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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI M BALAGANESH & SHRI RAVISH SOOD
ORDER PER BENCH: The captioned appeals filed by the revenue are directed against the respective orders passed by the CIT(A)-21, Mumbai, dated 08.03.2019, which in turn arises from the assessment orders passed by the A.O under Sec. 143(3) r.w.s 147 for A.Y. 2009-10, A.Y.2011-12 and A.Y. 2012-13 AND under Sec. 143(3) for A.Y. 2013-14. As common issues are involved in the captioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall first advert to the appeal of the revenue for A.Y. 2009-10 wherein the impugned order has been assailed before us on the following grounds of appeal: “1. Whether on the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the Assessing Officer to delete the addition of Rs. 2,69,38,787/- made on account of bogus purchases ignoring the fact that the assessee during the course of survey proceedings as well as during the course of assessment proceedings had not been able to furnish any evidence to negate these clinching evidences by producing these purchase to 3516 & 3518/ Mum/2019 2 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal parties with the relevant books of accounts/documents to show that the materials allegedly supplied by these hawala parties were indeed consumed
2. Whether on the facts and in the circumstances of the case and in law the Ld. C.I.T. (A) erred in directing the Assessing Officer to delete that addition made on account of bogus purchases ignoring the fact that ii is a settled provision of law that the onus is upon the assessee to prove the genuineness of the alleged purchases. 3. the appellant prays that the order of the CIT(A) on the grounds be set aside and that of the assessing officer be restored. 4. the appellant craves leave to add, amend or alter all or any of that grounds of appeal which may be necessary.”
2. Briefly stated, the assessee which is engaged in the business of trading in various goods and is a contractor for garden development and maintenance had filed his return of income for A.Y. 2009-10 on 14.09.2009, declaring a total income of Rs.69,27,480/-. The return of income filed by the assessee was processed as such under Sec.143(1) of the Act.
3. Survey under Sec.133A of the Act was conducted at the business premises of the assessee on 07.01.2013. Subsequently, the case of the assessee was reopened under Sec. 147 of the Act. Information was gathered during the course of the survey proceedings that the assessee had booked purchases from certain hawala dealers without any actual delivery of goods. In the course of the assessment proceedings the A.O confronted the assessee with the allegation that he had booked bogus purchases of Rs.2,69,38,787/- from parties which were declared as hawala dealers by the Sales Tax Department and called upon him to put forth an explanation as regards the same. In reply, the assessee objected to the reopening of assessment and also furnished submissions to support his claim of having made genuine purchases from the aforesaid parties. However, the A.O not being satisfied with the explanation of the assessee added the amount of the impugned purchases of Rs.2,69,38,787/- as an unexplained expenditure within the meaning of Sec.69C of the Act. Resultantly, the assessment was framed by the A.O vide his order passed under Sec. 143(3) r.w.s 147, dated 30.03.2015 at a total income of Rs.3,38,66,260/-. to 3516 & 3518/ Mum/2019 3 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal 4. Aggrieved, the assessee assailed the assessment before the CIT(A). It was observed by the CIT(A) that the A.O had stamped the impugned purchases as bogus, for the reason, that the parties from whom the same were claimed to have been made figured in the list of the suspicious dealers enlisted by the Sales Tax Department, Government of Maharashtra. In fact, the aforesaid conviction of the A.O was further fortified by the fact that the notices which were issued to the aforementioned parties under Sec. 133(6) were either returned back or no reply was received. Also, the fact that the assessee could not substantiate the movement of goods by placing on record the delivery challans and lorry receipts weighed in the mind of the A.O while holding the impugned purchases as bogus. Further, the observations made by the DDIT(Investigation)-1(2), Pune, while investigating the case of a „sister concern‟ of the assessee whereby it was noticed that some of the aforesaid parties were not available at their given addresses also strengthened the aforesaid conviction of the A.O. As observed by the CIT(A), the A.O on the basis of the aforesaid combined reasons had concluded that the impugned purchases claimed by the assessee to have been made from the aforementioned parties were not genuine and added the value of the same to the returned income of the assessee. To sum up, as observed by the CIT(A), the aforesaid addition towards bogus purchases was made in the hands of the assessee on the ground that the aforementioned parties from whom purchases were claimed by the assessee to have been made were enlisted on the sale tax website as suspicious hawala dealers and the notices issued to them by the A.O under Sec. 133(6) were either returned unserved or no reply was received in compliance thereto. At the same time, it was observed by the CIT(A) that the assessee in order to support the genuineness of the aforesaid purchase transactions had placed on record the following documentary evidence:
(a) Ledger Account confirmation of all the parties alongwith copies of invoices issued. (b) Copies of purchase orders; (c) Proof of payment made by account payee cheque; to 3516 & 3518/ Mum/2019 4 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal (d) Sample copies of work orders issued by MCGM whereby the very same material purchased from these parties are certified to be used for garden maintenance and development. The CIT(A) after perusing the facts observed, that the assessee in order to substantiate its claim that the goods under consideration were actually purchased and used in the course of its work contract had therein placed on record the payment certificate issued by Municipal Corporation of Greater Mumbai (MCOGM). On a perusal of the said certificate, it was observed by the CIT(A) that the fact that the work therein stated was done by the assessee was certified by the field officers, engineers and also the accounts department. It was further noticed by the CIT(A) that the aforesaid payment certificate was also examined by the vigilance department and