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Shri Mukeshkumar Pukhraj Mehta Versus The Income Tax Officer, Ward 8 (3) , Pune

2015 (11) TMI 1526 - ITAT PUNE

Addition made on account of alleged bogus purchases - Held that:- 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 verification was made by the Assessing Officer. 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 .....

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ion, 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 the assessee. - Decided against assessee.

Addition under section 68 - Held that:- Both the lower authorities had time and again asked the assessee to furnish the complete details in respect of loan credito .....

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ddition made on account of stock valuation - Held that:- Assessee submitted that due to large number of items involved, it was not practical to maintain day-to-day stock register. Though the assessee claims that the stock register was prepared on the basis of physical verification, but no proof of physical verification was filed before the Assessing Officer, hence, the Assessing Officer made lump sum addition. Before the CIT(A), the claim of the assessee was that no such addition could be made s .....

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y the Assessing Officer was held to be justified. - Decided against assessee. - ITA No.2026/PN/2014 - Dated:- 3-11-2015 - MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM For the Appellant : Shri M.K. Kulkarni For the Respondent : Shri Dheeraj Kumar Jain ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the assessee is against the order of CIT(A)-V, Pune dated 18.09.2014 relating to assessment year 2010-11 against order passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. .....

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Purchases is unwarranted and it be deleted. 2) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the addition of ₹ 74,73,020/- by not accepting the submission of the assessee that on the basis of 'Matching Principle' and since the sales turned out from such purchases have been accepted by the A.O. no addition on account of gross value of purchases was possible. The addition of ₹ 74,73,020/- is warranted. It be deleted. 3) On .....

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38 Taxmann.com 386 (Guj), had held that not the entire purchases but only the profit element can be added. The Ld.CIT(A) was not justified in not accepting the ratio decidendi of Hon'ble Gujrat High Court judgment and decision of other judicial forums. The addition be deleted. 5) On the facts and circumstances of the case and in law the Ld.CIT(A) erred in confirming the addition made by A.O. of ₹ 15,65,000/- invoking S. 68 of the Act even though the confirmation letters, Incometax det .....

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staining the addition of ₹ 2,00,000/- made by the A.O. on account of stock valuation. The sustenance of addition is not in consonance with the provisions of law. The addition be deleted. 7) On the facts and circumstances of the case and in law the levy of interest u/s 234A, 234B and 234C is not justified. 8) The appellant craves/leave to add, amend or alter any of the above grounds of appeal. 3. The issue raised vide ground of appeal Nos.1 to 4 is against the addition made on account of al .....

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096/-, which worked out to 7.94%. In the immediately preceding year, the total turnover was ₹ 1,99,07,510/- and the gross profit was shown at ₹ 27,46,379/- declaring GP rate at 13.80%. During the course of assessment proceedings, the Assessing Officer asked the assessee to provide the details of purchases, creditors, debtors, etc. From the list of purchases, the Assessing Officer noted that some of the parties were appearing in the list of hawala dealers published by the Sales Tax De .....

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vailable on the given address. Accordingly, the Sale Tax Department treated the above parties along with other such entities as hawala dealers. The Assessing Officer asked the Authorized Representative for the assessee to produce above parties for verification along with supporting bills and other related details, such as delivery challans for the goods, receipts from Octroi paid in respect of goods alleged to have been purchased from the above parties. However, the Authorized Representative for .....

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blacklisted by the Sales Tax Department as hawala dealers. The Authorized Representative for the assessee was confronted with the said fact and was asked to show cause vide order sheet entry dated 04.03.2013 as to why the alleged purchases from the above parties amounting to ₹ 74,73,020/- should not be disallowed and added to the total income of the assessee. In response to the said opportunity, the Authorized Representative for the assessee stated that since parties are included in the li .....

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held to be genuine, the purchases could not be disallowed on the basis of matching principles. Reliance in this regard was placed on various decisions. The assessee further submitted before the CIT(A) that one of the selling dealers M/s. Sidhivinayak Enterprises, Mumbai was not found in the list of hawala dealers, as per the website of Sales Tax Department. Accordingly, at the most, such purchases could be held to be unverifiable purchases and it was alleged that the Assessing Officer s stand i .....

