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2016 (5) TMI 707 - ITAT PUNE

2016 (5) TMI 707 - ITAT PUNE - TMI - Addition made on account of bogus purchases - Held that:- As decided in M/s Kolte Patil Developers Ltd Versus Dy. Commissioner of Income Tax [2015 (3) TMI 363 - ITAT PUNE] once the assessee had prevented the Assessing Officer from carrying on any exercise of any kind of verification, then on a later date, the assessee cannot take the stand that no such addition is warranted in the absence of any verification exercise carried out by the Assessing Officer. The .....

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ot furnished any evidence of payment except for making the statement that the amounts were paid by way of cheques. In view thereof, we find no merit in the said stand of the assessee. Thus we reverse the order of CIT(A) and uphold the addition made by the Assessing Officer on account of bogus purchases - Decided against assessee.

Addition made on account of commission expenses - Held that:- The said amount was added as income of the assessee on the surmise that it was due as on close .....

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d - Decided against revenue - ITA No.991/PN/2012 - Dated:- 7-4-2016 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri Mahesh D. Akhade For The Respondent : Shri Nikhil Pathak ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the Revenue is against the order of CIT(A)-I, Nashik, dated 02.03.2012 relating to assessment year 2009-10 against order passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The Revenue has raised the following ground .....

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norable CIT(A)-I, Nashik erred in granting relief to assessee on the basis of incorrect facts filed by assessee before the Honorable CIT(A) regarding utilization of the alleged purchases made from M/s. R.K. Ispat. 4. On the facts and in the circumstances of the case the Honorable CIT(A)-I, Nashik erred in granting relief to assessee in respect of the commission expenses on the basis of incorrect facts filed by assessee before the Honorable CIT(A) regarding the purpose for which the commission ex .....

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second issued raised by the Revenue is against the deletion of addition of ₹ 1,50,000/- made on account of commission expenses. 4. Briefly, in the facts of the present case, the assessee was an electrical contractor. For the year under consideration, the assessee had declared income of ₹ 11,29,526/-. During the course of assessment proceedings, the assessee produced the books of account. On the perusal of sundry creditors, the Assessing Officer noted sum of ₹ 43,62,275/- was ou .....

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eness of purchase transactions, the Assessing Officer sent a letter to M/s. R.K. Ispat on the address provided by the assessee. The said letter was received back undelivered . The assessee was asked to file confirmation from the said concern and was also requested to produce evidence with regard to delivery of articles purchased to the site, where they were put to use. The assessee on 21.12.2011 filed the copy of ledger accounts of M/s. R.K. Ispat containing the rubber stamp For R.K. Ispat . The .....

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arious sites and since they were received on the site, the delivery challans could not be preserved till date. The assessee also stated that the details as to where the materials were available and without material being used, the work could not be completed. The Assessing Officer rejecting the explanation of assessee in the absence of any delivery receipts being produced and payment having not been made to the said party till date, completion of assessment proceedings and in the absence of asse .....

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18.02.2010. The vouchers in respect of payment of the said dues were filed. However, in the absence of assessee having clarified the nature of expenses and the payments having been made to the labour classes and in the absence of assessee producing the said persons for verification, the Assessing Officer held the expenditure to be not genuine and added sum of ₹ 1,50,000/- to the total income of the assessee. 5. The CIT(A) after considering the factual aspects and proceeding before the Ass .....

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5.4 In respect of the allegation of the A.O. that the purchases of ₹ 43,62,275/- are bogus, the appellant has pointed out that the work executed by the appellant could not have been executed in the absence of the said material. The appellant has also explained in his written submission as to how the material purchased by him has been utilized at various sites stating the date of purchase, quantity purchased, nature of goods and utilization of goods with quantity at various sites. The appel .....