clearance was given as regards the work executed by the assessee. In fact, as observed by the CIT(A), the vigilance department had also levied penalty and had made the requisite deductions as and where any deficiency was noticed as regards the work executed by the assessee. Apart from that, it was noticed by the CIT(A) that the assessee had maintained complete quantitative details and stock records which were examined by the A.O during the course of the survey proceedings as well as in the course of the assessment proceedings. Also, it was noticed by the CIT(A) that the books of accounts of the assessee were duly audited by a chartered accountant and no deficiency was therein reported. In the backdrop of the aforesaid facts, it was observed by the CIT(A) that though the A.O had disallowed the impugned purchases, however, the corresponding sales credited in the profit and loss account were accepted by him. Also, it was observed by the CIT(A) that the assessee had made the payments for the impugned purchases through account payee cheques only. In the course of the appellate proceedings, the assessee in order to substantiate its claim that the goods under consideration were consumed in execution of the works contract of garden development and maintenance had furnished the complete quantitative details of the goods so consumed. Further, the assessee in order to prove to the hilt that the goods so purchased were utilised in executing the works contract obtained from BMC had also to 3516 & 3518/ Mum/2019 5 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal cross-linked the impugned purchases as against their consumption in the course of execution of the aforesaid government work orders. To sum up, it was observed by the CIT(A) that the assessee had established that the goods so purchased from the aforementioned parties were in fact consumed while executing the BMC contract, and thus, formed part of its duly accounted sales for the year under consideration. Observing, that though the assessee had failed to discharge the onus as was so cast upon him as regards proving the genuineness of the purchase transactions with the aforementioned parties, the CIT(A) was of the view that it remained as a matter of fact borne from the records that the factum of consumption of such goods in execution of the works contract by the assessee was however proven to the hilt. Backed by his aforesaid observations, the CIT(A) was of the view that as the assessee had failed to fully discharge the onus that was cast upon him and therein substantiate the genuineness and veracity of the purchases which were claimed to have been made from the aforementioned parties, it could, thus, safely be concluded that the possibility of inflated purchases/cost could not be ruled out. In the backdrop of his aforesaid conviction, the CIT(A) was of the view that the addition in the hands of the assessee was liable to be restricted only to the extent of the estimated profit which he would have made by making the impugned purchases from parties which could not be verified. Observing, that the assessee could not get the aforesaid purchase transactions verified, the CIT(A) held a conviction that the fact that the impugned purchases had been booked at an inflated value could not be ruled out. On the basis of his aforesaid observations the CIT(A) was of the view that in the totality of the facts of the case the addition towards the inflated purchases/cost of the goods accounted for by the assessee in its books of account was to worked out by estimating the profit that the assessee would had made by purchasing the goods from the unverified sources. For the purpose of quantifying the profit element the CIT(A) relied on the view that was taken by the Tribunal in the assessee‟s own case and that of his related parties, viz. (i) Order passed by the Tribunal in the case of Shri Kishore Agarwal (assessee‟s brother) in ITA ITA Nos.3514 to 3516 & 3518/ Mum/2019 6 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal No. 870 & 871/Mum/2015, dated 25.01.2017 for A.Y. 2010-11 and A.Y. 2011- 12; (ii) Order passed by the Tribunal in the case of M/s Technotrade Impex India Pvt. ltd. (sister concern of the assessee) in dated 24.01.2018 for A.Y. 2011-12; (iii) Order passed by the Tribunal in the case of M/s Technotrade Impex India Pvt. Ltd., (sister concern of the assessee) in ITA No.5382 & 5383/Mum/2016, dated 17.04.2018 for A.Y. 2009-10 and A.Y.2012-13; and (iv) Order passed by the Tribunal in the assessee‟s own case for A.Y. 2010-11 in ITA No. 5220/Mum/2014, dated 10.08.2017. It was inter alia observed by the CIT(A) that his predecessor while disposing off the assessee‟s appeal for A.Y. 2010-11 wherein identical facts were involved, had estimated the addition with respect to bogus purchase made by the assessee in the garden maintenance and development contract segment of his business by adopting a gross profit rate of 12%. Accordingly, the CIT(A) observing that the assessee during the year under consideration had already declared a G.P rate of 14.23% insofar the garden development and maintenance segment of his business was concerned, therein concluded that as the profit declared by the assessee was already more than the rate of 12% as was upheld by the Tribunal in the assessee‟s own case for A.Y. 2010- 11, therefore, no further addition was called for in his case for the year under consideration. On the basis of the aforesaid observations the CIT(A) deleted the addition of Rs.2,69,38,787/- made by the A.O.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We find that the assessee respondent despite having been put to notice about the hearing of the appeal has however failed to put up an appearance before us. Accordingly, in the backdrop of the aforesaid facts, we are constrained to proceed with as per Rule 25 of the Appellate Tribunal Rules, 1963, and therein dispose off the appeal after hearing the appellant revenue and perusing the orders of the lower authorities.
The ld. Departmental Representative (for short „D.R‟) relied on the order passed by the A.O. It was submitted by the ld. D.R that the CIT(A) had erred to 3516 & 3518/ Mum/2019 7 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal in dislodging the well reasoned order passed by the A.O. It was averred by the ld. D.R that as the assessee had failed to substantiate the genuineness of purchase transactions under consideration, therefore, the A.O had justifiably added the same to the returned income of the assessee. It was averred by the ld. D.R that the order passed by the CIT(A) may be „set aside‟ and that of the A.O be restored.
