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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
आयकर अपीलीय अिधकरण, पुणे �यायपीठ “ए” पुणे म� IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE सु�ी सुषमा चावला, �याियक सद�य एवं �ी डी. क�णाकरा राव, लेखा सद�य के सम� BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM आयकर अपील सं. / ITA Nos.2814 & 2815/PUN/2016 िनधा�रण वष� / Assessment Years : 2010-11 & 2011-12 M/s. Thermo Engineers Pvt. Ltd., Plot No.71-72, MIDC, Malegaon, Sinnar, Nashik-422113. अपीलाथ�/Appellant PAN : AACCT4440Q …. Vs. DCIT, Circle-1, …. ��यथ� / Respondent Nashik. Assessee by : Shri Sanket Joshi Revenue by : Shri Sanjeev Ghai सुनवाई क� तारीख / घोषणा क� तारीख / Date of Hearing : 04.04.2019 Date of Pronouncement: 30.04.2019 आदेश / ORDER PER D. KARUNAKARA RAO, AM : There are two appeals under consideration filed by the assessee. Both the appeals are against the common orders of CIT(A)-1, Nashik dated 01.09.2016 for the Assessment Years 2010-11 and 2011-12 respectively. Since the facts and issues are common in both the appeals, therefore, these were heard together and are being disposed of by this composite order. Preliminary Issue - Condonation of Delay 2. Before us, at the outset, ld. Counsel for the assessee submitted that the above two appeals of the assessee could not be filed in time and the said appeals are filed with the marginal delay of 01 day. Considering of the smallness of marginal delay i.e. only one day, we condone the delay and
2 ITA Nos.2814 & 2815/PUN/2016 proceed to adjudicate the appeals of the assessee in the following paragraphs. 3. As mentioned above, the grounds are common in both the appeals, therefore, for the sake of brevity, the grounds in ITA No.2814/PUN/2016 raised by the assessee are extracted hereunder :- “1] The learned CIT(A) erred in confirming the disallowance of Rs.2,08,817/- out of the total disallowance of Rs.8,35,269/- made by the A.O. in respect of purchases made from alleged hawala parties on the basis of information obtained from Maharashtra Sales Tax Dept. 2] The learned CIT(A) erred in holding that 25% of the purchases made from the alleged hawala parties were to be disallowed by presuming that the assessee may have made the impugned purchases of goods from certain other parties at a lower cost and hence, the purchases shown from the above parties as recorded in the books of accounts are inflated. 3] The learned CIT(A) failed to appreciate that – a. The purchase made by the assessee from the above party were supported by tax invoices and transportation receipts and hence, there was no reason to doubt the genuineness of the said purchases merely on the basis of uncorroborated statement of such supplier. b. The payments to the said party were made through banking channel and the A.O. had not brought any evidence on record to shown that the payments made by the assessee to the said party was withdrawn by it and returned to the assessee in cash and hence, in the absence of any contrary evidence, there was no reason to doubt the genuineness of the payments made to the said party. 4] The learned CIT(A) ought to have appreciated that – a. The above supplier had evaded VAT and hence, it may have denied any actual sales before the Sales Tax Dept. solely to absolve itself from VAT liability, however, there was no corroborative evidence whatsoever on record to support its statement and hence, such unsubstantiated statement could not be relied upon by ignoring the documentary evidences furnished by the assessee. b. After considering the same statement of the alleged hawala supplier, the Sales Tax Dept. had not disputed the fact that there has been actual transfer of goods between the assessee and the supplier and hence, the assessee has been made liable to pay VAT on such transfer of goods which has not been deposited by the supplier and therefore, the Income Tax Dept. is not justified in raising additional income tax liability on the assessee in respect of these purchases by adopting a contrary interpretation of the same statement to the effect that there has been no actual transfer of goods. c. The A.O. had himself admitted in the asst. order that he was not able to locate the above alleged hawala party and thus, the A.O. was in no position to grant the opportunity of cross examination of this party to the assessee and hence, in view of the ratio laid down by Hon’ble Supreme Court in the case of Andaman Timber Industries v. CCE (Civil Appeal No.4228/2006 dated 02.09.2015], the addition
3 ITA Nos.2814 & 2815/PUN/2016 made solely on the basis of statement of such supplier recorded at the back of the assessee was not justified at all. 5] The assessee submits that the presumption drawn by the CIT(A) that the impugned purchases were inflated and that the same may have been made from other parties is solely based upon the uncorroborated statement of the alleged hawala party which cannot be relied upon in the facts of the case and hence, the disallowance sustained by the CIT(A) @ 25% of the purchases made from the above party is not justified at all. 6] Without prejudice, the assessee submits that the disallowance made @ 25% of the amount of purchases is very high and the same may be restricted to a reasonable level considering the facts of the case. 7] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.” 4. Briefly stated the relevant facts include that the assessee is a company and is engaged in the business of manufacturing of technical equipment. The assessee filed the return of income declaring total income of Rs.9,53,000/- and Rs.8,69,568/- for the assessment years 2010-11 and 2011-12 respectively. This is the case where the assessee claimed the purchasing from suppliers, whose name appeared in the Website of the Sales Tax Department, Maharashtra Government. In the assessment, the Assessing Officer made addition of Rs.8,35,269/- and Rs.86,61,812/- for the assessment years 2010-11 and 2011-12 respectively i.e. 100% of the suspicious bogus purchases. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 147 of the Act. 5. During the first appellate proceedings, the CIT(A), relying on various decisions, granted part relief i.e. 75% of the GP addition to the assessee and confirmed the addition @ 25% of the bogus purchases. 6. Aggrieved with the above decision of the CIT(A), the assessee is in appeals before the Tribunal with the above extracted grounds. Revenue did not file the appeals against the relief granted by the CIT(A).
