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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM
These cross appeals by the assessee and the Revenue are directed
against the order of Commissioner of Income Tax (Appeals), Pune-11 dated 29.07.2016 common for the assessment years 2009-10 & 2010-11.
Since issues in appeals for both the impugned assessment years are
arising from same set of facts, these appeals are taken up together for
adjudication and are being disposed of vide this common order. For the sake of convenience, the facts are extracted from the appeals for assessment year
2009-10.
ITA No.2220/PUN/2016 (By Assessee) ITA No.2329/PUN/2016 (By Revenue) (Assessment Year 2009-10)
The brief facts of the case as emanating from records are: The
assessee is engaged in the business of manufacturing and trading of feed
concentrates & supplements, disinfectants, pet products, health and nutritional products etc. The assessee is a group concern of Venkateshwara
Hatcheries. Information was received by the Department from Sales Tax
Department, Govt. of Maharashtra that the assessee company is one of the
beneficiaries of suspicious and hawala transactions carried out by hawala operators. The case of the assessee was re-opened after issuing notice
u/s.148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). In
3 ITA Nos.2220 & 2221/PUN/2016 ITA Nos. 2329 & 2330/PUN/2016 A.Ys.2009-10 & 2010-11
re-assessment proceedings, the Assessing Officer observed that the assessee
had made purchases to the tune of Rs.1,30,28,844/- from M/s. Ajanta
Enterprises, a declared hawala dealer by the Sales Tax Department. In the
P & L account, the assessee had debited purchases from the aforesaid
dealer as Rs.1,25,27,737/- i.e. after reducing the amount of VAT paid by the
assessee on behalf of dealer. The Assessing Officer made addition of the
aforesaid net amount as non-genuine purchases in the hands of assessee.
Aggrieved by the assessment order dated 27.03.2015 passed
u/s.143(3) r.w.s. 147 of the Act, the assessee filed appeal before
Commissioner of Income Tax (Appeals). The Commissioner of Income Tax
(Appeals) after considering the documents on record, facts of the case and
various decisions cited by assessee, restricted the addition in respect of
bogus purchases to 20% of such purchases. Against the findings of the
Commissioner of Income Tax (Appeals), both, the assessee and the Revenue
are in appeal before Tribunal.
The assessee has assailed the order of Commissioner of Income Tax
(Appeals) for assessment year 2009-10 by raising following grounds:
“On facts and in law, 1] The learned CIT(A) erred in confirming disallowance @ 20% amounting to Rs.25,05,550/- out of the total purchases made by the appellant company of Rs.1,25,27,737/- from M/s. Ajanta Enterprises on the ground that the said purchases were made from suspicious dealer and hence, disallowance to the extent of 20% on the basis of average gross profit declared by the appellant company was reasonable. 2] The learned CIT(A) failed to appreciate that the purchases made by the appellant company from M/s. Ajanta Enterprises were genuine and it had submitted all the documentary evidences to establish receipt and consumption of the material and therefore, such ad-hoc disallowance to the extent of 20% of the total purchases from the said party was not justified at all and the same should be deleted.
4 ITA Nos.2220 & 2221/PUN/2016 ITA Nos. 2329 & 2330/PUN/2016 A.Ys.2009-10 & 2010-11
3] The learned CIT(A) erred in making disallowance on an ad-hoc basis on presumptions and surmises when he himself has accepted that the appellant has established the receipt and consumption of the material purchased from M/s.Ajanta Enterprises and accordingly, the disallowance confirmed by him may kindly be deleted. 4] Without prejudice to the above grounds, if at all any disallowance is warranted, the appellant submits that the gross profit percentage in this year was 19.02% and the same should be adopted as against 20% applied by the CIT(A) and hence, the addition should be reduced accordingly. 5] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
The Revenue has challenged the order of Commissioner of Income Tax
(Appeals) for assessment year 2009-10 in restricting the disallowance on
account of bogus purchases to 20% by raising following grounds:
“1.Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in holding that the Assessing Officer has not conducted proper enquiries for the verification of genuineness or otherwise of these purchases wherein the facts that the purchases were made from the bogus /hawala dealers as per the information received from the Maharashtra Sales Tax Department, even though admitted by the CIT(A) himself that the supplier under reference was not a genuine concern.
Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs.1,25,27,737/- and upholding only part of this addition @20% of the bogus purchases even when the assessee himself accepted that the purchases were made only from M/s. Ajanta Enterprises and nowhere else.
