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TMI Blog2020 (11) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... dded to the total income of the assessee. In the instant case, the sales made by the assessee has been accepted and the books of account have not been rejected and the assessee has made the payments to the sundry creditors in the subsequent years and there is nothing on record to suggest that the money so paid has come back to the assessee directly or indirectly in any form, therefore, making addition of the entire amount payable to the six sundry creditors in the instant case in our opinion is highly unjustified. Assessee also cannot get scot free by not producing the sundry creditors and making purchases from parties who are not maintaining proper records or who have made adverse statements and, therefore, the assessee cannot be equated with another assessee who is maintaining records meticulously and not making purchase from grey market. Since the assessee in the instant case is showing GP rate of less than 4%, therefore, considering the totality of the facts of the case, we are of the considered opinion that adoption of GP rate of 16% on such unsubstantiated purchases from the six creditors will meet the ends of justice. We, therefore, direct the AO to adopt GP rate of 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences filed before him that the confirmations filed bear signature of some person whose identity could not be proved as no ITR, PAN No., identity proof, confirmation of ledger account or Bank account statement were enclosed along with confirmations filed. Further, he found that in the year under consideration, no payments have been made to M/s Indian Crafts, Irshad Khan, Lalmiyan, Riyazuddin and Shakeel (M/s Shakeel Zari Art) and these persons do not file any ITR meaning thereby under the presumption that their income were below the taxable limit. Accordingly, vide letter dated 23.11.2016, the AO sought directions of the JCIT, Range-45, New Delhi u/s 144A of Act. 7. Vide letter dated 21.12.2016 the JCIT, Range - 45 directed the AO to make local enquiries through Inspector in 6 cases where the sales made during the year were exceeding ₹ 10 lakhs and to issue summons u/s 131 for personal attendance and also for calling PAN/ITR with complete annexures, complete books of accounts with purchase and sale vouchers, ledger account of Smt. Manju Sharma in the books of creditors and ledger accounts of other parties in the books of creditors, bank account and any other information co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2016 at 11.00 AM. 12. In spite of being allowed opportunity to produce the 6 creditors afresh for verification, the assessee refused to produce them except Sh. Ovais Khan. At the time of service of summons u/s 131 of I.Tax Act dated 21.12.2016 Sh. Ovais Khan was not found at the address provided by the assessee i.e. Mohalla Deepur, Village Khadagunj, Distt. Shajaanpur, U.P. However, he appeared on 26.12.2016 for recording his statement when address was stated as 39, Lodhi Tola, Purana Sahar, Bareilly, U.P. Further, in response to Q.No. 16, he denied of having made any Stamp put on the bill and stated that he has not signed in the confirmation dated 19.09.2016 filed by the assessee in this office on 26.09.2016. Also he could not confirm that the amount of ₹ 16,50,000/- is to be received by him from the assessee. Also in the Affidavit dated 05.08.2017, he could not mention how much amount is to be receivable or payable by him to the assessee. Therefore, taking into consideration the fact that only 50% of credit amount shown outstanding by the assessee as on 31.03.2014 has been added back by the AO in his assessment order i.e. AO made addition of ₹ 8,25,000/- only, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditor for personal examination on oath and also did not submit any bill/voucher and details of documents as asked for vide show cause dated 29.12.2016 to prove the genuineness of the transaction as asked for vide note sheet entry dated 26.12.2016 and show cause dated 29.12.2016. Hence, in the absence of examination/verification, the identity, genuineness of transactions and creditworthiness of the creditor is not proved as per section 68 of the Act by the assessee. 