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pportunities. The CIT(A) further noted that on the contrary, when confronted on the issue by the Assessing Officer, as to why the amount of ₹ 74,73,020/- representing alleged purchases from the said Hawala Dealers should not be treated as bogus, the learned AR of the appellant stated that amount of purchases claimed from the above parties may be added to the total income of the appellant. This position has been clearly highlighted by the Assessing Officer on page 3 of the assessment order. .....

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y 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. Consequently, the stand of the assessee regarding matching concept was found to be mis-placed by the CIT(A). In the alternate, the CIT(A) observed that if it is accepted that corresponding purchases entered into books of account are from alternate sources made by the assessee, the purchases from alternate sour .....

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74,73,020/- was to be upheld as unexplained expenditure under section 69C of the Act. Reliance of the assessee on the decision of Mumbai Bench of Tribunal in M/s. Bassein Drugs Ltd. Vs. ITO was found to be mis-placed as the facts of the said case were on different footing. In the said case, the CIT(A) had examined the complete details, documents and records and came to the conclusion that the material referred to in the so-called alleged purchases had been used in the manufacturing of drugs and .....

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gs Vs. CIT (supra), the CIT(A) upheld the addition. Another reliance placed upon by the learned Authorized Representative for the assessee was on the decision of Hon ble Bombay High Court in the case of CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. In ITA No.5604/2010 , wherein the confirmation from the suppliers, copies of bank statements, stock statements with complete details of opening stock, purchases, sales and closing stock were filed and also substantial amount of sales were made to the Gov .....

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out that the findings of CESTAT in this case were that these were Hawala dealers, wherein the seller had collected the tax, but had not paid to the Sales Tax Department. The VAT tax was collected from the assessee and once the assessee has paid VAT, then as per t he learned Authorized Representative for the assessee, the purchases were regularized. The learned Authorized Representative for the assessee further pointed out that in case the said purchases are added in the hands of the assessee, th .....

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see stated that only percentage in purchases could be added in the hands of assessee and not the entire purchases. The learned Authorized Representative for the assessee relied on the following decisions:- 1. CIT Vs. Sunrise Tooling Systems Pvt. Ltd. (2014) 361 ITR 206 (Delhi) 2. Eland International (P) Ltd. Vs. DCIT (2009) 124 TTJ 554 3. CIT Vs. M.K. Brothers (1987) 163 ITR 249 (Guj) 4. CIT Vs. Bholanath Poly Fab Pvt. Ltd. (2013) 355 ITR 290 (Guj) 5. Ganpatlal A. Sanghavi Vs. ACIT, ITA No.2826/ .....

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sessee has failed to establish the genuineness of the purchases. There is no mode of transportation established by the assessee, no bills of octroi paid since the goods travelled from Mumbai to Pune and no evidence of arrival of goods. It was stressed by the learned Departmental Representative for the Revenue that once the assessee admitted to the addition, the Assessing Officer was prevented from making any further enquiries and hence, no merit in the plea of the assessee. In relation to the de .....

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ned Authorized Representative for the assessee in turn, stated that he was relying on the decision of Hon ble Bombay High Court in CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. (supra) and also pointed out that the purchases were made through cheque. 10. We have heard the rival contentions and perused the record. The assessee for the year under consideration was engaged in the business of trading in hardware and fittings. The total turnover declared by the assessee for the year was ₹ 1.98 cro .....

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es were made were located in Mumbai i.e. outside the area of operation of the assessee in Bhosari, Pune. The case of the Sales Tax Department against the said parties was that they were providing accommodation entries and though there was a TIN number allotted to each of them, but they had not paid any VAT alleged to have been collected from the re spective persons to whom sales had been made. The assessee was one such person to whom the sales were made by the said parties who were enlisted by t .....

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th related details i.e. delivery challans for the goods, receipts from octroi paid in respect of goods alleged to have been purchased from the above said parties. In reply, the assessee expressed his inability to produce the parties. He further stated that he was not in a position to produce any octroi receipts or any other corroborative evidence in support of the purchases alleged to have been made from the said parties. In view thereof, where the assessee was not in a position to produce any c .....

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74,73,020/- should not be disallowed and added to his total income. Sufficient opportunity was given to the assessee and the learned Authorized Representative for the assessee in turn, stated that since the parties are included in the list of hawala dealers, the amount of purchases claimed from the said parties may be added to the total income of the assessee. The Assessing Officer accordingly, disallowed the alleged purchases of ₹ 74,73,020/- and added to the total income of the assessee, .....