We have heard the ld. D.R, perused the orders of the lower authorities and the material available on record. Admittedly, it is a matter of fact borne from the record that the assessee had failed to substantiate the genuineness and veracity of the purchase transactions under consideration. In fact, the assessee by not assailing the order of the CIT(A) before us, had thus, accepted the fact as regards unverifiability of the purchases under consideration. On a perusal of the records, we find that the assessee had claimed to have made purchases from the following 9 parties whose names were enlisted by the Sales Tax Department, Maharashtra as the parties which were engaged in the business of providing accommodation entries:
Sr. No. Name of the party Amount (in Rs.) 1. Maharashtra Trading 99,33,184 2. Mahavir Corporation 5,74,600 3. Omkar Steel Centre 29,76,896 4. P.K. Trading Co. 24,075 5. Parsvanath Enterprises 2,33,072 6. Pearl International 50,21,252 7. Samarth Sales Syndicate 77,33,748 8. Swastik Sales Agency 1,33,376 9. Nidhi Industries 3,08,584 Total 2,69,38,787 As per the records, the notices issued by the A.O under Sec. 133(6) to the aforementioned parties were either returned unserved or no reply was received from them. In order to verify the genuineness and veracity of the impugned purchases which were claimed by the assessee to have been made from the aforementioned parties, the A.O had specifically called upon the assessee to place on record certain documentary evidence. Although, the assessee in compliance to the directions of the A.O had placed on record ITA Nos.3514 to 3516 & 3518/ Mum/2019 8 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal certain documentary evidence in order to substantiate his claim of having carried out genuine purchases from the aforementioned parties, however, the A.O was not satisfied with the same for the reasons stated at length by him in the body of the assessment order. Accordingly, the A.O being of the view that the assessee could not prove the genuineness of the purchases of Rs.2,69,38,787/- had therein added the entire value of such purchases as an unexplained expenditure under Sec.69C in the hands of the assessee.
As observed by us hereinabove, the CIT(A) noticed that his predecessor while disposing off the appeal in the assessee‟s own case for the immediately succeeding year i.e A.Y. 2010-11, wherein identical facts as regards impugned bogus purchases were involved, had estimated a G.P rate of 12% as a yardstick in respect of the unverified purchases made by the assessee in his garden maintenance and development segment of business. Observing, that the assessee during the year under consideration had already declared a gross profit rate of 14.23% insofar the garden development and maintenance segment of his business was concerned, the CIT(A) was of the view that no separate addition was called for in the hands of the assessee. The CIT(A) while concluding as hereinabove, had observed, that the view taken by his predecessor in the assessee‟s own case for A.Y. 2010-11 was thereafter upheld by the Tribunal and the department‟s appeal was dismissed in dated 10.08.2017. In sum and substance, the CIT(A) finding that identical facts were involved in the case of the assessee for the year under consideration as were there before his predecessor in A.Y. 2010-11, had thus followed the view that was taken by the latter. Apart from that, we find that the CIT(A) had also relied upon certain orders passed in the case of related concerns of the assessee viz. (i) Order of the Tribunal in the case of Shri Kishore Agarwal (assessee‟s brother) in ITA No. 870 & 871/Mum/2015, dated 25.01.2017 for A.Y. 2010-11 and A.Y. 2011-12; (ii) Order of the Tribunal in the case of M/s Technotrade Impex India Pvt. ltd. (sister concern of the assessee), ITA No.3835/Mum/2016, dated 24.01.2018 for A.Y. 2011-12; and (iii) Order of the Tribunal in the case of M/s Technotrade ITA Nos.3514 to 3516 & 3518/ Mum/2019 9 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal Impex India Pvt. Ltd, (sister concern of the assessee) in & 5383/Mum/2016, dated 17.04.2018 for A.Y. 2009-10 and A.Y.2012-13. Also, support was drawn by the CIT(A) from the order passed by the Tribunal in the assessee‟s own case in ITA No. 5220/Mum/2014, dated 10.08.2017 for A.Y. 2010-11, wherein under identical circumstances the Tribunal had upheld the order of the CIT(A) as regards restricting the addition to the extent of the estimated profits involved in making of the unverified purchases by the assessee. Apart from that, the Tribunal had concurred with the manner in which the CIT(A) had estimated the profit element involved in making of purchases by the assessee from unverified sources i.e by considering the G.P rate declared by the assessee in comparison to the normal acceptable G.P rate that was estimated by him. For the sake of clarity the view taken by the CIT(A) is being reproduced as under: “8.12 In the present case, I find that the appellant has declared gross profit rate of 14.23% on garden development and maintenance. In assessee‟s own case for A.Y.2010-11, my predecessor has estimated a gross profit rate of 12% in garden maintenance and development segment after analyzing all the facts of the case in detail and such gross profit rate of 12% has also been upheld by Hon‟ble ITAT. Therefore, I do not find any reason to deviate from the view taken by my predecessor which has also been upheld by Hon‟ble ITAT. Since, in the present case, the appellant has declared GP rate of 14.23% which is already more than the rate of 12% as upheld by Hon‟ble ITAT, I find that the same does not call for any interference and accordingly, the addition made in the assessment of Rs.2,69,38,787/- is deleted. Ground No. 5 and 6 of grounds of appeal
are thus, allowed.” We have given a thoughtful consideration and find no infirmity either in confirming of the addition by the CIT(A) to the extent of the profit which the assessee would had made by procuring the goods from unverified parties, nor the methodology adopted by him for quantification of such profit element. In fact, we find no reason to take a view different from that arrived at by the Tribunal while disposing off the appeal in the assessee‟s own case for A.Y. 2010-11 in ITA No. 5220/Mum/2014, dated 10.08.2017. As observed by us hereinabove, the CIT(A) while disposing off the assessee‟s appeal for A.Y.2010-11 had after analyzing all the facts of the case had estimated a G.P rate of 12% in respect of the garden maintenance and development segment. to 3516 & 3518/ Mum/2019
10. A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal The aforesaid order of the CIT(A) was thereafter upheld by the Tribunal. As in the case before us the assessee had already declared a G.P rate of 14.23% which is already more than the rate 12% as had been approved by the Tribunal in the assessee‟s own case for A.Y. 2010-11, we, therefore, finding no reason to take a different view respectfully follow the same. Accordingly, finding no infirmity in the view taken by the CIT(A) we uphold his order.
