TMI Blog2017 (11) TMI 1234X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, Mumbai dated 20/01/2016 for the A.Y.2009-10 and 2011-12 in the matter of order passed u/s.143(3) r.w.s. 147 and Section 143(3) of the IT Act respectfully. 2. Common grievance of assessee in both the years relate to CIT(A) s action for estimating net profit margin of 12.5% in respect of bogus purchases. 3. Rival contentions have been heard and record perused. 4. Facts in brief are that the assessee is an individual and is engaged in the business of trading in Ferrous Non Ferrous Metal, under the proprietary concern by name M/s Palgotta Metal Industries. The return of income for A.Y. 2009-10 was4 filed on 29-09-2009 declaring total income of ₹ 7,54,600/-. Subsequently the assessment was reopened u/s 147 of the Act by issuing a notice u/s 148 of the Act. Assessment u/s 143(3) was completed by the Ld. AO on 28-03-2014 determining the total income of ₹ 1,23,50,530/-. During the course of reassessment proceedings, in order to verify the genuineness of purchases, notice u/s 133(6) of the Act issued to the parties at the addresses provided by the assessee. In respect of five parties the notices could not be served and returned back by the postal authorities with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases. However, the said notices were returned by the postal authorities with the remarks vnot known', left'. The appellant was accorded sufficient opportunities to prove the genuineness of the parties by producing them along with the books of accounts. However, he failed to do so and merely relied on the proposition that the goods were purchased on payment by cheques and that no sales could be effected without responding purchases. However, Ld. AO was not satisfied with the explanation furnished and went on to hold that the material was not received from these parties and must have been purchased in cash to regularise purchases and sales. It was further held by the AO that from whom such goods were .purchased in cash was within the - exclusive knowledge of the appellant and therefore, total amount of such purchases had to be added as unexplained expenditure U/s 69C of the Act, since the expenditure was not verifiable, is the contention of the AO for considering the addition. 6.2 ' Brief summary of the submissions of the appellant in support of the grounds of appeal are that he is in the business, of last 20 years and is a law abiding citizen and the business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue must be found against him. Therefore, onus is always on a person who asserts a proposition or fact and .in the instant case, the appellant has miserably failed to lead evidence. 6.4 Coming to the main issue, it is observed from the assessment proceedings that, despite providing adequate opportunity by the AO, the appellant has failed to produce key evidences like Purchase order, transportation bill, octroi receipt, weighing bill, goods receipt notes (CRN), etc., details. When the Sales Tax Department has classified the five parties as Hawala Dealers and has subsequently forwarded the information to the Income Tax Department that the appellant is one of the beneficiaries, onus of very high degree is on the appellant to prove with infallible evidence that the purchases are genuine and the material was received by the appellant from these parties. But, the appellant is not able to produce any evidence whatsoever to prove that the goods in terms of quantity and quality from the above said parties were actually received by the appellant. The appellant has not produced copies of the consignments, if any, received from the transport contractor showing that the material purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 record a different conclusion, different from the one recorded by the Commissioner (Appeals) and the Tribunal concurrently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts 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, The purchases of the entire 1,02,514 meters of cloth were sold during the year under consideration. The Hon'ble Tribunal, therefore, accepted the assesseefs 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 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the said parties were held to be bogus. The A.O. in that case added the entire amount of purchases to gross profit of the assessee. Ld. CIT (A) having found that the assessee had indeed purchased though not from named parties but other parties from grey market, partially sustained the addition as probable profit of the assessee. The Tribunal however, sustained the addition to the extent of 12.5%. Taking into account the above facts, the Hon'ble Gujarat High Court held that since the purchases were not bogus, but were made from 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. In the case of Vijay Proteins, the Hon'ble ITAT was seized with a suppliers of oil cakes where 33 parties were found to be bogus by the departmental authorities even though payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustained the addition at 12.5%. While doing so, he has also relied upon the decision of the Tribunal in the case of M/s. Vijay Proteins Ltd. 55 TTJ (Ahd) 76, In the case of M/s. Vijay Proteins Ltd. the Tribunal has sustained the addition of 25% of the bogus purchases. However, considering the facts of the assessee s case the CIT (A) restricted the disallowance to 12.5% as against 25% made in the case of M/s. Vijay Proteins Ltd. From these facts it is evident that the CIT(A) has sustained the addition at 12.5% of the 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 CFT (A) in this regard. The same is sustained. 6.12. The motive behind obtaining bogus bills thus, appears to be inflation of purchase price so as to suppress true profits. Estimation ranging from 12.5% to 25% has been upheld by the Hon'ble Courts depending upon the nature of the business. As held in the case of Simit P. Sheth (supra) no uniform yardsticks could be applied to estimate the rate of profit and it varies with the nature of business. Taking all the facts into consideration and the assessee is offe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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