AI Drafter 
TaxTMI 
TaxTMI 
2020 (9) TMI 90
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.... facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the facts of the case that the assessee failed to prove identity, genuineness and creditworthiness of the entities, who invested as Share Application Money in the assessee company. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 4. The brief facts of the case are that the assessee filed its return of income on 18.10.2007 declaring total income to the tune of Rs.Nil. The return was processed u/s 143(1) of the I.T. Act. The assessee is a Manufacturer & Exporter of Stainless Steel, Utensils. An information was received on 12.03.2013 from the O/o Dy. DIT (Inv.), Unit-1(2), Mumbai in which it was conveyed that the assessee has taken the bogus purchase entries from the eight entities in sum of Rs. 39,78,97,166/- for the F.Y.s 2005-06 to 2012-13. The discrepancy in purchases from the following parties was noticed in the A.Y.2007-08. Sr. No Name of the purchase party Amount 1 Champion Steel Party 31,71,775 2 Chirag Steel India 14,43,512 3 Dhanera Metal Corporation 63,25,999 4 Manish Ind....
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.... of exports and hence, there is no doubt about the same. The said fact has been accepted by the AC) and has raised no dispute as to sales. in respect of purchases and manufacturing of the goods is concerned the appellant has submitted various details. It has been explained by the 1.d.AR that the details show that the appellant has been maintaining stock records which shows the quantity of goods purchased, consumed and stock in hand and the valuation thereof. The 'Fax Audit Report confirms the same. The stock statements have been regularly submitted to the banks and are subject to verification by third party agencies. The appellant has also been maintaining records of scrap generated and the shown sales of scrap. The books of account have been audited and that there is no adverse finding in the assessment order to that effect. The appellant has its own transport vehicle to facilitate transport of goods from one place to another as the appellant main business is that of exports. 6.3.2. In respect of purchases from the bogus parties the appellant has submitted details of purchases along with payment details. The goods purchased are reflected in the stock records. The paym....
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....v. Nikunj Eximp Enterprises (P.) Ltd CIT [2015)(372 ITR 619)(Bombay) the court has held as under:- "We have considered the submission on behalf of the revenue. However, from the order of the Tribunal dated 30-04-2010, we find that the Tribunal has deleted the additions on account of bogus purchases net only on the basis of stock statement i.e. reconciliation statement, but also in view of the other frets. The Tribunal records that the Books of Accounts of the respondent assessee have not been rejected. Similarly, the sales have not been doubled and it is an admitted position that substantial amount of sales have been wade to the Government Department i e. Defense Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchase; as well as copies of bank statement all of which would indicate that the purchases were fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or tit CIT(A), one cannot conclude that the purchases were not made assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of ca.33 4rbres. on account of purcha....
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....ing ti4r present A. Y. will become abnormally high and therefore that is not acceptable because it Onus of the A. 0. by bringing adequate material on record to prove that such a high GP. ratio exists in tire nature of business carried out by the appellant. Further, it has to be appreciated that (i) Payments were through banking channel and by cheque, (ii) Notices coming back, does not mean, those Parties are bogus, they are just denying their business to avoid sales tax/VAT etc, (iii) Statement by third parties cannot be concluded adversely in isolation and without corroborating evidences against applicant. No cross examination has been offered in AO to the appellant to cross examine the relevant parti2. (who are deemed to be witness or approver being used by AO against the appellant) whose name appear in the website www.maltavat.g02).2fl and (v) failure to produce parties cannot be treated adversely against appellant 6.3.7.iv) The Jurisdictional ITAT Mumbai Bench in the case of ITO V. NVs Eagle Impex (FFA No 5697/Mum/2010) has held that: We have carefully considered the rival contentions perused the finding of the AO and the learned commissioner (Appeals....
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.... held that the transact wits of the purchases are not genuine. The other evidences like sales tax registration certificate and confirmation of accounts by the said parties also prima facie proves the identity of the purchaser. The reassessed has also produced copies of purchase invoices and also the entire details toil/s regard to the purchase and corresponding exports made by the assessee. In this case, the Assessing Officer has dull accepted the sales /export turnover and also (lie gross profit rate. This, inter - alia, means that the assessee must have made purchases during the year under consideration for which there is corresponding the gross profit which is the balancing figure of the opening stock, purchases and direct cost on site and sales and closing stock on the credit side, Iris been accepted by the Assessing Officer. the'? it would be farfetched to perceive that such a huge quantity of purchases have not been made. Further, these evidences with regard to the purchases were there with the Assessing Officer in the second round of proceedings, he could have at least made sonic efforts to enjoy as to whether these purchases have actually been routed through: b....
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.... made, the assessee could not have effected sales. 4.3.5 lit our considered view, the AO has not brought on record any material evidence to conclusively prove that the said purchases an: bogus. Mere reliance by obtained from the Sales Department or on statements/affidavits of the before the Sales Tax these parties did not respond to notices issued under section 133(6) of the Act, would not in itself suffice to treat the purchases as bogus and make in addition under section 69C of the Act. If the AO doubted the genuineness of the said purchases, it was incumbent upon him to cause further inquiries in the matter in order to ascertain the genuineness or otherwise of these transactions. Without causing any further enquiries to be made in respect of the said purchases, the AC) cannot make the addition under section 69C of the Act by merely relying on information obtained from the Sales Tax Department, the statements/ affidavits of third parties, without the assessee being afforded any opportunity of cross examination of those persons for non-response to information called fly under section 13.3(6) of the Act. 4.3.6 In the factual matrix of the case on hand, where the A....
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.... not in dispute that the case of the assessee was reopened on the basis of information received from the DIT (Inv.), Unit-1(2), Mumbai by virtue of latter dated 12.03.2013. The doubtful purchase was found in sum of Rs. 39,78,97,166/- for the F.Y.s 2005-06 to 2012-13. The AO issued the notices u/s 133(6) of the Act which were not served. The AO raised the addition on the basis of peak purchase of Rs. 1,02,60,149/-. The CIT(A) has deleted the same on the basis of this fact that the assessee's unit was 99% exports unit and the sale was supported by documents of export and stock register confirmed sale and purchase. The Tax Audit Report confirmed the same. The stock statement produced to the banks was subjected to verification of the third party and the assessee was having its own vehicle for transporting of goods from one place to another. The CIT(A) also observed that the AO nowhere brought any substantial material to raise the addition. AO nowhere brought the material on record to prove the fact that the purchase was bogus. The documents relied upon the CIT(A) was already available with the AO which were not considered and discussed. The CIT(A) has considered the all relevant mat....