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Income Tax Officer Versus Shri Deepak Khusaldas Mehta

2016 (10) TMI 318 - ITAT MUMBAI

GP addition - non-genuine and unproved purchase from the parties declared as "Hawala Operator" by the Sales Tax Department of Maharastra State - Held that:- we are of the considered opinion that end of justice will be met whereby further addition of 5% of the alleged bogus purchases of ₹ 95,25,636/- are made to income of the assessee to cover payment of commission in cash by the assessee to these bogus hawala dealers who have provided accommodation entries to the assessee by providing bogu .....

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evenue by : Shri Vishwas Jadhav Assessee by : Shri K.P. Kapadia ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER This appeal, filed by the Revenue, being ITA No. 3019/Mum/2014, is directed against the appellate order dated 11th February, 2014 passed by learned Commissioner of Income Tax (Appeals)- 34, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 22nd March, 2013 passed by the learned .....

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95,25,636/- made by the AO on account of non-genuine and unproved purchase from the parties declared as "Hawala Operator" by the Sales Tax Department of Maharastra State. 2. On the facts and in the circumstances of the case and in law, the learned CIT [A] ought to have understood that it is the responsibility of the assessee to prove its purchase and the Ld. CIT(A) should have held that in the absence of that, the entire unsubstantial purchase cannot be allowed as deduction while compu .....

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ase are that the assessee is engaged in wholesale trading of iron and steel. During the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act, it was observed by the AO that the assessee has made purchases of ₹ 6,93,56,301/-. The assessee was called upon to file the details of purchases like TIN, name & addresses of parties from whom the purchases were made. The assessee filed the details along with documentary evidences. Meanwhile, information was received by .....

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7030540755V ANMPP9773E 2010-11 493272 02 National Trading Company 27210561220V AAGFN0083N 2010-11 662558 03 Shubhlaxmi Sales Corpn 27490615192V AAVPS1333B 2010-11 401024 04 Bhavani Trade Impex 27520680505V BBZPS3489Q 2010-11 299853 05 SS Enterprises 27950562074V ABGFS2578E 2010-11 678912 06 Darshan Sales Corporation 27920382883V AAGPG7681P 2010-11 310424 07 Siddhi Enterprises 27860154093V AHUPK6877P 2010-11 886584 08 Amar Enterprise 27030265566V AIRPB6559J 2010-11 67564 09 Dhruv Sales Corporatio .....

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es 27420603736V AKYPS7058N 2010-11 513321 18 Leo Impex 27230614753V AOXPK1621F 2010-11 170914 19 Mahaveer Sales Corporation 27090707756V AMMPM3778R 2010-11 494816 20 Naveep Trading Corpn. 27540616280V AAAPV4487A 2010-11 397280 Total 95,25,636 It was observed by the A.O. that the Sales Tax Department conducted independent enquiries in each of the hawala parties and it was conclusively proved that these parties were engaged in the business of providing accommodation entries only. The sales Tax Dep .....

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& Affidavit dated 16-07-2011 of Shri Sanjay Manharlal Solanki Prop Bhavani Trade Impex. 4. Statement & affidavit dated 18-07-2011 of Shir Pravin Meraj Bishoni/Shah Partner of M/s Amar Enterprises, M/s Bright Corpn, M/s Nageshwar Enterprise, M/s Samarth Enterprises and M/ s Shubhlaxmi Sales Corpn. The copies of the above documents were given to the assessee by the AO whereby it was proved that these 20 parties did not supply any goods to the assessee and the parties issued bills without .....

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he ledger of the parties, which as per the A.O. cannot be relied upon as the assessee neither produced the parties nor provided the new addresses. Thus, the A.O. held that the assessee did not purchase any goods from these 20 parties as mentioned above, and accordingly treated the amount of ₹ 95,25,636/- as unexplained expenditure u/s 69C of the Act and added the same to the returned income of the assessee vide assessment order dated 22-03-2013 passed by the AO u/s 143(3) of the Act. 4. Ag .....

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The assessee submitted that he do not carry any inventory at any given point of time. All the purchases effected by the assessee can be indentified & co-related against sales made by him. The assessee get the order which are normally verbal or in writing or through SMS also. Upon receipt of the order ,he contacts various suppliers either directly or through brokers for procurement of materials for the clients. The goods are directly sent to the customers for which the assessee direct the tra .....

