TMI Blog2009 (1) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... s that person who withdrew cash from bank account of the aforesaid five parties. All the five parties had account in the same bank namely Sevalia Urban Co-operative bank, Sevalia. Payments were made to these parties on the same dates as indicated already. AO found that a specific person had withdrawn cash from the bank account of these parties. But he did not make further inquiries in order to ascertain his identity or whereabouts. Therefore, In the interest of justice and fair play, matter is restored to the file of the AO with the directions to; i) make necessary further inquiries from the (a) concerned bank authorities or otherwise in respect of person making withdrawals in cash and (b) Sales Tax authorities, in respect of genuineness of transactions in purchase; and ii) allow another opportunity to the taxpayer to (a) furnish the actual working of GP on account of trading and manufacturing of rubble, and kapchi grit etc. and its impact on the profitability of the year under consideration vis- -vis preceding years, in the light of books of accounts and other records claimed to have been maintained by the taxpayer; and (b) to produce proprietors of the five firms in supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, then how there could be any sale or closing stock and since, the revenue always accepts the sales and the closing stock, non-acceptance of the purchases, which are duly accounted for in the books was held could not be justified and the credit for such purchase has to be given. It observed that addition, in such case, can be made only - (i) if it were established that sale of goods so purchased (if sold) is not accounted for in the books of account, or (ii) the goods so purchased are not accounted for in the closing stock (if not sold) and not otherwise except where there is an allegation of suppression of sale price or suppression of value of closing stock and for that purpose, the onus is on the Revenue to establish that suppression. It is also observed that there is another way of making addition when the Revenue is able to establish that the assessee has inflated the purchases either by way of value or by way of quantity. It observed that so far as quantity is concerned, the onus is on the assessee to establish that whatever quantity purchased, was either sold or was available in closing stock but so far as inflation of purchase price is concerned the onus is on the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made during the relevant previous year. 2. On the facts and circumstances of the case and in law the ld. CIT(A) ought to have upheld the order of the Assessing Officer. 3. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the A.O. be restored. 2. Facts, in brief, are that the taxpayer, engaged in the manufacture and sale of crushed stone aggregates viz. Rubble, kapchi. grit etc., filed its return on 30.10.98 declaring total income of Rs. 9,73,010/--. After processing the return on 27.3.2000, it was taken up for scrutiny. The Assessing Officer (AO in short) noticed that taxpayer reflected gross profit of Rs. 24,04,679/- on the turnover of Rs. 2.88,30,124/- during the year as against gross profit of Rs. 14,45,026/- on sales of Rs. 81,74,404 in the preceding year, resulting in gross profit rate of 8.34% during the year under consideration as against gross profit rate of 17.67% in the preceding year. The reasons for this steep fall are not evident from the order of AO. After calling for the details of purchases exceeding Rs. 5.00 lakhs each, the AO asked the taxpayer to furnish confirmation from the following parties: 1. M/s. R.K. Traders 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly Shri Kiritbhai R. Shah. He further admitted his mistake in introducing the aforesaid firms to the Bank and stated that he had signed introduction forms as asked for by Shri Kiritbhai R. Shah. AO also noticed that person withdrawing cash through self cheques from the bank account of five parties was other than the account holder. 2.2 The Assessing Officer thereafter deputed inspector Suhanda to enquire about the identity and genuineness of the five parties at the addresses given to bank. In Thasra, the villagers stated that M/s. Ashirwad Corporation R.K. Traders and their owners were not living at the address given by the taxpayer. Similarly, the Secretary of the Gram Panchayat, Sevalia certified that owners of M/S Bhagyalaxmi Trading Company, M/S Shalin Corporation M/S Bharat Sales Corporation did not belong to Sevalia Gram Panchayat as per record of last ten years. AO also noticed that addresses of the five parties given by the taxpayer to him and addresses of these parties, as per bank records were different. It was also noticed that signatures on the confirmations produced by the taxpayer in respect of M/S Bharat Sales Corporation and M/S Ashirwad Corporation were qui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 278.39 lacs in the year under consideration. It was pleaded that during the year, taxpayer had started manufacturing kapchi, Grit etc. while in earlier years the taxpayer dealt in sale of rubble and thus, GP in earlier years is not comparable with the results of current year. GP after starting manufacturing activities of kapchi, grit etc., ranges between 6 to 8%. Inter alia, quantitative details of purchase of rubble, crushed stone aggregates and month-wise consumption, production