Fact that vendors are not available at given address doesn't make purchases bogus : ITAT
The Fact that vendors are not available at given address is not sufficient to make purchases as bogus when assessee purchased the goods and made the payments through banking channel and he substantiated all the necessary documents which is required to be kept such as purchase invoices, ledger accounts, C Form issued to the suppliers, Form No.XXXVIII of the Department of Commercial Taxes etc.
Delhi ITAT in matter of ACIT, Central Circle-7, New Delhi. Vs. Karam Chand Rubber Industries (P) Ltd.,
Fact that vendors are not available at given address doesn't make purchases bogus : ITAT
The extract of Order is given below for reference :
16. We find merit in the above argument of the ld. counsel for the assessee. It is an admitted fact that during the course of search nothing adverse was found from the premises of the assessee regarding the purchases made from the four parties concerned. Only during post search enquiry it was found that those four parties are not available at the given address. However, it is a fact that the payments have been made through banking channel and the assessee had substantiated the purchases by providing documents such as purchase invoices, copy of the ledger accounts, evidences for having made payments through banking channels, C Form issued to the suppliers, copy of VAT return duly reflecting the said purchases, etc. The assessee has also submitted the copies of Form No.XXXVIII of the Department of Commercial Taxes which accompanies details of each consignment of goods that enters Uttar Pradesh from outside the State. None of these documents have been proved to be false or untrue and thus, the initial burden cast on the assessee was duly discharged. No doubt, those four parties were not available at the given address at the time of enquiry by the Inspector. However, is it is also an admitted fact that the enquiries were conducted at a later stage and there may be a number of reasons for those parties to shift their place of business. From the submissions made by the ld. DR, we find the names of those parties were existing at the website of the Government of NCT, Delhi earlier, but, at the relevant time of enquiry, the status of the concerns was shown as ‘cancelled.’ This indicates that at some point of time, these concerns were very much available in the website of Government of Delhi and, therefore, it cannot be said that these firms are bogus when the assessee purchased the goods and made the payments through banking channel and the assessee substantiated all the necessary documents which is required to be kept such as purchase invoices, ledger accounts, C Form issued to the suppliers, Form No.XXXVIII of the Department of Commercial Taxes which
accompanies details of each consignment of goods that enters Uttar Pradesh from outside the State. In our opinion, the assessee in the instant case has discharged the initial onus cast on it. Under these circumstances and in view of the detailed reasoning given by the CIT(A) while deleting the addition, we do not find any infirmity in the order of the CIT(A). So far as the decision in the case of N.K. Proteins Ltd., is concerned, in that case, during the course of search proceedings at the office premises of the assessee blank signed cheque books and vouchers of number of concerns were found. Accordingly, the purchases made through these concerns were treated as bogus purchases by the Assessing Officer and the entire deposits in bank accounts of these parties were treated as assessee’s income on protective basis. The Tribunal restricted the addition on account of such alleged bogus purchases at 25% of the total purchases and the Hon'ble High Court modified the order of the Tribunal and directed for addition of the entire bogus purchases. However, in the instant case, no such blank cheque books and vouchers of the alleged four concerns have been found. Therefore, the decision in the case of N.K. Proteins Ltd. cannot be applied to the facts of the present case. Similarly, in the case of Vijay Proteins Ltd., the purchases were made through brokers and such documents relating to the brokers were produced for the first time before the CIT(A) and it was also found that there was close link between the assessee company and one Mr. P. Therefore, the above decision relied on by the ld. DR is also not applicable to the facts of the present case. In view of the above discussion, we do not find any infirmity in the order of the CIT(A) deleting the above addition on account of the purchase from the four parties. Accordingly, the order of the CIT(A) is upheld and the ground of appeal No.2 of the Revenue is dismissed.
accompanies details of each consignment of goods that enters Uttar Pradesh from outside the State. In our opinion, the assessee in the instant case has discharged the initial onus cast on it. Under these circumstances and in view of the detailed reasoning given by the CIT(A) while deleting the addition, we do not find any infirmity in the order of the CIT(A). So far as the decision in the case of N.K. Proteins Ltd., is concerned, in that case, during the course of search proceedings at the office premises of the assessee blank signed cheque books and vouchers of number of concerns were found. Accordingly, the purchases made through these concerns were treated as bogus purchases by the Assessing Officer and the entire deposits in bank accounts of these parties were treated as assessee’s income on protective basis. The Tribunal restricted the addition on account of such alleged bogus purchases at 25% of the total purchases and the Hon'ble High Court modified the order of the Tribunal and directed for addition of the entire bogus purchases. However, in the instant case, no such blank cheque books and vouchers of the alleged four concerns have been found. Therefore, the decision in the case of N.K. Proteins Ltd. cannot be applied to the facts of the present case. Similarly, in the case of Vijay Proteins Ltd., the purchases were made through brokers and such documents relating to the brokers were produced for the first time before the CIT(A) and it was also found that there was close link between the assessee company and one Mr. P. Therefore, the above decision relied on by the ld. DR is also not applicable to the facts of the present case. In view of the above discussion, we do not find any infirmity in the order of the CIT(A) deleting the above addition on account of the purchase from the four parties. Accordingly, the order of the CIT(A) is upheld and the ground of appeal No.2 of the Revenue is dismissed.
17. So far as ground No.3 is concerned, we find the Assessing Officer disallowed the entire addition of Rs.4,20,000/- paid to Smt. Shibani Khosla by invoking the provisions of section 40A(2)(b) of the IT Act and in appeal, the ld.CIT(A) deleted the addition of Rs.1,80,000/-, the reasons for which has already been given in the preceding paragraphs. We find from the order of the A.O. that Smt. Shibani Khosla was receiving salary and bonus from assessment year 2006-07 to 2010-11 ranging from Rs.3,74,000/- during financial year 2006-07 which has gone up to Rs.7,80,000/- in assessment year 2010-11. Even in the assessment order while the A.O. mentions that the kind of work rendered by Mrs. Khosla would have fetched her Rs.3000/- to 5000/- per month in an industrial area of Ghaziabad. Thus, the A.O is not saying that Mrs. Khosla has not done any work for the assessee company. Therefore, he could not have disallowed the entire salary. Since the ld. CIT(A) after considering the totality of the facts of the case has restricted Rs.1,80,000/- as against Rs.4,20,000/- disallowed by the A.O., we are of the considered opinion that the order of the ld.CIT(A) is justified under the facts and circumstances of the case. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed.
18. Ground of appeal No.1 being general in nature is dismissed.
19. In the result, the appeal filed by the Revenue is dismissed.
The decision was pronounced in the open court on 12.12.2018.
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