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d them as hawala dealers are as under:- Sr Name amount remarks Remarks Remarks 1 Nageshwar nterprises 4,93,272/- Statement filed with Sales Tax Department Old supplier 2 National Company Trading 6,62,558/- Statement filed with Sales Tax Department Old supplier 3 Shubhlaxmi Sales Corpn. 4,01,024/- Statement filed with Sales Tax Department New supplier Confirmation already filed during assessment proceedings!. 4 Bhavani Trade Impex 2,99,853/- Statement filed with Sales Tax Department New supplier .....

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New supplier Confirmation already filed during assessment proceedings 13 Rohit Enterprises 5,96,268/- New supplier 14 Bright Corporation 6,16,871/- Statement filed with Sales Tax Department Old supplier 15 Jaimata Di Trading Co 11,70,801/- Old supplier Confirmation already filed during assessment proceedings 16 Shardha Trading Co. 2,46,675/- New supplier 17 Gururaj Enterprises 5,13,321/- Old supplier Confirmation already filed during assessment proceedings 18 Leo Impex 1,70,914/- Statement filed .....

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awala business and did not supply material to the assessee and issued bogus sales invoices. It was submitted by the assessee that the A.O. in his assessment order confirmed that only 9 parties have given statements/affidavits to Sales Tax Department that they were engaged In providing accommodation bills. It was submitted that the A.O. has not examined the parties and had not given opportunity to the assessee to cross examine these parties. Only nine parties had given statement or affidavits to .....

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sactions. It was submitted that while making the addition, the A.O. did not consider the various details filed in the form of quantitative reconciliation and one to one identification of sale and purchases produced by the assessee, and the transport receipts and weighment slips filed before the AO. The payments to these parties were made through cheques. The assessee submitted that the A.O. has erred in making the addition of ₹ 95,25,636/- by treating the entire purchases as bogus although .....

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ncome of the assessee. Thus it was submitted by the assessee that the A.O. has not been able to conclusively prove that the purchases made by the assessee were bogus. The details of purchases, sales, gross profit and net profit for the past five years were submitted by the assessee before the learned CIT(A), the details of which are as under:- Assessment year Sales Gross profit GP ratio Net profit Net profit ratio 2010-11 7,34,89,568/- 22,73,639/- 3.09% 5,46,192/- 0.74% 2009-10 6,04,24,903/- 19, .....

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mount Amount 1 Sale 7,34,89,568/- 2 Purchases 6,93,56,301/- Less: Alleged bogus purchases (95,25,636/-) 5,98,30,665/- 3 Gross profit 1,36,58,913/- 4 Gross profit ratio 18.57% In support, the assessee relied upon the following decisions:- Sr o. Case Citation Authority 1 Commissioner of Income Tax v. Leaders Valves (P) Ltd. 258 ITR 435 High Court of Punjab & Haryana 2 J. R. Solvent Industries (P) Ltd. v. Asstt. Commissioner of Income Tax 68 ITD 65 (TM) ITAT, Chandigarh Third Member Bench Witho .....

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bogus purchases from these nine parties with respect to the dealers who have filed the affidavit/statement. The assessee submitted that as per the assessment order, the A.O. had sent notices u/s 133(6) of the Act to twenty dealers who were hawala dealers and the notices were returned undelivered. The assessee submitted that the assessee want to buy peace and do not want to litigate the matter therefore requested to make lumpsum addition on account of alleged bogus purchases by adopting GP ratio .....

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adabad Bench. Thus, it was prayed that the addition may be deleted. The ld. CIT(A) considered the submissions of the assessee and observed that the assessee has claimed that out of 20 parties, 9 parties had given statements/affidavits to Sales Tax Department that they were engaged in providing accommodation bills and rest of the parties had not given statements/affidavits. The learned CIT(A) observed that in the absence of any affidavits/statements, the assessee seems to be under the impression .....

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de appellate order dated 11.02.2014. 6. Aggrieved by the appellate order dated 11.02.2014 passed by the ld. CIT(A), the Revenue is in appeal before the Tribunal. 7. The ld. D.R. relied upon the orders of the A.O. and submitted that notices were issued u/s 133(6) of the Act to the 20 parties from whom the bogus purchases were made by the assessee aggregating to ₹ 95,25,636/- which could not be served on these parties as these parties were not available at their given addresses. Information .....

