ASSISTANT COMMISSIONER OF INCOME-TAX vs. KEVAL KADU DEORE,, NASHIK

आदेश / ORDER

PER ANIL CHATURVEDI, AM :

as under :-

Assessee is an individual and is stated to be engaged in the

business of as Electrical Contractor. Assessee filed his return of

income for A.Y. 2011-12 on 28.09.2011 declaring total income at

Rs.56,02,883/-. A notice u/s 148 of the Act was issued on

15.10.2013 and in response to which assessee vide letter dated

14.11.2013 submitted that the original return of income filed on

28.09.2011 may be treated as return in response to notice u/s 148 of

the Act. Thereafter, notice u/s 143(2) of the Act was issued and

served on the assessee. AO has noted that there was no compliance

to the notice. Consequently, assessment was framed u/s 147 r.w.s.

144 of the Act vide order dt. 25.03.2015 and the total income was

determined at Rs.1,71,93,354/-. Aggrieved by the order of AO,

assessee carried the matter before Ld.CIT(A), who vide order

dt.29.06.2016 granted partial relief to the assessee. Aggrieved by the

order of Ld.CIT(A), assessee and Revenue are now in appeal before us.

for A.Y. 2011-12 reads as under :

“1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-1, Nashik was justified in deleting the addition of Rs.86,92,853/- out of total addition of Rs.1,15,90,471/- on account of alleged bogus purchases from Hawala dealers / parties? 2. Whether on the facts and circumstances of the case the CIT(A)-1, Nashik was justified in deleting the purchases treated as bogus when the appellant had not been able to produce the certain parties from whom purchases were made when letters sent to the parties were returned undelivered or the parties did not respond? 3. Whether on the facts and circumstances of the case, the Ld CIT(A)-1, Nashik erred in assuming that the purchases were only inflated when it was clear from the conduct of the assessee, the parties found missing and results of the investigation of another Govt. Department (Sales

Tax), that the purchases could not be proved as genuine and therefore the disallowance by the AO was justified?

No.1998/PUN/2016 for A.Y. 2011-12 reads as under :

“1. The learned CIT(A) erred in confirming the disallowance of Rs.28,97,618/- out of the total disallowance of Rs.1,15,90,471/-- 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.

a. the entire purchases made by the assessee from the above parties were supported by tax invoices and other documentary evidences and hence, there was no reason to doubt the genuineness of the said purchases.

b. The payments to the said parties were made through bank cheques and the A.O. had not brought any evidence on record to show that the payments made by the assessee to these parties were 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 by the assessee to these parties. 4. The learned CIT(A) ought to have appreciated that-

a. The above suppliers had not paid VAT and hence, they had left their registered premises and hence, the addition made by ignoring the various documentary evidences furnished by the assessee was not justified merely because the assessee was not able to produce these parties. b. The A.O. had himself admitted in the asst. order that he was not able to locate the above alleged hawala parties and thus, the A.O. was in no position to grant the opportunity of cross

examination of these parties 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 dated02.09.2015], the addition made solely on the basis of statement of such suppliers recorded at the back of the assessee was not justified at all. 5. 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. “

inter-connected, both the appeals are considered together.

5.1. Before us, though assessee and Revenue raised various grounds

but the sole controversy is with respect to the addition made on

account of bogus purchases.

that in case of assessee, information was received from Maharashtra

Sales Tax Department that assessee has claimed to have made

purchases from various parties aggregating to Rs.1,15,90,471/- and

the parties from whom assessee had made purchases are allegedly

bogus supplier of bills who gave bills without actual transactions of

sale and purchase of goods. In order to verify the genuineness of

purchases, notice u/s 133(6) of the Act was issued to the suppliers

but the notices were returned back by the Postal Authorities with

remarks “not known”. AO noted that assessee had also not filed copy

of octroi receipts, copy of any lorry receipts for transportation of

purchase material, stock register showing consumption of material

purchased etc., and thus the genuineness of the purchases has not

been established by the assessee. AO therefore concluded that

assessee has failed to prove the purchases of Rs.1,15,90,471/- and

accordingly made its addition as unexplained / unproved purchases.

