Principal Commissioner Of Income Tax Ii vs. Bhupendra Singh Rajendra Singh

-1- HIGH COURT OF M.P: BENCH AT INDORE ITA NO.64/17 & ITA No.65/17 Principal Commissioner of Income Tax, Indore vs. Bhupendra Singh Rajendra Singh Rajput, HUF 13.04.2018 (INDORE): Ms.Veena Mandlik, learned counsel for the appellant. Heard on the question of admission. This order shall also govern disposal of ITA No.65/17. It is not in dispute that respondent/assessee has purchased 600 & 500 cotton bales from M/s Nirma Trading Company and Shri Omkar Enterprises respectively. The information was received by the appellant regarding bogus purchases from these two suppliers on the ground that these parties are giving only the bills and they not given delivery of goods. The above two parties were not found at their address, therefore, it was concluded that they have given accommodation entries by giving purchase invoices. The assessee has submitted the statement of M/s Nirma Trading Company and Shri Omkar Enterprises. The statement of account of Shri Omkar Enterprises in the books of the assessee, statement of account of M/s Nirma Trading Company in the books of the assessee, payment details of Axis Bank in support of the payment made by account payee cheques to Shri Omkar Enterprises and M/s Nirma Trading Company, purchase invoice issued by Shri Omkar Enterprises and M/s Nirma Trading company along with copy of lorry receipt and corresponding sale invoices, copies of sales tax returns filed by the assessee. -2- Considering the aforesaid, learned Tribunal has observed that Assessing Officer has not issued any summons to both parties for their presence during the assessment proceedings. The Tribunal relying on the decision of the Delhi High Court in the case of CIT vs. Hi Lux Automative Pvt. Ltd, 183 taxmann 260, Bombay High Court in the case of Babulal C.Borana vs. ITO, 282 ITR 251 and Hindustan Equipment, 22 ITJ 555 wherein it has been held that where the summons could not be served and where the summons were served but there was no compliance, the Assessing Officer should verify the genuineness of the transaction from the books of the assessee and bank account or bills. In the case in hand, the cotton bales are sold by identifying the same lot numbers to various manufacturers by identifying press numbers, the goods have been purchased and ultimately sold, quantity details are maintained and they are reflected in tax audit report u/s 44AB of the Act, all the purchases are not found to have been made from these two parties and treated as bogus purchases because the entire relevant documents have been given to the Assessing Officer. Learned Tribunal has held that the entire addition cannot be made and the only addition which can be made is only NP addition and allowed the appeal of the assessee in part. Para-10 & 11 of the Tribunal's order is relevant which reads as under:- 10. We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, in the instant case it is not disputed that the assessee has purchased 600 and 500 cotton bales from M/s Nirma Trading Company and Shri Omkar Enterprises respectively. The information was received regarding bogus purchases from these two suppliers on the ground that these parties are giving bills and they not giving delivery of goods. The above two parties were not found at their address, therefore, it was concluded that -3- they have given accommodation entries by giving purchase invoices. The assessee has submitted the statement of M/s Nirma Trading Company and Shri Omkar Enterprises. The statement of account of Shri Omkar Enterprises in the books of the assessee, statement of account of M/s Nirma Trading Company in the books of the assessee, payment details of AXIS Bank in support of the payment made by account payee cheques to Shri Omkar Enterprises and M/s Nirma Trading Company, purchases invoices issued by Shri Omkar Enterprises and M/s Nirma Trading Company along with copy of lorry receipt and corresponding sale invoices, copies of sales tax returns filed by the assessee. The assessee has filed complete details showing purchases effected by the assessee from the above parties, TIN number, lot number, cotton bales purchases, net value, value of goods, tax charged and corresponding sales of same cotton bales to various parties. The assessee has erned grosds profit on Rs.37,55,227/- against these purchases. In this case the assessee has also filed copies of VAT audit report and returns submitted under Maharashtra VAT Act of Shri Omkar Enterprises and M/s Nirma Trading Company vide paper book page nos.96 to 129 and pages 132 to 135. We find that in thise case the addition has been made only on the ground that both the parties are not traceable. We find from the order of the Assessing Officer that the Assessing Officer has not issued any summons to both the parties for their presence during the assessment proceedings. As per the decision of the Hon'ble Delhi High Court in the case of CIT vs. Hi Lux Automative pvt. Ltd, 183 taxmann 260, the Hon'ble High Court has held that where the summons could not be served and where the summons were served but there was no complaince, the Assessing Officer should verify the genuineness of the transaction from the books of the assessee and bank account or bills. The Assessing Officer should also make inquiry from bak to determine whether or not the amounts were credited in the accounts of respective parties. We find that in this case the Assessing Officer has not issued any notice for the presence of M/s Nirma Trading Company and Shri Omkar Enterprises. Therefore, we are of the view that the Assessing Officer has not doubted the bank transaction and the Assessing Officer has not made any inquiry whether the bank transaction was genuine or not. Similar issued had also come up before the Hon'ble Bombay High Court in the case of Babulal C.Borana vs. ITO, 282 ITR 251 wherein the Bombay High Court has held that if any purchase has been made and payment of the same were made by the assessee by cheque and the same has been duly credited in the bank account of that party and this purchase is reflected in the books of accounts maintained by the assessee and the value of these goods are reflected in the -4- books of accounts, hence the identity of the persons from whom the goods were purchases and source of investment in such goods have been explained, therefore, no addition can be made u/s 69 of the Act. Similarly, we find that the Hon'ble jurisdictional High Court in the case of Hindustan Equipment; 22 ITJ 555 held that if there is bogus purchase having corresponding actual sales, the only profit can be added. WE also get support from the decision of the Hon'ble Gujarat High Court in the case of CIT vs. M.K. Brothers; 163 ITR 249; CIT vs. Bholanath Poly Fab Pvt. Ltd; 83 CCH 275; CIT vs. Simit P.Sheth; 84 CCH 339, Sanjay Oil Cakes Industries vs. CIT; 316 ITR 274. We find that in this case the cotton bales are sold by identifying the same lot numbers to various manufacturers by identifying press numbers, the goods have been purchases and ultimately sold, quantity details are maintained and they are reflected in tax audit report u/s 44AB of the Act, hence, it at all the purchases are not found to have been made from these two parties and treated as bogus purchases, the entire addition cannot be made unless there is some evidence in support of the claim that money reached back to the assessee. We find that in the instant case, the Assessing Officer has not doubted the bank transaction. Therefore, we are of the view that the entire addition cannot be made. The only addition which can be made is only NP addition. In the instant case, the assessee has shown NP rate of 1.62% of total turnover. Therefore, we direct to apply net profit on above purchases at the rate of 6%. 10. In the result, the appeal of the assessee stands partly allowed. On due consideration of the aforesaid, we are of the view that the findings recorded by the learned ITAT are based on proper appreciation of evidence and material available on record and no substantial question of law arises in this appeal. Accordingly, the appeal stands dismissed. (P.K.JAISWAL) (S.K.AWASTHI) J U D G E J U D G E hk/ Digitally signed by Hari Kumar Nair Date: 2018.04.16 10:31:39 -07'00'