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ct to these parties new addresses nor these parties were produced by the assessee before the AO. Total addition were made for ₹ 95,25,636/- u/s 69C of the Act rightly by the AO which learned CIT(A) erroneously reduced the same by applying GP ratio of 3% as per appellate orders dated 11.02.2014. The onus is on the assessee to prove the genuineness of the purchases by providing cogent evidences and material to substantiate its contentions as the said amount is duly reflected in books of acco .....

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les and corresponding purchases were also submitted to reconcile stock. The revenue has accepted sales as genuine but doubted purchases. The ld. Counsel submitted that in the earlier years, the department has accepted the assessee s books of account and GP ratio. GP ratio of five years were produced before the authorities below and GP ratio of the current year under appeal is in line with GP ratio of earlier years. Movement of goods was also not in dispute with the Revenue. Payments have been ma .....

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es below and relied upon the order of learned CIT(A). The assessee also drew our attentions to the replies and evidences submitted before the authorities below to support its contentions that purchases are genuine which are placed in paper book i.e. purchases were supported by invoices, payments were made by cheque, reconciliation of quantitative stock of sale with purchases to reconcile stock, confirmations from certain parties which are placed in voluminous paper book filed with the Tribunal r .....

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had indulged in accommodation entries for providing bogus bills, and these hawala dealers were engaged in providing accommodation entries by way of bogus purchase bills were also listed in Maharashtra Government- Sales Tax website as bogus dealers. They were hawala dealers engaged in providing bogus purchase bills whereby there is no actual supply of material and as against cheque received by them against bogus bills, cash was returned to the assessee after deducting commission. Out of 20 partie .....

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ived back unserved. The notices have been returned back by the postal authorities with the remark not known . The parties were not available at the given address and are untraceable. The assessee also expressed his inability to supply new addresses of these twenty parties nor was able to produce these parties before the authorities below on being called upon to produce these parties before the Revenue. The assessee submitted that the assessee is not in contact with these parties and the dealings .....

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ed by the assessee. The books of account were not rejected by the A.O. while the purchases were doubted and addition of ₹ 95,25,636/- has been made by the AO to the returned income u/s 69C of the Act. In the preceding year, the Revenue has duly accepted the return of income filed by the assessee and GP ratio declared were accepted and only minor additions were made. We have also observed that the GP ratio is consistent with the preceding year. The ld. CIT(A) restricted the addition to GP r .....

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to buy peace of mind. Nine out of twenty parties have already given the statement and the affidavit that they had indulged in hawala bogus accommodation entries whereby cash was returned to the assessee by these parties after deducting their commissions against the cheque paid by the assessee to settle payment against the bogus purchase bills which were merely accommodation entries arranged by these 20 bogus dealers whereby no actual supply of material took place as per the contentions of the R .....

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eping in view the peculiar facts and circumstances of the case as emerging from the records and surrounding circumstances , we are of the considered opinion that end of justice will be met whereby further addition of 5% of the alleged bogus purchases of ₹ 95,25,636/- are made to income of the assessee to cover payment of commission in cash by the assessee to these bogus hawala dealers who have provided accommodation entries to the assessee by providing bogus bills whereby cash was returned .....

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ITA no 3311/Mum/2012 for assessment year 2007-08 vide orders dated 25-07-2016, whereby it was held by the Tribunal as under : 10. We have considered the rival contentions and perused the material placed on record including the Tribunal orders in ITA No. 6457/Mum/2012 & ITA 6611/Mum/2012 dated 17th February, 2016 in the case of sister concern of the assessee namely M/s Prakash Metals which was also covered by survey action on 12-12-2007. The Tribunal in ITA No. 6457/Mum/2012 & ITA 6611/Mu .....

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ment year 2007-08 on 29/10/2007 declaring NIL income. A revised return was filed on 1/9/2008 declaring total income of ₹ 5,91,912/-. The return was processed under section 143(1) of the Income Tax Act, 1961 ( in short the Act ) and the case was subsequently taken up for scrutiny. 2.2 A survey under section 133A of the Act was conducted in this case by the ADIT (Inv), Unit IV(i), Mumbai on 12/12/2007 on the basis of information/verification of bank data under the Banking Cash Transaction Ac .....

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worth ₹ 2,27,60,254/- from M/s. Shraddha Saburi Merchants Ltd. and ₹ 1,55,09,505/- from M/s. Sai Kripa Metallic Tradecom Ltd., for which payments made by the assessee were credited in the aforesaid two parties bank accounts and the same was withdrawn in cash on the very next dates after its deposits; the assessee being the main beneficiary of these activities. The survey action revealed that the assessee had taken accommodation bills showing bogus purchase during the period relevant .....

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Pravin T. Agarwal, which he did not avail. 2.3 In the light of the above material on record, the Assessing Officer afforded the assessee an opportunity of being heard in the matter to explain the purchase transactions carried out with these parties in the relevant period (supra). In this regard, the statement of Shri Prakash J. Shah, partner of the assessee firm was recorded on 12/12/2007 wherein, inter-alia, he has stated that he is only acting as an indenting agent wherein the materials purcha .....

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rchases and sales being the G.P, only this amount should be considered as its income. The Assessing Officer did not accept the explanations put forth by the assessee observing that except for making the aforesaid claims, the assessee could not furnish material to prove the mode of delivery of goods purchased/sold, names and addresses and other related particulars and details of the parties to whom goods were allegedly sold, or to explain with documentary evidence the transactions entered into fo .....

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ium and M/s. D.C. Metals (sale parties) were only accommodation entries rendered by Shri Pravin T. Agarwal and accepted by Shri Prakash J. Shah of the assessee firm and not real sale/purchase transactions as presently claimed by the assessee. In this view of the matter, the Assessing Officer at para 10 to 12 of the order of assessment held that since the assessee could not substantiate the purchases made from the aforesaid two concerns, the entire alleged purchases of ₹ 3,82,69,759/- shown .....

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bai. The CIT(Appeals) disposed off the assessee s appeal vide the impugned order dated 17/8/2012 allowing the assessee partial relief. In the course of appellate proceedings, the CIT(Appeals) remanded to the file of the Assessing Officer for enquiries to be made for the purpose of corroborating the Assessing Officer s finding that the entire investment in purchases by the assessee from M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd. amounting to ₹ 3,82,69,759/ .....

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tals put forth by the assessee. Report in the matter was also called for from the DDIT (Inv) Unit IV(i), Mumbai. 3.2 After taking into account all the facts before him, the CIT(Appeals) observed that the assessee had only facilitated the concerned purchase and sale parties, as an indenting agent for commission, in their transactions of bogus sale and purchases. The CIT(Appeals) observed that no evidence was brought on record by the Assessing Officer /DDIT to establish that the assessee purchased .....

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he assessee facilitated these bogus transactions for the pecuniary benefit of commission. The CIT(Appeals) was of the view that since the entire transaction was clandestine, the assessee would have earned more than the 0.17% commission declared by it; (which was the difference between the concerned sales and purchase transactions) or which is normally declared in this business at 1 to 2% according to the assessee. Following the ratio of the decision of the ITAT, Ahmedabad bench, in the case of V .....

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The Commissioner of Income Tax ("CIT(A)") erred in making confirming addition of ₹ 18,48,429/-, being estimating the additional commission income on the accommodation bills of bogus purchases made from M/s. Sai Kripa Mettalic Tradecom Pvt. Ltd., and M/s Shardhha Saburi Merchants Ltd @ 5% of the total purchase amount from the above two parties, after deducting the net commission income of ₹ 65,0591- shown in the books of account. 2. The learned CIT(A) was already satisfied a .....

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enting agent and accordingly, earned the commission income as shown in the form of profit which is in the nature of commission and shown in the Profit & Loss Account. Hence no addition is called for. 3. The appellant prays that the addition of ₹ 18,48,429/- be deleted as unwarranted and unjustified. 4. Without prejudice to the above the appellant prays that the addition be reduced to reasonable appropriate rate depending upon the circumstances of the Appellant s case. II. 1. The appell .....

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raised in Revenue s appeal are as under:- 1. The Learned CIT(A) has erred on facts and circumstances of the case and in law in directing AO to delete ₹ 3,64,21,330/- held as bogus purchases by the Assessing Officer. 2. The Learned CIT(A) has erred on the facts and circumstances of the case and in law in assuming the assessee as merely an agent receiving prefixed commission in respect of the transaction of alleged bogus purchases. 3. The appellant prays that the order of the CIT (Appeals) o .....