The appeal of the revenue is dismissed.
A.Y: 2011-12 ITA No. 3516/Mum/2019
We shall now take up the appeal of the revenue for A.Y. 2011-12. The revenue has assailed the impugned order on the following grounds of appeal before us: “1. Whether on the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the Assessing Officer to restrict the addition of Rs. 4,19,59,365/- made on account of bogus purchase ignoring the fact that the assessee during the course of survey proceedings as well as during the course of assessment proceeding had not been able to furnish any evidence to negate these clinching evidences by producing these purchase parties with the relevant books of accounts/documents to show that the materials allegedly supplied by these hawala parties were indeed consumed.
2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in directing the Assessing Officer to restrict the addition made on account of bogus purchases ignoring the fact that i is a settled provision of law that the onus is upon the assessee to prove the genuineness of the alleged purchases.
3. The appellant prays that the order of the CIT(A) on the grounds be set aside and that of the assessing officer he restored.
4. The appellant craves leave to add, amend or alter all or any of the grounds of appeal which may be necessary.”
11. Briefly stated, the assessee had e-filed his return of income for A.Y. 2011-12 on 27.08.2011, declaring a total income of Rs.1,35,09,170/- The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was reopened under Sec. 147 of the Act. In compliance to the notice issued under Sec. 148, dated 28.03.2014, it was submitted by the assessee that his original return of to 3516 & 3518/ Mum/2019 11 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal income may be treated as the return filed in response to notice issued under Sec.148 of the Act.
12. Survey action under Sec.133A was conducted on 07.01.2013 at the business premises of the assessee. On the basis of the information gathered in the course of the survey proceedings and thereafter, it was observed by the A.O that the assessee had booked bogus purchases in the name of the following 17 parties aggregating to an amount of Rs.4,19,59,365/-:
Sr. No. Name of the Party Amount (in Rs.) 1. Karan Enterprises 1,73,000 2. K.K. Enterprises 36,75,748 3. Mahalaxmi Enterprises 11,60,801 4. Mahavir Engineering Works 1,65,994 5. Manibhadra Enterprises 13,275 6. Parsvanath Enterprises 11,953 7. Parsvanath Enterprises TG 71,748 8. Pearl International 2,61,44,693 9. Royal Enterprises 70,830 10. Royal Enterprises TG 4,07,093 11. Sambhav Traders 15,29,907 12. Vatika Trading Company 6,22,460 13. Sunico Traders 4,02,370 14. Arihant Traders 1,02,120 15. Amrutlal Sales Pvt. Ltd. 34,160 16. Sivamani Traders Pvt. Ltd. 7,97,690 17. V3 Enterprises 65,75,553 Total 4,19,59,365 As the assessee failed to discharge the onus that was cast upon him insofar proving to the hilt the genuineness of the purchase transaction under consideration was concerned, the A.O, therefore, added the same as an unexplained expenditure under Sec. 69C of the Act.
On appeal, the CIT(A) after exhaustive deliberations and observations recorded in the body of his order, therein noticed that a similar issue was involved in the case of the assessee and his related parties, viz. (i) Order passed by the Tribunal in the case of Shri Kishore Agarwal (assessee‟s brother) in & 871/Mum/2015, dated 25.01.2017 for A.Y. 2010-11 and A.Y. 2011-12; (ii) Order passed by the Tribunal in the case of M/s Technotrade Impex India Pvt. ltd. (sister concern of the assessee) in ITA ITA Nos.3514 to 3516 & 3518/ Mum/2019 12 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal No.3835/Mum/2016, dated 24.01.2018 for A.Y. 2011-12; (iii) Order passed by the Tribunal in the case of M/s Technotrade Impex India Pvt. Ltd, in ITA No.5382 & 5383/Mum/2016, dated 17.04.2018 for A.Y. 2009-10 and A.Y.2012-13; and (iv) Order passed by the Tribunal the assessee‟s own case for ITA No. 5220/Mum/2014, dated 10.08.2017 for A.Y. 2010-11. It was noticed by the CIT(A) that his predecessor while disposing off the aforesaid appeals had estimated the gross profit rate prevailing in the assessee‟s line of business as a yardstick for quantifying the profit which the assessee would have made from purchasing the impugned goods from unverified suppliers. Further, it was noticed by him that the aforesaid view taken by his predecessor in the case of the aforesaid related parties was thereafter upheld by the Tribunal. Apart from that, it was observed by the CIT(A) that his predecessor in the assessee‟s own case for the immediately preceding year i.e A.Y. 2010-11 had estimated the G.P rates in respect of the different segments of the assessee‟s business, viz. (i) trading in garden items: 10%; and (ii) garden maintenance contract segment: 12%. It was observed by the CIT(A) that the aforesaid view taken by his predecessor was thereafter upheld by the Tribunal in ITA No. 5220/Mum/2014, dated 10.08.2017 and the appeal of the revenue was dismissed. Observing, that the assessee during the year under consideration had three business segments, viz. (i) garden and other items trading; (ii) cloth trading; and (iii) garden development and maintenance, the CIT(A) taking lead from the view taken by his predecessor therein estimated the G.P rate of the aforesaid business segments on a similar footing i.e (i) garden and other items trading: 10%; (ii) cloth trading: 10%; and (iii) garden development and maintenance: 12%. Accordingly, the CIT(A) restricted the addition of the bogus purchases to an amount of Rs.26,32,187/- as against Rs.4,19,59,365/- made by the A.O.