TMI Blog2017 (9) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee and revenue against the order of CIT(A)-3, Mumbai for the A.Y. 2009-10, 2010-11, 2011-12 and 2012-13 in the matter of order passed u/s. 143(3) r.w.s. 147 of the IT Act. 2. Common grievance of both the assessee and revenue in all the years pertain to addition made on account of bogus purchases, part of which was deleted by the CIT(A). 3. Rival contentions have been heard and record perused. On obtaining information that assessee has made purchases from the bogus suppliers reopened the assessment and the enquired about such bogus suppliers. AO also issued notice u/s. 133(6) to these concerns and thereafter added entire amount of such purchases in assessee s income u/s.69C. In the A.Y.2009-10, addition so made was u/s.69C was ₹ 69,13,003/-. 4. By the impugned order CIT(A) restricted the addition to the extent of 12.5% after applying various judicial pronouncements. The CIT(A) has dealt with the issue at para 6 to 8.36 of his order after giving his reasoning, the CIT(A) restricted the addition in respect of profit earned on such bogus purchase to the extent of 12.5% amounting to ₹ 8,37,780/-. 5. In the A.Y. 2010-11 similar addition was mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the Appellant relied on the statement recorded by the Sales Tax Department without even providing the Appellant an opportunity to cross examine them. Hence, Reopening of the assessment is merely on the suspicion and without any reason to believe and therefore the notice for reassessment is bad in law. 7.2 The Appellant further submitted that it has already accounted the expenditure incurred on purchases made from the above said parties and debited the same in its Profit Loss Account for the year ended as on 31.03.2009. Therefore, issuance of notice under section 148 of the Act to examine the same, in the absence of new material, unjustified. The Appellant, therefore, submits that the Assessment Order passed under section 143(3) r.w.s. 147 of the Act pursuant to the notice under section 148 is ab-initio void. 7.3 Records revealed that the case was re-opened by issue of notice u/s 148 of the IT Act which was duly served upon appellant. In response to the notice u/s.148 of the IT Act, the appellant had submitted that the return filed earlier be treated as filed in response to notice u/s 148 of the IT Act. The AO had also given the reasons recorded for re-opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to reopen the assessment'. It was further held that so long as the conditions of section 147 of the IT Act are fulfilled, the AO is free to initiate the proceedings u/s 147 of the IT Act and even failure to take steps u/s 143(3) of the IT Act will not render the AO powerless to initiate reassessment proceedings, even when the intimation u/s 143(1) of the IT Act has been issued. 7.7 The Apex Court has further held that section 147 of the IT Act authorizes and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajesh Jhaveri (supra) that so long as the ingredients of section 147 of the IT Act are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 of the IT Act and failure to take step; section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) of the IT Act had been issued. 7.10 It may also be stated here that departmental authorities and the appellate authorities should keep in mind the following observations made by the Federal Court in Chatwram v. C/T [1947] 15 1TR 302: The income-tax assessment proceedings commence with the issue of a notice. The issue or receipt of a notice is not, however, the foundation of the jurisdiction of the Income-tax Officer to make the assessment or of the liability of the assessees to pay the tax. It may be urged that the issue and service of a notice under section 22(1) or (2) may affect the liability under the penal clauses which provide for failure to act as required by the notice. The jurisdiction to assess and the liability to pay the tax, however, are not conditional on the validity of the notice. Suppose a person, even bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 153A, such a plea has to be examined thoroughly and in-depth by taking a practical and reasonable view of the matter, not inconsistent with the statutory provisions, keeping in mind the basic principle that the liability to pay tax, which is founded on the charging provisions of the statute, is not to be nullified on specious or unjustified pleas taken by the assessee. 7.14 Even in GKN Driveshafts (India) Ltd. v. Income-tax Officer 259 ITR 19(SC) what the Hon'ble Apex Court ruled while dismissing SLP against issuance of notice u/s 148 was: Insofar as the appeals filed against the order of assessment before the Commissioner (Appeals), we direct the appellate authority to dispose of the same, expeditiously. 