The order of CIT(A) may be vacated and that of the Assessing Officer be restored.
The Appellant craves leave to add, amend or alter any of the above grounds of appeal.”
Shri Nikhil Pathak appearing on behalf of the assessee submitted that
the assessee in First Appellate Proceedings has demonstrated complete trail
of goods purchased from M/s. Ajanta Enterprises. The assessee has
furnished along with the bills, purchase order, delivery challan, goods
received notes, lorry receipt, stock details, utilization of material, sale of
5 ITA Nos.2220 & 2221/PUN/2016 ITA Nos. 2329 & 2330/PUN/2016 A.Ys.2009-10 & 2010-11
finished products, etc. The Assessing Officer called for confirmations from
transporters who have confirmed delivery of goods to the assessee from
M/s. Ajanta Enterprises. The ld. AR of the assessee submitted that since
the assessee had demonstrated complete trail of goods supported by cogent
evidences, no disallowance on account of bogus purchases is required to be
made.
7.1 The ld. AR submitted that without prejudice to his primary
contentions, if at all, disallowance is to be made, it should be restricted to
10% of the alleged bogus purchases. In support of his contentions, the ld.
AR of the assessee placed reliance on the following decisions:
i) Dilawar R. Shaikh Vs. Deputy Commissioner of Income Tax, in ITA Nos.1832-1834/PN/2017 for assessment year 2009-10 to 2011-12 decided on 31.08.2017.
ii) Income Tax Officer Vs. M/s. Debros Polymer Product, STICE in ITA Nos.1927-1929/PN/2016 for assessment year 2009-10 to 2011-12 decided on 08.08.2018.
On the other hand, Shri N Ashok Babu representing the Department
vehemently defended the assessment order and prayed for reversing the
finding of Commissioner of Income Tax (Appeals) in restricting the
disallowance to 20%. The ld. DR submitted that during assessment
proceedings, the assessee had failed to file any confirmations from
suspicious dealer i.e. M/s. Ajanta Enterprises. Neither the said dealer was
produced before the Assessing Officer nor any supporting document to
prove genuineness of the purchases was furnished by assessee before
Assessing Officer. The address of M/s. Ajanta Enterprises furnished by the
assessee was also not correct. Assessing Officer issued notice u/s.133(6) to
M/s. Ajanta Enterprises, the same was received back with remarks ‘Left’.
6 ITA Nos.2220 & 2221/PUN/2016 ITA Nos. 2329 & 2330/PUN/2016 A.Ys.2009-10 & 2010-11
Thus, the assessee failed to discharge his onus of proving genuineness of
purchases and vendors.
We have heard the submissions made by representatives of rival sides
and have perused the orders of Authorities below. The assessee and
Revenue are in appeal against the findings of Commissioner of Income Tax
(Appeals) in restricting the disallowance to 20% of the bogus purchases. The
Assessing Officer in assessment proceedings had made addition of the entire
alleged bogus purchases. It is an undisputed fact that Department has not
disputed the sales made by the assessee. Thus, without corresponding
purchases, there cannot be sales. In the instant case, Commissioner of
Income Tax (Appeals) restricted the addition to 20% of the bogus purchases
after considering various documents such as invoices from M/s. Ajanta
Enterprises, consignment note , delivery challan, raw material testing report,
stock register, etc. The assessee was able to establish trail of goods by
furnishing documentary evidences.
The Pune Bench of the Tribunal in the case of M/s. Chhabi Electricals
Pvt. Ltd. Vs. DCIT in ITA No. 795/PUN/2014 for the assessment year 2010-
11 has held that where the assessee is able to show trail of goods, addition
on account of bogus purchases should be restricted to 10% of bogus
purchases over and above GP declared by the assessee. Similar view has
been taken by the various Benches of Tribunal on the given set of facts.
Further, we observe that the Co-ordinate Bench of the Tribunal in the case
of assessee’s group concern, Venky’s (India) Ltd. Vs. DCIT in ITA Nos.2222
& 2223/PUN/2016 for assessment years 2010-11 & 2011-12 decided
on19.03.2019 has taken similar view and has restricted the addition to 10%
7 ITA Nos.2220 & 2221/PUN/2016 ITA Nos. 2329 & 2330/PUN/2016 A.Ys.2009-10 & 2010-11
of bogus purchases following the decision of Tribunal in the case of M/s.
Chhabi Electricals Pvt. Ltd. Vs. DCIT (supra.).
