TMI Blog2023 (3) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to 15% of such bogus purchase as against 25% restricted by the CIT (A) - Decided partly in favour of assessee. - ITA Nos. 571, 514 & 572/Hyd/2022 - - - Dated:- 14-3-2023 - Shri R.K. Panda, Accountant Member And Shri Laliet Kumar, Judicial Member For the Assessee : C.A Mrudulatha For the Revenue : Shri KPRR Murthy, DR ORDER PER R.K. PANDA, A.M ITA 571/Hyd/2022 is directed against the order dated 23.08.2022 of the CIT (A)-NFAC Delhi relating to A.Y 2008-09. ITA No.514/Hyd/2022 is directed against the order dated 10.08.2022 of the CIT (A)-NFAC Delhi relating to A.Y 2009-10. ITA 572/Hyd/2022 is directed against the order dated 29.8.2022 of the CIT (A)-NFAC Delhi relating to A.Y 2010-11. For the sake of convenience, all these appeals were heard together and are being disposed off by this common order. ITA 571/Hyd/2022 A.Y 2008-09 2. Facts of the case, in brief, are that the assessee is an individual and derives income from trading in jewellery and precious stones. He filed his return of income on 5.9.2008 declaring total income of Rs.48,13,858/-. The assessment was completed u/s 143(3) on 27.12.2010 determining the total income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulging in providing accommodation entries in the nature of bogus sales and unsecured loans. He noted that a search seizure action in these group of cases has been carried out on 3.10.2013 by Dy. CIT, CC-4 Surat. During the course of such proceedings, a statement on oath of Shri Rajendra Jain was recorded by the Dy.DIT (Inv.) Unit-I (4) Mumbai on 5.10.2013 wherein he had given the list of firms who have been engaged in the business of bills shopping, lending names and providing accommodation entries. 4. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He observed that the facts and circumstances of the case is different from the normal business activity of any businessperson. In the instant case, the entire gamut of things are to prove the bogus transactions a real transaction by doing paperwork. He summoned the assessee and his statement was recorded u/s 131 of the I.T. Act. In the said statement, the assessee Shri Ram Gopal submitted that he personally went to Surat and purchased the goods. However, the Assessing Officer noted that he could not explain as to how he went to Surat and how he purchased only from these bogus entities a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged that the leaned ITO failed to note that the supplier of diamonds had filed affidavits and retracted the statement given earlier before the IT authorizes at Surat and confirmed the transactions as given and therefore the leaned ITO erred in making the addition of Rs.25,63,834/- . 6.1. The appellant has submitted that he had in response to the notice issued U/s. 143(2) in respect of the re-assessment proceedings, filed the details called for including party wise purchase and sales invoices. The appellant has submitted that the purchases are genuine and Rajender Jain had furnished affidavits stating that he had sold the diamonds to the appellant and this evidence has not been rebutted by the Assessing Officer. The appellant has argued that the mere fact that the appellant has not been able to adduce evidence for the movement of the purchases from Surat to Hyderabad which on many occasions was delivered by the seller or on other occasions personally taken by the appellant. Further, the appellant has stated that the movement of goods cannot be the ground to disbelieve the purchases made. The appellant has argued that the Assessing Officer's statement that accommodat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es made, when in fact, no purchases have been made, the aim being reduction of taxable income by inflating expenses on account of purchases. In the case of M/s. Lifeline Drugs and Intermediates Pvt. Ltd. (5535/Mumbai/2007), ITAT Bombay Bench held that when the assessee has no explanation to offer for the bogus purchases, the same has to be added to the total income. lt cannot be said that no addition can be made since the assessee might have made corresponding purchases from alternate sources and the assessee cannot be given an opportunity to legalize its illegal transaction through accommodation entries. In the case of N.K. Industries Ltd. Vs DCIT [2016] 72 taxmann.com 289 (Gujarat), entire purchases shown on basis of fictitious invoices was debited in trading account. Assessing Officer made addition of 25 per cent of total purchase. Tribunal came to a categorical finding that there were purchases from bogus suppliers and, thus, Tribunal made addition of total purchases. The Hon'ble Gujarat High Court upheld Tribunal's finding as follows: 6. The Tribunal in the case of Vijay Proteins Ltd. (supra) has observed that