Aggrieved by the order of AO, assessee carried the matter before

Ld.CIT(A), who granted partial relief to the assessee by restricting the

disallowance to 25% of purchases by observing as under :

“4.88 Adverting to the fact in the instant case, the assessee is engaged in the business of Electrical Contractor, under the name and style of M/s K.K. Deore Electricals. The parties, who are in dispute for purchases are neither produced before me nor before the AO. However, the AO has not brought on record any evidence to prove that the purchases were bogus except relying on the information received form Sales tax Department. Ledger extracts of suppliers account reflecting all the purchases and payment by account payee bank cheques have been filed by the appellant. However, in absence of production of parties the issue that purchases were indeed from them cannot be verified. The consumption detail is no testimony of the fact that the purchases are not inflated and parties are not bogus. Since supplies have been made to MSEDCL, Nashik and have not been questioned by the AO in his assessment it is quite likely that the appellant had procured the goods from somewhere else may be from open markets and obtained accommodation bills from the supplier viz. M/s. Sunico Traders, M/s. Fasto Traders Pvt. Ltd. & M/s. Sainath Traders. No confirmations of purchases from the parties are produced. As purchases are claimed by the assessee the primary onus is on him to produce the parties which the appellant has failed to do. Since AO has not doubted the sales the entire purchase cannot be termed as bogus. 4.88.1 Thus, in my opinion the facts on record demonstrate that this not a case of bogus purchase but a case of inflated purchased and at best from bogus parties. Considering the facts and circumstances of the case, the AO is directed to restrict the disallowance to 25% of purchases i.e. Rs.28,97,618/-.”

Aggrieved by the order of Ld.CIT(A), assessee and Revenue are

now in appeal before us.

facts in the case of assessee for A.Y. 2010-11 the Co-ordinate Bench

of the Tribunal vide order dt.15.10.2018 in ITA No.117/PN/2016 has

restricted the addition to 10% of hawala purchases by following the

order of Tribunal in the lead case being of Chhabi Electricals Ltd., Vs.

DCIT and others (in ITA No. 795/PUN/2014 for A.Y. 2010-11 dated

28.04.2017). He submitted that the facts in the year under appeal

are identical to that of earlier year and therefore, following the same

reasoning, the appeal of the assessee may be decided in the same

manner. Ld.D.R. on the other hand, did not controvert the

submissions made by Ld.A.R. but however supported the order of AO.

on record. The issue in the present case is with respect to addition on

account of bogus purchases. We find that Ld.CIT(A) while granting

partial relief to the assessee has noted that AO had not brought on

record any material to prove that the purchases were bogus except

relying on the information receiving from the Sales Tax Department.

She has further noted that since the supplies have been made to

MSEDCL, Nashik and have not been questioned by the AO in its

assessment, it is quiet likely that assessee has procured the good

from somewhere else may be at the open markets and obtained

accommodation bills from the alleged hawala suppliers. She further

noted that since the AO has not doubted the sales, the entire

purchases cannot be said as bogus. She accordingly restricted the

disallowance to 25% of alleged bogus purchases. We find that on

identical facts in the case of assessee for A.Y. 2010-11, the

Co-ordinate Bench of the Tribunal by following the decision in the

case of Chhabi Electricals (supra) has restricted the disallowance to

10% of the hawala purchases by observing as under :

