IN THE HIGH COURT OF GUJARAT
R/Tax Appeal No. 260 Of 2019
PRINCIPAL COMMISSIONER OF INCOME TAX-1
SANDEEP P SHAH
J B Pardiwala & A C Rao, JJ
Dated: July 09, 2019
Appellant Rep by: Mrs Mauna M Bhatt(174)
Respondent Rep by: None
Income Tax – Bogus purchases – Genuineness of transactions
THE assessee had filed his return for the relevant AY. The assessment order was framed u/s 143(3).Later, the assessment was reopened by the AO to verify the genuineness of sale purchase transaction made by the assessee. Concluding the 47% of the purchases as bogus, the assessment was finalized after making the addition. The CIT(A), however, deleted such addition holding that the assessee had successfully discharged his onus proving the genuineness of transactions in question. The Revenue challenge of such deletion was dismissed by the Tribunal which held that no addition can be made merely on the basis of the statement recorded by the third party statement (Sales Tax Department of Mumbai).
On appeal, the High Court held that,
Whether in the light of concurrent factual findings of the appellate forums with regard to genuineness of sale transaction in assessee’s favour, any substantial question of law arises before the writ court in absence of new evidence indicating perverse findings – NO: HC
++ whether the transactions were bogus or not, it cannot be a pure question of fact having regard to the evidence. If the two Revenue authorities have recorded concurrent finding with regard to the genuineness of the transactions, this Court would not like to disturb it in the present appeal. It is difficult to take the view that the findings are based on no evidence or are on misreading of evidence on the basis of which it can be said that the findings were perverse. Hence, no substantial question of law arises in the present appeal.
Revenue’s appeal dismissed
Per: J B Pardiwala:
1. This Tax Appeal under Section 260A of the Income Tax Act, 1961 [for short, “the Act, 1961”] is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad dated 1st November 2018 in the ITA No.3260/AHD/2015 for the assessment year 2011-12.
2. The Revenue has proposed the following question of law:
“whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs.66,76,237/- made on account of bogus purchases?”
3. It appears from the materials on record that the assessee preferred appeal before the CIT(A) against the order passed by the ITO, Ward1( 2) (4), Ahmedabad, dated 9th March 2015 under Section 143(3) read with Section 147 of the Act assessing the total income at Rs.71,67,910/- as against the return income of Rs.3,28,170/-. The issue in the case on hand is with regard to deletion of the addition of Rs.66,76,237/- made on account of bogus purchases. The CIT(A) took the view that the additions made by the Assessing Officer are not justified for the following reasons:
“i) The appellant is engaged in the business trading in ferroous and non ferrous metal. During the year, total purchases of the appellant is Rs.1,44,80,582/-, out of which, the AO considered purchases of Rs.66,76,237/- as nongenuine. This is about 47% of the total purchases. If 47% purchases are nongenuine, how the appellant made sales is an important fact to be considered.
ii) The appellant submitted stock register, which shows monthwise purchase and sales in terms of quantity. The AO did not find any defect in the sales shown by the appellant. 70% of sales have been made to very.
iii) The appellant made payments through a/c payee cheques and there is no evidence to prove that the appellant received back the amount in cash.
iv) The statements of these parties were general in nature and name of the appellant was not mentioned in particular.
v) The appellant submitted confirmation from these parties and copies of their VAT registration during the assessment proceedings.”
4. The CITA (A), ultimately, took the view that the assessee had successfully discharged his onus to prove the genuineness of these transactions in question. It, ultimately, held that the addition of Rs.66,76,237/- were not found to be justified, and hence, they were ordered to be deleted.
5. The Revenue, being dissatisfied with the order passed by the CIT(A), preferred appeal before the Appellate Tribunal. The Appellate Tribunal took into consideration three judgments:
(1) C.I.T. vs. M.K. Bros. : 163 ITR 249 = 2003-TIOL-441-HC-AHM-IT
(2) Diagnostics vs. C.I.T. : 334 ITR 111 = 2011-TIOL-158-HC-KOL-IT
(3) C.I.T. vs. Nikuni Exismp : 372 ITR 619 = 2013-TIOL-04-HC-MUM-IT
6. The Tribunal, while concurring with the finding recorded by the CIT(A), ultimately, held as under:
“In view of above, we hold that no addition can be made merely on the basis of the statement recorded by the third party statement i.e. Sales Tax Department of Mumbai in the case before us. We also note that the ld. DR at the time of hearing has not brought anything on record suggesting that the ld. CIT(A) has admitted any additional documents in contravention to the provision of Rule 46A of the Income Tax Rule.”
7. We are of the view that whether the transactions were bogus or not, cannot be a pure question of fact having regard to the evidence on record. If the two Revenue authorities have recorded concurrent finding with regard to the genuineness of the transactions, we would not like to disturb the same in the present appeal. It is difficult for us to take the view that the findings are based on no evidence or are on misreading of evidence on the basis of which it can be said that the findings are perverse.
8. In such circumstances, we do not find any substantial question of law as such involved in this appeal.
9. In the result, this appeal fails and is hereby dismissed.