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TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 125
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....lief to the Respondent/Assessee. The Assessment Year involved is AY 2011-2012. 4. The Appellant/ Revenue has raised the following questions of law: i. Whether on the facts and circumstances of the case and in law, the ITAT was justified in directing the Assessing Officer to restrict the disallowance to 10% of hawala purchases even though the Respondent/ Assessee could not produce primary evidences delivery Challans, weigh slips, octroi receipts of M/s Oriental Enterprises to prove the genuineness of the purchases? ii. Whether on the facts and circumstances of the case and in law, the ITAT was justified in restricting the addition @ 10% of the bogus purchases, which is without any basis and justification? iii. Whether on the facts and circumstances of the case and in law, the ITAT was justified in not considering the decision of Hon'ble Apex Court in the case N K Proteins Ltd. v. Dy. CIT SLP 769 of 2017 dated 16th January 2017, wherein it has been held that once the purchases are bogus, additions should be made on the entire purchases and not only the profit embedded in such purchases? 5. At the very outset, without narrating the factual conspect....
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....10% of the total purchases. The Revenue strongly disputes this proposition. 3. Without elaboration, what the Tribunal by the impugned Judgment held is that the Department had not rejected the instance of the purchases since the sales out of purchase of such raw material was accounted for and accepted. With above position, the Tribunal applied the principle of taxing the profit embedded in such purchases covered by the bogus bills, instead of disallowing the entire expenditure. We do not find any error in the view of the Tribunal. No question of law arises." 8. Further, this Court in the case of SVD Resins (supra) held that, in the absence of a cohesive and coordinated approach between the Assessing Officer and the Sales Tax Authorities, it would be difficult to arrive at a definitive conclusion that the purchases were bogus merely on the basis of general information, so as to discard such expenditure and add the same to the income of the Assessee. 9. In SVD Resins (supra), this Court restricted the disallowance to 12.5% of the gross profit, as had been done by the Tribunal, and upheld the order of the Tribunal insofar as the said issue was concerned. The Court furthe....
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....as this may not be the position qua the others. Thus, unless there is a case to case verification, it would be difficult to paint all transactions of such supplier to all the parties as bogus transactions. 12. In our opinion, a full addition could be made only on the basis of proper proof of bogus purchases being available as the law would recognise before the AO, of a nature which would unequivocally indicate that the transactions were wholly bogus. In the absence of such proof, by no stretch of imagination, a conclusion could be arrived, that the entire expenditure claimed by the petitioner qua such transactions need to be added, to be taxed in the hands of the assessee. 13. In a situation as this, the A.O. would be required to carefully consider all such materials to come to a conclusion that the transactions are found to be bogus. Such investigation or enquiry by the AO also cannot be an enquiry which would be contrary to the assessments already undertaken by the Sales Tax Authorities on the same transactions. This would create an anomalous situation on the sale-purchase transactions. Hence, in our opinion, wherever relevant any conclusion in regard to the tra....
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....d / or bogus purchases, in that event, it is the solemn obligation and duty of the Income Tax Authorities and more particularly of the A.O. to undertake all necessary enquiry including to procure all the information on such transactions from the other departments / authorities so as to ascertain the correct facts and bring such transactions to tax. If such approach is not adopted, it may also lead to assessee getting away with a bonanza of tax evasion and the real income would remain to be taxed on account of a defective approach being followed by the department. 17. The decision in Mohammad Haji Adam & Company (supra) as relied on behalf of assessee is also quite apposite in the context in hand. In this decision, the Court observed that the findings which were arrived by the CIT(A) as also by the tribunal would suggest that the department did not dispute the assessee's sales, as there was no discrepancy between the purchases as shown by the the assessee and the sales declared. This was held to be an acceptable position, in dismissing the revenue's appeal on the ground that no substantial question of law had arisen for consideration of the Court. 18. In the li....
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....taken by the Assessing Officer accepting their purchases to be bogus. Further in the course of the assessment proceedings, the Respondent- Assessee had categorically submitted that it had not accepted the so called hawala purchases. The VAT assesments for the Respondent-Assessee company for the financial year 2008-2009 corresponding to assessment year 2009-2010, which is the relevant assessment year in the present appeal were pending adjudication and hence before conclusion of the VAT assessment confirming the so called hawala purchases and adding the same to the income of Respondent-Assessee was an inappropriate and unacceptable position adopted by the revenue. 14. Further, we are of the view that when the VAT assessment was pending adjudication, merely relying on the information of the Sales Tax Department without granting an opportunity to the Respondent-Assessee to even cross-examine the hawala purchasers to confirm the purchases from them violated the basic facts of law amenating to unfairness and breach of the principles of natural justice in making the addition of Rs. 2,05,74,750/- as bogus purchases in hands of the Respondent-Assessee. Further this court h....