By TIOL News Service

NEW DELHI, NOV 14, 2018: THE ISSUE IS - Whether merely relying on statements recorded in survey, no addition for bogus purchases should be made during reassessment proceedings if genuineness of the purchases are proved by several documents on record and books of accounts of the assessee are not been rejected by Revenue. YES IS THE VERDICT.

Facts of the case

The assessee company, engaged in manufacturer of various types of auto electric parts for vehicles, had filed return of income for relevant AY, which was processed u/s 143(1) of Act. Subsequently reassessment proceedings were initiated u/s 147 of the Act. The AO in the reasons for reopening of assessment mentioned that survey u/s 133A of the Act was conducted at the premises of M/s. Vinod Parashar & Associates, Faridabad. From the documents impounded during the course of survey, it was noticed that Sh. Vinod Parashar was engaged in the business of providing bogus bills to various parties in lieu of commission. ADIT (Investigation) Faridabad intimated that one such beneficiary was assessee company who have obtained bogus bills of purchases. It was also intimated that a perusal of copy of the accounts of the assessee company in the books of M/s Om Industrial Corporation (one of concern of Sh. Vinod Prashar) for financial year 2005-06 revealed that during this year assessee company had obtained bogus purchases bills, accounting to Rs. 1,22,54,000/-. The AO made the addition accordingly for bogus purchases. On appeal, CIT(A) deleted the addition made.

Tribunal held that,

++ the assessee filed several replies before AO, supported by documentary evidence to prove genuine purchases. The documents filed on record are copies of the ledger account, bills, invoices, D-3 form issued from sales tax/VAT authority, bank account showing payment for purchases, copy of stock register and the cash book etc. The assessee explained that it is in the business of manufacturing of various types of Auto electric part for vehicles. The Assessee also produced Gate Entry Register, stock register and production records which support the explanation of the assessee that whatever material was purchased from the above three companies have been entered into the statutory registers and the material have been used in the production process. The assessee has been filing regular return with the sales tax/VAT Department and assessee is also covered by Excise Department. No adverse views have been taken either by the VAT Department or by the Excise Department against the assessee. The AO did not rebut the documentary evidences filed by the assessee. AO has not established any relation of the assessee with the seller. The purchases are consumed in the production. Purchases are supported by Form D-3 issued by VAT Department of the State Government, bills and gate pass and production register and all the purchases are made through banking channel. Therefore, the view of the AO making addition against the assessee of bogus purchases was without any basis. Without purchases no production or sales could have done by the assessee. The production is supported by RG-1 Register and the details supplied to the Excise Department. Therefore, explanation of the assessee should not have been doubted by the AO. It may also be noted here that the production and sales declared by the assessee have been accepted by the AO. The AO while making the addition against the assessee has heavily relied upon the statement of Sh. Vinod Parashar which was recorded on 28.12.2007 in survey u/s 133A on oath. The AO merely on presumption noted that Sh. Vinod Parashar has made cash withdrawals which were returned to the assessee. There is no basis for making such an allegation against the assessee. It is well settled law that presumptions howsoever may be high but it cannot take placed on legal proof. The CIT(A) correctly decide the issue in favour of the assessee. There is no basis to hold that assessee made bogus purchases from the parties. The findings of fact recorded by CIT(A) have not been rebutted by the Revenue Department through any evidence or material on record. It was decided to confirm the findings on fact recorded by CIT(A) and dismiss the Departmental appeal. In the result, Departmental Appeal was dismissed.

(See 2018-TIOL-2106-ITAT-DEL)