ITO, WARD 2(5), KALYAN vs. M/S BHARAT FOOD PRODUCTS, MUMBAI

Inspite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought by the assessee. Therefore, I proceed to dispose off this appeal on hearing Ld. DR on merits.

Ld. DR vehemently supported the orders of the Assessing Officer.

Heard Ld. DR, perused the orders of the authorities below. On a perusal of the order of the Ld.CIT(A), I find that the Ld.CIT(A) considered this aspect of the matter elaborately with reference to the submissions of (A.Y. 2009-10) M/s. Bharat Food Products the assessee and the averments in the Assessment Order and following various judicial pronouncements restricted the disallowance to 12.5% of the non-genuine purchases. While holding so, the Ld.CIT(A) observed as under: - “8.0 Ground No. 2 & 3 are directed against addition of Rs.3,18,840/- as bogus purchases; therefore, these grounds are taken together for the sake of convenience. I have carefully considered the submissions of the appellant, the observations of the AO in the assessment order; case laws relied upon by the appellant and the facts of the case. In this case, as far as the addition is concerned, the AO has discussed from Para 4.1 in the assessment order. (1) On the other hand, the AR of the appellant has argued that, no purchases were made from M/s. Mayank Enterprises or M/s.Supreme Enterprises. The appellant's duly audited cash-book, ledger, purchase ledger and other books of accounts and documents, P&L a/c, bank account also do not reflect any purchases from these two concerns and the AR has further elaborated in his letter dated 14.12.2018. The AR of the appellant has further stated that, the appellant had not claimed bogus purchases from M/s Mayank Enterprises / M/s Supreme Enterprises, when the facts enumerated as above dearly reveal that (1) the appellant had not made any purchases whatsoever from both of these sellers, (2) had not made any payment whatsoever in cash or cheque to the said sellers, (3) had not debited this amount to Profit & Loss account, (4) had not added this amount to its purchases thereby inflating the purchases, and (5) had not reduced its profits. The AR of the appellant has placed reliance on the following judicial pronouncements (i) In the case of DCIT v. Shri Rajeev G. Kalathil, (Mum) (Trib) (ITA No.6727/M/2012 dt20/8/2014, Bench 'D' A.Y. 2009-10), Honourable Mumbai Tribunal has held: "that suspicion of highest degree cannot take place of evidence." (ii) In the case of: Dakeshwari Cotton Mills Ltd, 26 ITR 775 (SC) and R. Y. Duriabji (211 ITR 178, Rajasthan) it was held that any assessment made on pure guess work de hors material on record is a bad assessment. (iii) In the case of Jagdamba Trading Company vs. Income Tax Officer IT AT, JODHPUR 'SMC' Bench (2007) 107 TTJ 0398 it was (A.Y. 2009-10) M/s. Bharat Food Products held that merely on the basis of the deposition made by the said seller in his affidavit filed during safes-tax proceedings stating that he has not made any safes during the relevant year, particularly when no opportunity of cross-examination was given to the assessee, the addition was deleted. (iv) In the case of ITO v. Permanand (2007) 107 TTJ 395 (Jd) (Trib): AO received information from the Sales Tax Department that the purchases made by the assessee from two parties were bogus. Solely relying on the same, AO made addition under s.

Tribunal held that no addition can be made in the hands of the assessee merely on the basis of observations made by a third party. While making the assessment, it is the satisfaction of the AO which is of prime importance. It cannot be substituted by the satisfaction of someone else. (2) From the above discussion, it ca be concluded that, it is case where the goods were received from the parties other than the persons who had issued the bills of such goods. Though the purchases were shown to have been made by making payment to hawala dealers but goods must have come from gray market therefore, under such circumstances, the chances of purchase cost being inflated couldn’t not be ruled out. After considering the above facts of the case, I am of the view that, the AO is not justified in making addition of the entire purchases made from the aforesaid supplier. The AO has not denied the consumption of the materials of materials purchased for manufacturing biscuits and has also not found any lacunae in the books of accounts. After manufacturing, there were corresponding sales and the payments were made by account payees cheques, therefore, the disallowance of entire purchases made from the aforesaid supplier is not justified. Considering the totality of the facts of the case, I am of the considered opinion to disallow 12.5% as inflated cost on the total purchases made from unverifiable supplier, which is fair and just Therefore, the book result of the appellant is rejected u/s. 145(3) of the Act. The disallowance @12.5% of purchases from unverifiable/Hawala dealer had been upheld by the jurisdictional ITAT in the following cases:- i. Deepak Chunilal Bajaj in &. ITA No.284/Mum/2017 - A.Ys.2009-10 & 2011-12 order dtd. 04.05.2017 ii. Raju Amarlai Vaswani in ITA No.288/Mum/2017 order dtd .10.04.2017 A.Y. 2010-11.

On a careful perusal of the order of the Ld.CIT(A) and the reasons given therein, I do not find any infirmity in the order passed by the Ld.CIT(A) in restricting the addition/disallowance to the extent of 12.5% of the purchases. Grounds raised by the revenue are dismissed.

In the result, appeal of the Revenue is dismissed.