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TMI Blog2017 (10) TMI 1558X X X X Extracts X X X X X X X X Extracts X X X X ..... lead case, therefore, we shall first take up the cross appeals of the assessee and the revenue for A.Y. 2010-11. The assessee vide his appeal marked as ITA No. 126/Mum/2016 had assailed the order of the CIT(A) by raising the following grounds of appeal before us: "1. That on the facts and circumstances of the case and in law the ld. Assessing officer has erred in making an addition u/s 69C of Rs. 3,66,65,814/- in respect of peak amount of alleged bogus purchases from various parties without giving reasonable & adequate opportunity and also without properly appreciating the facts of the case & applicable tax law provisions. Thus appellant prays that alleged addition made at Rs. 3,66,65,814/- u/s 69C being wrong on facts & bad in law required to be deleted. 2. That the appellant craves the leave to add, alter, amend and substitute and to raise new or additional grounds of appeal at the time of hearing." The revenue on the other hand had challenged the order of the CIT(A) on the following grounds: "1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in confirming addition @ 17.5% of total purchases held as bogus. 2. The appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned parties, as well as place on record documentary evidence to substantiate the genuineness and veracity of the purchases claimed to have been made from them, viz. (i) copy of ledger accounts; (ii) purchase bills; (iii) copy of delivery challans; (iv) evidence in respect of transportation of goods; (v) copy of the bank statement; and (v) name of the transporter. The A.O further during the course of the assessment proceedings once again directed the assessee to produce the aforesaid parties for examination so that the authenticity of the purchase transactions could be verified to the hilt. The assessee in compliance to the 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 him. The A.O after deliberating on the incomplete information that was placed on record by the assessee, therein concluded that the same did not inspire any confidence as regards the genuineness and veracity of the purchase transactions. The A.O specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23; notice (for short "SCN‟) to the assessee to explain that now when he had failed to establish the authenticity of the purchase transactions, therefore, why an addition of the peak credit addition of Rs. 3,66,65,814/- may not be made in its hands under Sec. 69C of the "Act‟. The A.O after deliberating on the explanation of the assessee, however, did not find favor with the same, and thus taking cognizance of the fact that the assessee had failed to discharge the onus as stood cast upon him to substantiate the genuineness and veracity of the purchases which were claimed to have been made from the aforementioned parties, therefore, on the basis of his said conviction made an addition of Rs. 3,66,65,814/- in the hands of the assessee. 6. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions of the assessee as regards the authenticity of the purchase transactions, however, was not persuaded to accept the same. The CIT(A) taking cognizance of the fact that the notices issued under Sec. 133(6) to the aforementioned parties from whom the assessee had purportedly made purchases were returned by the postal aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the perusal of the bills/invoices revealed that the column for vehicle number was left blank in each of the delivery challan/invoice. The CIT(A) taking support of host of judicial pronouncements concluded that now when the assessee had claimed to have made purchases from the aforementioned parties, therefore, the onus was cast upon him to substantiate the veracity of the said purchases transactions. The CIT(A) being of the view that the question of rejection of the books of account of the assessee under Sec. 145(3) would normally arise only when the profitability ratio shown by the assessee was not accepted by the A.O having regard to the profits declared by the assessee in the preceding years and the profits shown by other assesses in the same line of business or certain major discrepancies/defects were noticed in the books of account of the assessee, therefore, on the basis of his said observations concluded that it was not obligatory on the part of the A.O to have rejected the books of account of the assessee before characterizing the purchases as ingenuine and disallowing the same in the hands of the assessee. The CIT(A) further being of the view that as the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said twelve parties. Thus, the CIT(A) on the basis of his aforesaid observations partly allowed the appeal of the assessee. 8. Both the assessee and revenue being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. The ld. Departmental representative (for short "D.R‟) taking us through the facts of the case submitted that the A.O after concluding that the assessee had not made any purchases from the aforementioned bogus parties had thus in all fairness made an addition of the peak credit of the investment of the assessee towards making of purchases from certain unidentified sources. It was submitted by the ld. D.R that though the CIT(A) had accepted that no purchases were made by the assessee from the abovementioned bogus parties, but however, he had erred in setting aside the addition of peak investment of Rs. 3,66,65,814/- and had wrongly restricted the same to 17.5% of the said bogus purchases, subject to a further relief of the profit that had already been disclosed by the assessee on the said purchases. The ld. D.R submitted that as the CIT(A) had failed to appreciate the facts of the case in the right perspective, therefore, his order m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and "unclaimed", further fortified the fact that they were non-existent and bogus parties. We find ourselves to be in agreement with the observations of the lower authorities that even otherwise the assessee had failed to substantiate the genuineness and veracity of the purchase transactions by not only failing to produce the parties for examination before the A.O, but even by failing to place on record irrefutable documentary evidence to substantiate the authenticity of the purchase transactions. We further find that as observed by the A.O, though the assessee had during the course of the assessment proceedings placed on record the copies of the ledger accounts of the aforementioned parties, copies of the purchase bills and the bank statements indicating payments made to them, but however, despite specific directions the assessee had failed to place on record material as was called for by the A.O to prove the genuineness of purchase transactions to the hilt and dispel the doubts raised as regards the veracity of the same, viz. transportation details, documents evidencing delivery of goods at assesses place, details of the transport contractor who had delivered the goods etc. We a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee by making the purchases from the open/grey market would had procured the goods at a lower rate, i.e by saving on the VAT liability, cash discounts and certain other factors, as in comparison to the price at which the same would be available in the organized sector. We find that as the VAT involved on ferrous and non-ferrous items during the year under consideration was 4%, therefore, keeping in view the other monetary benefits which the assessee as observed by us hereinabove would had benefited from by procuring the goods from the open/grey market, the same could safely be taken at an aggregate figure of 8%. We thus, in the backdrop of our aforesaid observations direct the A.O to restrict the addition in the hands of the assessee to 8% of the aggregate value of the purchases of 5,47,94,473/- (as tabulated hereinabove) claimed by the assessee to have been made from the aforementioned parties. We thus modify the order of the CIT(A) to the extent of estimation of the profit element involved in making of the purchases under consideration. 10. That the appeal of the assessee for A.Y 2010-11, marked as ITA No. 126/Mum/2016 is partly allowed and the appeal of the revenue, marked as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases aggregating to Rs. 68,97,619/- from the following parties:- S. No. Name of the Party Amount Remarks [as regards Notices sent u/s 133(6)] 1. G.K Industrial Corporation 1027709 No reply to notice u/s 133(6) received till date 2. P M Steel Alloys 48672 No reply to notice u/s 133(6) received till date 3. Vijay Industries 630433 No reply to notice u/s 133(6) received till date 4. Manibhadra Metal Industries 1438140 No reply to notice u/s 133(6) received till date 5. R K Metal 1146704 No reply to notice u/s 133(6) received till date 6. Reliable Metal (India) 245775 No reply to notice u/s 133(6) received till date 7. Nerolac Metal (India) 555241 No reply to notice u/s 133(6) received till date 8. Aman Impex 3065093 No reply to notice u/s 133(6) received till date 9. S K Engineering Co. 9356940 No reply to notice u/s 133(6) received till date 10. Moksha Metals Pvt. Ltd. 803563 No reply to notice u/s 133(6) received till date 11. Malwa Metal Corpn. 829243 No reply to notice u/s 133(6) received tillDate 12. Shree Keshar Impex Metals Private Ltd. 2454905 No reply to notice u/s 133(6) re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, therefore, direct the A.O to restrict the addition in the hands of the assessee to 8% of the aggregate value of the purchases of 2,16,02,418/- (as tabulated hereinabove) claimed by the assessee to have been made from the aforementioned parties. We therefore in light of our aforesaid observations modify the order of the CIT(A) to the extent of estimation of the profit element involved in making of the purchases under consideration. 16. That the appeal of the assessee for A.Y 2009-10, marked as ITA No. 125/Mum/2016 is partly allowed and the appeal of the revenue, marked as ITA No. 121/Mum/2016 is dismissed. ITA No. 127/Mum/2016 (Assesses appeal) & ITA No. 123/Mum/2016 (Revenues appeal) A.Y. 2011-12 17. We shall now take up the cross appeals of the assessee and the revenue for A.Y. 2011-12. The assessee vide his appeal marked as ITA No. 127/Mum/2016, had assailed the order of the CIT(A) by raising the following grounds of appeal before us: "1. That on the facts and circumstances of the case and in law the ld. Assessing officer has erred in maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn undelivered by the postal authorities. 5. Champion Steel (India) 300425 Return undelivered by the postal authorities. 6. Chirag Steel Centre 752180 Return undelivered by the postal authorities. 7. Darshat Trading Pvt. Ltd. 291329 Return undelivered by the postal authorities. 8. S K Engineering Co. 1213542 Return undelivered by the postal authorities. 9. Good Luck Metal mpex 312000 Return undelivered by the postal authorities. 10. Bright Steel India 473170 Return undelivered by the postal authorities. 11 . Rajendra Impex 607116 Return undelivered by the postal authorities. 12. Navkar Impex 1371299 Return undelivered by the postal authorities. 13. Pioneer Enterprises 2701124 Return undelivered by the postal authorities. Total Rs. 93,88,570 20. The A.O after deliberating on the facts of the case, therein being of the view that as the assessee had failed to substantiate the genuineness and veracity of the aforesaid purchase transactions by either producing the aforementioned parties or by placing on record irrefutable documentary evidences fortifying the veracity of the said purchase tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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