The authority must conduct independent inquiries when rejecting claimed purchases based on alleged non-genuine transactions.

ORDER

PER ARUN KHODPIA, AM:

This appeal is filed by the assessee to challenge the decision of Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (In short “ld. CIT(A)/NFAC”), vide order dated 15.01.2025 for the AY 2011-12, which in turn arises from the order u/s 143(3) r.w.s. 147 dated 23.11.2016, passed by Income Tax Officer – 19(2)(3), Mumbai (in short “Ld. AO”). The grounds of appeal raised by the assessee are as under:

“1. On the facts and in the circumstance of the case, the learned Commissioner of Income tax (Appeals), NFAC, New Delhi erred in confirming the order of the Assessing Officer under section 143(3) rw.s. 147 of the Act on the ground that DGIT has information from Sale-tax Department that the Appellant had purchased goods from non-genuine parties particularly when, the Assessing Officer has not made any independent enquiry about such parties, who have been assessed to tax and have VAT and CST numbers, therefore, the said order is bad-in-law, illegal and ab-initio-void.

2. On the facts and in the circumstance of the case, the said order is also bad- in-law, illegal and ab-initio-void, particularly, no copy of the statement recorded by Sale Tax Department of alleged non-genuine parties was provided by the Assessing Officer to the appellant for cross verification.

3. On the facts and in the circumstance of the case, the said learned Commissioner of Income tax has also erred in confirming the order of the Assessing Officer in respect of rejecting the books of account and making addition @ 12.5% profit on the said non-genuine purchases without giving any independent findings that income chargeable to tax has escaped the assessment.

4. On the facts and in the circumstances of the case, the said learned Commissioner of Income Tax has also erred in not considering the various judgements and decisions submitted with the grounds of appeal and at the time of hearing and hence also the said order is bad in law, illegal and ab-intio-void.”

2. Brief facts of the case are that the assessee is engaged in the business of trading in electronic items. During the year under consideration, the assessee filed its return of income on 28.09.2011 declaring total income of Rs. 2,47,636/-. The case of assessee, thereafter, was reopened u/s 147, accordingly a notice u/s 148 dated 04.03.2016 was issued. During the course of reopening proceedings, the ld. AO raised the issue that the assessee is involved in receipt of bogus purchase entries from the following parties:

3. It is observed by the Ld. AO that during the course of investigation, the sales tax department has found that the aforesaid concerns were not doing any genuine business of purchase and sales, that they are indulged in providing of accommodation bills. Assessee therefor was show caused to clarify in the matter, in response, the explanations furnished by the assessee are not found acceptable by the ld. AO and accordingly after discussing the modus operandi in execution of such transactions, the ld. AO added an amount of Rs. 4,05,659/- i.e. 12.5% of such suspicious purchases to the income of the assessee.

4. Being aggrieved with the aforesaid additions, assessee preferred an appeal before the ld. CIT(A), who after deliberating upon the facts on record and submissions of the assessee, was not convinced with the contentions raised by the assessee, accordingly, had dismissed the appeal of assessee and the addition made by ld. AO has been sustained by the ld. CIT(A).

5. Dissatisfied with th