TMI Blog2017 (5) TMI 1211X X X X Extracts X X X X X X X X Extracts X X X X ..... i dated 26/03/2015 for the A.Y.2010-11 in the matter of order passed u/s.143(3) of the IT Act. 2. Rival contentions have been heard and record perused. 3. Facts in brief are that assessee is engaged in the business of Civil construction. During the course of scrutiny assessment, AO found that assessee had made purchases from the bogus suppliers amounting to ₹ 70,23,639/-. The AO asked the assessee to produce these parties, however, the assessee failed to do so. It was also claimed that from the MVAT angle, there could be a case of non-filing of return or non-payment of MVAT taxes by the suppliers and in such scenario applying provisions of Section 48(5) of the MVAT Act, 2002, the assessee s input tax credit on the supplies cannot be allowed. This does not go on to prove that these parties were bogus suppliers. However, the AO did not agree with assessee s contention and added entire purchases in asessee s income. 4. By the impugned order, CIT(A) restricted the addition to the extent of 12.5% of such purchases after having following observation:- 6.3. I have considered the submission of the AR and the order of the AO. It is seen that the AO has not doubted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... six parties included in the list of MY AT Department therefore it is to be seen in the light of these market practices and the finding of the Sale Tax Department as also the inquiries conducted by the AO as brought out in the assessment order. The decisions of various ITAT/High Court on identical facts are also considered to decide the issue in the present case. Some of the recent Cases, which are also relied upon by the AR, are as under:- 6.5 In Bholanath Polyfab P.Ltd. 355 ITR 290 (Guj), the facts of the case were that the assessee was engaged in the business of trading in finished fabrics. For the A.Y. 2005-06, the A.O held that the purchases worth RAO,69,546/-were unexplained. He, therefore, disallowed such expenditure claimed by the assessee and computed the total income of ₹ 41,10,187/-. The issue was carried in appeal by the appellant before CIT(A). The Commissioner rejected the appeal, upon which the assessee went in further appeal before the Hon'ble Tribunal. The Hon'ble Tribunal substantially allowed assessee's appeal. In so far as the question of bogus purchase is concerned the Hon'ble Tribunal concurred with the Revenue's views that such purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject to tax. This was the view of this court in the case of San jay Oilcake Inds. Vs. CIT (2009) 316ITR 274 (Guj). Such decision is also followed by this court in a judgment dated August, 16, 2011 in Tax Appeal No. 679 of 2010 in the case of CIT Vs. Kishor Amrutlal Patel. In the result tax appeal is dismissed. 6.6 In the case of Vijay Proteins Ltd. 58 ITD 428, Hon'ble ITAT Ahmedabad 'C' Bench, under similar circumstances, where the A.O had disallowed the entire expenditure on account of purchases made from certain parties treating the same as bogus, has held that it is elementary rule of accountancy as well as of 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. Such a course is not permissible unless it is specifically authorized to do so under any particular provisions contained 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. Hon'ble Tribunal has held that if purchases are made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawal from their accounts. The ITAT held that since such exercise was not done, the said purchase cannot be disallowed only on the basis of the information given by Sales Tax Department. 6.10 It is also seen that for A.Y. 2009-10, the case of the assessee was reopened and the AO, on identical facts, disallowed only 12.5% of the purchases shown from the tainted parties. There is force in the argument of the AR that had the assessment for assessment year 2010-11 been passed after the finalisation of this reopened assessment for assessment year 2009-10, then only 12.5% of the purchases would have been disallowed by the AO for this year also. 6.11 The facts in the present case show that the appellant was not in a position to prove the existence of the suppliers or of supply of goods by those vendors. The suppliers were found to be engaged in providing bogus bills without actual delivery of goods. On careful analysis of the decisions of Hon'ble High Court of Gujarat and ITAT in the above mentioned cases, I am also of the view that without purchase of material it is not possible to complete the contract work of road widening done by the assessee. As mentioned above, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
