TMI Blog2017 (3) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt 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/Mum./2013, ITA no.6666/Mum./2013, ITA no.3391/Mum./2014, ITA no.4630/Mum./2014, - - - Dated:- 7-3-2017 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER For The Assessee : Shri. Rajesh Kumar Yadav For The Revenue : Shri. Deepak Tralshawala ORDER PER: SHAMIM YAHYA These are cross-appeal by the revenue and the assessee arising out of respective orders of the Ld. CIT-A for assessment year s 2005-06, 2006-07, 2008-09. 2. Since the issues are common and connected and the appeals 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 fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Akhil Towers, Ratan Nagar, Dahisar (East), Mumbai - 400068. Their activities are issuing/ providing accommodation bills (sales bills) to various parties in Mumbai and also to outsider Mumbai parties. At the time of survey, the survey team has found that there was no trading activities (sales/ purchase) conducted by these group concerns, and also there was no stock found with them. Asper 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 2000 onwards and earning 1% as commission on the amount of the accommodation sales bills issued. The modus operandi of these group concerns is that they issue sales bills as per the requirements of the various parties and receive cheque for the amount as per bills, which is deposited in the bank account and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant 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 to day movement of the materials (quantity wise and quality wise) purchased from these parties along with the sale of this material made to appellant's regular customers. e) Copy of sales bills issued to appellant's regular customers to who this material has been sold. Hence, the appellant claimed that the purchases from said parties are fully explained and corroborated with documentary evidence, and the same cannot be treated as in genuine. iii) The aforesaid reply of the appellant did not 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Shree Ram Sales Synthetics ₹ 7,97,473/- M/s Astha Silk Industries ₹ 18,58,845/- ₹ 36,00,649/- iv) In the assessment order, the AO further observed that the discussions made above establish the following facts: (i) Assessee s purchase from M/s. Manoj Mills and the group concerns amounting to ₹ 36,000,649/- are hawala purchases and not genuine. (ii) Assessee has issued cheques to the extent of bills obtained and collected back the 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 have been made from above group concerns are from outside the books and sources for which are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the statement 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 movement of the material purchased from these parties along with the corresponding sales/ inventory of stock at the yearend. The books of accounts of the appellant are audited wherein the complete purchase and sale details are incorporated, and there is no case of any adverse comments made by the auditors on the same. There are no adverse comments in the assessment order about the quantitative reconciliation. Hence, if the sales of appellant are treated as genuine, the corresponding purchases cannot 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 jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel and perused the records. Ld. DR relied upon the orders of the assessing officer. He submitted that the purchases have been found to be bogus, hence he submitted that assessing officer has rightly made the addition. He submitted that despite accepting that the purchases are bogus the Ld. CIT-A has only added 10% their of which has no justification. Hence he submitted that the order of the assessing officer be restored. 9. Per Contra the Ld. 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 Dhakeshwari Cotton Mills Ltd. Supreme Court of India (1995) 27 ITR 0126. ii) Judgement of Nikunj Eximp Enterprises Pvt. Ltd. Bomaby High Court Income Tax Appeal no. 5804 of 2010- 372 ITR 619. iii) Judgement of Adinath industries Gujrat High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, 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 considered and decided in favour of the assessee by the G Bench of the Mumbai Tribunal in the case of Goolamally Hassanji (supra). We would like to reproduce the relevant portion of the order of the Tribunal and same reads as under: i) The assessee is trader in cotton and man -nw4e fabrics on retail as well as wholesale. The assessee filed return of income on 2710.2006 declaring total income at ₹ 4.68,0891/. The said return was processed u/s. 143(1) of the Act and thereafter it was 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, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) further erred in making an adhoc disallowance which has no basis. vii) Per contra, the Ld. DR relied upon the findings of the AO. viii) We have carefully perused the orders of the lower authorities. We find that the entire addition has been made on the statement of one Shri Rakesh kumar M. Gupta and his family members. It is the 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 further find that the AU has not commented upon the retraction made by Shri Rakesh kumar M. Gupta and his family members. We noticed that the said retraction was made by filing an affidavit. Nothing has been brought on record except for the statement of Shri Rakesh kumar M. Gupta which could suggest that the purchases made by the assessee are bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 accepted the genuineness of sales made by the assessee. He had not made any effort to make further investigation to substantiate his allegations with regard to non-genuineness of the purchases. Considering the facts and circumstances of the case, we are of the opinion that the FAA was not justified in partly upholding the additions. Following the above mentioned decisions of the Tribunal and the judgment of the Hon'ble Bombay High Court, we decide the effective Ground of appeal against the AO. 15. Since the issue involved in presence case in identical to the one dealt with by the tribunal as above, adhering to the doctrine of stare decisis we do not find any infirmity in the order of Ld. CIT-A. 16. As regards violation of the principles of natural justice by denying the opportunity to the assessee to cross examine the person on whose basis/statement additions was made Hon ble jurisdictional High Court in the case of H R M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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