TMI Blog2020 (4) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... rom alleged hawala dealers, only profit element embedded in those purchases needs to be taxed, but not total purchase from those parties. Consistent with view taken by the Co-ordinate Bench in number of cases, and also by following the decision of Hon ble Bombay High Court in the case of The PCIT vs Mohammed Haji Adam Co [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] we are of the considered view that a reasonable profit on alleged bogus purchases would meet ends of justice. Hence, we direct the ld. AO to estimate 12.50% profit on alleged bogus purchases and further allow deductions towards GP already declared for the year in regular books of accounts. - ITA No.5982/Mum/2019 - - - Dated:- 29-1-2020 - Shri Saktijit Dey, Judicial Member And Shri G. Manjunatha, Accountant Member For the Assessee : Shri. Vishnu Agarwal For the Revenue : Shri A.H.Ansari, Sr.AR (CIT) ORDER PER G.MANJUNATHA (A.M): This appeal filed by the assessee is directed against, the order of the Ld. Commissioner of Income Tax (Appeals) 30, Mumbai, dated 28/08/2019 and it pertains to Assessment Year 2011-12. 2. The assessee has raised the following grounds of appeal:- 1. On the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bogus purchases as against the addition made by the AO of 12.5% of the bogus purchases. It was pointed out that notice u/s 133(6) issued by the AO to the parties from whom purchases have been made had been returned unserved, (para Bfjiij of the assessment order), that there was failure to produce parties from whom purchases were made (Para 8(iv) of the assessment order), that vital documents like delivery challans, transport receipt, goods inward register maintained at the godown etc. were not furnished (para 8(v) of the assessment order). There was no compliance to this notice of enhancement u/s 251[l)(a). 6.1 The impugned purchases are to the extent of ₹ 7/l,52,992/- and these purchases arc from 6 parties. These purchases of ₹ 74,52,992/- have been claimed by the assessee appellant as expenditure, in the P L account. This claim of expenditure has to be substantiated by the claimant i.e. the assessee appellant. As pointed out above, the burden of proof lies with the person making the claim. !n the case of a trader, purchase of goods would normally have to be substantiated with proof of purchase through purchase invoice, delivery challan, transportation rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the law. The action of the CIT u/s 263 to estimate the entire unsubstantiated purchases as bogus purchases was upheld. 6.5 The Hon'ble ITAT, Pune, in Kolte Patil, in ITA Nos.1411 to 1415/PN/2013 for A- Ys 2003-04, 2005-06 2007-08 to 2009-10 and ITA Nos.1478 to 1483/PN/2013 for AY 2004-05 to 2009-10 held that, where suppliers have been unable to produce even the primary evidence to show movement of goods from supplier to assessee or any other form of evidence of delivery, even though payment was made through cheques and purchases are evidenced by suppliers bills, the purchases are liable to be disallowed in toto. 6.6 Reliance is also placed on Sumati Dayal (214 ITR 801 SC) and Durga Prasad More ((1971) 82 ITR 540 SC) to state that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities, it is not probable that a purchaser could be unable to furnish requisite information with respect to purchases made by it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or personal expenses of the assessee ; (c) the expenditure must be laid out wholly and exclusively for the purpose of business or profession. If the assessee fails to satisfy any of these tests, the expenditure claimed is not allowable. The Hon'ble Bombay HC held so in the case of Rama nand Sagar (256 ITR 134). 6.11 The argument that the sales could not have been made without purchases is addressed below. The onus is on the appellant to establish the purchases. When this onus is not discharged, the purchases are disallowed to the extent these are not substantiated. It is not for the Department to doubt sales. The premise as per the IT Act in Sec 37(1) read with the Indian Evidence Act, Sec 101 and 103 is that the burden of proof with respect to claim of expenditure, in this case towards purchases, is on the assesseeappellant. When the burden is not discharged, the claim is liable to be disallowed. It is reiterated that it is not for the Department to reconcile the Sales claimed by the appellant. Every argument in logic has a structure that is premises and conclusion. Premises are statements which give evidence for, or reasons for accepting the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the event of disallowance of purchases as bogus, his sales too should be reduced, the onus is on the assessee to establish which of the sales are bogus, A bald claim that the sales have not been doubted by Department cannot be advanced as an argument to hold unsubstantiated purchases per Sec. 37(1) as an expenditure. It is pertinentto note that the oft cited Hon'ble Gujarat High Court decision in the case of Simit P Sheth ((2013) 356ITR451) is based on the fact that where purchases were made from grey market, only profit element embedded in such purchase could be added to assessee's income and accordingly upheld ITAT's estimation of profit @ 12.5% of bogus purchases. The facts in the recent decision of the Hon'ble Bombay High Court in the case of M/s Mohommad Haji Adam Co. dt. 11.02.2019, were that the Ld. AO added the entire sum on account of goods never being supplied to the assessee; the CIT(A) compared the purchases and sales statement of the assessee and observed that the department had accepted the sale and therefore there was no reason to reject the purchases, because without purchases there could not be sales and restricted the addition to 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh assesee has filed certain basic evidences, but failed to file further evidence in the backdrop of clear finding by the Sales Tax Department, Maharashtra that those parties are involved in providing accommodation entries without actual delivery of goods. The Ld. AO had also taken support from the investigation conducted during the course of assessment proceedings, as per which notice issued u/s 133(6) to the party were returned un-served by the postal authorities. Therefore, he came to the conclusion that purchase from the said party is bogus in nature. It is the contentions of the assessee before the lower authorities that purchase from the above party are supported by necessary evidences. It has furnished all possible evidences, including books of accounts; stock details and bank statement to prove that payment against said purchases have been made through proper banking channels. 6 Having considered arguments of the Ld. DR and also, material available on record, we find that both the sides failed to prove the case in their favour with necessary evidences. Although, assessee has filed certain basic evidences, but failed to file further evidences to conclusively prove purc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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