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82,69,759/- from these two parties. 5.2 In Grounds No.1 to 4 of Revenue s appeal, it is contended that CIT(Appeals) erred in directing the Assessing Officer to delete the addition of ₹ 3,82,89,579/- held by the Assessing Officer as income of the assessee arising out of bogus purchases from the aforesaid two parties and in assuming that the assessee has merely earned commission in respect of the aforesaid purchases. 5.3 The assessee s Grounds I(1) and Revenue s Grounds (1 to 4)(supra) being .....

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e being considered and disposed off together hereunder. 5.4.1 The Ld. Representative for the assessee , on the issue raised in Revenue s appeal, vehemently supported the impugned order of the CIT(Appeals) in respect of its finding holding that the Assessing Officer was not justified in holding that the entire purchases of ₹ 3,82,69,759/- made by the assessee from the two purchase parties i.e. M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd. was the assessee s u .....

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e s appeal, the Ld. Representative for the assessee contended that the CIT(Appeals), after observing that the assessee was only an indenting agent or facilitator for the aforesaid sellers and purchasers in their transactions of bogus sales and purchases in return for remuneration of commission, erred in not accepting the commission of 0.17% as admitted by the assessee. It is contended that the estimation of commission income earned by the assessee on the aforesaid transactions as a facilitator @ .....

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addition made by the Assessing Officer on account of bogus purchases from the aforesaid two parties; i.e. M/s. Shraddha Saburi Merchants Ltd. and M/s. Sai Kripa Metallic Tradecom Ltd.. It was prayed that the finding in the Assessing Officer s order be restored. 5.5.2 In respect of the averments of the Ld. Representative for the assessee on the assessee s grounds claiming that the assessee s income from commission @ 0.17% of purchases should be accepted as such and not at 5% determined by the CIT .....

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nces, since the averments of the assessee are bereft of any corroborative material evidence, the assessee s appeal ought to be dismissed. 5.6.1 We have heard the rival contentions, in respect of both the assessee s as well as Revenue s cross appeals, and perused and carefully considered the material on record. The facts of the matter, from the assessment to the first appellate proceedings, leading to the present appeal have been briefly narrated at para 2.1 to 3.2 of this order (supra). On a per .....

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ssing Officer /DDIT (Inv) to establish that the assessee purchased the goods from third parties in cash, as all the transactions of the assessee with both the sale and purchase parties were through banking channels. The CIT(Appeals) noticed from the material before him, that the assessee had only facilitated the concerned purchase and sale parties in their transactions of bogus sales and purchases as an indenting agent for commission. It was in this factual matrix that the CIT(Appeals) held that .....

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hese bogus transactions of sale and purchase for the aforesaid sale and purchase parties as an indenting agent and received commission thereon. We find that CIT(Appeals) was of the opinion that since the aforesaid bogus transactions of sales and purchases were clandestinely carried out, the assessee would have certainly earned more than the 0.17% declared by the assessee or 1 to 2% earned in such type of business as admitted by the Ld. Representative for the assessee. The CIT(Appeals) following .....

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ave also gone through the various remand reports and its rebuttals including the various details filed by the AR and the report of DDIT(Inv)Unit-V, Mumbai as discussed above. I have also gone through the various statements recorded by the AO during the remand proceedings i.e. statements of Shri Prakash J. Shah dated 21.07.2011 and statements of Shri Raju Bhansali & Shri Chanduprakash Bhansali dated 19.07.2011 and the affidavit of Shri Prakash J. Shah dated 06.01.2012 as well as the affidavit .....

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On perusal thereof I find the appellant has shown purchases of alluminium and copper rods of ₹ 3,82,69,759/- from M/s Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom Limited and its corresponding sales to M/s D.C. Metals and M/s Rajasthan Aluminum during the relevant accounting year. However, based on the various enquiries made and evidences gathered in the case of the appellant by the ADIT (Inv.), Unit - IV (1), Mumbai it was found that no such goods were purchased from .....

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r unexplained purchases and accordingly the same was added to its total income. However, the appellant has submitted that it is only engaged in the indenting agency business; whereby, the gods purchased were directly dispatched by M/s. Shraddha Saburi Merchants Ltd and M/s. Sai Kripa Metallic Tradecom Ltd. to the godowns of M/s. D.C.Metal and M/s. Rajasthan Alluminium without any involvement of the appellant. It was further submitted that the appellant for its indenting agency services was duly .....

