TMI Blog2017 (8) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... hese two appeals are by the Revenue for Assessment Year 2009-10 (ITA No.3917/Mum/2016) and Assessment Year 2010-11 (ITA No.3918/Mum/2016) against the impugned order both dated 31/03/2016 of the First Appellate Authority, Mumbai, restricting the disallowance on account of transaction with the parties, which were involved in hawala transaction by placing reliance upon the decision from Hon'ble Gujarat High Court in the case of CIT vs Simit P. Sheth (2013) 356 ITR 451 (Guj.) by holding that the impugned purchases were made from bogus parties, indicating that the purchases were made from the open market without insisting genuine bills. 2. During hearing, the Ld. DR, Shri Saurabh Kumar Rai, strongly defended the addition made by the Assessing Officer by advancing arguments, which is identical to the ground raised. Reliance was placed upon the decision from Hon'ble Gujarat High Court in the case of N.K. Industries Ltd. vs DCIT (IT Appeal No.240 of 2003 etc.). Reliance was also placed upon the decision in the cse of N.K. Proteins Ltd. vs DCIT (SLP No.769 of 2017), which was dismissed confirming the decision of the Hon'ble High Court for making the addition of entire incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site of the Sales Tax Department. The assessee attended the proceedings before the Assessing Officer and furnished the details impugned purchases including copy of ledger account, purchase bills, delivery challans, payment details by account payee cheque with supporting bank statement. The stand of the assessee is that merely because these parties are available/mentioned at the official website of the Sales Tax Department is not sufficient to make the addition as bogus purchases. The Ld. Assessing Officer treated the purchases as bogus and made the addition. 2.3. On appeal, before the Ld. Commissioner of Income Tax (Appeal), the factual matrix was considered the claim of the assessee that there cannot be sales without purchases, therefore, following the decision from Hon'ble Gujarat High Court in the case of Simit P. Seth (2013) 356 ITR 451 (Guj.), CIT vs Vijay M. Mistry Construction Ltd. (2013) 355 ITR 498 (Guj.), CIT vs Bhola Nath Poly Fab. (P.) Ltd. (2013) 355 ITR 290 (Guj.) and various other decisions of the Tribunal, the aggregate disallowance was restricted to 15%, which is under challenge before this Tribunal. 2.4. If the observation made in the assessment order, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re withdrawn by bearer cheques. That fairly leads to the conclusion that these parties were perhaps creation of the assessee itself for the purpose of banking purchases into books of account because the purchases with bills were not feasible. Thus, the abovenoted parties become conduit pipes between the assessee-firm and the sellers of the raw materials. Under the circumstances, it was not impossible for the assessee to inflate the prices of raw materials. Accordingly, an addition at the rate of 25 per cent. for extra price paid by the assessee than over and above the prevalent price is fair and reasonable and we accordingly confirm the finding of the Commis sioner of Income-tax (Appeals). 12. Thus, it is apparent that both the Commissioner (Appeals) and the Tribunal have concurrently accepted the finding of the Assessing Officer that the apparent sellers who had issued sale bills were not traceable. That goods were received from the parties other than the persons who had issued bills for such goods. Though the purchases are shown to have been made by making payment thereof by account payee cheques, the cheques have been deposited in bank accounts ostensibly in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 20/06/2016 considered the decision of the Tribunal and considering various judicial decisions including the case of Vijay Proteins and Sanjay Oilcakes Industries ltd., M/s Woolen Carpet Factory vs ITAT (2002) 178 CTR 420 (Raj.), the Tribunal was held to be justified in deciding the case against the assessee. The Hon'ble Apex Court confirmed the decision of the High Court for adding the entire income on account of bogus purchases (SLP (C) No.s 769 of 2017, order dated 16/01/2017, as relied upon by the Ld. DR before us. We have perused these orders and find the facts are different because in the case before us, the assessee is a trader, who filed necessary details like bills/vouchers, transport details, bank details, and the transactions was made through banking channel. The Hon'ble Gujarat High Court in CIT vs Bholanath Poly Fab. Pvt. Ltd. (2013) 355 ITR 290 (Guj.) held/observed as under:- 5. Having come to such a conclusion, however, the Tribunal was of the opinion that the purchases may have been made from bogus parties, nevertheless, the purchases themselves were not bogus. The Tribunal adverted to the facts and data on record and came to the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Proteins to the letter and enhanced the disallowance to 25 per cent. Thus, in both cases, the decision of the Commissioner (Appeals) as well as that of the Tribunal is based on estimate. This High Court in the case of Sanjay Oil Cake [2009] 316 ITR 274 (Guj) has held that whether an estimate should be at a particular sum or at a different sum can never be a question of law. 7. The apex court in the case of Kachwala Gems [2007] 288 ITR 10 (SC) has held that in a best judgment assessment there is always a certain degree of guess work. No doubt, the authorities should try to make an honest and fair estimate of the income even in a best judgment assessment and should not act totally arbitrarily but there is necessarily some amount of guess work involved in a best judgment assessment. 