The assessing officer must provide concrete evidence for disallowing purchases as bogus, rather than relying solely on generalized reports without independent inquiry.

ORDER

PER B.R. BASKARAN, ACCOUNTANT MEMBER :

The assessee has filed this appeal challenging the order dated 17-01- 2025 passed by Ld CIT(A), NFAC, Delhi and it relates to the assessment year 2012-13. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the disallowance of purchases holding them as bogus purchases.

2. The facts relating to the case are discussed in brief. The assessee is a partnership firm and it is carrying on the business of manufacturing, trading and sale of jewelleries, cut and polished diamonds. It filed its return of income for the year under consideration declaring a total income of Rs.48,57,630/-. The assessing officer received information that the assessee has made purchases from the following concerns, which belonged to Rajendra Jain group:-

3. A search and survey action was carried out in the case of M/s Rajendra Jain Group on 03-10-2013. It was noticed that they were engaged in the business of providing accommodation entries in the form of sales, unsecured loans, advances etc. The AO, fully placing reliance on the report given by the Investigation wing, took the view that the purchases made by the assessee from the above said concerns are bogus in nature. In this regard, the AO has also extracted the report of the investigation wing including the statement given by Shri Rajendra Jain in the assessment order. Accordingly, the AO show caused the assessee as to why the above said purchases should not be treated as bogus in nature.

4. In response thereto, the assessee produced the books of accounts, purchase and sales register along with purchase invoices and sales bills before the AO. It was further submitted that the transactions were entered through banking channels. Accordingly, the assessee contended that its purchases and sales are genuine. However, the AO did not examine those documents furnished by the assessee. The assessing officer, however, discussed various modes and reasons for procuring accommodation bills. One of such reasons is the necessity to reduce the profits by inflating the purchases. In the case of the assessee, the AO concluded that the assessee firm has indulged in inflating the purchases through bogus bills. The relevant observations made by the AO are extracted below:-

“16. From the circumstantial evidences collected through the various facts and the corroborative evidence in form of statements of the commission agents through which bogus bills were collected it is clear that the assessee firm is indulged in inflating the purchases through bogus bills.”

The AO further placed reliance on the decision rendered by Hon’ble Apex Court in the case of N K Proteins Ltd vs. DCIT (2017)(Tax Pub(DT) 1860)(SC) and also the decision of Hon’ble Gujarat High Court in the case of N K Industries Ltd vs. DCIT (2016)(292 CTR (Guj) 354)(Guj) and held that the entire purchases is required to be disallowed. Accordingly, the AO disallowed entire amount of purchases of Rs.9.56 crores made through above said concerns.

5. Before Ld CIT(A), the assessee made detailed submissions. It contended that there is no evidentiary value to the statement taken during the course of survey operations. It was submitted that the AO has wrongly relied upon the statement given by Shri Rajendra Jain, since he is not connected with any of the above said concerns, from whom the assessee had made purchases. It was submitted that the assessee has furnished all the documents to prove the factum of purchases. It was also contended that both the case laws relied upon by the AO are not applicable to the facts of the present case. It was submitted that the assessee has sold the materials purchased from these parties, i.e., the sales could not have been made without actually purchasing the materials. It was further submitted that all these suppliers have fur