9911796707
TMI Blog2018 (8) TMI 1181X X X X Extracts X X X X X X X X Extracts X X X X ..... cross appeals filed by the Revenue. 3. Since these are cross appeals on same issue of bogus purchases, in so far as the appeals for the Assessment Years 2007-08 & 2008-09 are concerned the assessee challenged the reopening of assessment made u/s. 147 of the Act. The contention of the assessee was that these assessments were reopened beyond four years and the reason for reopening the assessment was stated to be that there is inflation in expenditure. Ld. Counsel for the assessee referring to the Page No. 2 of the Assessment Order submitted that though the reasons for reopening the assessment was stated that there is inflation in expenditure while making the assessment the Assessing Officer estimated the Gross Profit on such alleged bogus purchases at the rate at which the assessee has shown the Gross Profit. Therefore, the contention of the assessee was that the basis for making addition is not adhered to. It was also contended that in the reasons it was mentioned that assessee was one of the beneficiaries of the accommodation bills/unsecured loans, but without finalizing the assessment, only Gross Profit addition was made. Therefore, it is contended that basis for making addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned as the Assessing Officer was of the view that there is a reason to believe that income had escaped assessment, there is no change of opinion. Ld.CIT(A) has dealt with this issue and gave a finding that the assessments were reopened on the material seized subsequent to completion of assessments u/s. 143(3) or issue of intimations u/s. 143(1) of the Act and sustained the re-assessments observing as under: - "4.3.1 I have considered the submissions of the appellant and perused the materials available on record including copies of the judicial decisions relied upon by the appellant. The issue for adjudication is whether the A.O. was justified in reopening the assessment u/s.147 of the Act beyond four years of the end of the relevant A.Y. and whether, while doing so, he had complied with the terms of the first proviso to section 147. It is a matter of record that the assessment of the appellant was reopened on the basis of the information received from the DGIT (Inv.), Mumbai vide letter dated 13.03.2014 that the appellant had obtained fictitious purchase bills or accommodation entries to the tune of Rs. 16,74,69,611/-from aforesaid 13 parties and thereby suppressed its true profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be said even in the instant case that there was any application of mind on part of the AO on this issue at the time of previous assessments and, therefore, the reopening of said assessment in these circumstances cannot be said to be based on change of opinion. 4.3.3 Finally, it is found that the A.O. had proceeded to reopen the assessment because there was a failure on part of the appellant to disclose fully and truly facts necessary for its assessment. In this connection, it would be pertinent to refer to the judgment of Hon'ble Supreme Court in the case of Phoolchand Bajranglal 203 ITR 456 (SC) wherein it has been held that where on the basis of subsequent information, the transaction itself is found to be a bogus transaction, mere disclosure of that transaction at the time of original assessment proceedings cannot be said to be disclosure of "true' and 'full' facts of the case and the ITO would have jurisdiction to reopen the concluded assessment in that case. Since in the instant case, the purchases from the above 13 parties were not genuine purchases but in the nature of accommodation entries, it is clear that the disclosure of aforesaid purchases as genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale proceeds received by those parties in the Income Tax Return. Therefore, it was submitted that since the parties have confirmed the transactions with the assessee by filing necessary details in response to notices issued u/s. 133(6) of the Act the purchases cannot be treated as bogus. It is further submitted that all the purchases are genuine, beyond doubt and supported by sufficient materials, all the purchases are backed by corresponding sale. The Gross Profit ratio shown by the assessee is quite reasonable, payment for purchases are made by account payee cheques only. It is further submitted that nothing has been brought on record by the Assessing Officer to show that the money has come back to the assessee to treat the purchases as non-genuine. It is also submitted that the Ld. DR did not provide copy of materials and statements relied upon by him nor allowed any opportunity to the assessee to cross examine those parties who have been believed to have provided alleged entries of purchases. 8. Ld. Counsel for the assessee further submitted that assessee produced necessary documentary evidences before the Assessing Officer such as, order for purchase is being placed afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 15.02.2018. 11. Ld. Counsel for the assessee also contended that Gross Profit from these purchases were made without rejecting the Books of Accounts, therefore, profit cannot be estimated without rejection of Books of Accounts. Reliance is placed on the decision of the Hon'ble Madras High Court in the case of Pr. CIT v. Marg Ltd., [396 ITR 580] and the decision of the Hon'ble Karnataka High Court in the case of CIT v. Anil Kumar & Co. [386 ITR 702]. 