IN THE INCOME TAX APPELLATE TRIBUNAL
\n\u201cF\u201d BENCH, MUMBAI<\/p>\n
BEFORE SHRI SAKTIJIT DEY, JM AND \u000e\u000f \u0010\t\u0011 \/ Judicial Member \u0932\u0947\u0916\f \u0010\t\u0011 \/ Accountant Member \u0007 \u0006 “\u0947 The assessee was in possession of primary purchase documents and the payments to the suppliers was through banking channels. The assessee had established corresponding sales before Ld. AO. The books of accounts were audited wherein quantitative details of stock was provided. We are of the considered opinion that there could be no sale without actual purchase of material keeping in view the fact that the assessee was engaged in trading activities. At the same time, the assessee failed to produce even a single supplier to confirm the purchase transactions. The delivery of material could not be substantiated.<\/p>\n
\nSHRI MANOJ KUMAR AGGARWAL, AM
\n\u0906\u092f\u000f\u0016\u0017\u092a\u0002\u001a \u0010\u0902.\/ I .T.A. No.4650\/Mum\/2018
\n(
\n\u001a\u000b\u0010\u001b\u0004\f \u0019\u001c\u001b \/ Assessment Year: 2009-10)
\nV.R.Enterprises
\n204, Gupta Bhavan
\nAhmedabad Street
\nMasjid (East), Mumbai \u2013 400 009
\n\u092c\u0928\u093e\u092e\/
\nVs.
\nITO-17(3)(5)
\nR.No.137, Aaykar Bhavan
\nM.K.Road
\nMumbai \u2013 400 021
\n !\f\u000e\u0002\u001a
\n\u001b\f\u0010\u001f. \/\u091c\u0002\u0906\u0907\u0906\u0930\u0010\u001f. \/PAN\/GIR No. AAGFV-3063-N
\n(\u0006\u0007\b
\n\u000b\f\/Appellant) : (
\n\u000e\u000f\u000b\f \/ Respondent)
\nAssessee by : Shri Rahul Hakani \u2013 Ld. AR
\nDepartment by : Chaudhary Arun Kumar Singh-Ld.DR
\n\u0010\u0011\u0012\u0013
\n\u0014\u0015\u0016\u0017
\n\u0018\u0019\u001a\/
\nDate of Hearing
\n: 16\/05\/2019
\n\u001b\u001c\u001d\u001e
\n\u0015\u0016\u0017
\n\u0018\u0019\u001a \/
\nDate of Pronouncement
\n: 16\/05\/2019
\n\u0906\u0926\u0947\u0936 \/ O R D E R
\nPer Manoj Kumar Aggarwal (Accountant Member):-
\n1. Aforesaid appeal by assessee for Assessment Year [in short referred
\nto as \u2018AY\u2019] 2009-10 contest the order of Ld. Commissioner of Income-Tax
\n(Appeals)-28, Mumbai, [in short referred to as \u2018CIT(A)\u2019], Appeal No. CIT(A)-
\n28\/IT-488\/ITO-17(3)(5)\/2015-16 dated 29\/06\/2018 qua enhancement of
\ncertain additions on account of alleged bogus purchases. Although, the
\nadditional grounds have been filed, however, the same has not been
\n2
\npressed during hearing before us and therefore, not considered while
\nadjudicating the appeal.
\n2.1 Facts in brief are that the assessee being resident firm stated to be
\nengaged in trading of iron & steel was assessed u\/s 143(3) r.w.s.147 for
\nimpugned AY on 23\/03\/2015 wherein the assessee was saddled with
\naddition of Rs.10.41 Lacs on account of alleged bogus purchases The
\noriginal return of income filed by the assessee was processed u\/s 143(1).
\n2.2 The reassessment proceedings got triggered pursuant to receipt of
\ncertain information from Sales Tax Department, Maharashtra wherein it
\ntranspired that the assessee stood beneficiary of accommodation purchase
\nbills aggregating to Rs.83.35 Lacs from 2 suspicious entities, the details of
\nwhich have already been extracted in para 4.1 of the quantum assessment
\norder. Accordingly, the case was reopened u\/s 147 by issuance of notice
\nu\/s 148 on 27\/03\/2014 which was followed by statutory notices u\/s 143(2) &
\n142(1) wherein the assessee was directed to substantiate the aforesaid
\npurchases.