Thus, in view of our above discussion, the appeal of the assessee for
assessment year 2009-10 is partly allowed and appeal of the Revenue for
assessment year 2009-10 is dismissed.
ITA No.2221/PUN/2016 (By Assessee) ITA No.2330/PUN/2016 (By Revenue) (Assessment Year 2010-11)
The assessee has assailed the findings of the Commissioner of Income
Tax (Appeals) for assessment year 2010-11 by raising following grounds:
“On facts and in law, 1] The learned CIT(A) erred in confirming disallowance @ 20% amounting to Rs.27,27,550/- out of the total purchases made by the appellant company of Rs.1,36,37,812/- from M/s. Ajanta Enterprises on the ground that the said purchases were made from suspicious dealer and hence, disallowance to the extent of 20% on the basis of average gross profit declared by the appellant company was reasonable. 2] The learned CIT(A) failed to appreciate that the purchases made by the appellant company from M/s. Ajanta Enterprises were genuine and it had submitted all the documentary evidences to establish receipt and consumption of the material and therefore, such ad-hoc disallowance to the extent of 20% of the total purchases from the said party was not justified at all and the same should be deleted. 3] The learned CIT(A) erred in making disallowance on an ad-hoc basis on presumptions and surmises when he himself has accepted that the appellant has established the receipt and consumption of the material purchased from M/s.Ajanta Enterprises and accordingly, the disallowance confirmed by him may kindly be deleted. 4] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
8 ITA Nos.2220 & 2221/PUN/2016 ITA Nos. 2329 & 2330/PUN/2016 A.Ys.2009-10 & 2010-11
The Revenue has challenged the order of Commissioner of Income Tax
(Appeals) for assessment year 2010-11 in restricting the disallowance on
account of bogus purchases to 20% by raising following grounds:
“1.Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in holding that the Assessing Officer has not conducted proper enquiries for the verification of genuineness or otherwise of these purchases wherein the facts that the purchases were made from the bogus /hawala dealers as per the information received from the Maharashtra Sales Tax Department, even though admitted by the CIT(A) himself that the supplier under reference was not a genuine concern. 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs.1,36,37,812/- and upholding only part of this addition @20% of the bogus purchases even when the assessee himself accepted that the purchases were made only from M/s. Ajanta Enterprises and nowhere else. 3. The order of CIT(A) may be vacated and that of the Assessing Officer be restored. 4. The Appellant craves leave to add, amend or alter any of the above grounds of appeal.”
Both the sides are unanimous in stating that facts in the present set
of appeals are identical and the addition on account of bogus purchases has
been made on similar lines as were in assessment year 2009-10 after
receiving information from Sales Tax Department, Govt. of Maharashtra.
The hawala dealer involved is also the same i.e. M/s. Ajanta Enterprises.
Since issues raised by both the sides in their respective appeals for
assessment year 2010-11 are identical to the one already raised in
assessment year 2009-10 and facts leading to the addition are also similar,
the findings given by us while deciding the appeals of the assessee and
Revenue in assessment year 2009-10 would mutatis-mutandis apply to the
present set of cross appeals in assessment year 2010-11.
9 ITA Nos.2220 & 2221/PUN/2016 ITA Nos. 2329 & 2330/PUN/2016 A.Ys.2009-10 & 2010-11
The addition on account of bogus purchases is restricted to 10% of such purchases over and above GP declared by the assessee. Consequently, the appeal of the assessee for assessment year 2010-11 is partly allowed and the appeal of Revenue for assessment year 2010-11 is dismissed.
To sum up, appeals of the assessee for the assessment years 2009-10 & 2010-11 are partly allowed and appeals of the Revenue for assessment years 2009-10 & 2010-11 are dismissed.
Order pronounced on Monday, the 03rd day of June, 2019.
Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER
पुणे / Pune; �दनांक / Dated : 03rd June, 2019. SB
आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals), Pune-11. 4. The Pr. CIT, Central, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.
10 ITA Nos.2220 & 2221/PUN/2016 ITA Nos. 2329 & 2330/PUN/2016 A.Ys.2009-10 & 2010-11
Date 1 Draft dictated on 29.05.2019 Sr.PS/PS 2 Draft placed before author 30.05.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk
11 ITA Nos.2220 & 2221/PUN/2016 ITA Nos. 2329 & 2330/PUN/2016 A.Ys.2009-10 & 2010-11
10 Date on which file goes to the A.R 11 Date of dispatch of order