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. Admittedly, it is a matter of fact borne from the record that the assessee had failed to substantiate the veracity of his claim of having made purchases from the aforementioned hawala parties. In fact, the to 3516 & 3518/ Mum/2019 13 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal assessee by not assailing the order of the CIT(A) any further before us, had thus, admitted to the fact of unverifiability of the impugned purchases. Issue before us is confined to two aspects, viz. (i) that as to whether the CIT(A) is right in restricting the addition to the extent of profit which the assessee would had made by procuring goods at a discounted value from the unverified suppliers; and (ii) that as to whether the quantification of profit by the CIT(A) is justified. As the sales corresponding to the impugned purchases had duly been accounted by the assessee in his books of accounts, and the same after verification had been accepted by the department, therefore, we concur with the view taken by the CIT(A) that the addition as regards such impugned purchases was liable to be restricted only to the extent of the profit which the assessee would had made by purchasing such goods at a discounted value from the unverified suppliers. Accordingly, we find no infirmity in the view taken by the CIT(A) that the disallowance of the entire amount of the impugned purchases was not called for in the hands of the assessee. On a careful perusal of the order of the CIT(A), we find, that he had after relying on the view taken by his predecessor had therein adopted the G.P rate in respect of the trading segment of the assessee at 10% and that of the garden development and maintenance segment at 12%. For a fair appreciation of the issue under consideration we herein cull out the observations of the CIT(A), as under: “8. 12 In the present case, I find that there are basically three types of transactions whereby such purchases parties could not be verified; (1) Trading items (garden and others), (2) Cloth Trading items and (3) Garden Maintenance contract. Further, my predecessor CIT(A) vide order dated 30.05.2014 for AY 2010-11 in assessee's own case, has already considered the identical issue of bogus purchases and has adopted a gross profit rate of 12% for garden development and maintenance contract and a profit rate of 10% for garden trading items after analyzing all the facts of the case in detail and such gross profit rate of 12% and 10% has also been upheld by Hon‟ble TAT. During the year, the appellant was also engaged in cloth trading items and considering the nature of trade, the decisions of CIT(A) & Hon‟ble ITAT on similar trade in the appellant's case. I deem it fit to estimate @ 10% gross profit on these items. Therefore, I am of the view that the assessee might have earned a gross profit of 10% for garden trading items, 10% percent on sales on cloth trading items and 12 percent on garden maintenance contract, accordingly, I compute the profit on the transactions vis-à-vis profit declared by the appellant in the table given below and work out the disallowance as under: - to 3516 & 3518/ Mum/2019 14 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal Particulars Sales/Contract Estimated G/P Estimated G/P G/P declared Addition to be amount (Rs.) rate (in%) (Rs) (Rs.) confirmed Garden & 41,90,361 10% 4,19,036 31,193 3,87,843 Other Items Trading Cloth 2,65,55,943 10% 26,55,594 4,11,250 22,44,344 Trading Garden 9,78,95,725 12% 1,17,47,487 1,26,87,558 Nil Development & Maintenance Total Rs. 12,85,42,029 1,48,22,117 1,31,30,001 26,32,187 We have given a thoughtful consideration and find that the CIT(A) while concluding as hereinabove had followed the view that was taken by his predecessor in the assessee‟s own case for A.Y. 2010-11, which thereafter had been upheld by the Tribunal. In our considered view, the very basis for the estimation carried out by the CIT(A) is the gross profit rate adopted by his predecessor while disposing off the appeal in the assessee‟s own case for A.Y.2010-11 and that of his related concerns, which thereafter had been upheld by the Tribunal. In the backdrop of the aforesaid facts we find no infirmity insofar the methodology adopted by the CIT(A) for estimating the profits which the assessee would have made from carrying out the purchases from unverified suppliers. In fact, finding no reason to take a different view from that arrived at by the coordinate bench of the Tribunal that was followed by the CIT(A), we uphold his order.
Resultantly, the appeal filed by the revenue is dismissed.
We shall now take up the appeal of the revenue for A.Y. 2012-13. The revenue has assailed the impugned order on the following grounds of appeal before us:
“1. Whether on the facts and in the circumstances of the case and in Iaw the Ld. C.I.T. (A) erred in directing the Assessing Officer to restrict the addition of Rs.5,69,49,153/- made on account of bogus purchase ignoring the fact that the assessee during the course of survey proceedings as well as during the course of assessment proceeding had not been able to furnish any evidence to negate these clinching evidences by producing these purchase parties with the relevant books of accounts/documents to show that the materials allegedly supplied by these hawala parties were indeed consumed. to 3516 & 3518/ Mum/2019 15 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal 2. Whether on the facts and in the circumstances of the case and in law the Ld. C.I.T. (A) erred in directing the Assessing Officer to restrict the addition made on account of bogus purchases ignoring the fact that ii is a settled provision of law that the onus is upon the assessee to prove the genuineness of the alleged purchases.
