M/S. TECHNIP ENGINEERING WORKS PVT.LTD,,RAIGAD vs. INCOME-TAX OFFICER, WARD - 3,, PANVEL

आयकर अपीलीय अिधकरण, पुणे �यायपीठ “एक-सद�य मामला” पुणे म� IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “SMC”, PUNE BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM आयकर अपील सं. / ITA No.332/PUN/2018 िनधा�रण वष� / Assessment Year : 2010-11 M/s. Technip Engineering Works Pvt. Ltd., Plot No.W-153(E), Near Deepak Fertilizers, MIDC, Taloja, Dist.-Raigad-410208. .......अपीलाथ� / Appellant PAN : AABCT7434M बनाम / V/s. ITO, Ward- 3, ……��यथ� / Respondent Panvel. Assessee by : Smt. Deepa Khare Revenue by : Shri M.K. Verma & Shri Rajesh Gawali सुनवाई क� तारीख / Date of Hearing : 05.02.2019 घोषणा क� तारीख / Date of Pronouncement : 07.02.2019 आदेश / ORDER PER D. KARUNAKARA RAO, AM: This appeal is filed by the assessee against the order of CIT(A)-2, Pune dated 31.08.2017 for the Assessment Year 2010-11.

2 ITA No.332/PUN/2018  Quantitative details are maintained.  Corresponding sales were made and profit offer for tax. 3. The appellant prays that disallowance made of Rs.7,00,015/- may be deleted. 4. The appellant craves your honour’s leave to add, alter or amend any ground of appeal.” 3. Briefly, the relevant facts include that the assessee is a Private Limited Company and is engaged in the business of manufacturing of chemical process equipments in S.S. and M.S. materials. The assessee filed the return of income declaring total income of Rs.9,52,313/-. Based on the information received from the Sales Tax Department, Maharashtra, the Assessing Officer found that the assessee was a beneficiary of the bogus purchases bills from the entry providers. As per the said information, the assessee was a beneficiary of the bills issued by M/s. Technip Engg. Works Pvt. Ltd. amounting to Rs.7,00,015/-. The assessee was asked to explain the same by issue of notice u/s 147 of the Act for reopening of the assessment. As the assessee did not reply to the said notice, the Assessing Officer passed the reassessment order u/s 143(3) r.w.s. 147 of the Act and added the addition of Rs.7,00,015/- on account of bogus purchases to the total income of the assessee. Aggrieved with the said decision of the Assessing Officer, the assessee carried the matter before the CIT(A). The CIT(A) confirmed the same.

3 ITA No.332/PUN/2018 5. Before us, at the outset, ld. Counsel for the assessee submitted that this is the case involving the issue of bogus purchases and the addition of entire purchases made by the Assessing Officer. The CIT(A) confirmed the same.

4 ITA No.332/PUN/2018 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 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.

5 ITA No.332/PUN/2018 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.”

6 ITA No.332/PUN/2018 over and above the net profit shown by the assessee in this assessment year. Accordingly, the grounds raised by the assessee are partly allowed.