4. Lalmiyan- 66,65,105/-The ledger A/c of Lalmiyan bears the heading LALMIYAN, the heading in the copy of bill/cash memo bears the name LALMIYAN, whereas the signatures below spelled as Lalmian . Also in the copy of the PAN CARD provided the signatures spelled as Lalmiyan. Also, as per the Inspectors report, the person does not file any ITR as he has income below taxable income. Also, summons u/s 131 of the Act dated 21.12.2016 was -served on him, but no reply/compliance has been made by him. The Husband and A.R. of the assessee also did not produce the creditor for personal examination on oath and also did not submit any bill/voucher and details of documents as asked for vide show cause dated 29.12.2016 to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors are either bogus or the liability shown by the assessee against them has not been proved by the assessee in terms of identity, creditworthiness and genuineness of these creditors. Since the assessee' has failed to discharge the onus cast upon her in respect of sundry creditors amounting to ₹ 3,05,34,283/- which have been found credited in the books of accounts maintained by assessee ,these are being charged to Income Tax u/s 68 of the Income Tax Act, 1961 for A.Y. 2014-15 14. In appeal, the ld.CIT(A) relying on various decisions confirmed the addition made by the AO u/s 68. The relevant final observation of the ld.CIT(A) is as under:- 4.9 Therefore, in the light of the present set of facts and circumstances of the case it is inferred that the appellant had largely failed on all accounts, as and when it comes to establishing the creditworthiness of the third party to whom the various amounts were recorded as payable in the books of accounts. As seen from the facts above, the chain of events herein clearly do not inspire confidence as being genuine and are shrouded in mystery, as to why the socalled creditors, who do not have even filed their income tax returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer in the Remand Report dated 24.11.2017, wherein the AO himself has admitted: a. That export sales made by the assessee were duly scrutinized and found to be genuine and; b. Evidence as to payment made to the creditors in the subsequent years had also not been refuted. 4. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in confirming the addition of ₹ 3,05,34,283/- in respect of trade creditors. 5. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in not adjudicating Grounds 1, 2, 3,4 and 5 as raised before him. The Assessee seeks leave to add to, alter, forego, or otherwise modify all or any of the grounds of appeal as taken herein above. 16. The ld. Counsel for the assessee strongly challenged the order of the CIT(A) in upholding the addition made by the AO. Referring to page 1-267 of the paper book, the ld. Counsel for the assessee drew the attention of the Bench to the consignment-wise details of export sales such as shipping bills, invoice, invoice summary and packing list, etc. Referring to page 268 to 309 of the paper book, the ld. Counsel for the assessee drew the attention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., 118 taxmann.com 406, he submitted that in that case, information was received by the AO to the effect that eight parties from whom purchases were made by the assessee were engaged in job work of dyeing of fabrics were hawala dealers who had issued bogus bills and the AO treated the aforesaid purchases as bogus purchases and accordingly addition was made to the total income of the assessee. The Commissioner (Appeals) noted that without purchase of materials, it was not possible for the assessee to complete job work of dyeing and, thus, the entire purchases could not be added as bogus and profit element embedded in such transaction had to be added to the total income of the assessee. Since profit estimation ranged from 12.5% to 25%, Commissioner (Appeals) took the view that 17.5% as profit element would meet ends of justice and accordingly he directed the AO to estimate the profit at 17.5% of the total alleged bogus purchases and, thereafter, to delete the balance addition. The Tribunal concurred with the said view. The Hon ble High Court upheld the order of the Tribunal and the appeal filed by the Revenue was dismissed. 20. Referring to the decision of the Hon ble Gujarat High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the authorities below had not even rejected the books of the assessee while treating the transaction in question to be bogus. It was accordingly held that the Tribunal has rightly deleted the addition made by the AO and sustained by the CIT(A). 22. Referring to the decision of the Hon ble Supreme Court in the case of CIT vs. Century Plyboards (I) Ltd., reported in 103 taxmann.com 179 (SC), he submitted that in that case, after completion of the assessment, the Commissioner received a complaint from Director General that assessee had entered into bogus purchase transactions with one D . On the basis of the said complaint, the CIT(A) passed a revisional order setting aside the assessment. In appeal proceedings, the Tribunal, having noticed copies of invoices and challans, proof of payments, bank statements, transportation payments, vouchers for movement of goods and like documents, concluded that transactions between assessee and D were not bogus or fraudulent. Accordingly, the order passed u/s 263 by the CIT was set aside. The Hon ble High Court upheld the order passed by the Tribunal. The Hon ble Supreme Court dismissed the SLP filed against the decision of the Hon ble H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased from the six creditors, freight charges paid for purchases, details of freight charges of ₹ 3.96 lakhs debited to the Profits Loss Account and has also given a finding that the assessee has paid the amount outstanding against the name of six sundry creditors as on 31.03.2004 in subsequent assessment years either by way of cheque/RTGS/NEFT or by making cash payment. He has further given a finding that provisions of section 40(a)(3) are not applicable to the cash payments where it has exceeded the limit of ₹ 20,000/- in view of Rule 60DD(f) of IT Rules vide Notification No.97/2008 dated 10.10.2008. Further, the assessee, in the instant case, has produced three of these six creditors before the AO. He further submitted that due to threat by the inspectors who visited the business premises of those creditors who are illiterate persons and village artisans and are not maintaining any regular books of account, they could not give proper replies to the AO as wanted by him. However, the chain of events indicate that the assessee had made purchases from the six creditors, maintained proper stock register giving date-wise and quantitywise purchase and sale of good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings, on being asked by the AO, the assessee has produced bills of goods purchased from the six sundry creditors, freight charges paid for purchases, details of freight charges, ledger account of these parties for subsequent assessment years highlighting the payments, etc. It is also pertinent to mention here that the AO himself in the remand report has accepted that the assessee has paid the amount outstanding against the names of six sundry creditors as on 31.03.2014 in subsequent assessment years either by way of cheque/RTGS/NEFT or by making cash payments. The relevant observation of the AO in the remand report reads as under:- During the course of remand proceedings, the assessee was asked to furnish the bills of goods purchased from the 6 sundry creditors, freight charges paid for purchases, details of freight charges of ₹ 3.96 lakhs debited in Trading account. Further, ledger accounts of these creditors for subsequent assessment years highlighting the payments made in subsequent years, item-wise purchases and sales made were called for. The same was filed by the assessee vide letters dated 11.09.2017, 26.09.2017 and 14.11.2017. On verification of details/docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 25%, the CIT (A) took the view that 17.5% as profit element would meet the ends of justice and he accordingly he directed the AO to estimate the profit at 17.5% of the total alleged bogus purchases and, thereafter, to delete the balance addition. The Tribunal concurred with the said view. On further appeal by the Revenue, the Hon ble High Court upheld the order of the Tribunal and the appeal filed by the Revenue was dismissed by observing as under:- 10. Submissions made have been considered. 11. In the assessment proceedings Assessing Officer had relied upon information obtained from the Investigation Wing of the Department at Mumbai which in turn had obtained the information from the Sales Tax Department, Government of Maharashtra. The information was to the effect that the eight parties from whom the purchases were allegedly made were alleged hawala dealers who had issued bogus bills totalling ₹ 1,14,92,970.00. 12. In the appellate proceedings before the first appellate authority, it was held as under :- 2.15 The facts in the present case shows that the appellant was not in a position to prove the existence of the suppliers. The suppliers were found to be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the circumstances of the case, CIT(A) took the view that taking of 17.5% as the profit would meet the Priya Soparkar 7 10 itxa 1354-17-o ends of justice. Accordingly, Assessing Officer was directed to estimate profit of 17.5% on the total alleged bogus purchases and thereafter, to delete the balance amount of addition. 14. In further appeal Tribunal referred to the above finding of the CIT(A), whereafter it was held as under:- 6. Thus, from the aforesaid analysis, conclusions and findings recorded by the Ld. CIT(A), it is evident that total purchases were wrongly disallowed by the Assessing Officer. The Ld.CIT (A) took a reasonable view whereby the disallowance was sustained to the extent of estimated inflation in the amount of purchases made by the assessee. The disallowance sustained by the Ld. CIT(A) @ 17.5% of the purchases have been accepted by the assessee with a view to bury the litigation. Nothing has been brought before us by the Ld.DR to contradict the findings recorded by the Ld.CIT(A). The assessee's counsel has also placed reliance upon the judgment of Hon'ble Bombay High Court in the case of CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. (supra) wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that if the Assessing