TMI Blog2017 (11) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... stified view, which deserves to be upheld. Therefore, we reverse the order of the First Appellate Authority and upheld the conclusion drawn in the assessment order on the issues in hand. The appeal of the Revenue, is therefore, allowed. - ITA NO.6104/Mum/2014 - - - Dated:- 14-9-2017 - Shri JOGINDER SINGH, Judicial Member And Shri G. MANJUNATHA, Accountant Member For The Revenue : Shri V. Justin-DR For The Assessee : None ORDER Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 26/06/2014 of the Ld. First Appellate Authority, Mumbai, holding that there was no enough material/evidence to reject the books of accounts and correct income can be computed by excluding one bogus transaction without appreciating the fact that assessee had not maintained stock records/stock register and also fail to prove the genuineness of purchases. Further, in directing to adopt gross profit at the rate of 1.5% on the sales out of purchases made from M/s Siddhpad Trading Pvt. Ltd. and recomputed the income accordingly. 2. During hearing, none was present for the assessee, in spite of the fact that on earlier date, on 06/12/2016, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but soon thereafter the amounts were withdrawn by bearer cheques.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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the entire quantity of opening stock, purchases and the quantity manufactured during the year under consideration were sold by the assessee. Therefore, the purchases of the entire 1,02,514 metres of cloth were sold during the year under consideration. The Tribunal, therefore, accepted the assessee's contention that the finished goods were purchased by the assessee, may 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 and also made reference to the Tribunal's decision in the case of Vijay Proteins Ltd. v. Asst. CIT [1996] 58 ITD 428 (Ahd). 6. We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mate, 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 per cent. on similar facts. In the circumstances, for the reasons stated hereinabove, the said grounds of appeal do not give rise to any question of law. 10. As regards the proposed question (B) which pertains to the deletion of addition of ₹ 7,88,590 made on account of inflation of expenses paid to Metal and Machine Trading Co. (MMTC), the Assessing Officer has found that MMTC was a partnership firm of Shri Nitin Gajjar along with his father and brother operating from Bhavnagar. A perusal of their transactions with the assessee indicated that there is some inflation of expenses as detailed in paragraph 6.1 of the assessment order. After considering the evidence on record, the Assessing Officer disallowed the amount ₹ 7,88,590 on account of payment made to MMTC. 11. The assessee preferred an appeal before the Commissioner (Appeals), who upon appreciation of the evidence on record found that the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 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. The Assessing Officer after examining the evidence on record and considering the explanation given by the assessee, made addition of ₹ 44,54,426, ₹ 39,59,490 being the purchase price of the crane along with its spare parts and ₹ 4,94,936 being depreciation claimed by the assessee. The Commissioner (Appeals), upon appreciation of evidence on record, was of the view that the Assessing Officer has not appreciated the facts of the case properly and had made disallowance which was not permitted by the Incometax Act. It was held that disallowance could only have been made in respect of expenses debited to the profit and loss account whereas in the present case the purchase of crane and spare parts of the crane and other machineries were in the nature of acquisition of capital asset. According to the Commissioner (Appeals), the disallowance could have been made on depreciation only if at all the Assessing Officer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is dismissed. 2.4. The Hon'ble jurisdictional High Court in the case of CIT vs Ashish International Ltd. (ITA No.4299/2009) order dated 22/02/2011, observed/held as under:- The question raised in this appeal is, whether the Tribunal was justified in deleting the addition on account of bogus purchases allegedly made by the assessee from M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. According to the revenue, the Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. in his statement had stated that there were no sales / purchases but the transactions were only accommodation bills not involving any transactions. The Tribunal has recorded a finding of fact that the assessee had disputed the correctness of the above statement and admittedly the assessee was not given any opportunity to cross examine the concerned Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. who had made the above statement. The appellate authority had sought remand report and even at that stage the genuineness of the statement has not been established by allowing cross examination of the person whose statement was relied upon by the revenue. In these circumstances, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urged that detailed inquiries were made and thereafter the conclusion was reached. The Tribunal found that there was no evidence anywhere that these concerns gave bogus vouchers to the assessee. No doubt, there were certain doubtful features, but the evidence was not adequate to conclude that the purchases made by the assessee from the said parties were bogus. The Tribunal accordingly, did not sustain the addition retained 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO . 2.3.Before us, Departmental Representative argued that both the suppliers were not produced before the AO by the assessee, that one of them was declared hawala dealer by VAT department, that because of cheque payment made to the supplier transaction cannot be taken as genuine. He relied upon the order of the G Bench of Mumbai Tribunal delivered in the case of Western Extrusion Industries. (ITA/6579/Mum/2010- 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT (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. 2.10. In such type of cases, broadly, the Ld. Commissioner of Income Tax (Appeal) as well as this Tribunal has followed the decisions 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 and the decision of M/s Nikunj Eximp(supra) from Hon'ble jurisdictional High Court, wherein, the aggregate disallowance was restricted to 12.5%. Admittedly, there cannot be sale without purchases. The case of the Revenue is that there is bogus nature of purchases made from suppliers and the parties were not found existing at the given addresses. 2.11. In the present appeal, the assessee is a listed company at Bombay Stock Exchange, declared income of ₹ 68,74,360/- in its return filed on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, which are under challenge before this Tribunal. 2.12. Admittedly, in such type of cases, there is no option but to estimate the profit which depends upon the subjective/objective approach of an individual and the material facts available on record. Considering the material facts, available on record, we find that, to plug the revenue leakage, the Ld. Assessing Officer has taken a justifiable approach. Before this Tribunal, as mentioned earlier, on the appointed date, the assessee neither presented itself, nor moved any adjournment petition, to justify the conclusion drawn in the impugned order. We find that the factual finding recorded in the assessment order has not been controverted by the First Appellate Authority. Normally, in such type of case, the Tribunal and the Hon'ble jurisdictional High Court has adopted the profit at the rate of 12.5% of the bogus purchases. However, considering the material facts, the Ld. Assessing Officer has already taken a justified view, which deserves to be upheld. Therefore, we reverse the order of the First Appellate Authority and upheld the conclusion drawn in the assessment order on the issues in hand. The appeal of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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