three years the facts and circumstances are exactly identical and issue is common and hence we will take the facts from AY 2010-11 in ITA No. 2173/Mum/2016 and will decide the issue. The ground raised by assessee in AY 2010-11 reads as under: - "1. The learned CIT(A) erred in confirming the disallowance of Rs. 4,59,25,643/- merely on the basis of list of suspicious parties by Sales tax Department without appreciating the fact that the goods were actually purchased and hence, the disallowance of the entire amount aggregating to Rs. 4,59,25.643/- is without any justification and liable to be deleted. 2. The ld. CIT(A) further failed to appreciate that there is no estoppel against the statute and that the statement recorded of the Director in the course of survey proceedings had no evi....
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....ings on the basis of information received from Maharashtra Sales Tax department Mumbai that the assessee is making purchase from Hawala parties/issuing bills without delivery of goods or articles and assessee being one of the beneficiaries of the hawala entries during the assessment year 2010-11 and 2011-12 and 2012-13 from the following parties - Admittedly, these above parties are declared as hawala parties by Maharashtra Sales Tax Department and these parties have admitted that they were issuing merely bills/ accommodation entries after receiving payment through cheque and non-delivery of actual goods. This was admitted before Maharashtra Sales Tax Department, Mumbai by these parties. In the meantime, a survey under section 133A of the Act was conducted by the investigation wing of the Income Tax Department on assessee's premises on 15.01.2013 and assessee voluntarily admitted bogus purchases/ receiving hawala bill without receiving in goods. 4. The AO added the entire bogus purchase of Rs. 8,76,40,588/- by observing in Para 12.10 and 12.11 as under:- "12.10. I have carefully considered all the contentions of the assessee as aforesaid and have also pursued a....
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....t. The appellant, during survey proceedings has itself failed to substantiate its purchases and also faded to substantiate the same said purchases during assessment proceedings. The appellant has also filed a letter offering the same as its income and hence the Department has not investigated deep into the matter. Appellant's subsequent retraction on account of initiation of penalty proceedings by the AO is not worth to be noted. If the appellant has made genuine purchases, then the appellant has to prove it at the time of survey proceeding. It could not be proved also at the time of assessment proceedings. The offering of income on theses two occasions has itself proved that there is no evidence of actual purchase of material. Purchase cannot be proved by itself on the mere production of bills and payment by cheque. There has to be more reliable evidence that the material is actually delivered. Hence there is no force in the submission of the appellant. The decision referred to by the appellant is of no value here as it is on different fact and circumstances. In the present case, the appellant has itself failed to substantiate its claim of purchase and the ad....
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.... judicial decisions in this regard areas follows 1 Hiralal Maganlal & Co V/s DOT 96 lTD 113 MUM. 2 Rameshchandra & Co V/s CIT 168 ITR 375 (BOM) 3. Hotel Kiran v/s Assistant Commissioner of Income-tax 82 lTD 453 4. Video Master V/S Joint Commissioner of Income-tax 83 ITD 102 It is pertinent to mention here that Hon'ble Supreme Court in the case of Pullangodo Rubber Produce co Ltd. V/s State of Kerala 1792 CTYR (SC) 253 has held that, an admission is an extremely important piece of evidence though it is not conclusive. Therefore, statement made voluntarily by the assessee could form the basis of the assessment. The burden lies on the assessee to establish that the admission made in the statement at the time of survey was wrong. The Hon'ble ITAT in the case of Carpenters Classic (EXim) Pvt. Ltd. V/s DCIT ITAT, Bangalore reported in 108 lTD 142), held that when statement was made voluntarily and was not alleged to have been obtained wider threat or coercion, onus was on the assessee to provide that the said declaration was made under any misconception of facts. Since assessee had not taken any steps to rectify its declaratio....
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....ng that the assessee might have made purchase from grey market and obtained bogus purchase bills from hawala parties just to avoid VAT and other regulatory procedures. The Tribunal in Para 19 held as under: - "19. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee company claimed to have disbursed gift articles for an amount of Rs. 20,97,900/- to the distributors/dealers for promotion of the pharmaceuticals products which it manufactures and trades in. The claim of the assessee was not acceptable for the AO for the reason that the 98.18% of the total sale of the pharmaceutical products of the assessee company was sold through the consignee M/s. Franco Indian Pharmaceuticals Pvt. Ltd. and in this assessment year the turnover has been less and, therefore the AO was not satisfied with the claim of the assessee. Moreover, he took note of the fact that of an internal information he received from the survey/search conducted at the business premises of M/s. Subhlakshmi Enterprises of Mumbai confirmed that they were providing accommodation entries and, therefore, the assessee company's claim that it had purchased gif....
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.... the recipients of the gift material or confirmation from them when called upon by the AO/Ld. CIT(A). When a claim of expenditure is claimed the assessee is duty bound to produce the vouchers/bills as well as material to show the genuineness of the claim. Here in this case, the assessee has purchased the material through banking channel from M/s. Subhalakshmi Enterprises. Though in another proceeding (survey/search) which happened in respect to the seller M/s. Subhalakshmi Enterprises of gift items, wherein the seller has given a statement that it is providing accommodation entries cannot be the only material which can make the claim of the assessee that it has purchased the SS Dinner set from them as bogus. Since the assessee has produced bills and invoices for purchase of the SS Dinner set from M/s. Subhalakshmi Enterprises and has made the payment through banking channel, the purchases cannot be disbelieved on a statement recorded behind the back of the assessee and without confronting the assessee company with the adverse material and unless the assessee had an opportunity to cross examine the person who has deposed on behalf of M/s. Subhalakshmi Enterprise, the internal commun....