“12. The case of assessee before us is otherwise that it had cooperated and furnished all the information. Our attention was drawn to the confirmation filed of the said party, which is placed at pages 14 and 15 of Paper Book, along with copy of VAT registration of supplier at page 16 and VAT return at page 17 of Paper Book. After going through the Paper Book, it transpires that all this information was filed along with letter dated 20.06.2013 i.e. before start of re-assessment proceedings in the hands of assessee, copy of account of said party is not even dated and no PAN is available. The learned Authorized Representative for the assessee states that the assessee has filed all the information and even the payment to the said party was made through banking channel after a gap of time, hence the purchases should be accepted as genuine. The said information was furnished by the assessee but it was furnished before re-assessment proceedings were initiated against the assessee. Another point to be kept in mind is that during the course

of assessment proceedings, the Assessing Officer in order to verify the genuineness of purchases had issued notice under section 133(6) of the Act, which was returned back by postal authorities with remark ‘not know’. The assessee was thus, confronted with the said information and even opportunity was given to the assessee to make good its case. We have already referred to various queries raised by the Assessing Officer during the course of assessment proceedings vide letter dated 10.04.2014. The assessee has failed to respond to the same and under such circumstances, we find no merit in the plea of assessee that it had asked for the copy of statement and had also asked for cross- examination of witnesses, which was not allowed by Assessing Officer, hence addition cannot be sustained in the hands of assessee. On the other hand, the Assessing Officer in the present case has made enquiries, try to summon the supplier M/s. Sunico Traders Pvt. Ltd., issued show cause notice under section 133(6) of the Act but the same could not be served upon the supplier and it was returned by postal authorities. Here, the onus shifts to assessee, who has failed even to acknowledge various notices given by Assessing Officer during the course of assessment proceedings and has failed to explain its case before the Assessing Officer. In such circumstances, mere reliance on confirmation which is undated, does not bear PAN number, cannot be relied upon. The VAT registration and acknowledgement of VAT return does not prove the case of assessee since the supplier was registered under the VAT and that is why enquiry was by the Sales Tax Department. Where the assessee has failed to discharge onus cast upon him, we find no merit in the plea of assessee. The assessee has failed even to establish trail of goods and has not even produced octroi receipts, transportation receipts of goods purchased from party in Mumbai for supply to the assessee’s address in Nashik. The assessee has also not filed any quantitative details or stock register showing consumption of material purchased and because of noncooperative attitude of assessee before the Assessing Officer, there is no merit in the plea of assessee that no addition is warranted in the hands of assessee. Once the trail of goods has not been established by the assessee, then onus upon the assessee has not been discharged and in such circumstances, we find no merit in the plea of assessee. We have already decided similar issue in bunch of appeals with lead order in the case of Anita Sanjay Agrawal Vs. ITO in ITA Nos.2622 to 2624/PUN/2016, relating to assessment years 2009-10 to 2011-12, order dated 28.03.2018, wherein the assessee had established the trail of goods but the Assessing Officer had failed to provide cross- examination to the assessee and the addition was deleted in the hands of assessee. However, the facts of present case are at variance, where the assessee has failed to cooperate in the assessment proceedings and has also failed to establish the trail of goods, in the absence of it, there is no merit in the plea of assessee. However, we have restricted the addition to 10% of hawala purchases in bunch of appeals with lead order in M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT in ITA No.795/PUN/2014, relating to assessment year 2010-11, order dated 28.04.2017. Following the same parity of reasoning, we direct the Assessing Officer accordingly. The grounds of appeal raised by the assessee are thus, partly allowed.”

Before us, since both the parties have admitted that the facts in the

year under consideration are identical to that of A.Y. 2010-11, we

therefore following the same reasoning as given by Co-ordinate Bench

of the Tribunal while deciding the appeal for A.Y. 2010-11 and for

similar reasons, direct that the addition be restricted to 10% of the hawala purchases. Thus, the grounds of the assessee are partly allowed and that of the Revenue is dismissed.

Order pronounced on 1st day of March, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 1st March, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-1, Nashik. Pr. CIT-1, Nashik. 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, 5. ITAT, “B” Pune; 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER,स �या // True Copy //

व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune