By TIOL News Service

KOLKATA, JULY 08, 2016: THE issue is - Whether where the assessee chooses to withhold the best evidence and relies on the secondary evidence assuming that any secondary piece of evidence was adduced, then the presumption in law shall be against the assessee. And the answer is YES.

Facts of the case

The assessee had in its trading account shown purchase of Rs.1,12,81,262/- whereas sale was shown at Rs.1,18,82,877/-. The AO was of the opinion that the assessee had failed to prove the purchases to the extent of Rs.9,23,142/-. He, therefore, added the aforesaid sum to the income of assessee. On appeal, the ITAT restored the matter to the file of AO giving one more opportunity to the assessee to prove purchases worth Rs.9,23,142/- from JKDPL. In spite of opportunity being granted, the assessee was unable to adduce satisfactory evidence as regards the aforesaid purchases from JKDPL. In that view of the matter, the AO once again added the sum to the income of assessee. On appeal, the CIT(A) accepted purchases to the extent of a sum of Rs.52,501/-. He, therefore, reduced the addition to a sum of Rs.8,70,641/-.

Having heard the parties, the High Court held that,

++ the question whether the assessee had purchased the goods worth Rs.8,70,671/- or Rs.8,70,641/- from JKDPL is essentially a question of fact. The assessee has been unable to prove that the aforesaid purchases were in fact made. The finding arrived at by the CIT(A) and the Tribunal has become final and no interference is possible. The questions formulated at the time of admission of the appeal are as: "Whether the Tribunal is justified in law in confirming the addition of Rs.8,70,641/- as bogus expenditure in absence of primary evidence after totally ignoring all the secondary evidence namely books of accounts, cash book, purchase ledger, profit and loss account and balance sheet etc. of the assessee firm produced by the assessee in support of its claim when all the items of medicines are MRP based products. From the judgment of the Tribunal our attention has not been drawn by assessee's counsel to any discussion as regards any secondary piece of evidence to show that the aforesaid purchases were made. On the contrary, the finding recorded by the Tribunal in that regard was: "the assessee failed to establish the genuineness of the purchases from JKDPL as claimed by it". From the submission of assessee's counsel, we understand that the purchase bills of less than Rs. 20,000/- were not produced. The payments, according to him, were made all in cash. The stock register was not produced. The absence of these documents go to suggest that the purchase from JKDPL may be a bogus purchase. In any event the view taken by the AO, CIT(A) and the Tribunal is not an impossible view. If the assessee chooses to withhold the best evidence and relies on the secondary evidence even assuming that any secondary piece of evidence was adduced then the presumption in law shall be against the assessee. The question of any lapse on the part of the Tribunal in accepting the sales at a sum of Rs.1,18,82,877/- did not arise because the aforesaid figure was furnished by the assessee himself. The assessee admits that the sale was for the aforesaid sum. What the assessee has done is that he tried to reduce the profit by showing artificial purchases. When the assessee was unable to show genuineness of those purchases the amount of profit is bound to be increased.

(See 2016-TIOL-1312-HC-KOL-IT)