8. Examining the facts of the present case in the light of the aforesaid decisions, the decision of the Tribunal, being based on an estimate, does not give rise to any question of law so as to warrant interference. 9. In so far as the proposed questions (C), (D) and (E) are concerned, the same are similar to the proposed question (A) wherein the Tribunal has restricted the addition to 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and would make some income from the entire exercise. In the circumstances, the purchases made by the assessee from MMTC would not be hit by the provisions of section 40A(2) of the Act. 13. Thus, the conclusion arrived at by the Tribunal is based on concurrent findings of fact recorded by the Commissioner (Appeals) as well as the Tribunal. It is not the case of the Revenue that the Tribunal has taken into account any irrelevant material or that any relevant material has not been taken into consideration. In the absence of any material to the contrary being pointed out on behalf of the Revenue, the impugned order being based on concurrent findings of fact recorded by the Tribunal upon appreciation of the evidence on record, does not give rise to any question of law in so far as the present ground of appeal is concerned. 14. In relation to the proposed question (F) which relates to the deletion of addition of ₹ 44,54,426 made on account of purchase of crane and allowing depreciation on the same, the Assessing Officer observed that the assessee had purchased a crawler crane for an amount of ₹ 24,61,000 excluding the cost of spare parts of ₹ 14,98,490. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowing the same and adding the same to the income would not arise. Moreover, in the absence of any evidence to indicate that the purchase was bogus or that the crane in fact did not exist, the question of disallowing the deprecation in respect of the same also would not arise. When the assessee had conclusively proved the purchase and existence of the crane, and had not debited the expenses to the profit and loss account, no addition could have been made in respect of the purchase price nor could have depreciation been disallowed in respect thereof. The Tribunal was, therefore, justified in deleting the addition as well as disallowance of depreciation. 17. In the light of the aforesaid discussion, it is not possible to state that there is any legal infirmity in the impugned order made by the Tribunal so as to warrant interference. In the absence of any question of law, much less, a substantial question of law, the appeal is dismissed. 2.7. The Hon'ble jurisdictional High Court in CIT vs Nikunj Exim Enterprises Pvt. Ltd. (2015) 372 ITR 619 (Bom.) held/observed as under:- 7. We have considered the submission on behalf of the Revenue. However, from the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Appellate Assistant Commissioner. Hence, at the instance of the Revenue, the aforesaid question has been referred to this court for opinion. On a perusal of the order of the Tribunal, it clearly appears that whether the said transactions were bogus or not was a question of fact. The Tribunal has also pointed out that nothing is shown to indicate that any part of the fund given by the assessee to these parties came back to the assessee in any form. It is further observed by the Tribunal that there is no evidence anywhere that these concerns gave vouchers to the assessee. Even the two statements do not implicate the transactions with the assessee in any way. With these observations, the Tribunal ultimately has observed that there are certain doubtful features, but the evidence is not adequate to conclude that the purchases made by the assessee from these parties were bogus. It may be stated that the assessee was given credit facilities for a short duration and the payments were given by cheques. When that is so, it cannot be said that the entries for the purchases of the goods made in the books of account were bogus entries. We, therefore, do not find that the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - dated 13.11.2013). Authrorised representative (AR) contended that payments made by the assessee were supported by the banker s statement, that goods received by the assessee from the supplie was part of closing stock, that the transporter had admitted the transportation of goods to the site.He relied upon the case of Babula Borana (282 ITR251), Nikunj Eximp Enterprises (P) Ltd. (216Taxman171)delivered by the Hon ble Bombay High Court. 2.4.We have heard the rival submissions and perused the material before us. We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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