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ravin T. Agarwal as discussed in the assessment order is false and incorrect. Accordingly, the appellant has filed an affidavit dated 19.05.2010 of Shri Pravin T. Agarwal; wherein, he has admitted having made sale of material as per the sale bills issued to the appellant. The AR has also filed corresponding affidavits dated 14.05.2010 of Shri Raju Bhansali partner of M/s Rajasthan Alluminium and Shri Chandra Prakash Bhansali partner of M/s D.C. Metals confirming the contention of the appellant, .....

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com Ltd are to be considered as its unaccounted or unexplained income. The AO herself vide para-4 of her remand report dated 19.09.2011 has confirmed the submissions of the appellant that the source of payments made to M/s Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom Ltd through banking channels are originating out of the payments received from M/s D.C. Metal and M/s Rajasthan Aluminum by the appellant. From the same as well as from the details and evidences brought on recor .....

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.C. Metal and M/s. Rajasthan Aluminum against the receipt of similar bogus or accommodation sale bills issued by M/s.Shraddha Saburi Merchants Ltd and M/s.Sai Kripa Metallic Tradecom Ltd. Or in other words, it has acted merely as an indenting agent or as an facilitator to legalise such bogus transactions; whereas, the real beneficiaries of these bogus transactions are M/s. D.C. Metal and M/s Rajasthan Aluminum, as no evidences except for the movement of funds no other corresponding or corroborat .....

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ecom Ltd or by the Appellant or by the M/s D.C. Metal and M/s Rajasthan Aluminum; except for the issue of bogus sales bills by M/s. Shraddha Saburi Merchants Ltd and M/s. Sai Kripa Metallic Tradecom Ltd and by the appellant which as discussed above are already confirmed to be bogus bills without sale of actual material by M/s. Shraddha Saburi Merchants Ltd. and M/s. Kripa Metallic Tradecom Ltd. (statement of Shri Pravin T. Agarwal dated 24.03.2008) and by the appellant (affidavit of Shri Prakash .....

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in remand) even though statements of Sri Prakash J. Shah and Shri Raju Bhansali & Shri Chanduprakash Bhansali were recorded during remand proceedings. It is not proved that the cash withdrawn from the bank accounts of M/s.Shraddha Saburi Merchants Ltd and M/s Sai Kripa Metallic Tradecom Ltd were given to the appellant. Therefore, it is seen that no such material is sold by the appellant to M/s. D.C. Metals and M/s Rajasthan Aluminum except for the issue of bogus bills in consonance with the .....

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was also stated that these suppliers I manufacturers are having their godowns situated outside Mumbai, Check Naka, where M/s D C Metals and Rajasthan Alluminium are also having their godowns I warehouses. On account of these facts and evidences placed on record, I find sufficient merits in the submissions of the AR that the appellant has only facilitated the concerned purchase and sale parties, being a conduit in the process of legalization of the transaction of bogus purchases and sales agains .....

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of M/s Shraddha Saburi Merchants Ltd and M/s. Sai Kripa Metallic Tradecom Ltd through the bank accounts of the appellant. Thereafter, the same are withdrawn in cash from the bank accounts of M/s. Shraddha Saburi Merchants Ltd and M/s. Sai Kripa Metallic Tradecom Ltd but ultimately to whom the same is paid is not investigated either by the AO or by the ADIT/DDIT either during the course of the assessment order or during the remand proceedings. Both these authorities as discussed above have failed .....

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rded by the AO during the remand proceedings on 19.07.2011. On account of these facts brought on record, I find sufficient merits in the submissions of the AR that the statements recorded by the AO at the back of the appellant cannot be considered as valid piece of evidence. 2.4.1. Besides, it may be noticed that in spite of granting sufficient opportunity by way of remanding the proceedings to the AO as well as referring the matter to the DDIT (Inv), as discussed above, they have failed to subs .....

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brought on record, to my considered opinion, it is unjustified on the part of the AO to hold that the entire purchases shown by the appellant are to be considered as its unexplained income. It is patently incorrect conclusion on the part of the AO that the purchases are not genuine but at the same time the corresponding sales shown are genuine sales. If the purchases are bogus without proving that the appellant has purchased the same items in grey market in cash it cannot be held that the corres .....

