In Rupesh Chimanlal savla v. ITO, held that a purchase cannot be treated as bogus only because the assessee failed to produce the dealers.
Deleting the addition made under section 69A of the Income Tax Act, the division bench said that the same is not sustainable since it was solely based on the information from the sales Tax Department.
The grievance of the assessee was that the Department initiated re-assessment proceedings against the assessee by finding that some dealers have provided accommodation entries for bogus purchase bills to large number of taxpayers. It was alleged that the assessee has also obtained bogus purchase bills from various parties listed in the Sales Tax department website.
Before the Tribunal, the assessee contended that the addition was wholely on the basis of the information from the sales tax department and the IT Department do not have any other evidence to prove that the transactions are bogus.
“It is apparent that sole basis of addition is only the information obtained from the Sales Tax department by the Assessing Officer. The Assessee for whatever reason might not have produced the parties for verification may be due to lapse of time or may be due to the dealers shifting from their business premises etc., but he has produced the copies of bank statements, where the payments were made through cheques and the ledger copies of the books of the Assessee of the parties etc. to prove the genuineness of the purchases. The Assessing Officer never doubted the sales made by the Assessee for such purchases, in fact, he has accepted the sales. Without there being any purchases, there could not be any sales. It is also not proved by the Assessing Officer that the amounts paid by the Assessee to the dealers were returned back to the Assessee and the purchase bills issued are only accommodation entries. Simply because the Assessee could not produce the dealers, the entire purchases cannot be treated as bogus purchases. The Assessing Officer could have made further investigations to ascertain the genuineness of the transactions.”
In a similar case, the Coordinate Bench of the Tribunal in the case of ITO Vs. Sanjay V Dhruv, held that addition under s. 69A is not sustainable.
In view of the above findings, the bench observed that there is no material on record to conclusively prove that the purchases made by the Assessee are bogus purchases and nothing is brought on record to suggest that the information gathered by the Sales Tax department conclusively proves that the dealers are providing only the accommodation entries to the Assessee.
Read the full text of the order below.