3. The appellant prays that the order of the CIT(A) on the grounds be se side and that of the assessing officer be restored.
4. The appellant craves leave to add, amend or alter all or any of the rounds of appeal which may be necessary.”
Briefly stated, the assessee had e-filed his return of income for A.Y.2012-13 on 03.09.2012, declaring his total income at Rs.89,89,830/-. Return of income filed by the assessee was processed as such under Sec.143(1) of the Act.
On the basis of survey conducted on the assessee under Sec.133A on 07.01.2013 and the details collected thereafter in the course of the assessment proceedings, it was observed by the A.O that the assessee had made bogus purchases from the following 14 parties:
Sr. No. Name of the Party Amount 1. Kala Traders 11,07,762 2. Kala Trading Co. 21,10,616 3. Kalpataru Enterprises 16,68,400 4. Laxmi Enterprises 96,29,653 5. Mahavir Enterprises (TG) 2,89,773 6. Mahavir Trading Co. 55,17,932 7. Royal Enterprises 1,63,010 8. Samir Trading Co. 1,95,48,473 9. Shree Vinayak Traders 1,22,20,485 10. Shubham Enterprises 20,91,667 11. Sivmani Traders Pvt. Ltd. 3,49,938 12. Sudha Corporation 6,74,144 13. Swastik Corporation 15,18,500 14. Hariom Enterprises 58,800 Total 5,69,49,153 As the assessee could not substantiate the genuineness and veracity of the aforesaid purchases transactions, the A.O, therefore, added the entire amount of the impugned purchases of Rs.5,69,49,153/- as unexplained expenditure under Sec.69C of the Act.
ITA Nos.3514 to 3516 & 3518/ Mum/2019 16 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal 19. On appeal, the CIT(A) restricted the addition to the extent of the estimated profit which the assessee would have made from making purchases from unverified suppliers. Further, for the purpose of quantification of the profit which the assessee would have made by procuring the good the CIT(A) followed the view that was taken by his predecessor while disposing off the assessee‟s appeal for A.Y. 2010-11. It was noticed by the CIT(A) that the view taken by his predecessor was thereafter affirmed by the Tribunal in its order passed in dated 10.08.2017. Also, the CIT(A) drew support from the view taken by his predecessor in the case of certain related parties of the assessee. On the basis of his aforesaid deliberations the CIT(A) confined the addition in respect of the two business segments from unverified parties during the year under consideration by estimating the gross profit which the assessee would had made from carrying out purchases from unverified sources, viz. (i) cloth trading: 10%; and (ii) garden development and maintenance: 12%. Accordingly, the CIT(A) restricting the addition to the extent of the shortfall in the disclosed gross profit rate of the assessee, therein scaled down the addition to an amount of Rs.32,00,099/-.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. Admittedly, it is a matter of fact borne from the records that the assessee had failed to substantiate the authenticity of the purchases claimed to have been made from the aforementioned parties. However, as the sales corresponding to the impugned purchases were recorded by the assessee in his books of accounts and were accepted by the department while framing the assessment, therefore, we concur with the view taken by the CIT(A) that the addition in respect of such unverified purchases was liable to be restricted only to the extent of the profit which the assessee would had made from making such purchases at a discounted value from unverified suppliers. Accordingly, we find no infirmity in the view taken by the CIT(A) that the entire amount of the impugned purchases could not have been added back/disallowed in the hands of the assessee. Our aforesaid view is also fortified by the fact that the assessee had in the course of the to 3516 & 3518/ Mum/2019 17 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal assessment proceedings duly substantiated the factum of having purchased the goods under consideration on the basis of the quantitative details culled out from the stock records which were produced before the A.O. Insofar the view taken by the CIT(A) that the addition in the hands of the assessee was liable to be restricted only to the extent of the profit made by the assessee from purchasing the goods at a discounted value from unverified sources is concerned, we finding no infirmity in the same, thus, uphold his view.
