SOFTCON SYSTEMS PVT. LTD.,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

आदेश / ORDER

PER PARTHA SARATHI CHAUDHURY, JM :

This appeal preferred by the assessee emanates from the order of Ld. CIT(Appeals), Pune-6 dated 26.12.2014 for the assessment year 2010-11 as per grounds of appeal on record.

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confirmation of addition of Rs.34,25,000/- made by the Assessing Officer on

account of bogus purchases.

proceedings, the Assessing Officer verified the purchases made by the

assessee-company and issued notice u/s.133(6) of the Income Tax Act, 1961

(hereinafter referred to as ‘the Act’). Some of the notices returned unserved

with the remark “left place/left/refused/unclaimed”. The Assessing Officer

verified these parties with the list of Hawala parties available on the official

web-site of the Sales tax Department of Govt. of Maharashtra. The Assessing

Officer found that these parties were also appearing in the list. Thereafter, the

Assessing Officer confronted the assessee on this issue and asked the

assessee to prove genuineness of the transactions by providing identity of the

parties, by providing PAN details, return of income as well as other details.

The assessee was also asked to furnish delivery challans, transportation bills,

octroi paid challans, weigh bridge bills, goods receipt register, store register,

stock register with relevant entries in order to prove genuineness of the

transactions along with ledger extracts. In response, the assessee could not

produce any details excess for the purchase bills. That further the Ld. AR of

the assessee himself admitted that the purchases were bogus and considering

details of facts, entire amount of Rs.34,25,000/- was added to the total

income of the assessee.

addition made by the Assessing Officer as per reasons appearing in his order

on record specifically opining that the Representative of the assessee has

accepted the disallowance and offered to pay tax being confronted on this

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issue. This admission of the assessee itself proves that the assessee has no

case in this regard.

previous year i.e. assessment year 2009-10, the Assessing Officer had

disallowed 20% of the bogus purchases. Similarly in the subsequent year i.e.

assessment year 2011-12, the Assessing Officer disallowed 20% of the bogus

purchases. Showing these statistics, the Ld. AR of the assessee submitted

that addition to the extent 20% of bogus purchases should be made in

conformity with these aforesaid years.

Authorities below and vehemently argued that it is case where the assessee

himself has admitted the bogus purchases and therefore, the entire amount

should be confirmed.

have also analyzed the facts in the case. We find that various scenarios of

bogus purchase issue was adjudicated in series of decisions by the Pune

Benches of Tribunal with lead order in M/s. Chhabi Electricals Pvt. Ltd. Vs.

DCIT, in ITA No.795/PUN/2014 for assessment year 2010-11 dated

28.04.2017. In the case similar to assessee, the Co-ordinate Bench of the

Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT (supra.)

had upheld the addition of 10% of the bogus purchases over and above the

GP shown by assessee by observing 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

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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 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.

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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 is to be made by estimating the same @ 10% of the alleged hawala purchases, over and above the net profit shown by the assessee.”

Respectfully, following the decision of the Co-ordinate Bench of the

Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT (supra.), we

direct 10% of the bogus purchases over and above GP percentage shown by

the assessee to be added as bogus purchases. Hence, grounds raised by the

assessee are partly allowed.

Order pronounced on 24th day of January, 2019.

Sd/- Sd/- R.S. SYAL PARTHA SARATHI CHAUDHURY VICE-PRESIDENT JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 24th January, 2019. SB

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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-6 4. The CIT-5, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” 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.

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Date 1 Draft dictated on 23.01.2019 Sr.PS/PS 2 Draft placed before author 24.01.2019 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 10 Date on which file goes to the A.R 11 Date of dispatch of order