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Department for non -payment of VAT, the assessee showed his inability to produce the said parties. Further, no confirmation was filed by the assessee to prove that it had made the purchases from the said parties. The parties were based in Mumbai and the assessee was based in Pune, had made purchases from Mumbai parties and the assessee was asked to produce any corroborative evidence of movement of goods from Mumbai to Pune. The assessee was asked to produce octroi receipts and / or any other co .....

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is that the said purchases could not be disallowed on the basis of matching principles. Another plea raised by the assessee in this regard was that one of the parties i.e. M/s. Sidhivinayak Enterprises, Mumbai from whom purchases of ₹ 12,73,892/- had been made were not found in the list of hawala dealers. The assessee in this regard submitted that if most of the purchases are unverifiable, at best reasonable GP rate could be applied to make the addition in the hands of assessee and the ent .....

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the transaction, especially in a case, where there is evidence with the Assessing Officer that the transaction entered into by the assessee is bogus. As referred to by us in the paras hereinabove, the parties from whom the assessee had made the purchases were blacklisted by the Sales Tax Department on the fact that they had entered into accommodation entries of providing the bills without transfer of goods, on which though VAT was collected but was not deposited with the Sales Tax Department. Fu .....

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s able to produce the purchase bills evidencing the VAT charged to the assessee, does not establish the factum of purchases being made by the assessee, which items in turn, were sold by the assessee. The assessee is engaged in the business of trading in hardware and fittings under the name and style of M/s. Arihant Tubes Fittings i.e. the assessee claimed to have made the purchases from certain parties, which in turn, were sold by the assessee. However, the assessee is unable to produce any evid .....

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uthorized Representative for the assessee by the Assessing Officer and show caused by way of an order sheet notice, also issued to the learned Authorized Representative for the assessee, he admitted that the alleged purchases made from the hawala dealers should be treated as income. At no point of time during the course of assessment proceedings, the assessee raised the plea of matching principles, under which it claimed that there was tally between the purchases and sales and also the closing s .....

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he assessee regarding matching principles was dismissed by the CIT(A). 14. The learned Authorized Representative for the assessee filed before us a voluminous compilation of data, which was headed as the charts showing details of purchases effected from so called Hawala Parties and corresponding sales turned out from such purchases also quantity - wise (Party -wise), as under:- 1) M/s. Phoenix Steels 2) M/s. K.G. Sales Corproation 3) M/s. Siddhivinayak Enterprises 4) M/s. James Steel Alloys P. L .....

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has been included, which was not placed before lower authorities. It is further certified that only from the available sales and purchase bills and the charts have been prepared and produced in this Paper Book indicating the quantity and other details of material purchased and quantitywise sales turned out from such branded as Hawala Purchases. When confronted, the learned Authorized Representative for the assessee fairly admitted that the enclosed tabulated details were not filed either before .....

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f goods, mere re-conciliation of purchases with the sales on a particular date, has no evidentiary value. The assessee is unable to establish that the goods purchased by it were sold to a particular person on the given date. No reliance can be placed on such chart prepared by the assessee, which admittedly was prepared from the available sales and purchase bills. The onus is upon the assessee that the items which it claims to have purchased should have reached him and thereafter, the same should .....

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the valuation of closing stock at the end of the year. During the course of assessment proceedings, the Assessing Officer found the assessee had not maintained any day-to-day stock register and was of the view that the valuation of stock could not be verified. When confronted on the said issue, the learned Authorized Representative for the assessee submitted that due to large number of items involved, it was not practical to maintain the stock register. As against the same, now the case of the .....

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see, but the presumption would be that the purchases were made from alternate sources. The purchases made from alternate sources corresponding to the bogus purchases were treated as unexplained expenditure under section 69C of the Act. We find that similar issue has been decided by the Hon ble Delhi High Court in CIT Vs. LAMEDICA (supra) and the Hon ble Madhya Pradesh High Court in System India Castings Vs. CIT (supra). 16. On the other hand, the learned Authorized Representative for the assesse .....

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wherein complete details and documents were filed on record, on the basis of which the conclusion of CIT(A) was that the alleged purchases had been used in the manufacturing of drugs and therefore, the quantity of such drugs could not be doubted. However, in the facts of the present case before us, during the course of assessment proceedings, the assessee himself admitted that the entire purchases may be added in his hands as it was made from the bogus parties. On a later date, before the CIT(A) .....

