Decided on August 21,2003

Sree Rajvel And Co Appellant


- (1.) THE Tribunal, Cochin Bench has referred the following question of law for decision by this Court : 'Whether, on the facts and the circumstances of the case, the Tribunal is correct in sustaining the additions on the ground that there were bogus purchases against the names of three identifiable persons and also against a number of unidentifiable parties ?'
(2.) THE brief facts necessary for decision of this question are as follows. The applicant is a partnership -firm carrying on the business of procuring Copra for a sister concern by name M/s MM. Nagalinga Nadar Son's, Quilon, who had their office in the same premises. While purchasing Copra the assessee was deducting an estimated quantity as driage and paying the suppliers the price for the net quantity only. In the course of the assessment proceedings for the asst. yr. 1990 -91 the AO found that even though during the previous year there was gross purchase of Copra to the extent of 52,918.78 quintals; the assessee had accounted by way of sales to the sister concern only 50,212.76 quintals. The AO was of the view that as Copra purchased on a particular day was transferred to the sister concern on the same day or the next day, there was no possibility of any driage and so the difference must have been accounted by the assessee as bogus purchases. The AO found that even after giving a reasonable deduction for driage, still there was a balance quantity of 576 quintals, which has to be treated as bogus purchases. Out of the total quantity of 576 quintals, 139 quintals was considered as bogus purchases from Karunakaran and Sons and the purchase cost of Rs. 2,07,582 was disallowed in the assessment. With regard to the remaining quantity of 437 quintals it was treated as bogus purchases against the names of sundry parties. The assessing authority had disallowed a sum of Rs. 6,50,434 representing the value of 437 quintals at the rate of Rs. 1,488 per quintal. The total additions on these two counts came to Rs. 8,58,016, which was disallowed. In appeal filled by the assessee the CIT(A) accepted the plea that there was in fact on claim of driage as the entire quantity purchased by the assessee had been transferred to the sister concern without even making payment and so there was no justification for any addition. However, in the appeal filed by the Revenue the Tribunal took the view that the CIT(A) was not correct in deleting the addition merely because there was no driage claimed by the assessee. The Tribunal noted that the addition made by the AO was not on the ground that there was excess claim of driage in the Copra account, The Tribunal also noticed that even though the AO had started with the quantification of the. driage, the addition of Rs. 8,58,016 had been made by way of disallowance of bogus purchases only. The Tribunal ultimately held that the AO was correct in the view that the purchase of 139 quintals from Shri Karunakaran and others was not proved to be genuine and so there was justification for disallowance of the sum of Rs. 2,07,582, claimed as the cost for such purchases. The Tribunal also held that there was justification for treating the quantity of 437 quintals as bogus purchase of Copra from sundry parties and for making the addition by way of disallowance of the purchase cost. Though notice was served on the applicant, there is no appearance. We haveheard Sri George K. George, learned standing counsel for Government of India,Taxes. We have also perused the orders of the three authorities. We find thatthe Tribunal has entered a clear finding regarding the difference of 576 quintalsof Copra as bogus purchases. The Tribunal had particularly noted in para 7 ofthe appellate order as follows : 'It is not disputed that Shri Karunakaran of Karunagappally and his sons Shri Rajan and Shri Raghu were regular suppliers of Copra to the assessee, When the assessee has claimed deduction for an amount as the purchase price of Copra and the AO finds that there was no such purchase, the onus was on the assessee to rebut that finding and prove that in spite of the denial by the persons concerned, there were in fact such purchases effected from them. The assessee did not even want to cross -examine the three persons; as they were regularly supplying Copra to the assessee, there would have been no difficulty in getting the transaction proved through cross -examination, But instead of making any attempt to prove that there were genuine purchases, the assessee's response was 'we are not bothered as to whether they had accounted for the sales or not.'
(3.) THE Tribunal has also noted the facts brought out in the assessment order as follows : '8. The facts brought out in the assessment order are : (1) The purchase of 139.47 quintals claimed by the assessee is not supported by independent evidence. (2) The assessee has not produced the Khatta Register and other primary books before the AO. (3) The parties in whose names the purchases are claimed had denied the sales to the assessee. (4) Form -19B register and the stock register maintained by them were verified by the AO and found that there were no such sales to the assessee.' ;

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