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Income Tax Appellate Tribunal, VIRTUAL COURT
Before: SHRI C.N. PRASAD, JM & SHRI M.BALAGANESH, AM
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in A.Y.2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-18, Mumbai in appeal No.CIT(A)-18/IT-10091/DCIT-11(3)(1)/16-17 dated 20/04/2016 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/03/2016 by the ld. Asst. Commissioner of Income Tax-11(3)(1), Mumbai (hereinafter referred to as ld. AO).
M/s. Tanaya Enterprises Pvt. Ltd.,
The only effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in sustaining the disallowance made @12.5% on value of alleged bogus purchases in the facts and circumstances of the instant case.
2.1. None appeared on behalf of the assessee. In fact the notices sent to the assessee on 06/10/2020 and 27/10/2020 had returned back to this Tribunal and we also find that from the date of first hearing of this appeal i.e. on 17/02/2020 onwards the assessee had not recorded its presence either in person or through an authorized representative u/s 288 of the Act. Hence, we proceed to dispose off this appeal on merits on hearing the ld. DR and perusing the materials available on record without waiting for the presence of the ld. AR, by holding that the assessee is not interested in prosecuting the appeal by proper representation.
We find that assessee is engaged in the business of trading in fabrics and had filed its return of income for the A.Y. 2013-14 on 29/01/2015 declaring total income of Rs.17,69,840/-. We find that the ld. AO observed that assessee had made total purchases amounting to Rs.224,30,16,142/- during the year, out of which purchases to the extent of Rs.10,55,96,000/- made from the following four parties were sought to be examined by the ld. AO and found to be bogus:-
Name of the suppliers Amount (Rs.) M/s. Citius Trading Pvt. Ltd., 1,94,47,000 M/s. Peach Exim Pvt. Ltd., 2,07,86,000 M/s. Hoatzin Trading Pvt. Ltd., 1,48,49,000 M/s. Somu Textrade Pvt. Ltd., 5,05,14,000 Total 10,55,96,000
M/s. Tanaya Enterprises Pvt. Ltd., 3.1. The ld. AO observed in his assessment order that information was received from DCIT, Central Circle-4(3), Central Range-4, Mumbai vide letter dated 23/02/2016 and assessee had taken accommodation entries aggregating to Rs.10,55,96,000/- from the aforesaid four parties by way of purchases which got unearthed during the course of search and seizure action u/s.132 of the Act carried out by the DGIT- Investigation Wing in the case of Balaji Group on 30/04/2013.
3.2. The ld. AO also observed that during the course of search, a statement was recorded u/s.132(4) of the Act from Shri Jagdish Mundra wherein he had also admitted that the aforesaid four suppliers were engaged in providing accommodation bills to various parties. Accordingly, the ld. AO sought to verify the veracity of the purchases made by the assessee from the aforesaid suppliers. The assessee vide letter dated 15/12/2015 furnished the financial statements of the alleged suppliers, copy of confirmations from the parties, copy of purchase invoices, copy of delivery challans, copy of bank statement highlighting the payment made to the alleged parties, statement showing items purchased from the alleged parties and on subsequent sales made by the assessee thereon. The assessee pleaded that assessee had even submitted the delivery challans evidencing the proof of delivery of goods by those suppliers to the assessee. The assessee also furnished the quantitative details in respect of each commodity purchased from the aforesaid suppliers, relevant stock register, ledger copies of the alleged suppliers for the period under consideration and bank statement extracts highlighting the payments made to those suppliers through account payee cheques. The ld. AO issued notice u/s.133(6) of the Act to the aforesaid suppliers which was returned unserved by the postal authorities. Accordingly, the assessee was asked to produce the said parties along with compliance letter to notice u/s.133(6) of the Act, for which the assessee expressed its M/s. Tanaya Enterprises Pvt. Ltd., inability to do so. The ld. AO also observed that the address of the aforesaid suppliers given by the assessee were also cross verified from the website of Sales Tax Department of Government of Maharashtra and found to be same. He observed that these parties appeared in the list of tainted hawala dealers in the said website of Government of Maharashtra. The ld. AO however, agreed to the fact that assessee had made sales out of the alleged purchases and accordingly, only the profit element embedded in the value of such purchases could be brought to tax which was estimated by the ld. AO at 12.5% of alleged bogus purchases of Rs.10,55,96,000/- and disallowance to the extent of Rs.1,31,99,500/- was made thereon while framing the assessment.
