TMI Blog2017 (11) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... on that sales are genuine and business losses were disallowed by the AO. We have observed that there is categorically finding by the AO that assessee has not proved utilization/consumption of the material purchased by the assessee and corresponding quantitative reconciliation with the said sales entries were not produced by the assessee before the AO . The learned CIT(A) has restricted disallowance to 2% of bogus purchases without brining on record as to how deficiencies as pointed out by the AO were met. Thus the appellate order of learned CIT(A) cannot be sustained and is hereby order to be set aside and in our considered view this matter need to be set aside and resorted to the file of the A.O for denovo determination of the issue - Decided in favour of revenue for statistical purposes. - I.T.A. No. 2952/Mum/2017 And I.T.A. No. 2953/Mum/2017 - - - Dated:- 26-9-2017 - SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Revenue : Shri M.C. Omi Ningshen, DR For The Assessee : Shri Satya Prakash Singh ORDER PER RAMIT KOCHAR, Accountant Member These two appeals , filed by the Revenue, being ITA No. 2952/Mum/2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation entry of sales and booking of fictitious losses was legally correct, and should have been upheld? The appellant craves leave to add to, amend or withdraw the aforesaid ground of appeal. 3. The grounds raised by the Revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) for the assessment year 2011-12 read as under:- 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition of ₹ 1,03,96,884/- ₹ 2,81,439/ - made on account of commission earned by assessee from the business providing accommodation entry of sales and booking of fictitious losses, respectively on such purchase and sales, without appreciating the facts brought out by assessing officer that Director of the assessee company, Shri Ambrish Doshi, had categorically admitted, before the DDIT(Inv.), in his statement recorded u/s 131, on 30.11.2012, of having indulged in such activity of taking accommodation entry of Purchases of ₹ 4,15,87,539/- and giving accommodation entry of Sales of ₹ 4,13,06,100/- without actually effecting any such purchase sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served on the assessee. The reasons for reopening of the assessment were recorded by the AO as under:- In this case, Return of Income was filed by the assessee on 29.09.2009 declaring total income of ₹ 70,55,060/-. An inquiry u/s 131 of the IT Act was conducted by DDIT (Inv.) Unit-VII (1), Mumbai. As per inquiry report, the assessee has taken bogus purchase accommodation entry from the following 15 concerns and in turn has provided bogus sales accommodation to 44 beneficiary concerns: M/s Parth Chem lmpex Pvt. Ltd. has taken bogus purchase accommodation entry from 15 (fifteen) concerns and in turn has provided bogus sales accommodation to 44 (forty four) beneficiary concerns (listed in the feedback report). M/s Parth Chem lmpex Pvt. Ltd. has booked a loss of ₹ 38,55,2001- for the FY 2009-10 on such paper transactions. The details are as under: S .No. F Y Pur c ha se Sa l e s Loss 1 2 008-09 9 6 . 84. 4 65 5 8 . 29 . 2 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale bills books of a/ c's and supporting documents for A Y 2009-1 0 on the date of hearing. 4. Please produce supporting documents in support of purchases booked by you with justification. The assessee was also asked by the A.O vide notices under 142(1) dated 20.01.2014 to produce the parties and prove the genuineness of the following parties, as under: 1. You are requested to produce the parties as per Annexure A and prove their genuineness and that actual delivery of goods were received by you. PARTY WISE BOGUS PURCHASE . S.No. Name of the party TIN FY 2008-09 FY2009-10 FY 20/0-11 PURCHASE PURCHASE PURCHASE 1 STHAPNA TRADE IMPEX PRIVATE LIMITED 27610598830 8284334.00 507000.00 0.00 2 R1TESH CORPORATION 27810669045 1400131 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grand total 148455610.00 2. You are requested to show cause why the purchase from the above parties booked by you should not be treated as bogus purchase and the same should not be added to the total income. 3. Various opportunities and sufficient time has already been given to you. You are therefore required to file complete detail called for till date by 31.01.2014 failing which the assessment will be completed on the basis of details available on record. The assessee was also asked to justify claim of expenses debited in books of accounts supported with evidences along with books of accounts which were directed by the AO to be produced before him . The assessee submitted purchases ledger , revised VAT return filed with the department. The Director of the company Shri. Ambrish Bhikalal Doshi statements were recorded by Investigation Wing, Mumbai on 30.11.2012 , where in reply to question no. 12 to Q.no. 17 , Mr Ambrish Bhikalal Doshi, Director of the assessee company confirmed that the accommodation bills were obtained from these parties an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee are not verifiable, the books of accounts of the assessee are not reliable. Therefore, the book results are rejected u/ s 145 of the Act. 7.2. Therefore, the purchases shown by the assessee in respect of the above mentioned parties amounting to ₹ 96,84,465/- are prima facie not genuine. 