The Delhi bench of the Income Tax Appellate Tribunal (ITAT) upheld the addition under Section 69C of the Income Tax Act, 1961, and held that the accommodation entries provided in the form of bogus purchases from the dummy companies.
The assessee made a purchase from the two companies viz., a purchase of Rs.14,93,750/- from M/s. Ridhi Sidhi Clothing Co. Pvt. Ltd. and purchases of Rs.6,95,440/- from Shri Hari Clothing Co. Pvt. Ltd. totalling to Rs.21,89,190/-.
The Assessing Officer made an addition of said amount in the hands of the assessee under Section 69C of the Income Tax Act by observing that Shri Himanshu Verma and his associates Shri Anjani Kumar have admitted in their statements that the said two companies were controlled by Shri Himanshu Verma and he was using these companies for providing bogus accommodation entries to various persons including the assessee.
The assessee submitted that the purchases cannot be treated as bogus if they are duly supported by the bills, payments have been made by account payee cheque or through banking channel, the supplier/seller has confirmed the transactions, there was no evidence to show that the purchase consideration paid to seller companies has come back to the assessee in cash, the sales out of purchases have been accepted by the Department and the supplier/seller has accounted for the purchases made by the assessee had also paid due taxes thereon.
The Assessing Officer after considering the explanation of the assessee and documentary evidence supported by the statement of Shri Himanshu Verma and his associate held that the impugned purchases were bogus transactions and he made addition under section 69C of the Act treating the purchases as unexplained expenditures.
The Commissioner of Income Tax (Appeal) [CIT(A)] had not only considered the findings of the Assessing Officer but has also considered explanations and documentary evidence submitted by the assessee and thereafter, held that there was no merit in the submissions of appellant company as appellant had taken the accommodation entry of Rs.21,89,190/- in the form of bogus purchases from said two dummy companies controlled by Shri Himanshu Verma.
Therefore, the CIT(A) upheld the addition of Rs.21,89,190/- under Section 69C of the Income Tax Act in respect of bogus purchases and had also upheld the addition of Rs.21,890/- on account of unexplained expenditure on commission paid for arranging impugned accommodation entries of bogus purchases.
The Two-member bench comprising of G.S. Pannu (President) and Chandra Mohan Garg (Judicial member) was unable to find any valid reason to interfere with the findings arrived by the CIT(A) while confirming the additions made by the Assessing Officer. Therefore, the sole grievance of the assessee being devoid of merits was dismissed.
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