4 ITA Nos.2814 & 2815/PUN/2016
Before us, at the outset, ld. Counsel for the assessee submitted that this is a case of bogus purchases where the trails of goods, payment through banking channels etc were demonstrated. Ld. AR relied on the order of the Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. and others Vs. DCIT in ITA No.795/PUN/2014, relating to assessment year 2010-11 dated 28-04-2017. In this case, the Tribunal analysed various beneficiaries of such bogus entry operators/suppliers of goods etc. and identified 4 types of categories of transactions. For the sake of completeness, we proceed to extract the said paragraphs from the order of the Tribunal (supra) and the same read as under :- “40. In view of the above said ratios, the present issue of bogus purchases is to be decided on the basis of facts of each case. The first aspect is the information received by the Assessing Officer from the Sales Tax Department in respect of alleged hawala dealers. In many cases, the Assessing Officer has not even received the copy of statement recorded or any other evidence from the Sales Tax Department, except the list of hawala dealers and on the basis of the said list, the assessment proceedings have been completed in the hands of assessee, who had made the purchases from the said parties. In case, no such evidence has been received by the Assessing Officer before making addition, then there is no warrant in making aforesaid addition in the hands of assessee merely on the basis of so called list of hawala dealers. There are other cases, where the Assessing Officer had received the statement of the persons who were hawala dealers and who had admitted to have just issued bills of sale without delivery of goods. In such circumstances, there is evidence against the respective assessee that where the seller of the goods, has admitted not to have entered into real transaction of sale of goods. Against such non-transaction, there can be no delivery of goods, then it is case of passing of bills of sale and purchases, against which no VAT has been paid. Such bogus purchases are then to be added in the hands of assessee. Where the Assessing Officer had confronted the assessee with the information received, supplied copies of statements and where the persons have not been traced and no confirmation has been filed by the assessee in this regard, then the addition is to be made in the hands of assessee on account of such bogus purchases. In the facts and circumstances of some cases, the goods have been transferred by such hawala dealers to the respective purchasers, against which the assessee has to discharge onus of establishing the trail of goods which are transferred and further sold by them. Where the assessee is able to produce evidence of purchase of goods by way of weighment bridge receipts, transportation documents, payment of octroi and subsequent sale of goods to the respective parties and / or where the assessee has maintained complete quantitative details of purchase and sale of goods, then total bogus purchases cannot be added in the hands of assessee, but GP rate of 10% is to be applied on bogus
5 ITA Nos.2814 & 2815/PUN/2016 purchases. Where the assessee does not establish its case, then the complete bogus purchases are to be added as hawala purchases. Further, in cases, where the statements are recorded and copies of which have been supplied to the assessee and assessee established the case of receipt of goods and its onward transmission by way of sale bills, then the factum of purchases by the assessee stands established in such circumstances. However, the benefit of purchases being made from grey market, needs estimation in the hands of assessee. The Tribunal has already held that the addition be made by estimating the same @ 10% of the alleged hawala purchases. Accordingly, it is so held. In view thereof, the issues which emerge are as under:- I. In case no information is received by the Assessing Officer from the Sale Tax Department and no copy of statement recorded or any other evidence is received from the Sales Tax Department, then no addition is to be made on the basis of name of hawala dealer in the list prepared by the Sales Tax Department, where the assessee had asked for the said information during assessment proceedings. II. Where the Assessing Officer had received the statements of persons who had admitted to have just issued bills of sale without any delivery of goods. In view of such evidence, where the assessee had not entered into real transaction of purchase of goods and in the absence of any delivery of goods, the sales are bogus and the entire sales are to be added in the hands of assessee. Admittedly, the dealer had not even paid VAT against such passing of goods. III. The case where the Assessing Officer had confronted the information received from the Sales Tax Department and had