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n net profit percentage would substantially increase. In view thereof, the CIT(A) deleted the addition holding that the Assessing Officer was not justified in treating the purchases as bogus. In respect of second addition of ₹ 1,50,000/-, the CIT(A) allowed the claim of assessee of commission payment since the amount in respect of the same was paid in the succeeding year, in respect of which the assessee had produced the vouchers. Further, the payment was made in the subsequent year after .....

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he said party. In this regard, the learned Authorized Representative for the assessee submitted that since the quality of goods was not good, hence the said payment was not made. He further stated that before the CIT(A), summary of utilization of goods was filed and the CIT(A) has deleted the additions. 9. The learned Departmental Representative for the Revenue on the other hand, pointed out that the issue raised in the present appeal is of bogus purchases is clearly covered by the order of Trib .....

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ng to assessment years 2004-05 to 2009-10, order dated 20.02.2015 10. We have heard the rival contentions and perused the record. The first issue arising in the present appeal is with regard to purchases made by the assessee totaling ₹ 43,62,275/- from a concern named M/s. R.K. Ispat. The assessee admittedly, for the year under consideration had booked the said expenditure on account of purchases made from the said concern. The Assessing Officer noted that the assessee had made the aforesa .....

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ssee was unable to comply with the directions of Assessing Officer and claimed that the material purchased by it was delivered directly to the respective sites, where it was utilized and he was not in a position to file the requisite details of delivery / transportation. With regard to non-payment, the assessee claimed different explanations, one of the explanations that the material supplied by the said party was not up to the mark and further, the payment to the said party would be made on rea .....

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any register with regard to its complete purchases and admittedly, the total details of utilization of raw material have not been filed. In the absence of the same, the question arising before us is whether the plea raised by the assessee could be accepted. Another claim of the assessee is that in case these purchases are ignored, then the profit declared by the assessee would be very high. 12. We find that similar issue of bogus purchases arose before Pune Bench of Tribunal in Shri Mukeshkumar .....

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rading account, in turn declaring GP rate at 14.58%. There was information with the Assessing Officer that some of the parties from whom the assessee had made the purchases were named in the list of hawala dealers published by the Sales Tax Department. The total purchases from the said parties worked out to ₹ 74,73,020/- as per the list at page 2 of the assessment order. All the above said parties from whom purchases were made were located in Mumbai i.e. outside the area of operation of th .....

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rties were not available at the given addresses and hence, these were treated as hawala dealers. The Assessing Officer during the course of assessment proceedings after noting that the assessee had made the purchases from the said hawala dealers, had asked the assessee to produce the said parties for verification. In addition, the Assessing Officer also requisitioned the assessee to produce the supporting bills along with related details i.e. delivery challans for the goods, receipts from octroi .....

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ties, the Assessing Officer show caused the assessee that since the parties were blacklisted by the Sales Tax Department as hawala dealers, the purchases alleged to have been made from them would be treated as bogus and not genuine purchases. The said show cause notice issued by the Assessing Officer was vide order sheet entry dated 04.03.2013 as to why the alleged purchases made from the said parties totalling ₹ 74,73,020/- should not be disallowed and added to his total income. Sufficien .....

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e particulars of income and also concealed the particulars of income, penalty proceedings under section 271(1)(c) of the Act were separately initiated by the Assessing Officer. 11. In the facts and circumstances of the present case, when the assessee at first instance was confronted by the Assessing Officer to prove the genuineness of its purchases made from the parties, who were listed as bogus parties by the Sales Tax Department for non-payment of VAT, the assessee showed his inability to prod .....

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e categorically before the Assessing Officer admitted that he was not in a position to produce any of the above. 12. Before the CIT(A), the assessee though had first admitted that the purchases should be added as its income, changed its stand that the entire purchases could not be disallowed as bogus, once it was held that the sales were genuinely effected. The case of the assessee before the CIT(A) and even before us is that the said purchases could not be disallowed on the basis of matching pr .....

