SIDDHI SYNTHETICS PVT. LTD.,MUMBAI vs. ITO 4(3)(4), MUMBAI

Date of Hearing 18/02/2020 Date of Pronouncement 13/03/2020 आदेश आदेश / O R D E R आदेश आदेश PER G.MANJUNATHA (A.M):

This appeal filed by the assessee is directed against order of the ld. Commissioner of Income Tax (Appeals)-2, Mumbai dated 05/09/2018 and it pertains to the A.Y 2011-12.

1) On the facts and in circumstances of the case and in law, the Ld. CIT(A)-2 has erred in sustaining the assessment order passed by the AO, without appreciating that the AO has erred in Invoking the provisions of Sec 147 and reopening our assessment for the year under consideration. The impugned order is therefore liable to be quashed. 2) On the facts and in circumstances of the case and in law, the Ld, CIT(A)-2 has erred in sustaining the addition made by the AO, on the basis of materials / information, if any, collected behind our back, without giving us copies thereof and opportunity to cross examine the witness and to rebut the same. Therefore, such evidence is no evidence in the Siddhi Synthetics Pvt.Ltd. eyes of law. The impugned order is therefore against the principles of natural justice and hence illegal and void on this score alone. 3) On the facts and in circumstances of the case and in law, the Ld. CIT(A)-2 has erred in sustaining the addition made by the AO, ignoring the fact that the appellant has produced all and every details, documents and records proving genuineness of his impugned purchases and that too without pointing out any Infirmity in the details, documents and records produced by the appellant. Such order cannot be sustained in the eyes of law. It may please be quashed. 4) On the facts and in circumstances of the case and in law, the Ld. CIT(A)-2 has erred in sustaining the addition made by the AO, without appreciating that none of the appellant's sales are suspected. His books of accounts are not rejected. His books of accounts are audited. Quantity details are submitted which has not been disproved by the AO. Hence, no part of purchases can be termed as bogus and disallowed. The Hon'ble CIT(A)-2 has erred in sustaining the disallowance.

5. On the facts and in circumstances of the case and in law, the Ld.CIT(A)-2 has erred in sustaining the impugned assessment order without appreciating that the AO has passed the impugned assessment order without disposing off the objections filed by the appellant against the AO invoking provisions of sec.147 3. The brief facts of the case are that the assessee is engaged in the business of Manufacturer of Cloths, filed its return of income for AY 2011-12 on 28/09/2011, declaring the total income at Rs. 1,65,963/- and said Return was processed u/s 143(1) of the I.T.Act, 1961/-. The case has been, subsequently reopened u/s 147 of the Act, on the basis of information received from DGIT, investigation, Mumbai, as per which, Sales Tax Authorities of Government of Maharashtra had taken actions against number of Hawala dealers, who had issued bogus purchase bills to various parties in Mumbai and other places. As per list of beneficiaries, the assessee is one of the beneficiary, who had taken accommodation bills of bogus purchases from M/s Samir Trading Corporation amounting to Rs. 1,11,510/-. The case was selected for scrutiny and the assessment has been completed u/s. 143(3).r.w.s. 147 of the I.T.Act, 1961 on Siddhi Synthetics Pvt.Ltd. 11/12/2015 and determined total income of Rs. 2,77,470/-, after making 100% additions towards alleged bogus purchase from those parties and made additions of Rs. 1,11,510/-.

Siddhi Synthetics Pvt.Ltd. from the said parties are bogus in nature. It is the contentions of the assessee before the lower authorities that purchases from the above party are supported by necessary evidences. It has furnished all possible evidences, including books of accounts; stock details and bank statement to prove that payment against said purchases have been made through proper banking channels.

6 Having considered arguments of both the parties and also, material available on record, we find that both the sides have failed to prove the case in their favour with necessary evidences. Although, assessee has filed certain basic evidences, but failed to file further evidences to conclusively prove purchases to the satisfactions of the Ld.AO. Further, mere payment by cheque does not prove the genuineness of purchase, more particularly when other circumstantial evidence says otherwise. At the same time, the Ld. AO had also failed to take the investigation to a logical conclusion by carrying out necessary enquires, but he solely relied upon information received from investigation wing, which was further supported by information received from Maharashtra Sales Tax Department. The AO neither pointed out any descrepanices in books of accounts nor made out a case of sales outside books of accounts. In fact, the AO did not disputed sales declared for the year. Under these circumstances, it is difficult to accept arguments of both the sides. Further, in a case where purchases are considered to be purchased from suspicious/hawala dealers, various High Courts and Tribunals had considered an identical issue in light of investigation carried out by the Sales Tax Department and held that in case of purchases claims to have made from alleged hawala dealers, only profit element embedded in those purchases needs to be taxed, but Siddhi Synthetics Pvt.Ltd. not total purchase from those parties. The Hon’ble Gujarat High Court, in the case of CIT vs Simith P.Sheth 356 ITR 451 had considered a similar issue and held that at the time of estimation of profit from alleged bogus purchases no uniform yardsticks could be adopted, but it depends upon facts of each case. The ITAT, Mumbai, in number of cases had considered an identical issue and depending upon facts of each case, directed the Ld.AO to estimate gross profit of 10% to 15% on total alleged bogus purchases. In this case, considering the nature of business of the assessee the Ld. AO has made 100% additions, which has been upheld by the Ld.CIT(A). Although, both authorities have made 100% addition on alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases. On the other hand, the ld. AR for the assessee has cited nuber of decisions of ITAT, Mumbai in support of his arguments, where the Tribunal has estimated profit ranging from 2% to 15% depending upon nature of business. Therefore, considering facts and circumstances of this case and consistent with view taken by the Co-ordinate Bench in number of cases, we are of the considered view that addition made by the ld. AO and the ld. CIT(A) is on higher side when compared to nature of business of the assessee and accordingly, we direct the ld. AO to estimate 12.50% gross profit on alleged bogus purchases.