supplied copies of statements recorded and had also issued notice under section 133(6) of the Act, where hawala dealer was not traceable and in the absence of the assessee failing to file any documentary evidence of delivery of goods, addition is to be upheld in the hands of assessee on account of such bogus purchases. IV. The next instance is the case of goods which have been admittedly sold by the hawala dealer and has been received by the assessee, who in turn had maintained quantitative details and also evidence of its movement i.e. transportation details and quality control details of consumption of the said material or exact details of sale of the same consignment through same transporter directly to the party, then the total purchases cannot be added in the hands of assessee. However, since the purchases are made from the grey market, some estimation needs to be made in the hands of assessee. The Tribunal in M/s. Chetan Enterprises Vs. ACIT (supra) has already held that the addition be made by estimating the same @ 10% of the alleged hawala purchases, over and above the GP shown by the respective assessee. V. Another set of cases where the statements recorded by the Sales Tax Department have been handed over to the assessee and the copies of same have been supplied to the assessee, then where the assessee established the case of receipt of goods and its onward transmission, then the factum of purchases by the assessee stands established in such circumstances. However, estimation is to be made in the hands of assessee because of purchases from the grey market and following the above said ratio, addition
6 ITA Nos.2814 & 2815/PUN/2016 is to be made by estimating the same @ 10% of the alleged hawala purchases, over and above the net profit shown by the assessee. 41. Now, coming to the factual aspects of each of the appeal, which have already been referred to by the learned Authorized Representative for the assessee and also refer to the orders of authorities below, where none has appeared on behalf of the assessee. 42. The lead case is in the case of M/s. Chhabi Electricals Pvt. Ltd., where the grievance of the assessee is that the Assessing Officer before making the addition has not even supplied the copy of statement or any other evidence recorded by the Sales Tax Department to establish that the purchases made by the assessee were bogus. I have already decided this issue in M/s. Chetan Enterprises Vs. ACIT (supra) and held that in cases where the Assessing Officer has failed to supply such statement recorded by the Sales Tax Department or any other evidence justifying the addition, no addition is to be made in the hands of assessee. The grounds of appeal raised by the assessee are thus, allowed. The learned Authorized Representative for the assessee has further referred to various documents i.e. gate pass, GRN and issue pass establish its case of delivery of goods i.e. purchase from hawala dealer and its onwards consumption in the manufacturing process of the assessee. In such circumstances, where the assessee has established the trail of goods purchased to the final consumption, then there is no merit in the addition made by the Assessing Officer. Thus, the grounds of appeal raised by the assessee are allowed and appeal of the assessee is allowed.” 8. Further, referring to the facts of the present case, where the trail of goods and payments are demonstrated, ld. Counsel for the assessee submitted that the disallowance at the rate of 10% towards gross profits should meet the ends of justice. 9. The ld. DR for the Revenue, on the other hand, relied heavily on the order of the Assessing Officer. 10. In this case, trail of goods is demonstrated and the payments are made through the banking channels only. Considering these facts and submission of the assessee and following the above decision of the Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. and others (supra), we are of the opinion that the addition by way of estimation is to be made in the hands of the assessee at the rate of 10% of the alleged bogus purchases in
7 ITA Nos.2814 & 2815/PUN/2016 the assessment year under consideration. This is over and above the net profit shown by the assessee in this assessment year. Accordingly, the grounds raised by the assessee are partly allowed. 11. In the result, both the appeals of the assessee are partly allowed. Order pronounced on this 30th day of April, 2019. Sd/- Sd/- (SUSHMA CHOWLA) (D. KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 30th April, 2019. Sujeet आदेश क� �ितिलिप अ�ेिषत/Copy of the Order is forwarded to : अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-1, Nashik; 4. The CCIT, Nashik; िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “ए” / DR ‘A’, 5. ITAT, Pune; गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, स�यािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune