17. Ground No. 2 is regarding deletion of addition of Rs. 44,07,287 made on account of bogus purchases.
18. The assessing officer made this addition on account of alleged bogus purchases from 4 concerns, mentioned at p. 4 of the order of the learned Commissioner (Appeals). These purchases have been treated as bogus by the assessing officer on the basis of statement of one Shri Subhash Daga, who has stated that the bogus purchase bills were supplied to the assessee. The assessing officer has also mentioned that the assessee did not furnish the details of purchases and sales, etc., which were required to be submitted in a prescribed proforma and the details of purchases and sales could not link with the export. He did not even consider the plea of the, assessee that the payments were made by account payee cheques. The learned Commissioner (Appeals) has deleted this addition for the reason that Shri Subhash Daga clearly stated that whenever he was not in possession of goods, the same were arranged by him from unregistered dealers and supplied to the assessee. Shri Subhash Daga has changed his stand in the affidavit and stated that whenever he did not have the stock then the material was supplied by unregistered dealer and bill was issued by him. The Commissioner (Appeals) held at p. 7 of his order that the purchases of Rs. 44,07,287 are not accepted, then it will result into higher profit of the export business by this amount. Deduction under section 80HHC is allowed on the profits and gains as computed under the provisions of the Act. Since the assessee is 100 per cent exporter of goods, therefore, increase in export profit by Rs. 44,07,287 will result into increase in the claim of deduction under section 80HHC of the equal amount. Therefore, he deleted this addition.
19. The learned Departmental Representative (IT) vehemently contended that Shri Subhash Daga cannot retract from his earlier statement and the affidavit filed subsequently cannot be relied upon in view of the decision of Hon'ble Supreme Court in the case of CIT v. Durga Prasad More (1971) 82 ITR 540 (SC). The learned Commissioner (Appeals) has totally ignored the basic fact that the investment in bogus purchases is considered unexplained and taxable. Moreover, the assessee also failed to correlate the nexus of the goods purchased from Daga group concerns with exports. He relied upon the decision of Hon'ble Delhi High Court in the case of CIT v. La Medica (2001) 250 ITR 575 (Del) and contended that the addition for bogus purchases has rightly been made.
(3) It is noticed that total purchases are vouched and all are through brokers, whose names are appearing in purchase invoices (pp. 107 to 196 of paper book). All the payments were through account payee cheques in the name of the parties who had issued the invoices to the assessee-firm. If one or few brokers had arranged goods from one and bill from others, assessee is not supposed to go into the depth to know the party/parties who had supplied the goods nor assessee could be doubted for making bogus purchases on the facts.
(b) Dy. CIT v. Adinath Industries (2001) 252 ITR 476 (Guj)
(c) Chitra Devi v. Assistant Commissioner (2002) 28 Tax World 455 (Jd)
21. We have heard the rival submissions and have also perused the record. We find that in this case, the addition for bogus purchases has been made by the assessing officer on the basis of statement of Shri Subhash Daga. Shri Subhash Daga has subsequently changed this stand by filing the affidavit that whenever he did not have the stock, then the material was supplied by unregistered dealer and bill was issued by him. All the purchases were vouched and have been made through brokers whose names and addresses are appearing in the purchase invoices (pp. 107 to 196). Complete stock tally in three volumes for the purchase of goods has been submitted by the assessee. These purchases have been considered as genuine while calculating the stock as per the books, There cannot be any motive of the assessee to make bogus purchases as total income was exempt under section 80HHC of the Income Tax Act. The assessing officer and the learned Commissioner (Appeals) have grossly erred in holding that these purchases were bogus purchases or addition can be made for unexplained investment. The payments have been made through account payee cheques and there is no evidence in this regard that the payment thus made has been received back by the assessee. The assessee is 100 per cent exporter and the assessee is not maintaining any showroom and there cannot be any case of money laundering. The payments have been made through cheques and names and addresses of the Dalals have been given. The assessing officer could not bring sufficient material on record to prove that these purchases were bogus. If it is held that no purchases had been made by the assessee, then no addition can be made for excess stock as the stock is to be reduced by the amount of bogus purchases, The assessee has also exported the goods, which are subject to verification by the customs authorities. If no purchases have been made then how the assessee has earned income from export of goods. There cannot be any attempt on the part of the assessee to reduce tax incidence as in this case the income of the assessee is 100 per cent exempt under section 80HHC of the Income Tax Act and the assessee has no income from any source. Under such circumstances, the case law relied upon by the learned Departmental Representative (IT) in the case of La Medica (supra), is of no help. Therefore, we decline to interfere with the order of the learned Commissioner (Appeals).