Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

ITO 14 (2) (3) , Mumbai Versus K. Ashok Kumar and Co. and Vice-Versa

2017 (3) TMI 386 - ITAT MUMBAI

Addition of bogus purchases - denial of natural justice - Held that:- We find that in this case additions have been made on the basis of a statement of suppliers that they were only providing accommodation bills. Despite request assessee has not been granted an opportunity to cross examine the suppliers. Moreover, no adverse inference has been drawn as regards the sales made by the assessee. In several cases higher courts have held that in such cases in absence of any infirmity found in the sale .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

statement relied upon by the assessing officer. Further the decision from the Hon’ble Apex Court in the case of Kishanchand Chillaram (1980 (9) TMI 3 - SUPREME Court ) relied upon by Ld. CIT-A is also germane here. In the background of aforesaid discussion and precedent we find that the additions in this case are not justified. Hence we set aside the order's of authorities below and delete the addition. - Decided in favour of assessee - ITA no.6665/Mum./2013, ITA no.6239/Mum./2013, ITA no.6240/M .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

were heard together these are being disposed of by this common order. 3. Revenues Appeal The common grounds of appeal as under: i) The Ld. CIT-A has erred in law as well as on fact by not sustaining addition u/s. 69 after having accepted the finding in principle that the purchases were made from undisclosed/unverifiable/unidentifiable parties in the grey market by investing in cash and the purchases from the group concerns of Shri Rakesh Gupta & family were only accommodation entries and no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y Proteins Ltd. Vs. ACIT (58 ITD 428). iii) The appellant craves leaves to amend or alter any ground or add a new ground which may be necessary. Assessee s Appeal: The common grounds of appeal as under: On the facts and circumstances of the case, and in law, the Ld.CIT-A-25, Mumbai, erred In directing the AO to make an ad hoc addition representing 10% of the purchases alleged to be bogus by the AO to cover up the difference of GP in recording the said purchases as well as to plug any leakage of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e following group concerns on 13.2.2009: - 1. Shri Rakesh kumar M. Gupta, Prop. of M/s Manoj Mills, PAN: AAJPG976JF 2. Smt. Hema R. Gupta, Prop. of M/s Shree Ram Sales & Synthetics, PAN: AAKPG3030IE (wife of Shri Rakesh kurnar Gupta) 3. Shri Mohit R. Gupta, Prop. of M/s Astha Silk Industries, PAN: AAKPG3030E (son of Shri Rakeshkumar Gupta) These group concerns are engaged in the activities of issuing accommodation bills from the premises of Shop No. 4, Ram Gally, Pankaj Market, Champa X-lane .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the statement recorded during the course of survey action, which was later on confirmed in the statement recorded u/s 131 of the Act on 23.2.2009 of the main person, Shri Rakesh Kumar Gupta, who is running and managing all the activities of all the three concerns, has admitted and stated on oath that he and his above family group concerns are engaged exclusively in the activities of issuing accommodation bills for the past 9 years and that they did not have any trading activities from the year .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