and sale of crushed stone were also placed before the ld. CIT(A). It was further urged by the taxpayer before the ld. CIT(A) that the proprietor of M/s. R.K. Traders, M/s. Ashirwad Corporation and M/s. Bharat Sales Corporation was Shri Kiritkumar R. Shah, while the proprietor of M/s. Bhagyalaxmi Trading Co. and M/s. Shalin Corporation was Mr. Patel Ramanbhai Bhagwanbhai. It was further argued that complete evidence in respect of purchases and date of receipt of materials in the form of delivery cum invoice were available and payments were made through crossed cheques. It was pointed out that if purchases from the five parties were considered to be bogus, then sale of 160505.82M3 must be considered to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve genuineness of purchases and the said onus has not been discharged. He pleaded that before the AO, the taxpayer initially submitted addresses of five parties, whereat these parties were not found by AO. In the records of bank, different addresses were given by these five parties. Since, the taxpayer declined to give latest addresses, the AO conducted further inquiries and recorded statements of two persons, who had introduced these parties to the bank. Ld. DR relied upon the decisions of the Hon'ble High Court of Allahabad in the case of Sri Ganesh Rice Mills vs. CIT (2007) 294 ITR 316 (All), decision of Hon'ble High Court of Rajasthan: Jaipur Bench in the case of Indian Woollen Carpet Factory vs. ITAT Ors. (2002) 178 CTR (Raj) 420 : (2003) 260 ITR 658 (Raj) and the decision of Hon'ble High Court of Delhi in the case of CIT vs. La Medica (2001) 168 CTR (Del) 314 : (2001) 250 ITR 575 (Del) as also decision of Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC) and ITO vs. Diza Holdings (P) Ltd. (2002) 173 CTR (Ker) 45 : (2002) 120 Taxman 539 (Ker) and submitted that the facts are distinguishable in the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uj) 228 : (1987) 163 ITR 249 (Guj), Babulal C. Borana vs. ITO (2005) 195 CTR (Bom) 199 : (2006) 282 ITR 251 (Bom) and CIT vs. Cholamandalam Investment Finance Co. Ltd. (2007) 211 CTR (Mad) 384 : (2007) 294 ITR 438 (Mad) and submitted that once sales have been accepted there was no question of disbelieving purchases. 8. We have heard rival contentions and gone through the facts of the case as also decisions relied upon. As is evident from the order of AO and reply submitted by the taxpayer before him vide his letters dated nil, dated 23.2.2001 7.3.2001, (PB pg. 30,38 43-44) the taxpayer submitted addresses of aforesaid five parties besides confirmation of two parties M/s. Bharat Sales Corporation, M/s. Ashirwad Corporation and pleaded that payments to aforesaid five parties were made through crossed a/c payee cheques. Since the parties were not existing at the addresses given by the taxpayer while summons issued to M/s. Bhagyalaxmi Trading Co, M/s. Shalin Corporation and M/s. R.K. Traders were returned by the postal authorities and the taxpayer was well aware that proprietor of M/s. Bharat Sales Corporation, M/s. Ashirwad Corporation and M/s. R.K. Traders was Shri Kiritku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e identity had not been established, withdrew money from the bank accounts of aforesaid five parties immediately after credit to their accounts. As regards the aspect of steep fall in GP rate, we find that in the letter dated 29.12.2000, AO pointed out that the taxpayer had been requested to submit reasons for fall in GP rate, but reasons were not forthcoming. Despite reminder dated 30.1.2001, it seems no reasons were submitted nor these have been placed before us nor any whisper has been on this aspect by ld. AR on behalf of the taxpayer. Even the order of AO is silent on this aspect. Before the ld. CIT(A), ld. Counsel of the taxpayer pleaded that during the year the taxpayer changed its business and so GP results of earlier years cannot be compared with the results of year under consideration. It was also submitted before the ld. CIT(A) that GP rate in respect of manufacturing activities of Kapchi and Grit ranges from 6 to 8% for the year under consideration as also in the subsequent period. Without ascertaining the veracity of these statements through any independent inquiries or otherwise, ld. CIT(A) accepted these submissions. It is noticed that in earlier years also taxpayer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity to the taxpayer to produce the relevant books of accounts and other records/evidence and in the light of decisions relied upon on either side. Thus the ground of appeal raised by the Revenue is disposed of accordingly. 10. In the result, appeal is treated as allowed for statistical purposes. Order pronounced in the court on -3-2008 I.S. VERMA, JUDICIAL MEMBER 1. I have gone through the draft order authored by the ld. Accountant Member and after careful consideration of the totality of the facts and circumstances of the case and various decisions referred to by the Parties, I have not been able to persuade myself with the conclusion arrived as per paragraph No. 9 of the draft order and, therefore, proceed to write my own order. 