7.15 Thus, it cannot be said that Apex Court treated the procedural lapse as fatal to nullify the re-assessment. In any case, in Datamatics Ltd. v. Assistant Commissioner of Income-tax 110 ITD 24 (Mum), Hon'ble Mumbai Tribunal after considering GKN Driveshafts (supra) has held as under : Considering the issue in detail, in the case of ITO v. Smt. Gurinder Kaur [2006] 102 ITD 189 (Delhi), Tribunal held that non-communication of the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open the assessment'. It was further held that so long as the conditions of section 147 of the IT Act are fulfilled, the AO is free to initiate the proceedings u/s 147 of the IT Act and failure to take steps u/s 143{3J of the IT Act will not render the AO powerless to initiate reassessment proceedings, even when the intimation u/s, 143(1) has been issued. 7.19 It is the duty of the assessee to disclose full and true materials to the A.O, but for which the A.O. could initiate the reassessment proceedings. It has been held by the Hon'ble Supreme Court in Shrl Krishna P. Ltd. 221 ITR 538, 549 that every disclosure is not and cannot be treated to be a true and full disclosure. A disclosure may be a false one or a true one. It may be a full disclosure or it may not be. The Hon'ble Supreme Court held that a partial disclosure may very often be a misleading one. Therefore, what is required is a full and true disclosure of all material facts necessary for making assessment for that year. As noted in detail earlier, I find from the reasons recorded by the Ld. A.O. that these transactions were not disclosed by the appellant and therefore, prima facie he had valid grounds to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) Where an assessment has been made, but (i) Income chargeable o tax has been under assessed; ;or (II) Such income has been assessed at too low a rate; or (iii) Such income has been made the subject of excessive relief under this Act; or (iv) Excessive loss or depreciation allowance or any other allowance under this Act has been computed. 7.23 Interpreting and highlighting the significance of the said Explanation in Consolidated Photo Finvest Ltd. vs. Asstt. CIT (2006) 200 C77? (Del) 433 : (2006)281 ITR 394 (Del), it has been held: 9. The above would show that cases falling in cl.(c) of Expln. 2 in which income chargeable to tax has been underassessed or assessed at too low a rate or cases in which income has been made the subject of excessive relief under the Act or where excessive loss or depreciation allowance of any other allowance under the Act has been computed, would constitute cases of income escaping assessee. There is considerable authority for the proposition that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reopening the assessment, the High Court was only concerned with examining whether the conditions which invested the ITO with the powers to reopen the assessment existed. It is not, observed the Court, within the province of the High Court to record a final decision about the failure to disclose fully and truly all material facts bearing on the assessment and consequent escapement of income from assessment and tax. The Court also held that from a mere production of the books of account, it could not be inferred that there had been full disclosure of the material facts necessary for the purposes of assessment. The terms of the Explanation, declared the Court, were too plain to permit an argument that the duty of the assessee to disclose fully and truly all material facts would stand discharged when he produces the books of account or evidence which has a material bearing on the assessment. The Court observed (P.644): It is the duty of the assessee to bring to the notice of the ITO particular items in the books of account or portions of documents which ore relevant. Even if it be assumed that from the books produced, the !JO may not on that account be precluded from exercising the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) Ltd. (1999) 155 CTR (SC) 538: (1999) 237 ITR 13 (SC) the apex Court held that the audit party can point out a fact, which has been overlooked by the ITO in the assessment. Though there cannot be any interpretation of law by the audit party, it is entitled to point out a factual error or omission in the assessment and reopening of a case on the basis of factual error or omission pointed out by the audit party is permissible under law. As the Tribunal has righty noticed, this was not a case for the AO merely acting at the behest of the audit party or on its report. It has independently examined the material collected by the audit party in its report and has come to an independent conclusion that there was escapement of income. The answer to the question, therefore, in the affirmative, in favour of th Revenue and against the assessee. 7.30 So much so that even in a case of scrutiny assessment, when there is no discussion on the issue in the Assessment order and no details were called for by the A.O. or filed by the assessee on the issue, no finding either positive or negative can be said to have been arrived at during the course of original assessment proceedings. Hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of the appellant are distinguishable in as much as either there was no failure to disclose the full and true relevant information and/or it was merely a change of opinion in those cases. Sustenance in this regard is also drawn from the judgement of Hon'ble jurisdictional High Court in the case of M/s.Girilal Co. vs. ITO 300 ITR 432 (Bom). 7.34 Any fresh information received by the A.O. can entitle him to issue notice u/s 148 of the IT Act, if on the basis of such information he has prima facie reason to believe that income has escaped assessment. So much so that it was held by the Hon'ble Supreme Court in Claggett Brachi Co.Ld. vs CIT 177 ITR 409 (SC) that an information obtained during assessment proceedings of a subsequent year can also validate the proceedings initiated u/s.147 for earlier year. Similarly, Hon'ble Bombay High Court in the case of Anusandhan Investments Ltd. vs. M.R. Singh, DOT, 287 ITR 482 held that a notice issued notice u/s 148 of the IT Act based on assessment of subsequent assessment year is valid even if the appeal is pending for such assessment. Further, in the case of Piaggio Vehicles P. Ltd. vs. DOT 290 ITR 377 (Bom), the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AHQPP1838A 11,33,755.00 2. Alpesh Trading Company AIRPP3049H 9,08,221.00 3. Shreeji Sales ADNPR3792A 9,08,221.00 29,50,197.00 Sr. No. Name of the party PAN No. Amount (Rs.) 1. Trishana Multrade Private Ltd. BMFPS9038A 3,71,280.00 2. Caprihans Trade Centre ADXPD0923F 7,12,738.00 3. Smartlingk Tradex P. Ltd. AALCS4411B 1,97,860.00 4. Nisha enterprises AWCPS3492N 98,020.00 5. Monil Impex AAGPS5222E 1,53,010.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade purchases from such party, then it is possible that such brokers would have procured the goods from open (grey) market and supplied the physical goods with alleged ingenuine bills against which the appellant made only A/c payee cheque payments. 8.5 As regard the appellant's argument that the payment were made by the appellant company through banking channel, the same is irrelevant since the many parties have stated/filed affidavit stating therein that the payments received were credited to their account and cash was withdrawn and given back to the parties after taking their commission. With such finding on record clearly indicate that some of parties are not genuine. 8.6 In this regard it is also pertinent to mention that while dealing with the concept of burden of proof, onus of proving is always on the person who makes the claim and not on the Revenue as being made out by the Ld. AR in his submission. While dealing with the issue of deciding the burden of proof, Hon'ble Supreme Court in the cases of CIT Vs. Durgaprasad More 82 ITR 540 and Sumati Dayal Vs. CIT 214 ITR 801 has held that the apparent must be considered real until it is shown that there are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of Sri Meenakshi Mills Ltd 63 ITR 609 where it was held that the I.T. Authorities are entitled to pierce the veil of Corporate Entity and to look into reality of transaction. In the case of McDowell Co. 154 ITR 148(SC) it was stated that implications of tax avoidance are manifold. First, there is substantial loss of much needed public revenue. Next, there is serious disturbance caused to the economy of the country due to piling of mountains of black money, causing inflation. Thus, there is the large hidden loss to the community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of the members in the country being involved in the perpetual war waged between the tax payer and his expert team of advisors, and accountants on the one side and the tax gatherer and his perhaps not so successful advisors on the other side. Hon'ble Court further held that it was for the Court to take stock to determine the nature of new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices would be related to the existing legislation with the aid of emerging techniques of interpretation as was done in Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by technical rules of evidence, as held by the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775. The Hon'ble Supreme Court, in the case of Chuharmal (supra) held that what was meant by saying that Evidence Act did not apply to the proceedings under Income-tax Act,1961, was that the rigours of Rules of evidence, contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act, in proceedings before them, they were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law jurisprudence viz, where a person was found in possession of anything, the onus of proving that he was not its owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings. 8.12 The Ld. AR has relied on a number of decisions including in the case of Nikunj Eximp in ITA No. 5604 of 2010 (Bombay High Court) to suggest that no addition could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 20 (Bom), Hon'ble Bombay High Court on the very same issue of obtaining bogus bills dismissed the assessee's Writ Petition filed against notice u/s.148 of the IT Act, 1961. 