red by themselves by getting the bill books printed in the names of fictitious firms. From the materials collected during the survey action from the premises of the above group concerns, it was found that the assessee, M/s K. Ashok Kumar & Co. has availed/ obtained accommodation (purchase) bills, for the year under consideration, as per the following details:- M/s Manoj Mills ₹ 9,44,331/- M/s Shree Ram Sales & Synthetics ₹ 2,18,589/- M/s Astha Silk Industries ₹ 18,58,84 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2005-06. The case is proposed for re-opening u/s. 147 of the Act, so that the amount of accommodation bills availed for inflating the purchases, without actual purchase, can be brought to tax. In view of the above, 1 have reason to believe that the assessee has not disclosed fully and truly all the material facts necessary for its assessment for A. Y. 2005-06. Accordingly, such income and also any other income chargeable to tax exceeding ₹ 1 lac, has escaped assessment within the meaning .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e. In response, the appellant submitted that it had affected purchases from these parties and materials for purchase from them has been further sold by it during the year. In support of the claim, the following details were submitted appellant for perusal and record: a) Copy of confirmation of account of said parties b) Copy of bank statement highlighting payment to said parties by account payee cheque. c) Copy of bills of said parties in respect of purchases effected from them. d) Copy of day t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ot find favour with the AO and he reiterated the basis of reopening the assessment stating that these concerns are exclusively engaged in issuing accommodation (sales) bills without affecting any real purchases to the parties who require the bills in order to inflate/ accommodate their purchases made outside the books of accounts. The proprietors of said firms have admitted hawala sales without affecting real purchases in the statement recorded during the survey action u/s 133A and also reaffirm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rse of survey and in statement u/s. 131, it is revealed that the above concerns are only issuing accommodation (sales) bills, and corresponding purchase bills are prepared by them after getting printed by themselves or generated from computer. There was neither any real purchases nor sales but merely issuing of hawala sales bills. The AO reproduced extracts of statement recorded during the survey action u/s. 133A of the main person, Shri Rakesh Kumar Gupta, on 13/14.0202009. The facts of said st .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ances, the bills introduced in the books are nothing but colourable device adopted to cover up investment in purchase made from outside the books which attracts the provisions of see- 69 of the Act. The AO found that purchases made from parties are not reflected in the stock register. No hills/ documentary evidences of transportation of purchases shown from these parties were produced. During the course of assessment proceedings, the assessee filed details of purchases from the parties as under: .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he amount in cash after reducing the commission amount as found during the survey and affirmed u/s. 131 by the said group concerns. (iii) As discussed above the assessee could not establish the purchases to the extent of bills obtained from the said group concerns whereas the department found that the said parties have no real trading business of any goods but issuing of accommodation entries/ bills only. In the circumstances, it is clear that assessee's purchases to the extent claimed to ha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

stered when verified physically. considering the above facts and circumstances of the case, it was held by AO that the assessee's purchases to the extent claimed to have made from the said group concerns are hawala purchases/ are out of the books purchases, source of which is not explained by the appellant. He concluded that the investments made for these purchases are not reflected in the books of account of assessee and accordingly, the total accommodation bill amount of ₹ 36,00,649/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ind that the AO has basically relied on the statements recorded of Shri Rakesh kumar M. Gupta & others during the course of survey action u/s 133A and subsequently re-affirmed on oath u/s 131 of the Act, to make additions in hands of purchaser party i.e. the appellant in this case. However, the AO did not provide the opportunity of cross examination of said parties to the appellant in spite of specific request made by the appellant. The Hon'ble Supreme Court in the case of Kishanchand Ch .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of third parties cannot be relied upon and used against the assessee. Since in the present case, the cross examination of the alleged hawala parties was not permitted, the statement of those parties cannot be used against the appellant. Therefore, additions made merely on the basis of statement of those parties without any corroborative evidences cannot be the basis of additions in the assessment. ii) I further find that the appellant has submitted during assessment proceedings the day-to-day m .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not be considered as bogus. iii) The AO has not dealt with the case laws relied upon by the appellant in reaching at conclusion against the appellant. The ratio of said judgments seems to be that there can be no sales without corresponding purchases, and when the quantitative details of purchase, sales and closing stock are available, the same cannot be completely overlooked in arriving at any adverse conclusion. iv) In above circumstances, even assuming the purchases from said parties treated a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es for purchase of specified material. In fact, the AO in Para 4.3 of the assessment order has stated as under: "In the circumstances, stances, the bills introduced in the books are nothing but colourable device adopted to cover up investment in purchase made from outside the books which attracts the provision of sec. 69 of the IT Act." The aforesaid conclusion reached by AO does not deny, and in fact gives an illusion that purchases have been made by the appellant from outside the boo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ny revenue leakage in aforesaid circumstances. I feel that estimate of differential profit @10% of disputed purchases will be fair and reasonable to cover up the difference of GP in recording the said purchases as well to plug any leakage of revenue. Therefore, addition @10% of disputed purchases i.e. ₹ 3,60,065/- is confirmed and the balance amount of addition is deleted. Hence, the appellant gets partial relief of ₹ 32,40,584/-. 7. Against above order assessee and revenue are in cr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Counsel of the assessee submitted that assessee is a trading concern. All the sales made by the assessee have been duly accepted and no-fault has been found in the sales recorded. Hence learned counsel submitted that there are a catena of decisions where in it has been held by Hon ble Court that purchases cannot be held to be bogus when the corresponding sales has not been doubted. Learned counsel of the assessee in this regard placed reliance upon following case laws. i) Judgement of Dhakeshwar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Judgement of H.R. Mehta Bombay High Court Income Tax Appeal No. 58 of 2001-378 ITR 561. 10. Ld. Counsel for the assessee further referred to the decision of ITAT A Bench Mumbai in the case of Ashok Talreja supra. He submitted that the above case relates to a sister concern of the assessee operating from the common address. That the issue was identical and was related to same search with relation to the suppliers. He submitted that on identical facts the ITAT has deleted the entire addition. 11. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