2. So far as facts and circumstances of the case and various decisions relied upon by the parties are concerned, there is no dispute. However, the dispute is as to whether in the given facts and circumstances of the case, should the order of the CIT(Appeals) be upheld or should the issue relating to genuineness of the purchases and consequential addition be restored back to the file of Assessing Officer with the directions as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ller or assessee is found to be not in a position to furnish evidence satisfactory for Assessing Officer to establish that the purchases from the persons from whom the assessee has claimed to have made and had paid the purchase price, in fact, were made from those very persons, the Revenue, without fail, considers such purchases as bogus or unverifiable and proceeds to make addition to the extent of such purchases on the ground that investment in such purchases has been made from undisclosed sources. 9.2. This approach of the Revenue, in our opinion, and as explained hereunder, being contrary to the accounting system as well as the law, is not sustainable. (i) First of all, let us consider the Effect of so-called bogus/ingenuine purchases with the help of an example as under: Example-I Quantity Value (Rs.) Suppose, in a given case: Opening Stock is: NIL NIL NIL Purchase claimed to have been Made, say, from 3 parties Worth Rs. 100/-, Rs. 150/- Rs. 200/- respectively = A + B + C 450/- (Quantity-wise A, B C of Rs. 100, 150 200 respectively) Sales: (Quantity-wise)/value-wise = A 150/- C-Stock (Quantity-wise)/ = B+C 350/- value-wise (ii) On enquiry by Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 100/- as undisclosed investment, then the Assessee's income will be net profit + Rs. 100, without any credit for the purchases which is not justified either under the law or under the normal accounting system. Therefore, we are of the opinion that there is no justification for such addition. Addition, in such case, can be made only in the circumstances and for the reasons stated as under: First of all, we are of the opinion that once it is found that the assessee has duly recorded the alleged purchases (quantity as well as the value) in its books of account and the payment has gone out of books of account, then there is no question of assuming the payment of purchase price as having been made from undisclosed sources and, consequently, there cannot be any addition on account of undisclosed investment in such purchases. (a) If the aforesaid fact is coming out from the books of account, then, the addition if any, can be made only on account of following two counts: (i) If it is established that sale of goods so purchased (if sold) is not accounted for in the books of account, or (ii) The goods so purchased are not accounted for in the closing stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound recorded in the books of account and, (v) The Revenue has not established the coming back of the purchase price, so paid, to the assessee, simply non-availability of seller cannot be a reason for terming such purchases as bogus or ingenuine, then- (a) There is no question of any addition either on account of any undisclosed investment in such purchases or otherwise - it is so because the purchase as well as payment of purchase price is duly recorded in the books of account. (b) There cannot be any addition on account of undisclosed sales or suppression of sale price - unless and until Revenue proves this fact by cogent material. (c) There cannot be any addition on account of suppression of value of closing stock also unless and until the Revenue establishes such fact by cogent material. 11. Coming to the present case, admittedly, the purchases made by the assessee from the relevant four parties, quantity-wise as well as value-wise have been found to have been recorded in the books of account, the payment for such purchases has been found to have been made by-crossed cheques and duly recorded in the books of account, the sales corresponding to such purchases have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in establishing that the CIT(Appeals) has violated the provisions of Rule 46-A of the IT Rules, 1962, otherwise not. 4.3. So far as assessee is concerned, I am of the opinion that it can plead the restoration of the issue back to the file of CIT(Appeals) or of the Assessing Officer if its succeeds in establishing that any of the authority below has violated the principles of natural justice. 5.1. In view of above discussion, I am of the opinion that the Tribunal has power to refer back the matter to the CIT(Appeals) at the behest of the Revenue only if it comes to conclusion that there has been violation of provisions of Rule 46-A of IT Rule 1962, otherwise not. 5.2. The Tribunal has, further, power to restore the issue back to the file of the CIT(Appeals) or the Assessing Officer at the behest of the assessee if it comes to the conclusion that any of the authority below has violated the principles of natural justice while deciding any issue detrimental to the interest of the assessee. 