C I T-1 JAIPUR vs. SHRI MOHAN AND COMPANY

Judgment Per Hon’ble Jhaveri, J. 24/04/2017

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books of accounts of other parties were not given. Thus, after considering all the facts and circumstances of the case, the Assessing Officer has rejected books of accounts relying upon Gujarat High Court judgment on the basis of 25% of the bogus purchase and assessed that the unverifiable purchase was Rs.1,74,37,160/- which has been partly modified by the Tribunal to the extent of 2.19% and the Tribunal has totally reversing the finding has rightly given Rs.5,00,000/-, without justifying the record. FACTS IN APPEAL NO.668/2011.

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“3. Considering the law declared by the Special Leave to Appeal (C) No.8956/2015 No.240/2003 decided on 20.06.2016, the parties are bound by the principle of law pronounced in the aforesaid three judgments.

“12. We have heard learned counsel for both the sides. Having appreciated the material on record, the Tribunal recorded a finding that the transactions in respect of oil cakes shown as purchases by the assessee from 33 parties were not genuine transactions and that all those 33 parties were bogus parties. The Sale Invoices claimed to have been issued by them were also found to be fictitious and the bank account in the name of M/s. Pooja Traders was found to have been opened and operated mainly with a view to accommodate these fictitious transactions carried out by the assessee in respect of oil cakes shown as purchases from such bogus suppliers. The above findings were recorded on the basis of the material on record of the Tribunal.” 6. has been observed as under:

“11. . Pronouncements of law, which are not part of the ratio decidendi are classed as obiter dicta and are not authoritative. With all respect to the learned Judge who passed the order in Jamna Das' case and to the learned Judge who agreed with him, we cannot concede that this Court is bound to follow it. It was delivered without argument, without reference to the relevant provisions of the Act conferring express power on the Municipal Corporation to direct removal of encroachments from any public place like pavement or public streets, and without any citation of authority. Accordingly, we do not propose to uphold the decision of the High Court because, it seems to us that it is wrong in principle and cannot be justified by (6 of 13) [ITA-673/2011]

the terms of the relevant provisions. A decision should be treated as given per incur am when it is given in ignorance of the terms of a statute or of a rule having the force of a statute. So far as the order shows, no argument was addressed to the Court on the question or not whether any direction could properly be made compelling the Municipal Corporation to construct a stall at the pitching site of a pavement squatter. Professor P.J. Fitzgerald, editor of the Salmond on Jurisprudence, 12th edn. explains the concept of sub silentio at p. 153 in these words: A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The Court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio. ” 7. wherein para 4 & 5 has observed as under:

“4. For the purpose of satisfying the question as formulated, the learned counsel for the Revenue could not show as to what material has not been considered by the learned Tribunal, and what irrelevant material has been considered in reducing the additions made. Rather an overall consideration of the orders of the AO, the CIT(A) and the learned Tribunal does show,

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that on account of the assessee having shown bogus purchases, the books of accounts had been rejected, and the matter was proceeded under s. 145. Then, the question remained of determining the income on the basis of best judgment assessment. At this point, it is significant to note, that the gross sales figure for the relevant year is not in controversy, in the sense, that whatever bogus sales have been found by the AO, if they were to be considered literally, they would have reduced the figure of sale, and there is no material or finding, or any indication, to show that the gross sale was shown by the assessee at any deflated figure.

under: “As regards question No. (i) Shri Patwalia, learned Counsel for the Revenue, has vehemently argued that the findings of the Tribunal pertaining to deletion of the addition of Rs. 1,48,93,286 in the income of the assessee on account of bogus purchases, are totally perverse. We are, however, unable to persuade ourselves to agree with learned Counsel. We find from the Tribunal's order that the analysis and conclusions drawn by the Commissioner of Income Tax (Appeals) on the appreciation of material on record, have been concurred with the Tribunal after taking notice of the fact that the trading results of the assessee had all along been accepted and the purchases of scrap from the seven parties could also be not termed as bogus for the reason that in the subsequent assessment year, i.e., 1987-88, the purchases from these very parties stood accepted by the Department to a very substantial extent. The Tribunal, as a matter of fact, noticed that no sale invoices were found to be undervalued or the purchases inflated, yet the extraordinary profit in respect of goods sold to M/s. Mazagoan Dock Ltd., Bombay, and as recorded in the books of account which ought to have been taken favourably qua the assessee, was considered "adverse" by the Assessing Officer by adopting an erroneous approach. The Tribunal also affirmed the conclusion drawn by the Commissioner of Income Tax (Appeals) that M/s. Kohinoor Enterprises and M/s. Swami Enterprises are existing parties doing business of scrap metal and had vast financial resources at their disposal. Similar