8.16 Hon'ble Bombay High Court in the case of Killick Nixon Ltd. v. Deputy Commissioner of Income-tax [2012] 20 taxmann.com 703 (Bom.) was similarly faced with the question of sham transactions and it inter alia, held as under:, Section 254 of the Income-tax Act, 1961, read with rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963 - Appellate Tribunal -Orders of - Assessment year 2001-02 - Assessee transferred certain land to bank - Assessee claimed to have incurred long-term and short-term capital losses on share trading transactions - Accordingly, it set off said losses against capital gain earned on sale of land - Assessing Officer found that assessee entered into sham and bogus share trading transactions resulting in capital loss with purpose to reduce tax liability arose on capital gain - Assessing Officer, therefore, discarded capital losses - Commissioner (Appeals) confirmed order of Assessing Officer -Tribunal also confirmed order of Assessing Officer, and while doing so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of para 45, it held that colourable device c.annnt he a part of tax planning and it is wrong to encourage the belief that it is honourable to avoid payment of tax by resorting to dubious methods . It is the obligation of every citizen to pay the taxes without resorting to subterfuges. The above observations should be read with para 46 where the majority holds on this aspect one of us, Chinappa Reddy, J. has proposed a separate opinion with which we agree . The words this aspect express the majority's agreement with the judgment of Reddy, J. only In relation to tax evasion through the use of colourable devices and by resorting to dubious methods and subterfuges. Thus, it cannot be said that all tax planning is illegal/illegitimate/impermissible. Moreover, Reddy, J. himself says that he agrees with the majority. In the judgment of Reddy, J. there are repeated references to schemes and devices in contradistinction to legitimate avoidance of tax liability (Paras 7-10, 17 and 18). In our view, although Chinnappa Reddy, J. makes a number of observations regarding the need to depart from the Westminster and tax avoidance- these are clearly only in the context of artificial a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced. Taking into consideration the entire facts and circumstances of the case, the findings recorded by the Tribunal could not be said to be based on irrelevant material and consideration. The assessee being o manufacturer of chuni-bhusi hod not been able to establish the purchases in question which hod been made from the non-existent firms. Further, the two firms owned by the brothers of the partners of the assessee-firm were said to have purchased the goods from the non-existent firms and even the invoices/bills had been prepared by the munim of the applicant. Merely because the applicant had been dealing with the firm, that would not make the purchases of chunhbhusi genuine when there was sufficient evidence to the contrary. So far as the question of deduction of purchases from the corresponding sales was concerned, the assessee being a manufacturer of chuni-bhusi and purchases having been found to be bogus and as there were no other purchases of chuni-bhusi, the benefit of deduction of such purchases had rightly been disallowed. 8.18 Similarly, in the case of KHANDELWAL TRADING CO. v. ASSISTANT COMMISSIONER OF INCOME-TAX [1996] 55 TTJ 261 (JR.), it was observed and held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toic silence of the assessee also blunts the assessee's argument that Shri Hukamchand's statement was recorded at its bock. It may have been recorded at its back, but the results thereof were informed to the assessee and that is what the assessee was asked to explain and failed to do so. Thus, now we are not assuming but are concluding that the purchases of ₹ 86,500 were in fact bogus. In case of bogus entries, in our opinion, what could be the best remedy, has been discussed above. The Assessing Officer has simply done that. We are unable to appreciate Shri Singhvi's contention. Had there been suppression of sales, probably, depending on the facts of the case, the \ addition to the extent of g.p. rate would have been sufficient. But in case of bogus purchases we do not see a better solution than the one adopted by the Assessing Officer. 