5.3. The Third situation under which the Tribunal can restore the issue back to any of the authority; i.e. to the CIT(Appeals) or to the Assessing Officer, as the case may be, is if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a difference of opinion, the matter is being referred to the Hon'ble President of ITAT with a request that following question may be referred to a Third Member or pass such order as the Hon'ble President may think fit. Whether on the facts and circumstances of case as well as in law, the order of the CIT(Appeals) deleting the addition, having been made on account of so-called ingenuine/unproved purchases, be upheld or the issue relating to, ingenuine/unproved purchases and consequential addition be restored back to the Assessing Officer as per directions contained in paragraph No. 9 of the order of the Learned Accountant Member. R.P. GARG, SR. VICE PRESIDENT 1. The President, Income Tax Appellate Tribunal has referred this case to me as third member Under Section 255(4) of the Act to resolve the following point of difference between the Accountant Member and the Judicial Member: Whether on the facts and circumstances of the case as well in law, the order of the CIT(A) deleting the addition, having been made on account of so called ingenuine/unproved purchases and consequential addition be restored back to the Assessing Officer as per directions contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke in introducing the aforesaid firms to the Bank and stated that he had signed introduction forms as asked for by Kiritbhai R Shah. AO also noticed that person withdrawing cash through self cheques from the bank account of five parties was other than the account holder. The inspector was again deputed to enquire about the identity and genuineness of the five parties at the addresses given to bank. In Thasra, the villagers stated that Ashirwad Corporation R.K. Traders and their owners were not living at the address given by the assessee. Similarly, the Secretary of the Gram Panchayat, Sevalia certified that owners of Bhagyalaxmi Trading Company, Shalin Corporation and Bharat Sales Corporation did not belong to Sevalia Gram Panchayat as per record of last ten years. AO also noticed that addresses of the five parties given by the assessee to him and addresses of these parties, as per bank records were different. It was also noticed that signatures on the confirmations produced by the assessee in respect of Bharat Sales Corporation and Ashirwad Corporation were quite different from the signatures available in the introduction forms obtained from the bank in respect of these parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 87165.49 M3, thereby reflecting yield of 184.13%, which is quite absurd. 5. The CIT(A) deleted the addition by observing that the AO has not disputed the sales made by the assessee; that only dispute was regarding purchases of rubbles which have been considered bogus; that from the month wise purchases/production and sales details submitted by the assessee, if the purchases were treated as bogus, then, production and sales would not have been possible considering the yield at 96%, which required an input to the proximity of 167193 M3; that the yield was also not disputed by the AO; that the payments to the parties from whom purchases have been made are through account payee cheques which was also verified by the AO; that these parties are having sales tax registration numbers also; that there is no evidence on record that withdrawals made by the respective parties have been in turn received by the assessee either directly or indirectly; that since these parties are stated to be outside parties and in no way related to the assessee except through these purchase transactions; that since the AO could not trace put these parties or that the assessee could not produce these parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases were claimed to have been made were not found existing at the addresses given by the assessee and addresses given by them to the bank were different whereas a particular person whose identity had not been established, they withdrew money from the bank accounts of aforesaid five parties immediately after credit to their accounts. As regards steep fall in GP rate, he found that reasons were not forthcoming; that despite reminder no reasons were submitted nor these have been placed before the Tribunal nor any whisper has been said on this aspect by ld. AR on behalf of the assessee and that even the order of AO is silent on this aspect. He observed that without ascertaining the veracity of these statements through any independent inquiries or otherwise, the CIT(A) accepted the submissions of the assessee. He also noticed that in earlier years also assessee had been selling kapchi, grit etc. as is evident from the details of composition of sales of rubble and kapchi given in his order and no reasons have been adduced to explain the fall in GP rate by more than 100%; that no evidence has been brought to tribunal's notice as to whom the cheques were handed over by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the assessee's appeal and deleted the similar additions, i.e. addition having been made on account of alleged bogus purchase. So far as decisions relied upon by the ld. DR are concerned, he is of the opinion that in none of the decisions, the issue relating to unverifiable or ingenuine purchases and consequential addition had not been considered from the angle in which the Tribunal has dealt with in the aforesaid order, and, therefore, these are distinguishable on facts. In view of above facts and circumstances of the case, he proposed to uphold the order of the CIT(Appeals). 