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ablish the entries passed in the books of account by first proving that the transaction entered into is genuine, incurred for the purpose of business and also by establishing its case by way of corroborative evidence. In cases, where the assessee claims that it has made purchases from various parties, just because the purchases are evidenced by purchase bills are not sufficient evidence to establish the genuineness of the transaction, especially in a case, where there is evidence with the Assess .....

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irmed that the said parties were hawala dealers, wherein the seller had collected the tax but had not paid to the Sales Tax Department. The said fact had been brought to the notice by the learned Authorized Representative for the assessee. The assessee in this regard wants to point out that VAT was collected from it and once the assessee has paid VAT, then the purchases stand regularized. Merely because the assessee is able to produce the purchase bills evidencing the VAT charged to the assessee .....

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the transport of goods from the parties at Mumbai to the assessee s premises at Bhosari, Pune. Despite the Assessing Officer and the CIT(A) having given ample opportunity to the assessee to produce the confirmation of purchases by way of transport receipts, weigh bridge receipts, octroi receipts, etc., the assessee has not produced any evidence. On the other hand, when all these facts were confronted to the learned Authorized Representative for the assessee by the Assessing Officer and show cau .....

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s raised, but in the absence of any details whatsoever, the CIT(A) vide para 10 has given a finding that Even at this stage, the appellant is not in position to discharge the onus cast upon him by producing the parties, their confirmations, transport details, weigh bridge and octroi receipts, etc. to support his case so that remand order u/s.250(4) of Income-tax Act can be passed, and in view of thereof, the plea of the assessee regarding matching principles was dismissed by the CIT(A). 14. The .....

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xcel Industrial Corporation 8) M/s. Virgo Valve Controls Ltd., 9) M/s. Suraj Steel India 10) M/s. Ashtavinayak Sales Agency 11) M/s. Dhiren Mercantile Pvt. Ltd. 12) M/s. Ashtavinayak Sales Agency. 15. The assessee has furnished the said information in respect of 12 parties from whom the alleged purchases have been made. Along with the said compilation of 130 pages, the assessee gave a Certificate that no new evidence has been included, which was not placed before lower authorities. It is further .....

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ade now. The perusal of data compiled in that Paper Book reflects similar items similarly named having been claimed to have dealt by the assessee. However, the assessee had not maintained any stock details and in the absence of complete stock details of purchases, sales, opening and closing stock being made by the assessee and in the absence of any evidence having been filed by the assessee to establish the movement of goods, mere re-conciliation of purchases with the sales on a particular date, .....

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de. However, the assessee has not produced any evidence in this regard and in the absence of the same and also in the absence of any stock details being maintained by the assessee, the alleged re-conciliation exercise has no basis and cannot be relied on to establish the case of the assessee on matching principles. Another aspect to be kept in mind is that the Assessing Officer had further confronted the assessee with the valuation of closing stock at the end of the year. During the course of as .....

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from hawala dealers with the sales made by it to different parties. However, in the absence of any day-to-day stock register being maintained by the assessee, we find no merit in the said plea of the assessee. The CIT(A) while deciding the case of the assessee has further gone on the issue that without prejudice even where it has accepted that the corresponding purchases were entered into books of account of the assessee, but the presumption would be that the purchases were made from alternate s .....

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where the sales have been accepted in the hands of assessee, then only a suitable percentage of the purchases are to be disallowed. The first such reliance was on the decision of Mumbai Bench of Tribunal in M/s. Bassein Drugs Ltd. Vs. ITO (supra). Even before the CIT(A), the learned Authorized Representative for the assessee placed reliance on the said decision. The facts of the said case are at a different footing, wherein complete details and documents were filed on record, on the basis of wh .....

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furnish any details. Before us, he claims all the bills were filed with him, under which, he has tried to match the purchases effected from the hawala dealers to the corresponding sales, but no other evidence of how he has matched the two is brought on record. The assessee is trading in the said goods from day to day and it is the case of the assessee that the items purchased from the hawala dealers are the only purchases made of the said items. Where the assessee has not maintained the stock re .....