12. But what about the quantitative record which is said to have tallied ? In the instant case the assessee has maintained the stock register but the same has been test-checked by the Assessing Officer. There is no specific discussion or finding as regards quantitative tally. However, when in substance the transactions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: 8. The Tribunal considered the matter in paragraph 6 of its order thus: 6. We have carefully considered the rival submissions of the parties, perused the material available on record and the decision relied upon by the learned Departmental representative. We find that as a result of search on the assessee-company, the purchases totalling to ₹ 4,37,048 were not found recorded in the seized books of account of the assessee-company. No surrender was made on behalf of the company by any of the directors of the assessee-company. The surrender was made by Shri Mahesh Toshniwal, one of the directors of the company in his individual capacity and not on behalf of the assessee-company and the same was considered in his persona! assessment. Under the law, the company is a separate juridical person. The surrender made by Shri Mahesh Toshniwal, in his individual capacity is not binding on the assessee-company. Shri Mahesh Toshniwal in his personal statements, has nowhere stated that the surrender was made on behalf of the assessee-company. We also find that even in the return filed in response to a notice under section 148, the assessee-company did not include the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued. Therefore, the initial dispute was with regard to genuineness of the transaction regarding purchase of wool from the parties, the assessee had failed to discharge the onus to prove the genuineness of the transactions, mere mentioning of section 68 did not affect the addition made when transactions were found bogus. 8.22 In Sanjay Oilcake Industries vs. Commissioner of Income-tax [2009] 316 ITR 274 (Guj), it was held as under : 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 hank accounts ostensibly in the name of the apparent sellers, thereafter the entire amounts have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount from the bank accounts, in the light of the aforesaid nature of evidence it is not possible to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ratio of these decisions, we are of the view that the assessee-firm cannot be dissociated from the scheme of declaration of gold under the amnesty scheme in the names of the family members of the partners of the assessee-firm, as different individuals could not have hit upon the same idea of acquiring gold in the year of account relevant for the assessment year 1978-79 and declaring such gold under the amnesty scheme and getting the gold valued by the same valuer on the same day and filing their returns under the amnesty scheme on the same day, i.e., 30-3-1987, and subsequently getting the gold converted into ornaments through Karigars on more or the same day and subsequently selling the ornaments to the asssessee-firm in the same year of account without the planning, controlling and coordination of a central agency and that agency in thesurrounding circumstances appears to be only the assessee-firm. The Apex Court has held in the case ofJamnaprasad Kanhaiyalal (supra) that there is no double taxation in taxing the person to whom the income actually belonged with the persons who falsely declared them in their returns filed under the Voluntary Disclosure Scheme. That is a risk wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principles of natural justice do not require formal cross-examination. Formal cross-examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of Court. It is part of legal and statutory justice, and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination. However, if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination. Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collateral Nature. (Emphasis supplied in all quotations). 