8. He also held that the Tribunal has no such power to remand back the issue for fresh consideration of the Assessing Officer with directions to improve upon his case. The ambit of Tribunal's power, as per provisions of law, though extends to pass any order it may deem fit, but such an order has to satisfy the principles of judicial propriety, one of which is that it should not put any of the parties before it, in a situation worse than the situation in which it is at the time of coming before the Tribunal. Directions to make fresh enquiries, which AO had failed to do at the time of making of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Accountant Member and submitted that power to remand a case cannot be disputed and can be exercised , if the sufficient material were not on record. Reference was invited to the decisions of Supreme Court in the cases of CIT v. Assam Travels Shipping Service (1993) 199 ITR 1 (SC) and Hukumchand Mills Ltd. vs. CIT (1967) 63 ITR 232 (SC). On merits, the decision of Delhi High Court in the case of CIT vs. La Medica was referred to besides the decision of Tribunal in the case of N.K. Proteins Ltd. vs. Dy. CIT (2004) 83 TTJ (Ahd) 904 and the decision in the case of Swetamber Steel Ltd., ITA Nos. 707/Ahd/2002, order dt. 30th April, 2003 wherein in the case of CIT vs. Motor General Finance Ltd. (2002) 173 CTR (Del) 123 : (2002) 254 ITR 449 (Del) and Law Medica supra) were discussed. The High Court and Supreme Court in the case of Swetamber held that no substantial question arose. Reference was also made to the decision of Allahabad High Court in the case of Sri Ganesh Rice Mills v. CIT 294 ITR 316(All.) wherein the purchases made from the parties who were found to be non-existent were held to be bogus and the addition made on account of such bogus purchases was held to be justified. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny of the grounds decided against it. The court held that even assuming that the Rules 12 and 27 are not strictly applicable, the Tribunal has got sufficient power under Section 33(4) of the Act to entertain the argument of the department with regard to applicability of paragraph 2 of the Taxation Laws Order and remand the case to the Income-tax Officer in the manner it has done. It was thought necessary by the court to state that Rules 12 and 27 were not exhaustive of the powers of Tribunal, the rules were merely procedural in character and did not, in any way, circumscribed and control the power of the Tribunal under Section 33(4) of the Act. It also held that the word thereon of course restricts the jurisdiction of the Tribunal to the subject matter of the appeal and the words passed such orders as the Tribunal thinks fit include all the powers (except possibly the power of enforcement) which are conferred upon the Appellate Assistant Commissioner by Section 31 of the Act. Consequently, it was held that the Tribunal has authority under this Section to direct the Assistant Commissioner or the Income-tax Commissioner to hold a further enquiry and dispose of the case on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was illegal, and that he could only cancel even the lesser penalty which had been imposed by Income-tax Officer. 13. In these circumstances, therefore, in my opinion, the Tribunal can set aside the matter or remand it to the file of the Assessing Officer for further enquiry to make the proper assessment by allowing the parties including the revenue authorities to raise a contention for the first time before it and such directions would be in conformity with the law laid down by the Supreme Court in the aforesaid two cases of Hukumchand Mills Limited and Assam Travels Shipping Service (supra). 14. The decision in the case of Saurashtra Packaging Pvt. Ltd. (supra) does not advance the case of the assessee any further. In this case the assessee was one of the partners in a firm dissolved on 1.4.1993 and on such dissolution he took the business of the firm as a going concern. A refund of sales-tax was received during the accounting year relevant to assessment year 1984-85 but the said refund was claimed not includible as income under Section 41(1) of the Act. It was also the case of the assessee that this income would not be assessed under Sections 28, 170 and 176(3A) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. On appeal to the Tribunal by the revenue, the Tribunal found that the Assessing Officer did not care to examine the five creditors and the voluminous evidence which was adduced by the assessee and he had adopted a short cut method and placed reliance on the statements of three creditors which were recorded during the search without supplying the copies of these statements to the assessee which were used by him and thus violated the principles of natural justice. The Tribunal observed that the Assessing Officer was a bit negligent in not examining the creditors who were produced by the assessee and that the ends of justice would be met if fresh innings be given to the Assessing Officer and that was the only course left with it. The High Court vacated the order by observing that the Tribunal has totally ignored the fact that the order of the Assessing Officer had merged in the appellate order of the CIT (Appeals) before whom the assessee had succeeded. The CIT (Appeals) held that the assessee had done all that he could do to prove that the cash credits were genuine and that the Income-tax officer was not correct in rejecting the evidence made by the assessee during the course of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove the genuineness of the loans. This material was duly considered by the CIT(A) in whose order the order of the AO stood merged and the Tribunal overlooked these facts and circumstances of the case and dealt with the matter as if it was entertaining an