TMI Blog2017 (11) TMI 1143X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, had therein deliberated on the gross profit of the assessee as against that reflected in the trade line being of the view that the same did not inspire much of confidence, had thus discarded the same by observing that the profit involved in the trade line of the assessee was found to be comparatively more. Thus, the aforesaid observations of the CIT(A) laid down the very foundation of his conviction that the purchases debited by the assessee in his books of account were inflated. We find that no attempt had been made by the ld. A.R before us to either dislodge the said observation of the CIT(A), or to prove that the same was perverse We find that the A.O after making independent inquiries and conclusively proving that the assessee had failed to substantiate the genuineness and veracity of the purchase transactions and therein discharge the onus as stood cast upon him, had only thereafter concluded that the purchase transactions under consideration were found to be ingenuine. We are of the considered view that no infirmity as regards sustaining of the observations of the A.O and the addition emerging there from does arise from the order of the CIT(A), solely for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or add a new ground which may be necessary. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 2. Briefly stated, the facts of the case are that the assessee who is engaged in the business of development of properties, painting and renovation had filed his return of income on 29.09.2009, declaring total income of ₹ 43,19,670/-. The return of income filed by the assessee was processed as such u/s 143(1) of the Act . The case of the assessee was reopened under Sec. 147, on the basis of the information received from the DGIT (Inv.), Mumbai that the assessee was one of the beneficiaries of the accommodation entries provided by some of the MVAT dealers who were indulging in issuing bogus sale/purchase bills. 3. That during the course of the assessment proceedings the A.O on the basis of the information received from the DGIT (Inv.), Mumbai, observed that the assessee had taken accommodation entries for purchases aggregating to ₹ 1,07,13,732/- from the following parties:- S. No. Name of the Hawala Party Bill Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforementioned parties; and (vii) details of the stock inventory. The assessee in compliance to the aforesaid directions of the A.O, though placed on his record the copies of the ledger accounts and the bank statements reflecting the payments made to the aforementioned parties for the purchases claimed to have been made from them, but however failed to produce either of the aforesaid parties for examination before the A.O. The A.O being of the view that as neither the assessee had produced the parties for necessary examination, nor the documentary evidence placed on record by the assessee in order to substantiate the genuineness and veracity of the purchase transactions did inspire any confidence, therefore, observed that the assessee had failed to discharge the onus as was so cast upon him. The A.O after deliberating on the facts of the case concluded that in the absence of the relevant supporting documents which could go to evidence the genuineness of the transactions of purchase of goods claimed by the assessee to have been made from the aforementioned parties, the same could not be allowed as an expenditure for the following reasons : ( i) The assessee could not produce t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee that it purchased goods in good faith is not tenable. The A.O on the basis of his aforesaid observations, held that on the basis of his independent inquiries, findings of the sales tax department and the details submitted by the assessee, it could fairly be concluded that the assessee had not purchased goods from the aforementioned parties and had only taken accommodation bills from them to inflate the expenses and scale down the profitability in order to reduce his tax burden. Thus, the A.O being of the view that the purchases claimed by the assessee were unverifiable, therefore, rejected the books of account under Sec. 145(3). 4. The A.O further observed that the assessee who was engaged in the business of painting, renovation and civil construction as a contractor had failed to demonstrate beyond doubt that the material claimed to have been purchased from the aforementioned parties was consumed in the course of his aforesaid business. The A.O on the basis of his aforesaid observations concluded that now when the assessee had even failed to substantiate the consumption of the goods under consideration, therefore, disallowed the entire purchases of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration spread at about 20 sites all over the city, therefore, the requisite information could not be consolidated and furnished to the A.O. It was submitted by the assessee that the observations of the A.O that no actual delivery of the goods had taken place was beyond comprehension, because if that would had been so, then it would not had been possible to have carried out the extensive repair and renovation work of various societies during the year under consideration. The assessee further submitted that even if the books of account were to be rejected, the A.O remained under a statutory obligation to have made a fair estimate on the basis of the past records of the assessee. Thus, taking support of his aforesaid contentions the assessee submitted before the CIT(A) that the entire addition made by the A.O was liable to be deleted. Alternatively, it was submitted by the assessee that even if the purchases made by the assessee remained unverifiable, the disallowance was liable to be restricted only to the extent of 12.5% of the aggregate value of the purchases claimed by the assessee to have been made from the aforementioned parties. 6. The CIT(A) after deliberating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... known entities operating in the open/grey market, therefore, concluded that the additions in the hands of the assessee were liable to be restricted only to the extent of the profit element involved in making of such purchases from the unknown entities. 