Officer had doubted the genuineness of the purchases, it was incumbent Priya Soparkar 9 10 itxa 1354-17-o upon the Assessing Officer to have caused further enquiries in the matter to ascertain genuineness or otherwise of the transaction and to have given an opportunity to the assessee to examine/cross- examine those two parties vis-a-vis the statements made by them before the Sales Tax Department. Without causing such further enquiries in respect of the purchases, it was not open to the Assessing Officer to make the addition under Section 69C of the Act. 18. We are in agreement with the view expressed by the Tribunal. In fact, Tribunal has only affirmed the finding of the first appellate authority. Thus, there is concurrent finding of fact by the two lower appellate authorities. 19. This Court in the case of Commissioner of Income Tax -1, Mumbai v/s. Nikunj Eximp Enterprises(P.) Ltd., 372 ITR 619; wherein an identical fact situation arose did not interfere with the order passed by the Tribunal and held that no substantial question of law arose from such order. It was held that merely because the suppliers had not appeared before the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt. 16. On thorough consideration of the matter, we do not find any error or infirmity in the finding returned by the Tribunal. No substantial question of law arises from such finding returned by the Tribunal. Accordingly, the appeal is dismissed. However, there shall be no order as to cost. 30. We find, similar issued had come up before the Hon ble Delhi High Court in the case of CIT vs. SunriseTooling System (P) Ltd., 47 taxmann.com 20. In that case the AO during assessment proceedings made addition to assessee s total income on the basis of statement of Director of Company that certain amount represented non-existent or bogus transaction. In appeal, the Tribunal took note of statement of D and retraction made later on. It was also noted that said statement was recorded in course of survey under section 133A and, consequently, did not have any evidentiary value. The Tribunal, thus, deleted the addition made by the authorities below. The Hon ble High Court noticed from records that the Tribunal passed this order after taking note of materials before Revenue authorities which included assessee s books of account. Besides, the Tribunal also noted that the authorities bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue by observing as under:- 14. In the light of the rival submissions, the question that arises for consideration is whether the restriction of disallowance in respect of bogus purchases to 25% thereof is justified. 15. As can be seen from the order passed by the Commissioner (Appeals), he, after appreciating the material on record, has recorded a finding of fact to the effect that the assessee had produced goods by utilising such bulk drugs and it is in the light of such finding of fact recorded by him that he has restricted the disallowance on account of bogus purchases to 25%. The Tribunal has not disturbed such finding of fact recorded by the Commissioner (Appeals). A perusal of the proposed questions shows that the appellant has neither challenged the concurrent finding of fact recorded by the Commissioner (Appeals) and the Tribunal, nor has it been pleaded that the findings of fact recorded by the Tribunal are perverse. The Tribunal has concurred with the finding of fact recorded by the Commissioner (Appeals) that the assessee had produced goods by utilising bulk drugs and has followed the decision of this court in the case of N.K. Industries Ltd. {supra), wherein th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e jurisdictional High Court, no infirmity can be found in the impugned order passed by the Tribunal warranting interference. However, it may be clarified that the quantum of deduction, namely, 25% cannot be said to be a fixed standard, inasmuch as, in the case of Sanjay Oilcake Industries {supra) what the court has held was that the extent of restriction was merely an estimate and that an estimate cannot give rise to a question of law. Nonetheless, having regard to the facts and circumstances of this case, this court does not find any warrant for interference. 18. Insofar as the decision of the Bombay High Court in the case of Shoreline Hotel (P.) Ltd. {supra) is concerned, the controversy involved in the said case was as regards the validity of exercise of power under section 263 of the Act and while the case involved bogus purchases, no principle has been enunciated in that regard. Moreover, in the facts of the said case, the assessee was engaged in running a hotel and there were no corresponding sales against those purchases. The said decision, therefore, would have no applicability to the facts of the present case. 19. In the light of the above discussion, the conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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