For quantification of the profit which the assessee would have made by purchasing the goods from unverified parties, we find, that the CIT(A) had adopted the gross profit rate that was adopted by his predecessor while disposing off the appeal of the assessee for A.Y. 2010-11, and that of his related parties, as a yardstick for working out the same. Accordingly, on the basis of the gross profit rate declared by the assessee in his various business segment during the year under consideration, viz.(i) cloth trading; and (ii) garden development and maintenance segment, as against that adopted by his predecessor while disposing off the appeal of the assessee for A.Y.2010- 11 as well as the those in the case of its related parties which thereafter had been upheld by the Tribunal, the CIT(A) had worked out the estimated addition in the hands of the assessee. In our considered view, the CIT(A) had adopted a logical basis for estimating the profit which the assessee would had made by booking purchases from unverified sources in his books of accounts. For a fair appreciation of the view taken by the CIT(A), we herein reproduce his observations as under: “7.12 In the present case, I find that there are basically two types of transactions whereby such purchases parties could not be verified; (1) Cloth Trading items and (2) Garden Maintenance contract. Further, my predecessor CIT(A) vide order dated 30.05.2014 for AY. 2010-11 in assessee's own case, has already considered the identical issue of bogus purchases and has adopted a gross profit rate of 12% for garden development and maintenance contract after analyzing all the facts of the case in detail and such gross profit rate of 12% has also been upheld by Hon'ble ITAT, with respect to cloth trading items considering the facts and circumstances and the decisions of the Hon'ble ITAT & CIT(A) and the AR's arguments during the appellate proceedings, stating that these items were trading items and GP would not be at the rate of other items. During the year, the appellant was also engaged in cloth trading items and considering the nature of trade, the decisions of CIT(A) & Hon'ble ITAT on to 3516 & 3518/ Mum/2019 18 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal similar trade in the appellant's case. I deem it fit to estimate @ 10% gross profit on these items. Therefore, I am of the view that the assessee might have earned a gross profit of 10% on sales on cloth trading items and 12 percent on garden maintenance contract, accordingly, I compute the profit on the transaction vis-à-vis profit declared by the appellant in the table given below and work-out the disallowance as under: - Particulars Sales/contract Estimated Estimated G/P Addition to Amount (Rs.) G/P Rate G/P (Rs.) Declared be (in %) (Rs.) confirmed (Rs.) Cloth 4,24,42,791 10% 42,44,279 10,44,180 32,00,099/- Trading Garden 8,64,51,185 12% 1,03,74,142 1,06,38,315 Nil Developm ent & Maintenan ce Total Rs. 12,88,93,976 1,46,18,421 1,16,82,495 32,00,099/- Accordingly, finding no infirmity in the aforesaid well reasoned view taken by the CIT(A) for concluding as hereinabove, viz. (i) that the addition in the hands of the assessee was liable to be restricted only to the extent of the profit (estimated) which he would have made by purchasing the goods from unverified sources; and (ii) estimation of the profit by comparing the gross profit rate declared by the assessee in his various business segments as against that adopted by his predecessor in the assessee‟s own case for A.Y.2010-11 and that of his related parties, we uphold the same.
Resultantly, finding no merit in the appeal of the revenue, we dismiss the same.
We shall now take up the appeal of the revenue for A.Y. 2013-14. The revenue has assailed the impugned order on the following grounds of appeal before us:
“1. Whether the facts and in the circumstances of the case and in law the Ld. CIT (A) erred in directing the Assessing Officer to restrict the addition of Rs.17,97,935/- made on account of bogus purchase ignoring the fact to 3516 & 3518/ Mum/2019 19 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal that the assessee during the course of survey proceedings as well as during the course of assessment proceeding had not been able to furnish any evidence to negate these clinching evidences by producing these purchase parties with the relevant books of accounts/documents to show that the materials allegedly supplied by these hawala parties were indeed consumed.
Whether on the facts and in the circumstances of the case and in law the Ld. C.I.T. (A) erred in directing the Assessing Officer to restrict the addition made on account of bogus purchases ignoring the fact that it is a settled provision of law that the onus is upon the assessee to prove the genuineness of the alleged purchases.
The appellant prays that the order of the CIT(A) on the grounds be seaside and that of the assessing officer be restored.
The appellant craves leave to add, amend or alter all or any of the grounds of appeal
which may be necessary.”
24. Briefly stated, the assessee had e-filed his return of income for A.Y.2013-14 on 16.09.2013, declaring his total income at Rs.55,31,610/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.
On the basis of information gathered in the course of the survey proceedings conducted under Sec. 133A at the business premises of the assessee as well as during assessment proceedings, it was observed by the A.O that the assessee had claimed to have made purchases aggregating to Rs.17,97,935/- from the following 5 parties:
Sr. No. Name of Party Amount 1. Mahavir Enterprises 11,62,546/- 2. Royal Enterprises 3,800/- 3. Shree Vinayak Traders 3,83,516/- 4. Sudha Corporation 73,500/- 5. Kirtan Trading Co. 1,74,573/- Total 17,97,935/- As the assessee failed to substantiate the genuineness and veracity of the aforesaid purchase transactions, the A.O, therein, treated the same as an unexplained expenditure under Sec. 69C and added the entire value of the impugned purchases to the returned income of the assessee. to 3516 & 3518/ Mum/2019 20 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal 26. On appeal, the CIT(A) inter alia taking cognizance of the fact that the impugned purchases had formed part of the duly accounted corresponding sales of the assessee for the year under consideration and had been accepted by the A.O, therein concluded that the addition in the hands of the assessee was liable to be restricted only to the extent the assessee had inflated the purchases made from unverified parties. In sum and substance, the CIT(A) was of the view that the addition in the hands of the assessee was liable to be restricted only to the extent the assessee would had benefited by purchasing the goods at a discounted value from the unverified parties. Observing, that the assessee had duly substantiated that the impugned purchases of goods/items under consideration were in fact consumed while executing the works contract, the CIT(A) was of the view that there was no justification in making an addition of the entire value of the impugned purchases as the corresponding sales were duly accounted by the assessee in his books of accounts. The view taken by the CIT(A) was further fortified by the fact that the assessee had maintained complete quantitative details and stock records which were examined by the A.O during the course of the survey as well as in the assessment proceedings. Accordingly, the CIT(A) in the backdrop of his aforesaid observations concluded that the addition in the hands of the assessee was liable to be restricted only to the extent of the profit (estimated) as regards the impugned purchases made by the assessee from the unverified suppliers.