8.27 To sum up, I would like to quote the landmark case of State Bank of India v. 5.K. Sharma AIR 1996 SC 364 where the Hon'ble Apex Court observed: Justice means justice between the parties. The interest of justice equally demand that the guil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be not from the parties shown in the accounts, but from other sources. In that view of the matter, the Tribunal was of the opinion that not the entire amount, but the profit margin embedded in such amount would be subjected to tax. The Tribunal relied on its earlier decision in the case of Sanket Steel Traders vs. ITO [IT appeal Nos. 2801 2937 (Ahd) of 2008, dated 20-05-2011] and also made reference to the Tribunal's decision in the case of Vijay Proteins Ltd. vs. Asstt.CIT [1996] 58 ITD 428 (Ahd). On appeal by the Department, the Hon'ble Gujarat High Court held as follows: We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to conclusion that the assessee did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this Court in the cose of Sanjay Oilcake Industries v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties other than those mentioned in books of accounts, only the profit element embedded in such purchases could be added to the assessee's income and as such no question of law arose in such estimation. While arriving at the above conclusion, the Hon'ble Court also relied on the decision in the case of Vijay M. Mistry Construction Ltd. 355 ITR 498 (Guj) and further approved the decision of Ahmedabad Bench, ITAT in the case of Vijay Proteins 58 ITD 428. 8.32 In the case of Vijay Proteins (supra), the Hon'ble ITAT was seized with a case of bogus suppliers of oil cakes where 33 parties were found to be bogus by the departmental authorities even though payments were made to the said parties by cross cheques and in fact the A.O. in that case had brought adequate material on record to prove that the cross cheques had not been given to parties from whom supplies were allegedly procured but these were encashed from a bank account in the name of another entity, possibly hawala dealer. Subsequently, the money deposited in that account was withdrawn in cash almost on the same day. The Tribunal however, held that if the purchases were lade from open market without insisting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-genuine purchases considering the facts of the assessee's case. We, therefore, do not find any justification to interfere with the order of the CIT(A) in this regard. The same is sustained. After considering the facts and the arguments of both the sides, we ore of the opinion that it would meet ends of justice, if the disallowance is sustained at 12.5% of the purchase from these two parties. The Assessing Officer is directed to work out the disallowance accordingly. Since the facts of the assessee's case are identical, we respectfully following the above decision of the ITAT, direct the Assessing Officer to disallow 12.5% of the purchases made during the year under consideration. 8.34 Similar cases have been dealt with by the CIT (A), Mumbai and the appeal has been heard by the jurisdictional ITAT, Mumbai and held in the following cases about the nature and treatment in such cases: 1. THE ITAT G Bench, Mumbai in case of Ganpatraj A. Sanghvi Vs. ACIT [ITA No. 2826/Mum/2013] has held that there is no scope for assumption and presumptions for anything can be implied. Addition cannot be sustained on the basis of preponderance of probabilities. Suspici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her held that The payments have been made by account payee cheque which are duly reflected in the bank statement of the assessee. There is no evidence to show that the assessee has received cash book from the suppliers. The additions have been made merely on the report of the Sales tax Department but at the same time it cannot be said that purchases are bogus. We, therefore, set aside the findings of the Ld.ClT(A) and direct the AO to delete the additions of ₹ 4,98,80,892/-. 4. THE ITAT D Bench, Mumbai in case of ACIT Vs. Ramila Pravin Shah [ITA No.5246/Mum/2013] has held that Further, it has to be appreciated that (i) Payments were through banking channel and by Cheque, (ii) Notices coming back, does not mean, those Parties are bogus, they are just denying their business to avoid sales tax/VAT etc,(iii) Statement by third parties cannot be concluded adversely in isolation and without corroborating evidences against appellant, (iv) No cross examination has been offered by AO to the appellant to cross examine the relevant parties. It was further held that, on a conspectus of the matter, we do not find any infirmity in the decision of the Ld.CIT(A) on this issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AALCS4411B 1,97,860.00 7. Nisha enterprises AWCPS3492N 98,020.00 8. Monil Impex AAGPS5222E 1,53,010.00 9. Maruti corporation AOEC5997Q 4,34,780.00 10 Tara Enterprises AWTPS0269A 1,86,363.00 11. Bhumi enterprises AVCPS0096H 1,09,200.00 12. Deepak Sales Corporation ADBPJ9865G 2,17,390.00 13. Mayor Trading Company BMQPS9058H 66,7170.00 14. Pooja Traders ALIPS2588P 8,14,995.00 Total 69,13,0037- 8 . 36 The total purchases of Rs . Rs . 69,13,003 /- , includes VAT of Rs . 2,66,760 / , which is a Govt . tax and should not be included in the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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