TMI Blog2016 (10) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... red any cogent reasons for coming to the said finding. In our view, the learned CIT(A)’s estimation that 25% of the alleged purchases of ₹ 70,60,756/- is profit therefrom, be taxed as income of the assessee, is unsustainable and therefore delete the same. Consequently, ground of assessee’s appeal is allowed. - ITA No. 7723/Mum/2014, ITA No. 7251/Mum/2014 - - - Dated:- 5-10-2016 - Shri Jason P. Boaz, Accountant Member And Shri Sandeep Gosain, Judicial Member Appellant by: Shri Haresh P. Shah Respondent by: Shri Rajneesh K. Arvind ORDER Per Jason P. Boaz, A. M. These are cross appeals, one by Revenue and the other by the assessee, directed against the order of the CIT(A)-34, Mumbai dated 09.10.2014 for A.Y. 2010-11. 2. The facts of the case, briefly, are as under: - 2.1 The assessee, Prop. of M/s. S.R. International and engaged in the business of trading in licences and earning salary from M/s. Guruashish Exim Pvt. Ltd., filed his return of income for A.Y. 2010-11 on 30.09.2010 declaring total income of ₹ 22,87,440/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.2014 allowing the assessee partial relief of ₹ 52,95,567/- and confirmed the disallowance only to the extent of 25% of the value of purchases, i.e. ₹ 17,65,189/- out of ₹ 70,60,756/- and holding that the correct section under which the disallowance ought to be made was 69C of the Act. 3. Both Revenue and the assessee, being aggrieved by the order of the CIT(A)-34, Mumbai dated 27.09.2014 for A.Y. 2010-11 to the extent the same is against them, have preferred appeals raising the following grounds: - 3.1 Grounds raised by Revenue 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 70,60,756/- made under section 40A(3) of the Act on account of non-genuine purchases from M/s. Crystal Enterprises and M/s. Induja Traders Pvt. Ltd. and directing the disallowance at 25% of alleged purchases of ₹ 70,60,756/- ignoring the fact that these two parties are included in the list of suspicious and/or hawala dealers provided by the Sales Tax Department. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions of ₹ 44,67,716/- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission paper book. 2. Without Prejudice to the above, the AO inferred in his order that Purchases of ₹ 70,60,756 is in cash (inspite of cogent evidence of payment by A/C. Payee cheques) disallowed U/S. 40A(3) which was corrected by Ld. CIT(A) to Section 69C as Unexplained Expenditure ignoring the fact it was explained further there was corresponding Sales of goods (i.e. Licences) is also wrong. 3. WIHTOU PREJUDICE TO THE ABOVE, the Ld. CIT(A) stated on page 8 para (iv) as under: - Hence, the addition of entire purchases amount cannot be made in the present case. Rather, the cause of justice would be met by making addition of a reasonable percentage of such purchases in order to fulfil the gap of any leakage in aforesaid circumstances. I further find that in many such cases, the additions are made based on the G.P./N.P. ratio. In the present case, the appellant has shown G.P. of 0.68% 1.19% on subsequent sale out of purchases from two suspicious dealers, i.e. M/s. Crystal License, M/S. Induja License respectively. The appellant has not shown any comparison of G.P. ratio in respect of purchase/sale from other parties, and also his overall G.P. rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the order of assessment on his issue. 5.3.1 The learned A.R. for the assessee submitted that in the impugned order at para 3.3 thereof, the learned CIT(A) has observed that the addition made by the AO was made on the basis of information received from Sales Tax authorities and that there was no mention of the name of the assessee in the case on hand therein or in the statement/affidavit of persons which is relied on by the AO and consequently contended that the addition made by the AO cannot be sustained as it is based only on presumptions and surmises. It is submitted that the assessee had admittedly placed before the authorities below copies of the purchase bills for purchases from the aforesaid two parties (placed at pages 26 to 47 of paper book), bank statements evidencing payments made through banking channels, ledger copies of these two parties in its books of accounts which evidenced the genuineness of the purchases. It was further contended that there is no evidence with the AO to prove that cash has flown back to the assessee in these transactions or that the bills given to the assessee by those two parties were bogus. It was submitted that once the purchases and sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase bills, bank statements evidencing payments made for purchase through banking channels and the copies of ledger accounts of these two parties appearing in the assessee s books of account to show that the said purchases were genuine. The AO was of the view that the inability of the assessee to produce these two parties before him, coupled with the reliance on the statement of a third party before the Sales Tax Department, even though the assessee was not named therein; rendered the purchases bogus and therefore relying on the said statement of the third party held the said purchases amounting to ₹ 70,60,756/- as bogus. 5.4.2 On appeal we find that the learned CIT(A) observed that in the statement made by the third party before Sales Tax Department relied upon by the AO to make the addition on account of bogus purchases, the assessee has not been named and that there being no corroborative evidence to prove that the said purchases made from the two parties were bogus, the addition of bogus purchases made by the AO in the case on hand was based on presumptions and is not sustainable in the eyes of law. It is seen that the learned CIT(A) also acknowledged that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon by the Ld AR and find that the facts of the above referred judicial pronouncements are similar to the present facts of the case and, therefore the ratio of judgments of the above referred two cases are fully applicable in the present case. Further, I have also taken into consideration the decision of jurisdictional High Court and ITAT i.e. The Commissioner of Income Tax - 1 Mumbai Vs Nikunj Eximp Enterprises Pvt, Ltd. Appeal No hA No. 5604 of 2010 (Hon. Mumbai High Court) and Balaji Textile Industries (P) Ltd. Vs Income Tax Officer (1994) 49 lTD (Bom) 177. While in the case of Nikunj Eximp Enterprises, the Hon'ble Bombay High Court in its latest judgment has held that once the Sales are accepted, the Purchases cannot be treated as ingenuine in those cases where the appellant had submitted all details of purchases and payments were made by cheques, merely because the sellers/suppliers could not be produced before the A.O. by the assessee. Further, I have also gone through the judgment in case Balaji Textile Industries (P) Ltd. Vs Income Tax Officer by Hon. ITAT, Mumbai (1994) 49 lTD (BOM) 177 which was made as long back as 1994 and which still holds good in which was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No cross examination has been offered by AO to the appellant to cross examine the relevant parties (who are deemed to be witness or approver being used by AO against the appellant) whose name appear in the website www.mahavat.gov.in and (v) Failure to produce parties cannot be treated adversely against appellant. In view of the facts discussed above as well as binding judicial pronouncements of the jurisdictional ITAT Mumbai Bench as well as Hon'ble Mumbai High Court and other legal precedents, the addition made by the AO amounting to ₹ 28,08,071/- cannot be sustained. Accordingly, the addition of ₹ 28,08,071/- is deleted. 7. Hence, on a conspectus of the matter, we do not find any infirmity in the decision of the Id. CIT(A) on this issue. Following the aforesaid decision of the Coordinate Bench in the case of Ramlia Parvin Shah (supra), we hold and direct that the addition of ₹ 70,60,756/- made by the AO (deleted to the extent of ₹ 52,95,567/- by the CIT(A)) is to be deleted in toto. We hold and direct accordingly. Consequently, Revenue s ground raised at S.Nos. 1 to 5 (supra) are dismissed. 5.4.4 After coming to the above finding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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