Sales accepted in supplier books cannot be bogus purchase of

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Case Law Details

Case Name : ACIT vs. M/s Jaybharat Textiles & Real Estate Ltd. ( ITAT Mumbai)
Appeal Number : IT Appeal No. 5163/Mum2013
Date of Judgement/Order : 24.02.2016
Related Assessment Year : 2010-11
Courts : All ITAT (1729) ITAT Mumbai (489)
Brief of the case :
The ITAT bench Mumbai in the above cited case held that when the department has not disputed the sales
transactions disclosed by the supplier in its books who is an income tax assessee then it cannot assume the same
as bogus purchases made by the buyer more so when the transaction has been supported by proper documentary
evidences and payments aremade to suppliers through proper banking channels.
Facts of the case:
The assessee company filed its return of income on 08 th Oct,2010 declaring a total income of Rs. 18.68
crores. In the course of assessment proceedings. AO after verifying books of accounts found that the
assessee has shown Share Application Money received of Rs. 100 crores from five companies based at
Mumbai.
AO officer in order to verify the genuiness of entries in the books of assessee issued notices to all these
companies from whom share application money shown to be received. The AO noted that in case of Elpro
Properties assessee shown as purchase from it Rs. 10.13 crores till March 2011 but assessee paid only
13,265/- and the balance Rs.10 crores was converted into share application money. Likewise , in the case of
Cyra Capital Limited assessee shown as purchase made of Rs. 30.13 crores but has paid R13,237/- only and
the balance Rs. crores converted into share application money.
AO having doubt of such big share application money conversion, conducted a survey u/s 133A of the Act in
the business premises of the assessee. On the basis of statement recorded in survey , AO came to
conclusion that purchases claimed to be made from five parties are bogus which are shown for having
accommodation entries just to evade tax.
Accordingly, AO added entire purchases made from these parties Rs. 118,64,12,141/- and added back same
to assessees income.
On appeal to CIT(A) , it was held by him that when the AO has not doubted the sales made by the assessee
,he cannot treat purchases as bogus as in the absence of such purchases , assessee could not have effected
sales of such goods. Further, the purchases made by assessee has been duly reported by sellers in their
books who are also income tax assessees which has been shown by them in their return of income and
books.

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Accordingly ., disallowance made by AO was deleted by CIT(A). Aggrieved assessee is in appeal before
ITAT.
Held by ITAT:
ITAT observed that in response to the notices issued under 133(6) to the suppliers whom AO doubted to have
be bogus one appeared before the AO and confirmed effecting sales to assessee. Further , the AO also
enquired the directors of these companies and on perusal of statement recorded from directors there is
nothing on record to suggest that sale and purchase transaction b/w assessee and these companies are nongenuine.
On the contrary ,suppliers have submitted copies of their audited books of accounts wherein they have
considered the sales made to assessee in their books and tax returns. Further , the assessee produced
purchases and sales bills and other documentary evidences in support of purchases effected by it from all
suppliers. And it is also not in dispute that payment made to the suppliers through proper banking channels.
The department has not disputed the sales made by suppliers to assessee. Therefore, when the sales
effected by the suppliers are accepted in their hands , the purchases made from them by the assessee
cannot be held to be non-genuine.
In these circumstances , department has failed to bring any substantive material to counter the findings of the
CIT(A) ,the tribunal decided not to disturb the order of CIT(A).
Accordingly , the appeal of revenue was dismissed.

Posted Under
Category : Income Tax (20852)
Type : Judiciary (8909)
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