appeal against the order of the Assessing Officer. Therefore, it was held that there was no question of giving one more innings to the Assessing Officer. It was held that the finding arrived at by the appellate authority on the basis such reliable material could not have been so cursorily dealt with by the Tribunal for the purpose of giving one more innings to the Assessing Officer. It failed in its duty to ascertain the reasons which were given by the Commissioner of Income-tax (Appeals) in whose order the order of the Assessing Officer had merged and not to base its decision merely on a bit of negligence of the Assessing Officer in not cross-examining the parties who were produced before him four to five times. In the present case, the material was not sufficient in deleting the addition. It was a case failure of the CIT(A) as well as that of the AO to allow and disallow the purchases as bogus on half baked information. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden lies on the assessee to prove the genuineness of the purchases. It is held by Rajasthan High court in the case of Indian Woollen Carpet Factory (supra) that, if the assessee having failed to prove the genuineness of credit purchases by producing the parties from whom the purchases are said to have been made and whose whereabouts are not known, the finding of the Tribunal sustaining the addition was held justified. The High Court held in paragraph under: 4. Heard learned counsel for the parties. Whether transactions with the parties referred to in para 6 of the original order is genuine or not that is basically a question of fact. Three times assessment has been made to find out as to whether the purchases from the persons referred to in para 6 is genuine or not. The case of the assessee is that the persons aforestated belong to Khatic community and they are nomadic. In our view it is basically wrong as Khatics are not come in the category of nomadic, they have their permanent houses. If for some period, they carry their sheep for grazing in some nearby places, they cannot be termed as nomadic and at least it cannot be said that they do not have their permanent houses. On ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had not been selling kapchi, grit etc. is contrary to the details of composition of sales of rubble and kapchi given in his order and no reasons are found on record explaining fall in GP rate by more than 100%. In view of the above, the order of the CIT(A) cannot be upheld and it would be proper to restore the matter to the file of the AO for fresh decision in the light of necessary material filed or ascertained in connection with genuineness of purchases. 20. There are decisions where disallowance is upheld that in such cases of ingenuine purchases. These are - i) the case of N.K. Proteins Limited by the Ahmedabad Bench of the Tribunal (supra). In this case certain blank bill books, signed cheque books and other documents of various parties including the five supplier concerns were found and seized from the office premised of the assessee during the search. The post-search investigation clearly indicated that these five parties did not in fact supply any material to the assessee but were only issuing fictitious bills. They may be called billing agents or name lenders . Whether they acted as billing agents/name lenders for and on behalf of the assessee as well as for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled to get the deduction. The Tribunal however noticing a contrary decision of the Delhi High Court in the case of La Medica, took a contrary view. In that case the assessee, a manufacturer of allopathic medicines claimed purchases of raw materials worth Rs. 3,82,750/-made from one K and on enquiry and on basis of material on record it was found that K did not exist and on summoning the agent of the bank through whom the payments were made it was found that the accounts were opened by one C on introduction by S by giving another fictitious address at Delhi. On the basis of this material available, the AO treated the sum of Rs. 3,82,750/- as income of the assessee from undisclosed sources. The Appellate Assistant Commissioner though observed that the circumstances were not clear, yet the fact remained that goods have been pledged with the bank after the alleged purchases and therefore, nonexistence of the seller could not be the basis of doubting the genuineness of the purchases and/or to infer that they were fictitious purchases. The Tribunal upheld the order of the CIT(A) and on a reference by the Revenue, the High Court held that the Tribunal had not taken into consideration re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the alleged sellers have been found to be persons with no means to effect purchases at to carry on business is a factor which does not appear to have been considered by the Tribunal in its proper perspective. Materials on record clearly establish that C was a petty employee of a concern of which SP was a partner. In fact SP was a partner of M, one of the sister-concerns of the assessee-firm. On enquiries conducted by the authorities after due notice to the assessee it was found that there was no such concern called KE at either 71, Canning Street, Calcutta or 479, Bartan Market, Sadar Bazar, Delhi. Additionally C opened the bank account with the introduction of SP and the amounts were withdrawn. If the purchases were really effected from KE it is not understood