ASSISTANT COMMISSIONER OF INCOME-TAX vs. M/S. ASHAPURA RUBBER UDYOG,, NASHIK

आयकर अपीलीय अिधकरण “बी” �यायपीठ पुणे म� । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE �ी डी. क�णाकरा राव, लेखा सद�य एवं �ी िवकास अव�थी, �याियक सद�य के सम� BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM आयकर अपील सं. / ITA Nos.1915 to 1917/PUN/2016 िनधा�रण वष� / Assessment Years : 2009-10 to 2011-12 ACIT, Circle-2, अपीलाथ�/Appellant Nashik. …. Vs. M/s. Ashapura Rubber Udyog, Prop. Rajesh Damji Poldiya, X-34, MIDC, Ambad, Nashik-422010. …. ��यथ� / Respondent PAN : AGRPP0744M Revenue by : Shri P. S. Naik Assessee by : Shri Pramod Shingte सुनवाई क� तारीख / घोषणा क� तारीख / Date of Hearing : 16.04.2019 Date of Pronouncement: 25.04.2019 आदेश / ORDER PER D. KARUNAKARA RAO, AM : There are three appeals under consideration involving assessment years 2009-10, 2010-11 and 2011-12. All the three appeals filed by the Revenue are against the common orders of CIT(A)-2, Nashik dated 08.06.2016. Since the facts and issues are common in all the three appeals, therefore, these were heard together and are being disposed of by this composite order. 2. Since the grounds are common in all the three appeals, therefore, for the sake of brevity, the grounds in ITA No.1915/PUN/2016 raised by the Revenue are extracted hereunder :- “i) Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-2, Nashik was justified in deleting the addition of Rs.44,70,687/- on account of alleged bogus purchases from Hawala dealers / parties ?

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ii) Whether the Ld. CIT(A) should have considered that the assessee could not substantiate the claims of purchases from identified Hawala dealers and specifically admitted under oath u/s 131 of the Act? iii) Whether the Ld. CIT(A) should have considered the fact that the onus was on the assessee to list out the bogus sales in its books before it can claim that only profit margin could be taxed ? iv) Whether the Ld CIT(A) erred in presuming that simply because no addition was made in case of Sales, it was accepted as genuine and further assuming that thereby purchases should be genuine ? v) The appellant prays that the order of the Ld. CIT(A)-2, Nashik may please be cancelled and the order of Assessing office may please be restored. vi) The appellant prays to adduce such further evidence to substantiate his case. vii) The appellant prays leave to add, alter, clarify, amend and or withdraw any grounds of appeal as and when the occasion demands.”

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returns of income for all the three assessment years. Assessee claimed that the purchases are genuine and furnished evidences in support of the genuineness of the transactions. The Assessing Officer ignored the said evidences furnished by the assessee with regard to the trail of goods, facts relating to the payments etc. 4. During the first appellate proceedings, the CIT(A) considered the facts relating to the said statement recorded u/s 131 of the Act and also considered the facts relating to absence of the corroborative evidences and restricted the disallowance to 10% of the alleged bogus purchases. In this regard, the CIT(A) relied heavily on the Hon’ble Supreme Court judgement in the case of CIT vs. Khader Khan sons, 352 ITR 480 (SC) and the Hon’ble Kerala High Court judgement in the case of Paul Mathews & sons vs. CIT, 263 ITR 101 (Ker) and also relied on the CBDT Instruction No.286/2/2003 dated 10.03.2003 and appreciated the reasons for retraction relating to the offer of entire bogus purchases income of the assessee during the proceedings u/s 131 of the Act. 5. In the background facts narrated above before us, ld. DR for the Revenue relied heavily on the order of the Assessing Officer. He also relied heavily on the statement obtained from the assessee u/s 131 of the Act, where entire such purchases was offered as additional income of the assessee. Ld. DR also questioned the retraction of the statement and its genuineness. Ld. DR, however, could not demonstrate that the existence of any corroborative evidence in support of bogus purchases and the assessee has not purchased equivalent purchases from grey market in cash.

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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 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

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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 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. Considering the above facts and submission of the assessee and following the above decision of the Tribunal in the case of M/s. Chhabi

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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 all the assessment years under consideration. Thus, the order of the CIT(A) is fair and reasonable and it does not call for any interference. Hence, the grounds raised by the Revenue are dismissed. 9. In the result, all the three appeals of the Revenue are dismissed. Order pronounced on 25th day of April, 2019. Sd/- Sd/- (िवकास अव�थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 25th April, 2019. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A)-2, Nashik. 4. The CCIT, Nashik. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.