TaxTMI 
TaxTMI 
2022 (8) TMI 669
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....er on points of law and on facts and circumstances of the case, the Ld. CIT(A) was justified in giving a finding that the books of account of the assessee as reliable, as against the rejection of the books of account of the assessee by the AO by applying the due provision of law u/s 145(3) of the I.T. Act?" 3. "Whether on points of law and on facts and circumstances of the case, the Ld. CIT(A) was justified in ignoring the findings of the Commercial Tax Department Chhattisgarh, and whose findings regarding the bogus purchases through accommodation entries have been relied upon by the A.O. in his assessment order?." 4. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in ignoring the affirmation on oath in statements recorded u/s 131 of the I.T. Act by the proprietors of the concerns, during investigation by the Income Tax Department, thereby admitting and confessing on oath that these concerns are bogus entities indulging in accommodation entries and money laundering?" 5. "Whether on points of law and on facts & circumstances of the case, the Hon'ble ITAT was justified in ignoring the ratio of the landmark decision of the ....
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....ing." 2. Succinctly stated, the assessee which is the engaged in the business of trading in rice under the name and style of M/s. Digi Trader, Raipur, a proprietary concern had filed his return of income for the assessment year 2014-15 on 04.11.2014, declaring an income of Rs.15,07,690/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act. 3. During the course of the assessment proceedings, it was gathered by the A.O on the basis of information received from the Commercial Tax Department, Chhattisgarh that the assessee was one of the beneficiaries who had procured bogus purchase bills from certain accommodation entry providers. Apart from that, it was observed by the A.O that survey proceedings conducted by the Income-Tax Department on certain rice millers and traders of rice and Kanki from 15.03.2016 to 18.03.2016 revealed that various concerns by availing the services of brokers/entry providers had provided bogus bills to rice millers and rice traders. Also, it was observed by the A.O that pursuant to a survey action conducted on Nagarik Sahakari Bank, Raipur the bank accounts which were opened by the brokers/entry providers to fa....
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....gards the weight, quantity and quality of rice, transportation vehicle nos., names of drivers, bank statement of the assessee showing payments made, confirmations of the brokers and delivery of the goods at the container depot of M/s. Container Corporation of India (CCI), a Government of India undertaking having its address at Inland Container Depot, Near Railway Store Depot, Kapa, Raipur a/w. loading of the goods in the railway wagons for which bills were issued by the railways and thereafter had been cleared by the assessee, the CIT(Appeals) was of the view that the purchases in question could not be said to be bogus. Accordingly, the CIT(Appeals) on the basis of his exhaustive deliberations qua the various facets of the issue in hand, Page 24 to 29 - Para 14 to 22 of his order, vacated the view taken by the A.O that the assesee had not made any genuine purchases. Adverting to the genuineness of the sales as claimed by the assessee, it was observed by the CIT(Appeals) that sale of rice was supported by requisite documentary evidence. It was observed by the CIT(Appeals) that the confirmation of the accounts a/w. account statement of the assessee in the books of account of the expo....
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....gus concerns recorded u/s.131 of the Act; (ii) enquiries in respect of vehicles through which transportation of rice was claimed to have been carried out; (iii) enquiries in respect of bogus concerns carried out by the Commercial Tax Department; (iv) statements recorded under Sec. 131 of the Act of the brokers through whom the assessee had claimed to have made purchases from the aforesaid tainted concerns; and (v) difference in the signatures of the owners of the concerns through whom purchases were claimed to have been made as were discernible from the purchase bills, as against that put by them in their respective statements recorded on oath, concluded, that the assessee had not made any genuine purchases and only procured accommodation bills. For the sake of clarity the observations of the A.O on the basis of which he had held the impugned purchases made by the assessee as bogus/non-genuine are culled out as under: "1. The assessee could not establish the business activity of the concerns from purchases has been shown. 2. The assessee could not provide any other address or business premise of the concerns till date. But it is observed that the assessee has made the payment ....
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....sh. The same was being return to the assessee who had made the payment to such bogus concern. 7. It is also observed that the registrations of some concerns were cancelled by the commercial tax department before the purchase made i.e. before A.Y. 2014-15. The assessee had not stated anything about the above finding. He could not provide any explanation how he had purchased the material from a cancelled concern. Thus, it is clear that the assessee had not purchased any material from such concern. The asseessee had taken the bogus bill from such concern. 8. It is also observed that the assessee had shown the purchase for M/s Samleshwari Foods, Raipur but TIN (22131103722) mentioned at the said bill was registered in name of M/s Shubh Laxmi Traders, Raipur. In the same way the assessee had shown the purchase from M/ s Sanjeevani Agro Produce, Raipur but TIN (22343605770) mentioned at bill was registered in the name of M/s Bhagwati Trading Co. The assessee was asked to explain the reason of such discrepancy. The assessee stated that the bill are being provided by the broker. The same is not being looked after by him. But as discussed above, the brokers also stated that the detail....
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....missions of the appellant and perused the assessment records of the appellant for the AY 2014-2015 and the submissions made during the assessment proceedings. According to the AO information was received from the Commercial Tax Department regarding some bogus concerns who were providing bogus bills which involved no physical transfer and sale and purchase of goods. The Income Tax Department also conducted surveys wherein it was detected that many concerns were showing bogus purchases on the basis of bogus bills. The AO relied on the statements recorded by the investigation wing and also himself recorded the statements of eight suppliers, four brokers and one transporter and after gathering material came to the conclusion that the purchases shown by the appellant was bogus and accordingly disallowed the same along with the relatable quantum of sales. There was no survey conducted in the appellant's own case but the statements recorded from the brokers and suppliers form basis for the disallowances made by the AO. 15. During the appeal proceedings the Id. Counsels appearing on behalf of the appellant brought to my notice that the appellant is trader of rice and neither owns or....
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....ission that the quantity of rice purchased was genuine and there were no instances of price inflation of purchases as the same were in accordance with the prevailing market rates and comparable with the other independent parties in the same line of business. It was submitted that this aspect was never questioned or disputed by the AO who only had doubts regarding the purchases from billing concerns. Letters of confirmation from the brokers indicate the names of concerns from whom rice has been procured by them and details of PAN, brokerage, names and addresses of concerns reveal the quantity and quality of rice purchased along with the truck number for unloading at the CCI. It was explained that the appellant would not be having full knowledge about these concerns which was known to the brokers in detail and any shortcoming on the part of the supplier cannot be fastened on the appellant. In this context the payments of cheques, deduction of tax at source as per provisions of section 194H and reflection of transactions in the quarterly transaction statements was brought to my notice in the assessment records. My attention was drawn to the accounts confirmations showing rice sales wh....
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....s could not. be plainly relied upon by simply quoting from the excerpts from such statements and could not render an automatic application in the case of the appellant. The appellant further submitted that mere information from the Sales Tax / VAT / Commercial Tax Department. regarding concerns involved in bogus billing or registered as hawala dealers or accommodation entry providers without conduct independent enquiry by the AO could not be used against the appellant drawing a parallel with the bogus transactions with such concerns by the appellant. In this context the appellant relied on judicial pronouncements that have been reproduced in their written submissions reproduced herein above. 16. With the above material on record regarding purchases I am of the view that the purchases with their description in the invoices, along with the names of suppliers, weight, quality and quantity, transportation vehicle numbers, names of drivers, bank statements of the appellant showing the payments made, confirmation of brokers and delivery at the CCI which is a government body and loaded into railway wagons and for which bills have been issued by the railways which has been paid by th....
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....sessment the AO has observed that the vehicle registration numbers showing rice transported by the appellant were of tractors, scooters, motorcycles and cars and not of trucks and heavy goods transport vehicles. I observe from the assessment records that vide their letter submitted to the AO on 20/12/2016 necessary clarifications were made by the appellant and the vehicle numbers were corrected which matched with the weighment slips at the CI showing that the vehicles in which the material was transported to the container depot were trucks and goods carriers. The weighment slips and bills are enclosed with the impugned letter filed on 20.12.2016 in the assessment records. 18. The cancellation/ registration of suppliers by the Commercial Tax Department relied upon by the Ld.AO in drawing adverse inference against the appellant does not indicate that business of the suppliers had completely closed down as there are evidences of material being supplied to the appellant through the brokers. From the findings recorded by the Ld. A at page no:16 of the assessment order the cancellation of registration of most of the s pliers (except at Si. No: 2,4,12&14 mentioned therein) had been don....
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....nd material, transportation and unloading of material purchased and their procedures have been enumerated and also the modus operandi of issuing bogus bills have been stated but at no place there is direct and specific admission by the suppliers or brokers that they had provided bogus bills to the appellant and the material and the details mentioned in the commission bills or in the invoices were false and fabricated pertaining to the appellant. I have not come across an instance where the suppliers and brokers have stated that the bills and invoices in possession of the appellant provided by them are bogus and fabricated against which no transaction had taken place. One of the brokers Shri Navratan Jain in reply to question no: 27 replied that he could not confirm whether Shyam Agro one of the suppliers had issued bogus bills or not as the same was not in his knowledge. Similarly in reply to question no: 15 the other broker Shri Ajay Shrivastava has confirmed that purchases of rice and transportation are being done but full and complete details could not be confirmed by him. Though bogus billing may be prevalent in this line of business no direct evidences indicting the appellant ....
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....d in para 3.1 that survey action was carried out at Nagrik Sahakari Bank Raipur where some of these bogus bank accounts were opened. In this context it was brought to my notice that the appellant had no bank account with Nagrik Sahakari Bank Raipur at any point of time. Regarding observations of the AO the appellant did not own or operate any godowns or mills it was clarified by the counsels that the appellant had submitted all along that he never had any godowns and the material was supplied to the Container Corporation of India and hence his business did not require maintenance of godowns and ware houses. 22. I observe that the AO has not controverted the material submitted during the course of assessment proceedings pertaining to purchases of material, vehicle registration numbers which was clarified during the assessment proceedings, Bank details, transportation details of trucks and Container Corporation of India, Custom clearance details, export and domestic sale documents and confirmation from the exporters along with their copies of accounts. Instead of discussing the modus operandi of the firms involved in bogus billing / purchases as in the statements recorded and rely....
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....ght on record cogent material in support of the views taken by him for making the impugned disallowances accordingly the disallowance pertaining to purchases is deleted and ground no. 2 is allowed." 10. Also, as observed by us hereinabove, the CIT(Appeals) after referring to the supporting documentary evidence that was filed by the assessee to substantiate the genuineness of the sales which were held by the A.O as bogus, had vacated the said adverse inferences and deleted the consequential addition of Rs.11.29 crore by observing as under: 23. Coming to ground no. 3 pertaining to sales the AO has made proportionate disallowance of sales relating to the purchases which he had held as bogus. I find that the sales of rice by the appellant in terms of quantity and monitoring is supported by documentary evidences which were filed during the assessment proceedings. The copies of accounts of the exporters / distilleries showing sales made, confirmation of accounts and accounts statements of the appellant in the books of accounts of the exporters are strong material proof of sales made by the appellant. There is therefore no concrete basis for making the addition on account of sales in ....
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....ses from the assessee had received custom clearances from the Custom Authority at the Inland Container Depot, Raipur, therein, dispels all doubts as regards the factum of the assessee having carried out genuine sales to the aforementioned parties. On the basis of the aforesaid facts, now when the evidence placed on record by the assessee proves to the hilt delivery of goods in question at the destination point i.e., Container Depot, CCI, a Govt. of India undertaking, therefore, we are unable to comprehend that as to on what basis the AO had concluded that the purchases claimed by the assessee were to be held as bogus. 12. At this stage, we may herein observe, that as noticed by the CIT(Appeals) the invoices issued by the seller concerns mentioned the requisite details, viz. TIN, names, addresses, statutory details, description of goods, total number of bags, invoice amounts and bank account details etc. Also, as noticed by the CIT(Appeals) the purchase bills did also bear the truck numbers, names of the drivers and that of the brokers. Fact that the weighment slips of the weigh bridges issued at the CCI before entering the CCI's Container Depot as mentioned on the invoices seizes ....
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....in question and delivering the same to the abovementioned parties. Also, as observed by the CIT(Appeals), and rightly so, letters of confirmations from the export houses and distilleries duly confirming the transactions in terms of both value and receipt of quantity of rice sold by the assessee a/w. Form No. 'H' relating to exports, bills of lading and reports of technical surveyors duly substantiates the assessee's claim of having sold the goods in question to the export houses and distilleries. Backed by the aforesaid facts, we concur with the view taken by the CIT(Appeals) that in absence of purchase of goods in question there could not have been any corresponding sales by the assessee to the aforementioned parties. 14. Adverting to the view taken by the A.O that as the assessee had claimed to have procured goods from 17 tainted parties who were involved in the business of providing bogus bills and accommodation entries, therefore, corresponding purchase transactions were to be held as bogus, we are afraid could not have been summarily so held by him by discarding the substantial documentary evidences that were filed by the assessee in support of the authenticity of the....
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.... of half-baked facts. As observed by the CIT(Appeals), and rightly so, though the registration of some of the suppliers had been cancelled by the Commercial Tax Department prior to the impugned purchases claimed by the assessee, but then on the said standalone basis it could not have been inferred that the business of the said suppliers was completely closed down, because there was evidence that goods were supplied by the said parties to the assessee through the brokers. Apart from that, as observed by the CIT(Appeals), we find that except for in the case of 4 suppliers registrations in the case of the remaining suppliers was cancelled by the Commercial Tax Department much after the end of the relevant financial year in which the assessee had purchased rice from them. Also, we concur with the view taken by the CIT(Appeals) that for the reason that the suppliers in question had not shown rice sales in their sales tax returns filed with the Commercial Tax Department, adverse inferences as regards the genuineness of the assessee's claim of having purchased goods from them could not have justifiably been drawn, specifically when supporting documentary evidence was placed on record by t....
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....roceedings, viz. vehicle numbers (which were corrected in the assessment proceeding), bank details, transportation details of trucks, custom clearance details, export sales and domestic sales documents, confirmation from exporters a/w. copies of account, but had chosen to focus more on the modus operandi adopted by the firms/brokers for providing bogus bills/accommodation entries, therefore, in absence of dislodging of the aforesaid supporting documents/materials there was no justification on his part in drawing adverse inferences as regards the authenticity of the purchases in question. 16. We, thus, in terms of our aforesaid observations, finding no infirmity in the well-reasoned view taken by the CIT(Appeals) as regards the authenticity of the purchases claimed by the assessee to have been made from the aforesaid suppliers/brokers, uphold his view to the said extent. 17. Adverting to the authenticity of the sale of goods in question, we find that the A.O holding a conviction that as the assessee had merely procured bogus purchase bills and had not made any genuine purchase of goods in question, therefore, there could be no occasion of having carried out any corresponding sales....