conclusion was drawn by it in respect of M/s. S.P. Metal Works and M/s. A.S. Metal Company also. The assessee's contention that out of total purchases of non-ferrous metal of Rs. 2.44 crores, the Assessing Officer had treated purchases worth Rs. 1.49 crores only as bogus and it was impossible to manufacture the goods shown to have been manufactured by it out of the remaining purchases if the Assessing Officer's conclusion is accepted, also found favour with the Tribunal. This in our view, is (9 of 13) [ITA-673/2011]

simply a finding of fact based upon appreciation of the material on record and, thus, hardly gives rise to any question of law. “

“4. Having considered the submissions made by the learned senior counsel for the appellant and after going through the order

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passed by the AO, the order passed by the CIT(A) and the order passed by the Tribunal, we find that the orders passed by the CIT(A) and the Tribunal are based on sound appreciation of evidence. The CIT(A) has exhaustively dealt with the finding recorded by the AO about holding the purchase shown from M/s Pooja Steel Sales and M/s Ashirwad Steels to be bogus and has rigfhtly set aside the order of the AO. The CIT(A) in the order has observed thus: “I have carefully considered the facts and circumstances of the case and the complete evidence recorded by the AO during the course of assessment proceedings and further the remand report of the present AO as discussed hereinabove and I am of the opinion that the appellant’s onus to prove the genuineness of the purchases is discharged soon after the receipt of regular purchase bills followed the delivery of goods and payment of sale consideration by Dds/cheques and the utilization of the raw material purchased by the appellant in the process of manufacture of threshers and evidenced by the chart of page No.34 of the assessment order, giving money-wise consumption of various inputs. The genuineness has to be examined at the time of purchases and not years thereafter. The report of the Dy. Director of IT, Indore, which is quite as sketchy does not prove the thing in favour of the Department/does not disprove the genuineness of purchases. Such a report of Dy. Director of IT, Indore in respect of M/s Pooja Steel Sales deserves to be rejected. As far as the report of the Dy. Director of IT with M/s Ashirwad Steels is concerned, the existence of the concerns, a few years before the date of completion has not been denied. The transaction of purchases by way of regular sale bills and subsequent payments etc. discharged the onus of genuineness of purchases as far as the appellant is concerned. An investigation by the purchaser as to who operates the bank account of the seller or the group of sellers is not in the domain of the purchasers (appellant). The rules regarding onus of proof laid down in the statute/case law, are quite flexible. The payment through banking channel is the essence of transaction so as to (11 of 13) [ITA-673/2011]

decide genuineness while deciding upon the question of onus of proof. On a careful consideration, I am o the opinion that the purchases from the above said parties could not be trated as not genuineness and hence purchases made from them (abovesaid to parties) are to be treated as allowable deduction. The deduction made of Rs.33,13,706 is hereby deleted.” 12. 65 DTR (Raj.) 196, it has been held as under:

“6. In the first place, what is involved in the case is a pure question of fact and not any question of law much less substantial question of law. Secondly, this Court cannot again in this appeal undertake the examination of factual issues nor can draw any factual inferences on the basis of explanation offered by assessee. Thirdly, once the explanation is accepted by an appellate court on facts, then in such event, a finding recorded on such explanation is binding on the High Court being a finding of fact.

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go to show that Tribunal did examine the issue in detail and then recorded a finding. Such finding when challenge does not constitute any substantial question of law within the meaning of Section 260A ibid in an appeal arising out of such order.”

we have heard both these appeals on merits.

will apply in the facts of the case.