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TMI Blog2020 (7) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. The Ld. AR also submitted that facts in the stated appeals are exactly the same to the facts of the case of assessee's son Shri Mitesh Ilesh Gadhia, whose appeal has already been disposed-off by the co-ordinate bench of this Tribunal vide ITA No.354/Mum/2019 order dated 12/04/2019. In the above background, the matter was placed before us for disposal and accordingly, we proceed to dispose-off the cross-appeals as per rival arguments made before us. 1.3 As stated in preceding para 1.2, Ld. AR has urged that since facts in both the years are pari-materia the same as in ITA No.354/Mum/2019 order dated 12/04/2019, similar view may be taken in the matter. The copy of the order has been placed on record. The Ld. AR also placed on record a tabulated chart to submit that the purchases made from one suspicious entity namely M/s Ragini Trading & Investments Private Limited (RTIPL) were genuine and not unsubstantiated / bogus purchases. A working of Gross Profit rate on suspicious transactions as well as on other transactions has also been placed on record for both the years. The Ld. CIT-DR relied on the order of Ld. AO to support the quantum additions. 1.4 We have carefully heard the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 385.07 Lacs after sole addition of bogus purchases of Rs. 381.02 Lacs as against assessed income of Rs. 4.04 Lacs. 3.2 The said assessment stem from search and seizure action u/s. 132(1) carried out by the department in the case of Ushdev group of companies on 11/09/2014. The assessee's concern is stated to be a part of the group. The search operations revealed that M/s Ushdev International Ltd. and its various group concerns obtained accommodation entries from various entities. The statement of key controller of Ushdev Group namely Shri Prateek Gupta was recorded on various dates. The relevant portion of these statements have already been extracted in the quantum assessment order. 3.3 In the above background, notice u/s 153C was issued to the assessee as per due process of law which was followed by statutory notice u/s 143(2). The allegations of Ld. AO were that the assessee inflated its expenses by booking bogus purchases from various entities and therefore, the purchases were to be disallowed. 3.4 The primary argument of assessee was that there was one-to-one correlation between the purchases and corresponding sales and the payment for purchases were through banking cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through banking channels. Therefore, the assessee proved the genuineness of the transactions. The assessee also submitted that there were no allegations of bogus sales by M/s RTIPL since only the purchases made by that entity were under suspicion. The assessee, in the alternative, pleaded for reasonable estimation of profit element against these purchases. It was also submitted that full disallowance of purchases would increase the Gross Profit (GP) rate to an unrealistic level of 4.7% as against normal GP rate of less than 1% reflected by the assessee in preceding as well as in succeeding years. 4.2 The Ld.CIT(A) noticed that the business model of the assessee was that after receipt of orders from the clients, the material was procured from the market from various suppliers. The suppliers would arrange for the material and deliver the material to the client. The delivery would be monitored by the assessee. The payment to the transporter was directly done by the clients. After the delivery of the material, the invoice would be received by the assessee who, in turn, would generate invoice against its own clients. This business model was not found to be incorrect. 4.3 Further, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, only Rs. 1.40 lakhs was the profit on unaccounted sales which could be added. Thus, the balance addition of Rs. 33.63 lakhs was deleted. 6. On further appeal, the Tribunal by the impugned order held that the entire sales which are unaccounted cannot be undisclosed income of the assessee, particularly as the purchase had been accounted for. It was held that only net profit which would arise on such unaccounted sales can rightly be taken as the amount which could be added to the Respondent-Assessee's income for the purpose of tax. 7. The grievance of the Revenue is that Section 69C of the Act is to be invoked and entire amount of undisclosed sales has to be brought to tax. We are unable to appreciate how section 69C of the Act which speaks of unexplained expenditure is all at relevant for this appeal. We are not concerned with any unexplained expenditure in this case. 8. In any view of the matter, the CIT(A) and Tribunal have come to the concurrent finding that the purchases have been* recorded and only some of the sales are unaccounted. Thus, in the above view, both the authorities held that it is not the entire sales consideration which is to be brought to tax b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e substantial savings on account non-payment of government taxes which will be shared with the wholesalers, dealers and the end-users. 