12. Ld. DR strongly placed reliance on the order of the Assessing Officer. Ld. DR submitted that assessee could not prove that the purchases made were genuine and therefore the Assessing Officer rightly estimated the addition from the purchases. 13. We have heard the rival submissions, perused the orders of the authorities below. Assessing Officer required the assessee to prove the genuineness of the purchases, since the information was received from DGIT(Investigation), Mumbai that assessee was one of the beneficiaries of bogus purchase bills issued by the companies which were maintained by Bhanwarlal Jain Group as there was search in the case of Bhanwarlal Jain Group. The Revenue came to know that the Bhanwarlal Jain Gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving that the purchases amounting to Rs. 16,74,69,611/- made by it from the aforesaid 13 concerns are genuine. It is noticed from the record that the AO treated the aforesaid purchases from 13 parties as bogus or non-genuine not merely on the basis of information received from the Investigation Wing but also because the appellant failed to furnish the purchase orders, delivery challans/ angadia receipts etc. in respect of the said purchases of cut and polished diamonds. The absence of these supporting evidences lent credence to the AO's finding that the purchases shown to have been made by the appellant from aforesaid 13 concerns were nothing but accommodation entries without any actual movement or delivery of goods. 6.3.2 A perusal of the relevant invoices reveals that out of aforesaid 13 concerns of Bhanwarlal Jain Group, many concerns were having common addresses, as brought out in the table below: - Sr. No. Name Address 1. Ankita Exports, Milan & Co. Parvati Exports 3-M, Ambika Darshan, Moti Kadia Sheri, Saiyadpura, Surat - 395 003 2 Laxmi Diamond Marvin Enterprise Prime Star 204, Vaibhav Chamber, Rughnathpura Main Road, Surat - 395 003 3. Mukti Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually made but not from the parties from whom these are claimed to have been made and instead may have been purchased from grey market without proper billing or documentation, only the profit element embedded therein needs to be brought to tax. The estimation of rate of profit must necessarily vary with the nature of business and no uniform yardstick can be adopted. It is well-known that if purchases are made from open market without insisting on the genuine bills, the suppliers may be willing to sell those products at a much lower rate as compared to the rate which they may charge in case the dealer has to give a genuine sale invoice in respect of that sale and supply the goods. It is a matter of common knowledge that there is bound to be a substantial difference between the purchase price of unaccounted material and rate of purchase of accounted for goods due to various factors such as saving on account of sales-tax and other taxes and duties leviable in respect of manufacture or sale of goods in question and substantial saving in the income-tax to suppliers in respect of income from sale of unaccounted goods etc. In these circumstances, the diamonds in the grey market are alw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the purchases have been actually made but not from these parties but they have been made from gray market without proper billing or documentation. In our considered view, when the parties have confirmed the transaction by filing necessary details as was done in this case the purchases cannot be treated as non-genuine. 15. Almost identical issue came up in the case of the M/s. Vama International v. I.T.O (supra) wherein the Assessing Officer treated the whole purchases are non-genuine, Ld.CIT(A) estimated the profit element from that purchases @12.5% the Coordinate Bench considering the evidences on record deleted the estimation made by the Ld.CIT(A) observing as under: - "16. We have heard the rival submissions, perused the orders of the authorities below. In this case the assessments were reopened based on the information from the DGIT(Investigations), Mumbai that assessee is a beneficiary from the entities operated by Shri Bhanwarlal Jain wherein the search took place and it was found that Shri Bhanwarlal Jain is providing only accommodation entries and there were no actual sale transactions. Assessing Officer observed that the assessee could not prove the movement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has remained to be carried out before arriving at the conclusion that impugned purchase debited in the books of the appellant are bogus. 14. It is not the case of the Assessing Officer that the above party i.e. M/s. Daksh Diamonds specifically stated that it had made bogus sales to the appellant. The purchase invoices, payments to the parties through cheques and closing stock inventory submitted by the appellant are certain important evidences regarding the purchases made by the appellant that cannot be set aside summarily. Therefore, the conclusion drawn regarding the purchases made from M/s.Daksh Diamonds being entirely bogus, is not justified. 