\n2.3 Although the assessee defended the purchases made by him,
\nhowever, the same were not accepted by Ld. AO for various reasons as
\nsummarized in para 4.5 of the quantum assessment order. One of the
\nreasons was that the assessee did not make available the details of
\ntransportation of the material purported to have been purchased from the
\naforesaid hawala dealers and could not provide any transportation receipts,
\ndelivery challans etc. In the affidavits filed before Sales Tax Authorities, the
\nstated dealer admitted to have indulged in providing accommodation entries
\n3
\nwithout carrying out any actual business activities. The assessee could not
\nproduce any of the supplier to confirm the transactions.
\n2.4 The factual matrix led the Ld. AO to believe that the said purchases
\nwere non-genuine and accordingly, the additions against these purchases
\nwere estimated @12.5% which resulted into an addition of Rs.10,41,892\/-
\nin the hands of the assessee.
\n3. Aggrieved, the assessee preferred appeal against the same before
\nLd. CIT(A). The Ld. first appellate authority, after considering assessee\u2019s
\nsubmissions and material on record came to a conclusion that the
\ncircumstances called for full additions as against 12.5% estimated by Ld.
\nAO. Accordingly, enhancement notice was issued to the assessee on
\n01\/06\/2018 wherein the assessee was show-caused as to why the whole
\namount of bogus purchases may not be added to the income of the
\nassessee. The assessee refuted the same by submitting that purchase bills
\nwere produced, corresponding sales were made and the payments to the
\nsuppliers was through banking channels. The attention was drawn to the
\nfact that VAT was paid twice. However, not convinced, the additions were
\nenhanced to 100% in the background of several judicial pronouncements,
\nwhich have already been enumerated in the impugned order and not
\nrepeated here for the sake of brevity. Aggrieved, the assessee is in further
\nappeal before us.
\n4. The Ld. Authorized Representative for Assessee [AR], Shri Rahul
\nHakani, vehemently contested the enhancement made by Ld. first appellate
\nauthority whereas Ld. DR supported the stand in impugned order by placing
\n4
\nreliance on the decision of Hon\u2019ble Gujarat High Court rendered in
\nN.K.Proteins Ltd. Vs. CIT [2016-TIOL-3165-HC-AHM-IT].
\n5. We have carefully heard the rival submissions and perused relevant
\nmaterial on record and deliberated on judicial announcements cited before
\nus. We find that assessee was in possession of primary purchase
\ndocuments and the payments to the suppliers was through banking
\nchannels. The assessee had established corresponding sales before Ld.
\nAO. The books of accounts were audited wherein quantitative details of
\nstock was provided. We are of the considered opinion that there could be
\nno sale without actual purchase of material keeping in view the fact that the
\nassessee was engaged in trading activities. At the same time, the assessee
\nfailed to produce even a single supplier to confirm the purchase
\ntransactions. The delivery of material could not be substantiated. Therefore,
\nin such a situation, the addition, which could be made, was to account for
\nprofit element embedded in these purchase transactions to factorize for
\nprofit earned by assessee against possible purchase of material in the grey
\nmarket and undue benefit of VAT against such bogus purchases. The Ld.
\nAO, in our opinion, had clinched the issue in the right perspective and was
\nfair enough to estimate the additions @12.5%. Therefore, concurring with
\nthe stand of Ld. AO, we restore the order of Ld. AO. Accordingly, the
\nenhancement of Rs.72.93 Lacs as made by Ld. first appellate authority
\nstands deleted.
\n6. Our aforesaid view is in line with the recent decision of Hon\u2019ble
\nBombay High Court rendered in bunch of appeals titled as Pr.CIT Vs. M\/sMohommad Haji Adam & Co<\/strong><\/a>. [ITA No.1004 & others of 2016, dated
\n5
\n11\/02\/2019] wherein Hon\u2019ble Court distinguishing the cited case law of
\nHon\u2019ble Gujarat High Court rendered in N.K. Industries Ltd. Vs Dy. C.I.T.
