TMI Blog2017 (2) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Commissioner of Income Tax (Appeal), his stand is affirmed, resulting into dismissal of appeals of the Revenue. - ITA NOs.1913 to 1915/Mum/2015 - - - Dated:- 2-12-2016 - Shri Joginder Singh, Judicial Member, and Shri N.K. Pradhan, Accountant Member For The Revenue by Ms. Beena Santosh-DR For The Assessee : Assessee by Shri Suresh Otwani ORDER Per Joginder Singh (Judicial Member) These three appeals are by the Revenue, aggrieved by the impugned orders all dated 21/01/2015 of the Ld. First Appellate Authority, Mumbai. The only common ground raised by the Revenue pertains to directing the Assessing Officer to estimate profit of 15% on the total alleged bogus purchases without appreciating that the seller parties were found to be Hawala Operators/ bogus bill providers. 2. During hearing of these appeals, the ld. DR, Ms. Beena Santosh, strongly defended the addition made by the Assessing Officer by advancing arguments, which is identical to the ground raised by explaining that while granting relief to the assessee, the Ld. Commissioner of Income Tax (Appeal) wrongly directed the Assessing Officer to estimate the profit at the rate of 15% on the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct ionduring the year. The ledger extract for the period 01.04.2008 to 31.03.2010 of this party is avai lable in page 66 of the paper book. The perusal indicate that the appel lant had purchased the material on 13/19.05.2008 for a sum of ₹ 1,07,138/- and the entire amount was outstanding as on 31.03.2009. The appel lant had cleared the payment in the next financial year on 19.04.2009. The payment was settled 11 months after the purchase. 2. Maulik Enterprises Ledger extract for theF.Y.2007-08 indicate that there was no transaction dur ing the year . Dur ing the year the' appel lant had made purchases to the tune of ₹ 6,46,932/- all in the month of November, 2008 and: the entire amount was outstanding as on 31.03.2009. The payments were made in the subsequent financial year in the month of September and October, 2009. The payment was settled 11 months after the purchase. 3. G.R.TradeLink : No transaction during the F.Y.2007-08 and 2009-10. During the year the appellant had purchased goods worth ₹ 3,37,740/- in the month of September, 2008 which was found to have been settled on 25.03.2009 after a period of 6 months from the date of purchase. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tood outstanding as on 31.03.2009. Payments were made in the month of April and August, 2009 in the subsequent Financial year which were beyond six months to 11 months after the supply. 9. Motion Traders Pvt. Ltd. No transaction during the *F.Y.2007-08Purchases to the tune of ₹ 8,43,615/- was made in the month of November and December, 2008 out of which payments to the tune of ₹ 6,60,825/- was made at the ' end of November, 2008. Further purchases amounting to ₹ 1,47,919/- were made in the month of January, 2009 and a sum of ₹ 3,30,709/- was found to be outstanding as on 31.03.2009 which got settled in the month of April, 2009 in the subsequent financial year. The purchases amounting to ₹ 1,37,627/- made during the F.Y.2009-10 was settled on 01.10.2009 within 15 days of the purchase. 10. Meeti Trade Impex: No transaction during the F.Y.2007-08. Out of the total purchases made ₹ 21,47,925/- during the year from October, 2008 to February, 2009 only the payment of ₹ 1,79,010/- towards purchase made on 20.11.2008 was paid during the year and the remaining ₹ 19,68,915/- was outstanding as on 31.03.2009. Subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of September, 2008 amount ing to ₹ 2,82,880/- remained outstanding as on 31.03.2009 and the payment was made on 20.08.2009 which was almost after 11 months of the purchase. 17. SaiLeela Trading Pvt. Ltd. : During the assessment year materials worth ₹ 20,40,413/- was purchased from this concern. Payments to the tune of ₹ 6,46,380/- was made during the year itself and balance ₹ 13,94,027/- remained outstanding which was found to have been settled in the subsequent financial year. During F.Y.2009-10 the purchases made were ₹ 7,48,873/-. The purchases made in the month of May, 2009 ₹ 1,56,954/- was settled on 23.12.2009 which was almost 6 months after the purchase. The purchases made in the month of July ₹ 1,51,242/- was paid on 18.12,2009. 18. Snehal Enterprises: There were no transactions during F.Y.2007-08 with this party. During A.Y.2009-10 the appellant had purchased material worth ₹ 18,62,9521- from this party. The perusal of the ledger extract indicate that the appellant had made payment of ₹ 3,61,340/- during the year leaving ₹ 15,61,612/- as outstanding at the end of the financial year. During th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hir Sales Private Limited denied having any transaction with appellant and in view of this he treated the purchase made from all the 8 parties as bogus. 4.2. The scrutiny of the ledger extracts of these suppliers and the findings are discussed as under: 1. K.C.Enterprises : The ledger extract of this party is available in page 196 of paper book. The appellant did not have transaction during F.Y.2007-08 and F.Y.2010-11. During the assessment year purchases to the tune of ₹ 1,09,226/- on 20.08.2009 was found to have been paid on 19.09.2009. 