For a better understanding of the case, it is crucial to know what is the meaning of a bogus purchase or a bogus sale, which is quite a common activity these days. Bogus purchases or bogus sales are entries made or created by the alleged vendor wherein all the transactions are done with the assessee are just accommodation entries and there have been no sales or purchases in reality. The Assessment Officer cannot rely on such statements given by the alleged vendor and the assessee has to be given the chance to cross-examine the vendor”.
Bogus Purchases Case
In this case of Pratibha Pipes, on examination of the various facts that were available on record, it is found that the Assessment Officer has not executed addition solely on the basis of the reports of the sales-tax department. In reality, the Assessment Officer has conducted every possible inquiry during the development of the assessment proceedings, according to which, the officer had ordered the assessee to file the confirmations from various parties involved and to even produce these parties for examination. However, the assessee was unable to file the confirmations, nor could the assessee produce the parties for examination in person.
Moreover, the Assessment Officer had produced many discrepancies in the assessee’s books of account inclusive of the purchases made from 22 parties, according to which, SOPs have been followed by the assessee pertaining to all the purchases, where every single identification has been done inclusive of the entry of goods, whereas, in terms of the purchases from the 22 parties, no identification has been done. The assessee and the directors have admitted this fact and its directors.
The ruling by Supreme Court related to Bogus Purchases
Hence, we are of the view that as per these facts, the ratio that has been laid down by the Hon’ble Supreme Court in the particular case of NK Proteins Ltd vs DCIT (2017) 292 CTR 354 (SC) is fairly applicable to the facts of the case of the assessee, where the Hon’ble Supreme Court had rejected the appeal that was filed by the assessee and the findings of the Hon’ble Gujarat High Court pertaining to bogus purchases was confirmed, where the Hon’ble Gujarat High Court, post the analysis of all the important facts mentioned in para 6 of the order, maintained ground that once the Tribunal has already come to a definite conclusion that the purchases from specific parties are bogus, it was not necessary on it to restrain the disallowance to an extent of 25% of such bogus purchases.