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was not a manufacturer of items, wherein some kind of exercise would be established that certain items were utilized to give the desired manufactured results. In case of trading, where no quantity-wise or amount-wise or date-wise purchases have been maintained by the assessee to reconcile that a particular item purchased on a particular date, had been sold by the assessee to a particular person on a particular date, it is not only difficult, but impossible to match the purchases and sales. Even .....

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no reliance of the data submitted before us, which in any case was not submitted before any of the authorities though before the CIT(A), the issue of matching concept was raised. The CIT(A) has given a finding that even at the appellate stage, the assessee is not in a position to discharge his onus. Further, in order to prove the sanctity of the purchases, the basic details of octroi receipts, transportation bills, delivery challans, etc. were not available with the assessee and the assessee ha .....

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presentative for the assessee before us has placed reliance on the ratio laid down by the Hon ble Bombay High Court in the case of CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. (supra). In the facts of the case before the Hon ble Bombay High Court, the addition on account of bogus purchases made by the Assessing Officer and upheld by the CIT(A), was deleted by the Tribunal, in view of the following factual positions:- (i) Letters of confirmation from suppliers were filed (ii) Copies of Bank stateme .....

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, cannot be upheld. However, in the facts of the present case as pointed out by us, the assessee has not maintained any stock details i.e. the details of opening stock, purchases, sales and closing stock, nor has he produced any evidence of the goods being delivered to him. Further, when he was confronted at the first stage by the Assessing Officer of the nongenuineness of the parties and the same being declared as bogus by the Sales Tax Department, the learned Authorized Representative for the .....

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f the assessee having established this transaction by way of corroborative evidence, mere exercise of matching some purchases with some sales, in the absence of any stock details being maintained by him from date to date, we find no merit in the stand of the assessee and the same is rejected. The exercise of matching principles has no basis and is futile exercise. 19. The learned Authorized Representative for the assessee placing reliance on various decisions as referred above, pointed out that .....

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tantiated purchases. The learned Authorized Representative for the assessee further placed reliance on series of decisions by different Benches of Tribunal and various Hon ble High Courts in this regard, but in view of the peculiar facts of the case, where the assessee himself had admitted to the addition of bogus purchases from hawala dealers, when confronted by the Assessing Officer to furnish the corroborative evidence, the reliance placed is mis-placed since in the facts of all the other cas .....

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nts to the selling dealer were made by cheque, then in the absence of any evidence being available with the Assessing Officer to show that the cheques issued in favour of the selling dealers for purchases effected by them, have come back to the assessee, no addition could be made. As pointed out by us, in the facts of the present case, the assessee had admitted to the addition of the purchases made from the aforesaid parties before the Assessing Officer and in view thereof, no further verificati .....

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on being filed by the said parties or the evidence of the bank statement of the said parties having been placed on record by the assessee to prove its case, merely because such view has been taken in any other decision, the same cannot be applied where the assessee has not discharged its onus. Even before us, the assessee has not furnished any evidence of payment except for making the statement that the amounts were paid by way of cheques. In view thereof, we find no merit in the said stand of t .....

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the assessee with regard to the quantum of addition on this count. In this context, assessee pointed out that if the entire amount of purchase debited in the Profit & Loss Account with respect to the six parties is disallowed, it would mean that the corresponding consumption of steel has not taken place in quantitative terms. Before the lower authorities, assessee had furnished a working, which was confirmed by a structural engineer regarding the minimum requirement of steel in the projects .....

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o the gross profit element corresponding to the amount of purchases but not the entire amount of purchase bills. The reliance has also been placed on certain decisions in this regard, which we have noted in earlier paras. 27. We have carefully considered the aforesaid alternate plea of the assessee but find ourselves unable to accept the same, having regard to the facts and circumstances of the present case. The proposition being relied upon by the assessee on the strength of the decisions of th .....

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