2. Mihir Sales Private Limited : The ledger extract is available in page 141 of the paper book. During the financial year 2009-10 relevant to A.Y 2010-11 purchases amounting to ₹ 11,61,754/- was made. The appel lant had made payment of ₹ 12,03,054/- during the year which include the outstanding amount ₹ 1,89,800/- belonged to A.Y. 2009-10. The purchases made during August , 2009, ₹ 1,48,500/- remained outstanding as on 31.03.2010. This outstanding balance of ₹ 1,48,500/- was settled in the subsequent F.Y.2010-11. The payments have been made beyond three months after the. purchases. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t vouchers indicates the name of the transporter but the details such as the tempo no., lorry no., address of the transporter etc. were not mentioned in the voucher. 5. Sthapna Trade Impex Pvt. Ltd.; The ledger extract is available in page 373 of the paper book. The ledger extract for the year indicate that there is an opening balance of ₹ 22,01,489/-. During the year purchases amounting to ₹ 9,24,650/- was made. The entire sum of ₹ 31,26,139/- was settled by January, 2010. The purchase made during the year on 06.07.2009 was paid on 20.12.2009. Therefore, the payment was found to have been made beyond six months. Copies of the invoice, delivery challan along with voucher for transport, filed are available in pages 374 to 434 of the paper book. The perusal indicate that the order no, date and the details of lorry no., transport through were left blank. The delivery challan did not indicate the lorry no. and name of the transporter. The voucher for transportation charges paid did not indicate the name of the transporter and it was self made. 6. Saileela Trading Pvt. Ltd. The ledger extract indicate that there is an opening balance of ₹ 13,94, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the month itself. The payment pattern indicates that the appellant had settled the payments on a month to month basis and, therefore, the payments were found to have been made within 30 days of the supply. 4.3.1 Similar is the pattern seen with the other suppliers viz. Sunlight Gas Equipments, Dakshinand United Technologies. Ill. As ses sment year : 2011-12: 5. Ground of appeal No 1 2 are directed against addit ion of ₹ 68,94,851/- on account of bogus purchases made in respect of 5 parties and bringing to tax 100% of purchase value. 5.1 The original assessment in this case was originally completed u/s 143(3). The assessment was reopened u/s 147 by issue of notice .u/s 148 on 09.03.2013. The reason for reopening is reproduced in para 2 of the assessment order. The AO had made addition of ₹ 65,32,410/- towards bogus purchase made in respect of five alleged suppliers. In the absence of any documentary evidence supporting the delivery of the material purchased and its utilization in the business of the appellant, the AO -had come to such conclusion. He had also referred to the investigation carried out by Sales Tax Department, Mumbai and, therefore, fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October remained out standing, which i s set t led. in the month of September . October , 2011. Therefore, the payment was made almost after a year. 5. Real Value Commercial Private 'Limited During the assessment year the appellant had made purchases amounting toRs.12,05,514/- in the month of October and November 2010. No payment was made during the year leaving entire amount Rs:42,05,514/- as closing balance of which got settled in the subsequent year from May, 2011 to March, 2012. Payment was made beyond six months after the purchase. 5.3 The AR of the appellant was directed to file the ledger extract of some of the topregular suppliers to analyse the payment pattern. The details of purchases and the payment made are as under: 1. M/s R.T. Instruments During the year the appellant had made purchases amounting to ₹ 1,33,87,870/-. Opening balance as on 01.04.2010 was ₹ 16,10,493/-. The appellant had made payments amounting to ₹ 1,36,84,023/- leaving a balance of ₹ 13,14,340/-. 2. Dakshin During the year purchases amounting to ₹ 80,95,278/- was made from this party. Opening balance of ₹ 22,46,67,4/- as on 01.04.2010. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the material. The mode of delivery and the evidence towards transport of the material in the form of LRs or transport bill also could not be filed for this supply. The mere payment by way of account payee cheques alone could not establish the genuine nature of the transaction. 