5.11 To have an idea as to what can be considered to be reasonable profit margin in respect of the purchases from the alleged hawala/bogus suppliers, it will be of help if the decisions of the Hon'ble Courts on the issue of bogus purchases in respect of assessees which are engaged in the business of trading in iron & steel which is similar to our assessee, are examined. 5.12 The Hon'ble Gujarat High Court in the case of CIT vs. Simit Sheth (2013) 38 Taxmann.com 385 (Guj), was seized with an issue where the A.O. had found that some of the alleged suppliers of iron & steel to the assessee had not supplied any goods but had only provided sale bills and hence, purchases 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. The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so considered that there will be savings on account of taxes while procuring material from grey market. The authorities below relied upon decision of Hon' ble Gujarat High Court in the case of CIT v. Simit P. Sheth (2013) 356 ITR 451/219 taxman 85 Mag./38 taxmann.com 385, which has estimated disallowance @f 2.5% of the disputed bogus purchases to meet the end of justice. The authorities below has not brought on record industry comparables nor any rational comparability vis a vis preceding years GP ratio are brought on record. There is no allegation brought on record by Id.DR that similar additions were a/so made in the immediately preceding year. The assessee earned GP ratio as detailed hereunder for last three years;- Financial Year %GP 2007-08 4.3% 2008-09 5.45% 2009-10 4.9% The books of accounts were not rejected u/s. 145(3) of the 1961 Act by the Revenue. In the immediately preceding year. le. A. Y. 2008-09, the assesses earned GP ratio of 4.3% on total turnover, while for the year under consideration GP ratio earned was 5.45%. In our considered view and based on facts and circumstances of the case as discussed by us in details above, end of justice will be met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P already shown by the assessee in the regular books in respect of the purchases from the said suspicious supplier while computing the additional profit. Accordingly, ground No. 1 of the appeal is partly allowed. As evident, Ld.CIT(A) has directed Ld.AO to apply GP rate of 12.5% with benefit of set-off of GP already shown by the assessee in the regular books in respect of purchases made from M/s RTIPL. The aforesaid adjudication has given rise to cross-appeals before us. 5. Upon due consideration of rival submissions and material on record, we are of the considered opinion that there could be no sale without actual purchase of goods considering the fact that the assessee was engaged in trading activities. The quantitative details were placed on record. There was one-on-one correlation of purchase and sale. The payment to the suppliers was through banking channels. The confirmation of M/s RTIPL was placed on record. The business model of the assessee, as noted by Ld. CIT(A), would explain the non-existence of stock movement register. The GP rate reflected by the assessee qua other years was not abnormal. Prima-facie, there is no change in the nature of business or business model. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame, our findings as well as adjudication as for AY 2009-10 shall mutatis-mutandis apply to this year also. Accordingly, the net additions as sustained by us would be 1% (net) of suspicious / unverified purchased made by the assessee from M/s RTIPL. Accordingly, the revenue's appeal stands dismissed whereas the assessee's appeal stands partly allowed. Reasons for delay in pronouncement of order 7.1 Before parting, we would like to enumerate the circumstances which have led to delay in pronouncement of this order. The hearing of the matter was concluded on 18/03/2020 and in terms of Rule 34(5) of Income Tax (Appellate Tribunal) Rules, 1963, the matter was required to be pronounced within a total period of 90 days. As per sub-clause (c) of Rule 34(5), every endeavor was to be made to pronounce the order within 60 days after conclusion of hearing. However, where it is not practicable to do so on the ground of exceptional and extraordinary circumstances, the bench could fix a future date of pronouncement of the order which shall not ordinarily be a day beyond a further period of 30 days. Thus, a period of 60 days has been provided under the extant rule for pronouncement of the order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board. 8. Quite clearly, "ordinarily" the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression "ordinarily" has been used in the said rule itself. This rule was inserted as a result of directions of Hon'ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that "We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly", and also observed that "arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020". It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus "should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure...". The term 'force majeure' has been defined in Black's Law Dictionary, as 'an event or effect that can be neither anticipated nor controlled' When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an "ordinary" period. 10. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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