Entire Purchase can’t be treated as Bogus when payment has been made through Banking Channels: ITAT

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the entire purchases cannot be treated as bogus when it is evident that the payments were made through accounted money or through banking channels.

The assessee is an individual engaged in the business of gold. During the course of the survey, it was revealed that these individuals were providing accommodation entries for the purchase of Gold/Gold jewellery including to the assessee’s proprietary concern M/s. Vijay Jewellers. The Assessing Officer, while concluding the assessment proceedings, treated the purchases made by the assessee from certain individuals as bogus transactions.

While considering the second appeal, the Tribunal found that the assessee had not submitted any material other than the bills and vouchers and the bank statement to establish the genuineness of the transaction.

The Tribunal also observed that the revenue has come across various incriminating materials during the course of search and seizure operation U/s. 132 of the Act with respect to the persons who had purported to have sold Gold / Gold Jewellery to the assessee.

“It is also a known fact that Gold / Gold Jewellery is often purchased in the grey market in order to avoid taxes/customs duty etc., by the traders. In this situation, the onus is on the assessee to establish the genuineness of the suppliers. Though the payment made by the assessee towards the purchases are through banking channels, it is also revealed that the suppliers were issuing bogus bills and vouchers to various parties. In this situation, producing the bills and vouchers and evidencing the payment made through cheque alone will not establish that the transactions are genuine,” the Tribunal said.

“However I am of the view that the order of the Ld. CIT (A) to enhance the addition by treating the entire bogus purchases as the income of the assessee is not appropriate because it is evident that the assessee had made purchases apparently from his accounted money as the payments have made through banking channels,” the Tribunal added.