6.3. The appellant had admitted sales and job work receipts amounting to.Rs.9,22,60,771/-, ₹ 11,27,52,136/- and ₹ 15,16,83,843/- respectively for A.Y.2009-10, 2010-11 2011-12. In my view without purchasing the materials, it would not have been possible for the appellant to complete projects/ jobwork of this magnitude. The purchases made cannot be treated as bogus particularly when the appellant had completed the contract or the material purchased was in turn sold, the fact of which has been entered into the books of account. As far as the sale was concerned the appellant had fully disclosed the entire sales and the AO had not disputed this. However, because of the information received from Sales tax Dept. and from the Investigation wing of the department, the AO had strongly presumed that the purchases were bogus. Therefore it is possible that appellant might have purchased these materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's views that such purchases were made from bogus parties. The tribunal noted that the Assessing Officer had issued notices to all the parties from whom such purchases were allegedly made. Such notices were returned unserved by the postal authorities with the remark that the addresses were incomplete. The inspector deputed by the Income-tax Department also could not find any of the parties available at the given addresses. The assessee was unable to produce any confirmation from any of the parties. Though the assessee had claimed to have made payment by account payee cheques, upon verification, it was found that the cheques were encashed by some other parties and not by the supposed sellers. However, the Tribunal was of the opinion that though the purchases might have been made from bogus parties, the purchases themselves were not bogus. The Tribunal adverted to the facts and data on record and came to the conclusion that the entire quantity of opening stock, purchases and the quantity manufactured during the year 2005-06 were sold by the assessee. Therefore, ho purchases of the entire 1,02,514 metres of cloth were sold during the year 2005-06. The Tribunal, therefore, accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t: Held, that the finding of the Assessing Officer had been accepted by the Commissioner (Appeals) and the Tribunal that (lie apparent sellers who had issued sale bills were not traceable. The goods were received from the parties other than the persons who had issued bill's for such goods. Though (lie purchases were shown to have been made by making payment therefore by account payee cheques, and the cheques had been deposited in bank accounts ostensibly in the name of the apparent sellers, thereafter the entire amounts had been withdrawn by bearer cheques and there was no trace or identity 01 the person withdrawing the amount from the bank accounts. Both the Commissioner (Appeals) and the Tribunal had come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated could not be ruled out and there was no material to dislodge such finding. The assessee had, by evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee had been actually received by the apparent sellers. Hence, the estimate made by the appellate authorities did not warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account. That being the position, not the entire purchase price but only the profit element embedded in such purchases could be added to the income of the assessee. In essence, the Tribunal only estimated the possible profit out of purchases made through non-genuine parties. 'The estimation of rate of profit return must necessarily vary with the nature of business and no uniform yardstick could be adopted. 6.7 The facts in the present case indicate that the appellant was not in a position to prove the existence of the suppliers. The suppliers were found to have been engaged in providing bogus bills without actual delivery of goods. Moreover few of the suppliers are not regular parties and they were found to have supplied only during the year and there were no supply either in the earlier year or in the subsequent year. As discussed above this circumstantial -evidence prove the bogus nature of the transaction. On careful analysis of the finding of Hon'ble High Court of Gujarat in the above mentioned cases, I am of the firm view that without purchase of materials it was not possible for the appellant to either sell the items or complete the contract. As mentioned ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the parties calling for the following information. Purchase orders, invoices, lorry receipts, check post entries, gate entries, goods received notes, issue of material, production record of consumption, delivery challans, octroi charges in relation to the goods supplied to the assessee from AY. 2006-07 to till date. Copies of Income Tax Returns, computation of income, Balance Sheet and Profit Loss account-with Annexures and Schedules thereto for the AY. 2011-12. Extract of Bank Statement(s) reflecting the relevant entries in relation to transactions with the assessee company till date . Copy of ledger account in relation to the assessee company from AY. 2006-07 to till date. Any other information that may be parted with, in connection with the transactions with the assessee during the year. 2.4. During assessment proceedings, the AR of the assessee was informed that notices issued to the parties have returned un-served. In the absence of genuineness of transaction, the additions were made as details in the respective appeal as bogus purchases and added to the total income. On appeal before the Ld. Commissioner of Income Tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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