TaxTMI 
TaxTMI 
TaxTMI 
2020 (9) TMI 621
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....sued notices u/s 133(6) of the Income Tax Act, 1961 to the said 8 parties requiring them to appear for examination before him along with books of account and other supporting documents so as to establish the genuineness of the purchases claimed to be made by the assessee from the said 8 parties. The said notices issued u/s 133(6), however, were returned back unserved by the Postal Authority with the remarks "Left without intimation". This position was confronted by the Assessing Officer to the assessee and the assessee was called upon by the Assessing Officer to produce the said parties for examination along with relevant documentary evidence. The assessee failed to comply with this requirement of the Assessing Officer. He, however, made a following submission in writing vide letter dated 18.03.2013 in support of his case :- "1. We have enclosed ledger extracts of all the said parties and it is evident that all the payments are made by cross account payee cheques. 2. We have submitted quantitative details of sales, purchases etc which also confirms purchases as sales are made and payments are realized. This automatically confirms purchases, Hence, it is requested not to disall....
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....s, the A.O. is not entitled to make any addition on this account. The assessee was given an opportunity to produce all the 8 parties in person for examination to prove the genuineness of the purchase transaction claimed to have been made by the assessee. It is a fact that the assessee has not accepted the offer of producing these parties in person. Notice issued u/s 133(6) of the I.T. Act have been returned by the postal authorities unserved. This raises serious doubt about genuineness of transactions purportedly entered into by the assessee. The contention that payments have been made through banking channels to these parties and hence the transactions should be considered as genuine, holds no water since the other part of the banking transaction i.e. at the end of the hawala dealer remains unknown. Whether the cheques issued by the assessee in this regard have been credited in the bank accounts standing in the name of those parties and if so, whether immediate corresponding cash withdrawal have been made from those accounts are the issues which have not come to light in view of the failure of the assessee to produce those hawala dealers. The onus is purely on the assessee to pr....
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....ords. However, pertaining to such purchases made from the open market parties outside the books, but shown as made from the hawala dealers, the assessee has failed to furnish the details regarding the source of expenditure incurred for the purchase of goods. Since the sources of payment, which obviously has to be in cash in respect of open market purchases remains unexplained, the provision of section 69C of the Act is attracted in respect of such purchases. The assessee has not given any indication in its submission about the source of making purchase in cash from the open market parties. In view of the failure of the assessee to explain the source of expenditure, the amount of Rs. 2,29,12,188/- is deemed as income of the assessee liable to be added u/s 69C of the Act. 8. While coming to aforesaid conclusion, I have also taken into account various decisions cited by the assessee in its submission. I have also considered the contention that for every sale, there has to be corresponding purchase and cost attached to that purchase. The moot point here is that having accepted the fact that the purchases as shown in the books from these parties as being bogus, there has to be corresp....
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....tment. These alleged hawala suppliers have not remitted the sales tax collected from the appellant on the sales made to it to the Maharashtra Sales tax department. The appellant himself paid these amounts subsequently on receiving the demands from the sales tax dept. The appellant never questioned the action of the sales tax department in recovering the taxes from him. The appellant also did not file any civil case for recovery of the vat amounts from the suppliers or criminal cases for cheating. Thus, the appellant himself has accepted the parties, to be bogus by his actions and inactions. Hence, the need to prove them to be bogus by the department is not warranted. However the question remains as to what happened to the amounts paid through cheques to these hawala suppliers. It is quite likely that the amounts would have been withdrawn at some stage in the chain and returned to the appellant in cash form. The hawala operations are very complex and it is not easy to pin down the direct and immediate link between the payments and withdrawals. It is true that the purchases could have been made from some other party which does not issue the bills. The payment may have been either pai....
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....9,12,188/- were duly recorded in the books of account of the assessee and even the same were settled by making payments through bank which were also duly recorded in the books of account of the assessee. Keeping in view these facts of the case, we find ourselves in agreement with the ld. CIT(A) that section 69C has no application in the case of the assessee and the Assessing Officer was not justified in invoking the said provisions for making addition on account of alleged bogus purchases. Even the ld. DR has not been able to dispute this position. He has also not been able to dispute that there being corresponding sales made by the assessee out of the purchases alleged to be bogus by the Assessing Officer as established by the assessee on the basis of quantitative details, the entire purchases cannot be treated as bogus. In the facts and circumstances of the case, what could be said is that the purchases were genuine but the source of the same as claimed by the assessee on the basis of the bills issued by the concerned 8 parties was bogus as rightly held by the ld. CIT(A). As further held by the ld. CIT(A), this aspect certainly made the relevant purchases unverifiable and certain....