urt and Hon ble Supreme Court as mentioned above. Hence Ld. Counsel submitted that there is no justification for the addition made in this regard and the same should be totally deleted. 12. We have carefully considered the submissions and perused the records. 13. We find that in this case additions have been made on the basis of a statement of suppliers that they were only providing accommodation bills. Despite request assessee has not been granted an opportunity to cross examine the suppliers. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e bills and bank statement, indicating the payment through banking channels were furnished, that AO had not doubted the sales shown by the assessee. He relied upon the cases of Nikunj Exim Enterprises Pvt. Ltd. (372 ITR 619) and Goolarnally Hasanjee (ITA/3740-41/Mum/2012-A.Y. 06-07 and 08-09, dt.10.6.14). 2) We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that a similar issue involving identical facts has already been consi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reopened and notice u/s. 148 was issued and served upon the assessee. The notices u/s. 143(2) and 142(1) were also issued and served upon the assessee. ii) The Survey operation u/s. 133A was conducted on the premises of Shri Rakesh kumar M. Gupta, Proprietor of M/s. Mano) Mills, Shri Mohit R. Gupta Prop. of U/s. Astha Silk industries and Smt. Hema R. Gupta, Prop. of U/s. Shree Ram Sales & Synthetics, in the course of the survey operation, it came to the notice of the survey parry that the af .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tive stock reconciliation. The assessee was further asked to explain why the bogus purchases made from the aforementioned parties be not added to the income. it was explained by the assessee that the statements given by Shri Rakesh Kumar M. Gupta and his family members are not correct it was further explained that purchases and sales are duly reflected in the books of account of the assessee. it was also brought to the notice of the AO that the Affidavit of Shri Rakesh Kumar M. Gupta and his fam .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssment. iv) Aggrieved by this, the assessee carried the matter before the id. CIT(A). Before the Ld. CIT(A), the assessee reiterated his submissions. After considering the facts and the submissions made by the assessee, the id. C1T(A) came to the conclusion that an adhoc addition of ₹ 1,35,0001- which is about 12.5% of the purchase in question would meet the ends of justice. The 14. CIT(A) restricted the addition to ₹ 1,35,000/- v) Aggrieved by this, the assessee is before us. vi) Th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e allegation of the Revenue that the said family members were issuing accommodation bills to the assessee. The AO accordingly went on to treat the entire purchases as bogus purchases. However, we find that the sales made by the assessee have been accepted. It is an elementary rule of accountancy as well as taxation laws that profit from business cannot be ascertained without deducting cost of purchase from sales, otherwise it could amount to levy of income-tax on gross receipts or on sales. We f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd any reason for making any disallowance on this account The adhoc addition sustained by the Ld. CIT(A) is also without any basis and the same is deleted." x) We further find that in the case of Jeetendra Harshad kumar Textiles (ITA/771 & 2211/Mum/2011 dated 21-11-2012), similar issue was decided in favour of the assessee, that the decision of the Tribunal in the case of Jeetendra Harshad kumar Textiles was subsequently followed by the Tribunal to decide a similar issue in favour of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ted April 30th, 2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement, i.e., reconciliation statement but also in view of the other facts. The Tribunal records that the books of account of the respondent assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, i.e. Defence Research and Developmen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tax (Appeals) have disallowed the deduction of ₹ 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of ₹ 1.33 crores was not bogus. No fault can be found with the order dated April 30th, 2010, of the Tribunal. " There is no doubt that the AO had ac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version