We have given a thoughtful consideration and are persuaded to subscribe to the view taken by the CIT(A) that the addition in the hands of the assessee was liable to be restricted only to the extent the assessee would had benefited from purchasing the goods at a discounted value from the unverified suppliers, and thus, inflated the corresponding purchases on the basis of accommodation bills procured from the aforesaid hawala parties. It is a matter of fact borne from the records that the assessee had established that the impugned purchases were consumed in the course of his business and formed part of his duly accounted sales. In fact, as observed by the CIT(A) the to 3516 & 3518/ Mum/2019 21 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal sales accounted for by the assessee in his books of accounts were verified by the A.O and had not been doubted or dislodged by him. Apart from that, the fact that the assessee had in the course of the survey and the assessment proceedings produced the quantitative stock records further strengthens the view taken by the CIT(A) that the assessee had actually purchased the goods under consideration. However, as the assessee had failed to substantiate his claim of having purchased the goods from the aforementioned parties whose names had figured in the list of the hawala parties as prepared by the Sales Tax Department, Maharashtra, therefore, a very heavy onus was cast upon him to establish the genuineness of the impugned purchases beyond any scope of doubt. However, we are in agreement with the view taken by the lower authorities that the assessee had failed to substantiate the authenticity of the purchase transactions to the satisfaction of the lower authorities. The fact that the notices issued by the A.O under Sec. 133(6) to the aforementioned parties were either returned unserved or no reply was received from the parties to whom service could be effected, therein raises serious doubts about the genuineness of the impugned purchase transactions. Apart from that, the failure on the part of the assessee to produce either of the aforementioned parties or even furnish the details of their respective addresses further strengthens our conviction that the assessee had not made any genuine purchases from the aforementioned parties and had actually procured the goods from the open/grey market, and thereafter, only for the purpose of routing the same through his books of accounts had procured accommodation bills from the aforementioned parties. Be that as it may, we concur with the view taken by the CIT(A) that as the sales corresponding to the impugned purchases had been accepted by the department, therefore, it can safely be concluded that the assessee had purchased the goods though not from the aforementioned parties but from the unverified suppliers operating in the open/grey market.
As regards the quantification of the profit (on estimate) insofar the impugned purchases are concerned, we find, that the CIT(A) following the ITA Nos.3514 to 3516 & 3518/ Mum/2019 22 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal view taken by his predecessor while disposing off the appeal in the assessee‟s own case for A.Y.2010-11, had therein adopted the gross profit rate of 12% as a yardstick. The CIT(A) while concluding as hereinabove, had observed, that the view taken by his predecessor in A.Y.2010-11 was thereafter upheld by the Tribunal in dated 10.08.2017, and the appeal of the department was dismissed. Accordingly, the CIT(A) taking cognizance of the fact that in A.Y. 2010-11 his predecessor had adopted a gross profit rate of 12% for the purpose of estimating the profit as regards the unverified purchases made by the assessee in his garden development and maintenance business segment, had thus adopted the same methodology and in the backdrop of such comparative analysis worked out the addition of the deficit gross profit in the hands of the assessee to the extent of Rs.1,50,223/-. The CIT(A) while observing as hereinabove had observed as under: “7.11 In the present case, I find that my predecessor CIT(A) vide order dated 30.05.2014 for A.Y 2010-11 in assessee‟s own case, has already considered the identical issue of bogus purchases and has adopted a gross profit rate of 12% for garden development and maintenance contract after analyzing all the facts of the case in detail and such gross profit rate of 12% has also been upheld by Hon'ble ITAT. I do not find any reason to deviate from the view taken by my predecessor and accordingly, 1 compute the profit on the transaction vis-à-vis profit declared by the appellant in the table given below and work-out the disallowance as under:-
Particulars Sales/Contract Estimated Estimated G/P Addition to Amount (Rs.) G/P rate (in G/P (Rs.) declared be %) (Rs.) confirmed (Rs.) Garden 6,16,03,935 12% 73,92,472 72,42,249 1,50,223 Development & Maintenance Total 6,16,03,935 73,92,472 72,42,249 1,50,223 Apart from that, the CIT(A) while concluding as hereinabove had also taken cognizance of a similar view that was adopted by his predecessor while disposing off the appeals in the case of certain related parties of the assessee, viz. (i) Order passed by the Tribunal in the case of Shri Kishore Agarwal (assessee‟s brother) in & 871/Mum/2015, dated ITA Nos.3514 to 3516 & 3518/ Mum/2019 23 A.Ys.2011-12 to 2013-14 & 2009-10 ACIT -13(3)(2) Vs. Shree Bimal Kumar Agarwal 25.01.2017 for A.Y. 2010-11 and A.Y. 2011-12; (ii) Order passed by the Tribunal in the case of M/s Technotrade Impex India Pvt. ltd. (sister concern of the assessee) in ITA No.3835/Mum/2016, dated 24.01.2018 for A.Y. 2011-12; and (iii) Order passed by the Tribunal in the case of viz. M/s Technotrade Impex India Pvt. Ltd (sister concern of the assessee) in ITA No.5382 & 5383/Mum/2016, dated 17.04.2018 for A.Y. 2009-10 and A.Y.2012-13. We have given a thoughtful consideration and are of a strong conviction that the CIT(A) had adopted a sound basis for estimating the profit which the assessee would had generated by procuring the goods at a discounted value from the unverified parties operating in the open/grey market. In fact, we find, that instead of adopting an adhoc basis for estimating the profit element the CIT(A) had in all fairness resorted to a logical basis for working out the same. We find no reason to dislodge the aforesaid well reasoned observations of the CIT(A), which we find is based upon the view that was taken by the Tribunal in the assessee‟s own case for A.Y 2010-11. Accordingly, finding ourselves to be in agreement with the view taken by the CIT(A), we uphold his order.
Resultantly, the appeal filed by the revenue is dismissed.
The appeals filed by the revenue are dismissed.