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ases made of the said items. Where the assessee has not maintained the stock register, which could establish datewise inflow of goods from different parties, which in turn, were sold by him to different parties on datewise, the assessee claims that he has reconciled the purchases and sales. In the absence of the said details being maintained by the assessee, the exercise of picking up of one item and matching with the another item of sales, around the same date, the data of purchases cannot be v .....

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t is not only difficult, but impossible to match the purchases and sales. Even in accounting principles, it is recognized that where the assessee is a trader, then at best FIFO method or LIFO method may be applied i.e. First In First Out and Last In First Out to match the movement of goods. The accounting principles provided that the assessee can maintain the quantity-wise or bill-wise and date-wise details of the items purchased by it. But in the absence of any such details being maintained by .....

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elivery challans, etc. were not available with the assessee and the assessee has admitted to the same before both the authorities below. In the above said facts and circumstances, there is no alternative, but to treat the purchases made by the assessee as bogus and the expenditure incurred by the assessee, thus, merits addition in the hands of assessee. We further place reliance on the ratios laid down by the Hon ble Delhi High Court in CIT Vs. LAMEDICA (supra) and the Hon ble Madhya Pradesh Hig .....

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) Letters of confirmation from suppliers were filed (ii) Copies of Bank statement showing entries of payment through A/c payee cheques to the suppliers. (iii) Stock statements with complete details of opening stock, purchases, sales and closing stock were filed. (iv) Substantial amount of sales were made to the Government Departments like Defence Research and Development Laboratory, Hyderabad. 18. The Hon ble Bombay High Court upheld the order of Tribunal, in view of the above factual aspects an .....

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ogus by the Sales Tax Department, the learned Authorized Representative for the assessee admitted before the Assessing Officer that the same may be treated as bogus and amount may be added in his hands. The onus is upon the assessee to establish that it had made the said purchases from the said parties. However, where the assessee has failed to discharge his onus and has made a statement before the Assessing Officer, then the retraction of such statement is possible only if the assessee files th .....

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essee placing reliance on various decisions as referred above, pointed out that in the absence of the Assessing Officer having been rejected the books of account, no addition could be made in the hands of assessee since the sales made by the assessee were established. We find no merit in the stand of the assessee in this regard since the disallowance in the hands of assessee is made on account of specific purchases being held to be bogus. Once the specific purchases are held to be bogus, then th .....

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dence, the reliance placed is mis-placed since in the facts of all the other cases, there was no admission before the Assessing Officer. Hence, the ratios laid down by the different Benches are not applicable to the facts of the present case. In the totality of the above said facts and circumstances, we find no merit in the plea of the assessee in this regard and upholding the order of CIT(A), we dismiss the ground of appeal Nos.1 to 4 raised by the assessee. 20. Another stand taken by the learn .....

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parties before the Assessing Officer and in view thereof, no further verification was made by the Assessing Officer. 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 assessee has failed to furnish the confirmation from the parties and the Sales Tax Dep artm .....

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paid by way of cheques. In view thereof, we find no merit in the said stand of the assessee. Upholding the order of CIT(A), we dismiss the ground of appeal Nos.1 to 4. 21. The issue in ground of appeal No.5 raised by the assessee is against the addition of ₹ 15,65,000/- under section 68 of the Act. 22. The Assessing Officer noted that during the year under consideration, the assessee had accepted unsecured loans from various parties to the extent of ₹ 50,05,000/-. The said loans wer .....

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ness of the said loan creditors could not be established. The learned Authorized Representative for the assessee was asked to show cause as to why the said amount should not be treated as unexplained credit under section 68 of the Act. In reply, the assessee stated that the details asked for could not be produced and the said amount may be added to the total income. Accordingly, sum of ₹ 15,65,000/ - was added under section 68 of the Act. 23. Before the CIT(A), no further details were file .....

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iled. We find no merit in the stand of the learned Authorized Representative for the assessee in this regard. Both the lower authorities had time and again asked the assessee to furnish the complete details in respect of loan creditors, but the assessee failed to furnish the details and before the Assessing Officer, he admitted that the same may be added as his income. In the absence of the assessee having filed the necessary bank details and the income-tax acknowledgements of filing the return .....

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