3.3. We find that the ld. CIT(A) in para 6.1. had observed that assessee during the course of appellate proceedings had submitted necessary evidences regarding transportation and consumption of the materials purchased but again observed that assessee could not produce the parties before him also. By placing reliance on various decisions including the various decisions of the Hon’ble Supreme Court as detailed in para 6.3,6.4,6.5,6.6,6.8 and decisions of the Hon’ble Jurisdictional High Court and Tribunal decisions up to para 6.29 of the order of the ld. CIT(A), the ld. CIT(A) ultimately concluded that the parties from whom the purchases were made were found to be bogus and that was the precise reason for non-production of those parties by the assessee either before the ld. AO or before him. The ld. CIT(A) also observed that the consumption / sales made out of such alleged purchases were not doubted in the instant case and though the bills were obtained by the assessee from these bogus suppliers at inflated purchase price so as to suppress its true profits. He concluded that the profit percentage thereon issued by the ld. AO @12.5% was found to be reasonable and accordingly, upheld the action of the ld. AO.
M/s. Tanaya Enterprises Pvt. Ltd.,
Aggrieved, the assessee is in appeal before us.
We find that the assessee has just raised a ground stating that the materials purchased by it do not come under the ambit of MVAT / Sales Tax. We find that no evidences in any manner whatsoever has been furnished by the assessee to support this claim and the assessee had absolutely not bothered to even record its presence either in person or through its authorized representative to substantiate its claim made in the grounds of appeal. We find that in the instant case, the consumption / sales made by the assessee out of the disputed purchases has not been doubted by the revenue. Hence, it would be just and proper to bring to tax only the profit element embedded in such disputed purchases by safely concluding that assessee could have made purchases from the grey market in order to have some savings and to substitute the same, it had given colour of a genuine transaction by obtaining the bills from the aforesaid bogus suppliers. It is a fact that none of the parties could be produced before the lower authorities by the assessee but we are not getting into the said aspect as to whether that alone could be a reason for justification of disallowance of bogus purchases made by the revenue. But in the instant case, notices issued u/s.133(6) of the Act could also not be served on the alleged bogus suppliers. This categorically goes to prove that those suppliers are not in existence at all. The primary onus is always on the assessee to justify its claim of deduction. Admittedly, it is the assessee which has claimed deduction for purchases in the sum of Rs.10,55,96,000/- in its return of income. The primary onus to prove the veracity of such purchase loss is only on the assessee. But we find that since the revenue had not doubted the corresponding consumption / sales made out of such disputed purchases in the peculiar facts of the instant case, it would be just and reasonable to estimate only the profit element embedded in such disputed purchases and bring to tax the same. We find
M/s. Tanaya Enterprises Pvt. Ltd., that the Hon’ble Gujarat High Court in the case of Simit P Sheth reported in 356 ITR 451 had estimated the profit percentage to be at 12.5%. We also find that in series of decisions rendered by this Tribunal the very same profit percentage of 12.5% has been considered for the similar line of industry in which assessee is engaged in. Hence, we hold that the ld. CIT(A) had rightly estimated the profit percentage at 12.5% on value of alleged disputed purchases in the facts and circumstances of the instant case, on which we do not deem it fit to interfere. Accordingly, the appeal filed by the assessee is dismissed.
In the result, appeal of the assessee is dismissed.
Order pronounced on 18/12/2020 by way of proper mentioning in the notice board.