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Income Tax Appellate Tribunal, “A”
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the Revenue directed against the order of ld.Commissioner of Income Tax(Appeals)-12, Pune for the A.Y.2009-10 dated 30.08.2019.
Brief facts of the case are that the regular assessment under section 143(3) was finalized declaring total income at Rs.2,90,85,170/-. The appellant filed appeal before the ld.CIT(A) and further ITAT where it got partial relief. The assessing officer received information from the Sales Tax Department regarding parties who provided only bills without actual delivery of goods, there were certain parties who provided such bills to the assessee
A.Y. 2009-10 ACIT vs. M/s.Kirti Foods Ltd., (R) also. Accordingly after recording reasons the notice u/s 148 was issued and served on the assessee.
2.1 During the assessment proceedings, the assessee was unable to prove the genuineness of the purchases debited to Profit and Loss Account, thereby the Assessing Officer passed assessment order under section 147 of the Act assessing the total income at Rs.2,69,56,580/- after making the addition of Rs.2,15,091/- for alleged hawala transactions. The Assessee filed an appeal before the Commissioner of Income Tax(A). The Commissioner of Income Tax(A) held that only the gross profit on such purchases at 12.5% should be added. Accordingly, he upheld part addition. Aggrieved by the order of the Commissioner of Income Tax(A) , the department has filed this appeal.
At the outset of hearing before the Bench, none appeared on behalf of the assessee. Therefore, we were left with no option, but to hear the submission of ld.Departmental Representative(ld.DR) for the Revenue and decide appeal on the basis of material available on record.
We have heard the ld.DR for the Revenue, perused the material available on record and have gone through the orders of the Lower Authorities. We find from the order of the ld.CIT(A) that the A.Y. 2009-10 ACIT vs. M/s.Kirti Foods Ltd., (R)
appellant assessee took a stand that the impugned purchases were all genuine and the payments were made by crossed cheques. However, the Assessing Officer could not bring any material or evidence to prove that the appellant has not paid the amounts by cheque, or assessee has not received the impugned goods. We also find that the Assessing Officer simply rejected the explanations of the assessee and disallowed the whole purchases without any basis.
The Hon’ble Bombay High Court has held in the case of PCIT Vs. Jakharia Fabric (P.) Ltd., [2020] 118 taxmann.com 406 (Bombay) as under : Quote “Thus, Tribunal concurred with the view taken by the CIT(A) that the Assessing Officer had erred in disallowing the entire total purchases and adding the same to the total income of the assessee. View taken by the CIT(A) that 17.5% of the purchases be added to the total income of the assessee as the profit element was a reasonable one. It was also noted that the said percentage was accepted by the assessee with a view to close the litigation. Nothing was brought on record by the Revenue to contradict the findings recorded by the CIT(A). Tribunal had also referred to the decision of this court in CIT v. Nikunj Eximp Enterprises (P.) Ltd. [2013] 35 taxmann.com 384/216 Taxman 171 (Mag.)/[2015]/384 ITR 619. Infact, this court has also held following the decision of Nikunj Eximp Enterprises Pvt. Ltd. that the revenue is required to furnish the information received from the Sales Tax Department or from the Investigation Wing of the Department to the assessee allowing the assessee to test the veracity of such information otherwise such information could not be relied upon. This court in the case of Pr.
A.Y. 2009-10 ACIT vs. M/s.Kirti Foods Ltd., (R)
CIT v. Vaman International (P.) Ltd. [IT Appeal No. 1940 of 2017, decided on January 29, 2020] held as under:-
"17.1 Thus, from the above, it is seen that Tribunal had returned a finding of fact that the assessee had filed copies of purchase bills, copies of purchase/sale invoices, challan cum tax invoices in respect of the purchases, extracts of stock ledger showing entry/exit of the materials purchased, copies of bank statements to show that payment for such purchases were made through regular banking channels, etc., to establish the genuineness of the purchases. Thereafter, Tribunal held that Assessing Officer could not bring on record any material evidence to show that the purchases were bogus. Mere reliance by the Assessing Officer on information obtained from the Sales Tax Department or the statements of two persons made before the Sales Tax Department would not be sufficient to treat the purchases as bogus and thereafter to make addition under section 69C of the Act. Tribunal has also held that if the Assessing Officer had doubted the genuineness of the purchases, it was incumbent upon the Assessing Officer to have caused further enquiries in the matter to ascertain genuineness or otherwise of the transaction and to have given an opportunity to the assessee to examine/cross-examine those two parties vis-a-vis the statements made by them before the Sales Tax Department. Without causing such further enquiries in respect of the purchase, it was not open to the Assessing Officer to make the addition under section 69C of the Act.
We are in agreement with the view expressed by the Tribunal. In fact, Tribunal has only affirmed the finding of the first appellate authority. Thus, there is concurrent finding of fact by the two lower appellate authorities.
This Court in the case of Commissioner of Income-tax -1, Mumbai v. Nikunj Eximp Enterprises(P.) Ltd. 372 ITR 619;
A.Y. 2009-10 ACIT vs. M/s.Kirti Foods Ltd., (R) wherein an identical fact situation arose did not interfere with the order passed by the Tribunal and held that no substantial question of law arose from such order. It was held that merely because the suppliers had not appeared before the Assessing Officer, no conclusion could be arrived at that the purchases were not made by the assessee."
16. Today while dealing with Income-tax Appeal No. 1330 of 2017 (Pr. CIT v. RishabhdevTechnocable Ltd.) [2020] 115 taxmann.com 333 (Bom.), we have held as under:
"19. On thorough consideration of the matter, we do not find any error or infirmity in the view taken by the Tribunal. The lower appellate authorities had enhanced the quantum of purchase much beyond that of the Assessing Officer i.e., from Rs.24,18,06,385.00 to Rs.65,65,30,470.00 but having found that the purchases corresponded to sales which were reflected in the returns of the assessee in sales tax proceedings and in addition, were also recorded in the books of accounts with payments made through account payee cheques, the purchases were accepted by the two appellate authorities and following judicial dictum decided to add the profit percentage on such purchases to the income of the assessee. While the CIT(A) had assessed profit at 2% which was added to the income of the assessee, Tribunal made further addition of 3% profit, thereby protecting the interest of the Revenue. We have also considered the two decisions relied upon by learned standing counsel and we find that facts of the present case are clearly distinguishable from the facts of those two cases to warrant application of the legal principles enunciated in the two cited decisions.
In Bholanath Polyfab Limited (supra), Gujarat High Court was also confronted with a similar issue. In that case
A.Y. 2009-10 ACIT vs. M/s.Kirti Foods Ltd., (R)
Tribunal was of the opinion that the purchases might have been made from bogus parties but the purchases themselves were not bogus. Considering the fact situation, Tribunal was of the opinion that not the entire amount of purchases but the profit margin embedded in such amount would be subjected to tax. Gujarat High Court upheld the finding of the Tribunal. It was held that whether the purchases were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. When the Tribunal had concluded that the assessee did make the purchase, as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be subject to tax.
We are in respectful agreement with the view expressed by the Gujarat High Court."
On thorough consideration of the matter, we do not find any error or infirmity in the finding returned by the Tribunal. No substantial question of law arises from such finding returned by the Tribunal.” Unquote.
The Hon’ble Bombay High Court in Principal Commissioner of Income-tax-17 v. Mohommad Haji Adam & Co. [2019] 103 taxmann.com 459 (Bombay) held as under: “In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal
A.Y. 2009-10 ACIT vs. M/s.Kirti Foods Ltd., (R) would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot he applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under—
" So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs. 37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6% gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66%. Therefore, considering 5.66% of Rs. 3,70,78,125/- which comes to Rs.20,98,621.88 we think it fit to direct the revenue to add Rs. 20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue."
In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order as to costs.” 7. The facts in the present case are identical to the facts of the above mentioned case. It is a fact that assessee is trading in poultry
A.Y. 2009-10 ACIT vs. M/s.Kirti Foods Ltd., (R) feeds etc. Department has not doubted the sales of the assessee. Therefore, respectfully following the decision of Hon’ble High Court, we agree with the ld.CIT(A) that only Gross Profit @12.5% of impugned purchases needs to be added. Therefore, we find that the ld.CIT(A) has given a reasoned order, which does not call for any interference from our side, hence, we uphold the impugned order of the ld.CIT(A) on this score.
In the result, appeal of the Revenue is dismissed. Order pronounced in the open Court on 28th June, 2022.