7.3. Further, information has been received from the DGIT (Inv.), Mumbai, forwarding thereon the information received from Sales Tax authorities wherein the parties have been declared Hawala dealer . Further, these parties have categorically stated on Oath that they have merely issued accommodation bills and that no actual delivery of goods was given. 7.4 Since the assessee has not discharged its prima facie onus of proving the identity of the parties and the genuineness of the purchases, the purchases from the parties is required to be disallowed and added to the total income. 7.5. Therefore, an amount of ₹ 96,84,465/- is required to be added to the total income of the assessee. With respect to the correspondence sales of the bogus purchases. The A.O made the verification for following parties:- (a) Classic Ceramics, Morbi. (b) Veron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Sthapna Trade Impex Private Limited (2) M/s. Ritesh Corporation are found to be defaulter in the Sales Tax Department and further the appellant has not proved the genuineness of the transaction. Therefore, he has added 25% of the purchases from the above mentioned parties as bogus purchases and the difference of purchases and sales as loss on accommodation entries. However, the AR of the appellant argues that the appellant has during the appellate proceedings and during the course of the assessment proceedings submitted all the material and documents to prove the existence as well as the genuineness of the transactions entered with M/s. Sthapna Trade Impex Private Limited M/s. Ritesh Corporation. Hence, it has to be deleted. From the assessment order, it is seen that the AO has not disputed the sales made by the appellant. Moreover, AO made verification with sales parties and they also have confirmed the sales made with the appellant which is discussed in para 7.6 of the Assessment order by the AO. However, having made the transaction with the Hawala suppliers as per the Investigation Wing, I am of the considered opinion that only profit element embedded in such purchases o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by learned CIT(A) , the Revenue has come in appeal before the tribunal. 7.The Ld. D.R submitted that learned CIT(A) erred in deleting disallowance of business loss to the tune of ₹ 38,55,200/- . Ld DR submitted that decision in the case law relied upon by learned CIT(A) in the case of Innovators Facade vs. ACIT(Cir -2), Thane, ITA No. 5450, 5451 and 5452/MUM/2015 dtd. 20.07.2016 to restrict disallowance to 2% is not accepted by the Revenue and appeal has been filed with Hon‟ble Bombay High Court u/s 260A. It was submitted that the learned CIT(A )has wrongly relied upon the judicial decision pertaining to capital gains while on the other hand , the Ld. AR submitted that the assessee is trader in chemicals . It was submitted that assessment was reopened u/s 147 . Notice u/s 148 was issued which was within four years from the end of the assessment year . The learned counsel for the assessee contended that the learned CIT(A) has rightly upheld the addition to the tune of 2% of alleged bogus purchases. It was submitted that learned CIT(A) rightly deleted the disallowance of business loss to the tune of ₹ 38,55,200/-. It was submitted that statement was recorded of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial and addition of 25% of bogus purchases of ₹ 96,84,465/- were made by the AO by holding as under:- 1. The assessee has booked purchases from the following parties which have been declared as Hawala dealers by the Sales Tax Department as under:- STHAPNA TRADE IMPEX PVT LTD AAKCS6555K 2008-09 8,284,333 RITESH CORPORATION AZFPK3051K 2008-09 1,400,131 TOTAL 96,84,464 2. The assessee has not produced the parties for verification. 3. The assessee has not produced any documentary evidence to prove the identity of the purchase party. 4. Further the assessee has merely produced the purchase bills. The assessee has not been able to establish the genuineness of these purchases. 5. The assessee has not been able to produce the following: i. Delivery challan ii. Transport receipt. iii. Octroi receipt etc. 6. The assessee has also not been able to establish how these purchases have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tune of ₹ 96,84,465/- which has been confirmed by the said suppliers to be bogus transactions being accommodation entries wherein only paper invoices were issued without supplying goods physically. The assessee could not produce said parties before the A.O. nor the assessee could prove utilization / consumption of the said material . Thus, quantitative reconciliation of the stock/material was not done by the assessee before the authorities below. Nor any paper book is filed before the tribunal to support the contentions of the assessee. The assessee also could not produce evidence as to the delivery of material to the assessee such as lorry receipts , delivery challans . octroi receipts etc. to prove delivery of material by the supplier to the assesse. The A.O has made random verification with respect to the sales and has come to the conclusion that sales are genuine and business losses were disallowed by the AO. We have observed that there is categorically finding by the AO that assessee has not proved utilization/consumption of the material purchased by the assessee and corresponding quantitative reconciliation with the said sales entries were not produced by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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