\nin Tax Appeal No. 240 of 2003 and connected appeals decided on 20th
\nJune, 2016 observed as under: –
\n8. In the present case, as noted above, the assessee was a trader of fabrics. The A.O.
\nfound three entities who were indulging in bogus billing activities. A.O. found that the
\npurchases made by the assessee from these entities were bogus. This being a finding
\nof fact, we have proceeded on such basis. Despite this, the question arises whether the
\nRevenue is correct in contending that the entire purchase amount should be added by
\nway of assessee’s additional income or the assessee is correct in contending that such
\nlogic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that
\nthe department had not disputed the assessee’s sales. There was no discrepancy
\nbetween the purchases shown by the assessee and the sales declared. That being the
\nposition, the Tribunal was correct in coming to the conclusion that the purchases cannot
\nbe rejected without disturbing the sales in case of a trader. The Tribunal, therefore,
\ncorrectly restricted the additions limited to the extent of bringing the G.P. rate on
\npurchases at the same rate of other genuine purchases. The decision of the Gujarat
\nHigh Court in the case of N.K. Industries Ltd. (supra) cannot be applied without
\nreference to the facts. In fact in paragraph 8 of the same Judgment the Court held and
\nobserved as under-
\n\u201c So far as the question regarding addition of Rs.3,70,78,125\/- as gross profit on sales of
\nRs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had
\nadmittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we
\nare of the view that the assessee cannot be punished since sale price is accepted by the
\nrevenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is
\nrequired to be deducted and tax cannot be levied on the same price. We have to reduce the
\nselling price accordingly as a result of which profit comes to 5.66%. Therefore, considering 5.66%
\nof Rs.3,70,78,125\/- which comes to Rs.20,98,621.88 we think it fit to direct the revenue to add
\nRs.20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the
\nsaid question is answered partially in favor of the assessee and partially in favor of the revenue.\u201d
\n9 In these circumstances, no question of law, therefore, arises. All Income Tax Appeals
\nare dismissed, accordingly. No order as to costs.
\n7. Resultantly, the appeal stands allowed in terms of our above order.
\nOrder pronounced in the open court on16\/05\/2019.
\nSd\/- Sd\/-
\n(Saktijit Dey) (Manoj Kumar Aggarwal)<\/p>\n
\n\u092e\u0941\u0902\u092c\u0908 Mumbai;
\n\t\u0928\f\u0902\u000fDated : 16\/05\/2019
\nSr.PS:-Jaisy Varghese
\n6
\n\u0906\u0926\u0947\u0936 \u0915\u0940
\n!<\/p>\n
\n\u001c!\/Copy of the Order forwarded to :
\n1. \u0017\u001e\u0002\u001a\f!%\/ The Appellant
\n2. &’!%\/ The Respondent
\n3. \u001d\u000e\u000f\u0016\u001d\u000e\u0015\u0005(\u0017\u001e\u0002\u001a) \/ The CIT(A)
\n4. \u001d\u000e\u000f\u0016\u001d\u000e\u0015\u0005\/ CIT\u2013 concerned
\n5.
\n\u0019(\f)\u0002\u000e&
\n\u0007
\n\u0013
\n*, \u001d\u000e\u000f\u0016\u0017\u001e\u0002\u001a\u0002\u000e\u0017
\n*\u000f\u0016\u0923, \u092e\u0015\u0902\u092c\u0908\/ DR, ITAT, Mumbai
\n6. )\f,-.\f\u0908\u001a \/ Guard File
\n\u0906\u0926\u0947\u0936\u093e\u0928\u0941\u0938\u093e\u0930\/ BY ORDER,
\n\u0909\u092a\/\u0938\u0939\u093e\u092f\u0915\u092a\u0902\u091c\u0940\u0915\u093e\u0930 (Dy.\/Asstt.Registrar)
\n\u0906\u092f\u0915\u0930\u0905\u092a\u0940\u0932\u0940\u092f\u0905\u093f\u0927\u0915\u0930\u0923, \u092e\u0941\u0902\u092c\u0908 \/ ITAT, Mumbai<\/p>\n","protected":false},"excerpt":{"rendered":"