DEPUTY COMMISSIONER OF INCOME-TAX vs. M/S. B.V. BIO CORP LTD., PUNE

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.

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)

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.

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.

(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.”

(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.

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.

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.

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.

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.).

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)

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

(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.”

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

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