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its movement or transportation to the godown of M/s. D C Metals and M/s. Rajasthan Alluminium is brought on record by the AO or by the DDIT(Inv), in spite of conducting survey u/s 133A of the Act. Further, there is no evidence to prove that the cash withdrawn by Shri Pravin T Agarwal is returned to the appellant and not to M/s. D C Metals or M/s. Rajasthan Alluminium, particularly considering to the contents of the affidavit of Shri Prakash J Shah, partner of the appellant firm dated 06.01.2012 .....

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llant through banking channels is out of the payments received from M/s. D C Metals and M/s. Rajasthan Alluminium. This proves that no unaccounted investment is made by the appellant for this purpose during the relevant accounting year. 2.4.2 Besides, Shri Prakash J Shah in his statement dated 06.01.2012 has sated the detailed modus-operandi of the entire transactions arranged by the appellant, which proves that the appellant has merely rendered or facilitated these two parties i.e. M/s. Shraddh .....

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Bank) in which, the bank accounts of M/s. D C Metals and M/s. Rajasthan Alluminium were maintained and the new account opening form of the appellant is introduced by the director/partner of M/s.D C Metals and M/s Rajasthan Alluminium. Secondly, it is also noticed a the appellant has never dealt in the business of alluminium sheets and rods, which are found mentioned in these accommodation bills issued. Further, the appellant has no facility or warehousing to store the material purchased, which .....

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paid by M/s DC Metals / M/s. Rajasthan Alluminium. 2.4.3. Therefore, on account of these facts available in the case of the appellant, as discussed above and further in the absence of any new facts and evidences brought on record by the AO as well as in the absence of any corroborative evidences placed on record in spite of remanding the matter on various occasions, I find it cannot be held that the entire purchases made by the appellant are out of Its unaccounted sources or the same is to be co .....

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ls against the payment of pre-fixed commission as discussed above. However, since the entire transaction is carried out in a clandestine manner, it cannot be held that the rate of commission is as per the normal practice followed in this line of business. Naturally, it has to be more than the normal rate of commission paid in this line of business. In the case of Vijay Proteins Ltd vs. ACIT reported in 15 ITD 428, the Hon'ble ITAT Ahmedabad "C" Bench under similar circumstances, wh .....

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d in the Act. It has been held by the Hon'ble Tribunal that in such circumstances, a certain percentage of expenditure has to be disallowed on account of inflation of purchase price. The ITAT has held that if purchases are made from the open market without insisting for the genuine bills, the suppliers may be willing to sell those products at a much lower rate compared to the rate at which they may charge in case the dealer has to give a genuine sale invoice in respect of that sale and suppl .....

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by them. This may also be one of the factors due to which the seller may be willing to charge lower rates for unaccounted goods as compared to accounted for goods. The AR has not filed the details of commission earned on this bogus transaction separately. However, from the P&L account it is seen that it has shown total commission of ₹ 85,948.70 on total purchases of ₹ 5,0l,02,850/- which is inclusive of the bogus sales made to M/s. Rajasthan Alluminium and M/s. D.C. Metals. The s .....

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he clandestine nature of business carried out by the appellant. And also considering to the fact that the appellant itself has shown such commission of 0.17%( as discussed above) which is much lesser than the rate of commission admitted by the AR in the similar line of business or practice. Therefore, on account of the same, I find it would meet the end of justice, in case, the rate of commission charged by the appellant is taken @ 5% of the total purchase value of the appellant during the relev .....

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is already assessed to tax, therefore, considering to the same, the balance amount of ₹ 18,48,429/- (i.e. ₹ 19,13,488/- (-) ₹ 65,059/-) of addition made on this account is sustained and the remaining addition made is directed to be deleted. This ground raised by the appellant is therefore partly allowed. 5.6.4 Before us, both revenue and the assessee have merely reiterated their respective claims (i) of revenue that the entire purchase to M/s. Shraddha Saburi Merchants Ltd. and .....

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ful consideration of the material on record, we find no reason for interference in the order of the ld. CIT(A) on both these issues before us raised respectively by revenue and the assessee. We, therefore, confirm the order of the ld. CIT(A) in holding that - (i) the AO was not justified in holding that the entire bogus purchases by the assessee from the aforesaid two parties amounting to ₹ 3,82,69,759/- in the assessee s undisclosed income and (ii) that the assessee had earned commission .....

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