as to how some other person namely, I accepted that the materials were supplied by it. Ample material has been brought on record by the Revenue to show that the purchases were in fact not made from KE. These are some of the relevant materials which have not been considered by the Tribunal. Tribunal's conclusion that even if it is accepted that C was only an instrument used by SP, assessee was not involved in it, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not the case of the applicant that it had made the purchase of Chuni-Bhusi from other person also. The AO had recorded a finding that in order to lower down the profits, the bogus purchases have been introduced. Taking into consideration the entire facts and circumstances of the case, we are of the considered opinion that the findings recorded by the Tribunal cannot be said to be based on irrelevant material and consideration. The applicant being a manufacturer of Chuni-Bhusi has not been able to establish the purchases in question which have been made from the nonexistent firms. Further, the two firms owned by the brothers of the partners of the applicant firm are said to have purchased the goods from the non-existent firm and even the invoices/bills have been prepared by the Munim of the applicant. Merely because the applicant had been dealing with the firm will not make the purchases of Chuni-Bhusi genuine when there was sufficient evidence to the contrary. 10. So far as the question of deduction of purchases from the corresponding sales are concerned, we may mention that the applicant being a manufacturer of Chuni-Bhusi and purchases having been found to be bogus and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore no interference was held called for in the matter. The necessary material details were thus there in that case which in the present case are missing. In any case the line of action as suggested by the High Court is being proposed by one of the members in the present case Jot bringing the material to prove/disprove the purchases. 25. In the case of Babulal C. Borana (supra), another decision relied upon by the assessee, the Bombay High Court held that under Section 69 of the Act, additions on account of unexplained investments can be made as deemed income of the assessee, if the assessee had made investments which are not recorded in the books maintained by the assessee and the assessee offers no explanation about the nature and source of investments or the explanation offered by the assessee is, in the opinion of the Assessing Officer, not satisfactory. The court found that the assessee had recorded the transaction of purchase of HDPE regularly in the books of account and the assessee had offered explanation regarding the nature and source of investment. The question was whether Tribunal was justified in rejecting the explanation offered by the assessee. The High Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the order of the Tribunal was supported by the evidence on record that the amount of Rs. 52,254/- was not assessable as income from undisclosed sources. In this case, the Income-tax Officer required the assessee to produce evidence regarding the purchases and in the meantime, the said parties had admitted to the sales tax authorities that they had issued bogus vouchers. The Income-tax Officer held that the purchases were not genuine and assessed the amount of Rs. 52,254/- as income of the assessee from undisclosed sources. The Tribunal found that there was no evidence to show that bogus vouchers had been issued to the assessee, that nothing had been shown to indicate that any part of the funds given by the assessee to these parties came back to the assessee in any form and that the assessee had made its payments by cheques. It was also found that even two statements given to the sales tax authorities did not implicate the transactions with the assessee in any way and the Tribunal ultimately observed that there are certain doubtful features, but the evidence is not adequate to conclude that the purchases made by the assessee from these parties were bogus. It was also stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an allegation of suppression of sale price or suppression of value of closing stock and for that purpose, the onus is on the Revenue to establish that suppression. It is also observed that there is another way of making addition when the Revenue is able to establish that the assessee has inflated the purchases either by way of value or by way of quantity. It observed that so far as quantity is concerned, the onus is on the assessee to establish that whatever quantity purchased, was either sold or was available in closing stock but so far as inflation of purchase price is concerned the onus is on the Revenue to establish this fact. Another way of making addition, it stated, could be if Revenue succeeds in establishing that the purchase the phrase price paid by the assessee through its books of account has come back to the assessee and here again, the onus is on the Revenue to establish such a fact. There cannot be any addition either on account of undisclosed investment or on account of undisclosed sales or undisclosed profit on the ground that some purchases are considered to be bogus or ingenuine only for want of availability of the seller. These observations of the Tribunal are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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