7. That deliberating on the facts which had a bearing on the estimation of the profit percentage in the business of contract work of repairs and renovation of buildings, it was observed by the CIT(A) that the profit involved in the trade line of the assessee was found to be more than the profit percentage as was declared by the assessee. The CIT(A) further observed that the assessee had by way of an alternative contention requested that the addition in its case may be restricted by estimating the profit percentage ranging from 12.5% to 25%. The CIT(A) on the basis of his aforesaid observations concluded that the profit percentage in respect of the bogus purchases in the hands of the assessee could fairly be estimated @ 25%, over and above the profit percentage already declared by him. Thus, the CIT(A) on his aforesaid observations directed the A.O to restrict the addition in the hands of the assessee @ 25% of the total bogus purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient to discard the statement of a party on the basis of which adverse inferences are drawn in the hands of the assessee, relied on the judgment of Hon ble High Court of Delhi in the case of Principal Commissioner of Income Tax Vs. Best Infrastructure (India) P. Ltd. (2017) 397 ITR 82 (Del) . The Ld. A.R. further submitted that though the CIT(A) had rightly appreciated that now when the sales/receipts of the assessee had not been dislodged, therefore, the purchase of the goods involved in the said purchase transactions could not be doubted, but however, despite so observing, had erred in sustaining an addition to the extent of 25% of the aggregate value of the purchases made by the assessee from the aforementioned parties. Per contra, the Learned Departmental representative (for short D.R ) submitted that as observed by the A.O, the inquiries made during the course of the assessment proceeding by way of notices sent u/s 133(6) therein revealed that the purchase transactions under consideration were not found to be genuine transactions. It was thus submitted by the Ld. D.R. that in the backdrop of the facts of the case the A.O had rightly disallowed the entire amount of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases from the aforementioned supplier parties and had debited its profit and loss account to the said extent, then the onus was cast upon the assessee to place on record documents which could go to evidence the genuineness and veracity of the purchase transactions. We are further of the view that now when there were serious allegations in respect of the purchase transactions claimed by the assessee to have been made from the aforementioned parties, therefore a much more heavy onus was liable to be discharged by the assessee in order to irrebutably evidence the genuineness and veracity of the purchase transactions under consideration. We find that the assessee had failed to substantiate the authenticity of the purchase transactions, and to the extent the material was placed on record by him, the same to our considered view was seriously falling short of the quality of onus which was required to be discharged by him. We further find that our aforesaid view that the transactions of purchase of goods as claimed by the assessee to have been made from the aforementioned parties could not be held to be genuine, further stands fortified from the very fact that the assessee had during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts involved in the present case and find that the estimation of the profit element involved in making of the purchase under consideration had fairly been adopted by the CIT(A) @25% after considering certain important factors, viz. (i). the gross profit declared by the assessee as deliberated upon by the CIT(A) in the backdrop of the profit percentage involved in the trade line of the assessee did not inspire much of confidence; and (ii). the assessee had himself offered that addition within the range of 12.5% to 25% of the aggregate value of the purchase transactions under consideration may be made as regards the profit embedded in respect of the purchase transactions under consideration. We have given a thoughtful consideration to the estimation of the profit element as regards the bogus purchases under consideration at 25% by the CIT(A), and are persuaded to be in agreement with him. We are of the considered view that the CIT(A) after rejecting the books of account of the assessee, had therein deliberated on the gross profit of the assessee as against that reflected in the trade line being of the view that the same did not inspire much of confidence, had thus discarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, we are of the considered view that the case of the assessee before us does not fall within the all fours of the proposition as had been canvassed before us. We find that in the case of the present assessee, though the proceedings had been initiated by the A.O on the basis of the information gathered from the MVAT authorities that the assessee had taken accommodation entries from the aforementioned parties, but then, the A.O had not merely proceeded with and based the addition in the hands of the assessee on the basis of the said stand alone information itself. We find that the A.O after making independent inquiries and conclusively proving that the assessee had failed to substantiate the genuineness and veracity of the purchase transactions and therein discharge the onus as stood cast upon him, had only thereafter concluded that the purchase transactions under consideration were found to be ingenuine. We are of the considered view that no infirmity as regards sustaining of the observations of the A.O and the addition emerging there from does arise from the order of the CIT(A), solely for the reason that the assessee was not allowed cross examination of the aforementioned parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y an addition @ 25% profit rate on total purchases of ₹ 68,97,619/-made from 10 parties. 2. The appellant prays that the order of the Learned CIT(A) on the above grounds be set aside and that of the A.O be restored. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing officer be restored. 12. Briefly stated, the facts of the case are that the assessee had filed his return of income on 30.09.2011, declaring total income of ₹ 61,25,234/-. The return of income filed by the assessee was processed as such u/s 143(1) of the Act . The case of the assessee was reopened under Sec. 147, on the basis of the information received from the DGIT (Inv.), Mumbai that the assessee was one of the beneficiaries of the accommodation entries provided by some of the MVAT dealers who were indulging in issuing bogus sale/purchase bills. 13. That during the course of the assessment proceedings the A.O on the basis of the information received from the DGIT (Inv.), Mumbai, observed that the assessee had taken accommodat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the CIT(A) @25% of the aggregate value of the purchases. That both the assessee and the revenue being aggrieved with the order of the CIT(A) had therein carried the matter in appeal before us by way of filing the present cross-appeals. 15. We find that the facts and the issue involved in the present cross appeals before us are the same as were involved in the cross appeals of the assessee and the revenue for A.Y. 2010-11, which had been adjudicated by us hereinabove, therefore, our order passed while disposing of the appeal of the assessee, marked as ITA No. 73/Mum/2017 and appeal of the revenue, marked as ITA No. 233/Mum/2017, for A.Y. 2010-11, shall apply mutatis mutandis for disposing of the present cross-appeals of the assessee and the revenue before us. We thus in terms of our observations recorded while disposing of the appeals of the assessee and the revenue for A.Y. 2010-11, dismiss the present cross appeals of the assessee and the revenue for A.Y. 2011-12. 16. That the appeal of the assessee, marked as ITA No. 72/Mum/2017 and the appeal of the revenue, marked as ITA No. 234/Mum/2017, are dismissed. 17. That both the appeals of the assessee and the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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