it would be just and proper to direct the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. There may be various factors due to which there is bound to be a substantial difference between the purchase price of unaccounted material and rate of purchase of accounted for goods. There may be a saving on account of sales-tax and other taxes and duties which may be leviable in respect of manufacture or sale of goods in question. The suppliers or the manufacturers make a substantial saving in the income-tax in respect of income from sale of unaccounted goods produced and sold by them. This may also be one of the factors due to which the seller may be willing to charge lower rates for unaccounted goods as compared to accounted goods. Keeping all these in mind and also keeping in view the decision of the ITAT in the case of Sanjay Oil Cake Industries (supra) we hold that 25% of the purchase price accounted for in the books of accounts through such fictitious invoices in the name of 33 bogus parties should be disallowed out of the amount of purchases shown to have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same was shown in the stock register as well. 5. The Ld. CIT(A) while confirming the addition of Rs. 6,40,960/- totally ignored the documentary evidence produced by the Appellant comprising of purchase invoices, payments made by account payee cheques, entries in the stock statement, sales and the confirmation made by the supplier and therefore, the addition of Rs. 6,40,960/- is totally opposed to the law of evidence and therefore unsustainable. 6. The Ld. CIT(A) on a wrong foundation of reasoning arising from a misconception of the facts failed to appreciate the entries in the stock register which finally culminated in sales and therefore erred in disallowing 25% of the purchases. 7. The Ld. CIT(A) failed to appreciate the line of business of the Appellant that loose diamonds purchased are embedded in various forms of jewellery and then sold, and therefore erred in disallowing 25% of the purchases. 8. The Ld. CIT(A) failed to note that Rajender Kumar Jain and others who were search and subject to seizure department and operation u/s 132 of the 1.T.Act, 1961 were witnesses of the onus lay on the Department to produce them for cross examination and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paper Book, she drew the attention of the Bench to the affidavit of Shri Rajendra Jain, Proprietor of AVI Exports confirming the sales to the assessee. Referring to page 73 to 74 of the Paper Book, she drew the attention of the Bench to the affidavit filed by Shri Rajendra Jain, Director, Mouli Mani Impex Ltd confirming the sales to the assessee. She submitted that when the books of account of the assessee are not rejected, sales has been accepted, the parties from whom assessee has purchased diamond have confirmed to have sold the goods to the assessee which has entered in the stock register and when the payments have been made through proper banking channel, then estimation of profit @ 25% is uncalled for. Referring to various decisions, she submitted that the Courts and various Benches of the Tribunal have estimated such profit at 3 to 5% which is the norm of the industry in such type of cases. She accordingly submitted that either the entire amount should be deleted or in the alternate the profit on such alleged bogus purchases be reduced to 3 to 5%. She also relied on the following decisions: 1. CIT, Hyderabad vs. Tilak Raj Kumar 6 [2015] 56 Taxmann 36 (AP Telangana) dt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerns wherein he is either the proprietor or partner or director confirming the sales to the assessee and as such the transactions are genuine and he has not given any bogus bills. Further, it is her submission that the goods have entered into stock register, the sales have not been doubted by the Assessing Officer, books of account have not been rejected and the payments have made through proper banking channel and therefore, no addition should be made. It is her alternate argument that the disallowance of 25% of such bogus purchase in any case is on the higher side and considering the norm of the industry in such type of cases, the disallowances at best can be made @ 3% to 5% which is the net profit on such bogus purchase. 12. We find some force in the above argument of the learned Counsel for the assessee. Admittedly, the Assessing Officer in the instant case has accepted the sales and books of account have not been rejected. Further, the payments for the alleged bogus purchases have been made through proper banking channels and the Revenue is not in appeal against the order of the CIT (A) allowing 75% of such purchases as genuine and only 25% of the bogus purchase has been ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