15. In this regard, the ratio was laid down by the Hon'ble High Court of Bombay in the case of CIT v. NikunjEximp Enterprises (P.) Ltd., is very relevant, wherein it was held that - "When the assessee have filed letter of confirmations of the suppliers, Bank statements highlighting the payment entries through account payee cheque, copies of invoices, stock reconciliation statements before the AO; and merely because the suppliers did not appear before the AO, one cannot conclude that the purchases were not made by the assesses. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncements on the issue, the courts have taken a consistent view that in case of non-existent parties from whom the purchases are shown to have been made, only pert of such purchases can be disallowed, particularly in the cases where the corresponding sales are not doubted. Alternatively, the profit embedded in such sales against the alleged bogus purchase, can only be brought to tax. 18. In the case of CIT-1 Vs Simit P. Sheth, ITA no. 553 of 2012, order dated 16.01.2013, while deciding a similar issue the Hon'ble High Court of Gujarat has held that: - "We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed purchases of steel. It may be that the three suppliers from whom the assessee claimed to have purchased the steel did not own up to such sales. However, vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and non-existent or that the purchases were actually made but not from the parties from whom it was claimed to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents cited above; what can be disallowed or taxed in the instant case of the alleged bogus purchases is only the excess profit element embedded in such purchases shown to have been made from M/s.Daksh Diamonds. The appellant has not placed any evidence on record that the goods were purchased from the above party at arms' length price. The appellant has also not placed on record any comparable bills/invoices for purchases of similar items made from other parties to establish that the purchases from M/s.Daksh Diamonds in question was at par with the purchases made from other parties during the period under consideration. The possibility of such purchases from unregistered dealers without invoices cannot be ruled out. Hence possibility of such purchases from unregistered dealers without invoices cannot be ruled out. In view of the above, the correctness of the purchase prices mentioned on such bills/invoices issued by M/s.Daksh Diamonds in question cannot be accepted and some additional profit needs to be estimated on such purchases made from M/s.Daksh Diamonds. As the purchases invoices issued against the alleged bogus purchases remains unverifiable, and part of the profit elemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit around 6% in these Assessment Years. The average Gross Profit shown by the assessee stood at 6.04% for these Assessment Years. Therefore even if we go by the submissions of the Ld.DR that the profit element should be estimated at 6% as per the CBDT Circular the assessee has already shown 6.04% of overall Gross Profit during these three Assessment Years. The disallowance/estimation of profit on purchases by treating them as bogus cannot be made only on the statements recorded from third parties, especially when those parties have responded to the notice issued u/s.133(6) of the Act by filing all necessary documents to prove that they have made sales to the assessee. It is also the submission of the assessee that none of the impugned parties have been declared as Hawala dealers or suspicious dealers by the Sales Tax Department and the genuineness of the purchases have been doubted merely on the basis of the statement given by the Bhanwarlal Jain group. The assessee has furnished all necessary evidence to prove the genuineness of the purchases, the parties have also responded to the notices u/s. 133(6) of the Act by filing necessary evidence as to prove that the purchases are genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of account. When the suppliers confirm that the transactions of sales made by them to the assessee are genuine, that too, in response to the notices issued by the AO u/s 133(6) of the Act during the course of assessment proceedings, in our view, the said replies cannot be rejected without bringing on record any material to show that they are not true. We notice that the AO did not bring any material on record and he simply relied upon the report given by the investigation wing. As per Ld A.R, the statement given by Shri Bhanwarlal jain is a general statement only. The assessee, as stated earlier, has furnished confirmation of ledger accounts and also affidavits to prove the genuineness of transactions. We notice that the AO could not controvert those documents. 12. In view of the foregoing discussions, we are of the view that the assessee has duly discharged the burden to prove the genuineness of purchases. On the contrary, the AO has simply relied upon the report given by the investigation wing. In this view of the matter, we are of the view that no addition is called for on account of alleged bogus purchases. Accordingly, we set aside the order passed by Ld CIT(A) o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
