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Income Tax Appellate Tribunal, “G”, BENCH MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI G. MANJUNATHA
Date of Hearing 13/02/2020 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)-30, Mumbai dated 18/07/2019 and it pertains to the A.Y 2009-10.
The assessee has raised the following grounds of appeal:
1) On the facts and circumstances of he case and law, the Ld.CIT(A) erred in enhancing the addition of Rs.80,54,296/- @12.5% on alleged purchases of Rs.6,44,34,396/- to Rs.6,44,34,396/- being 100% of such purchase solely on his own suspicion, surmises and conjectures and added the same as undisclosed income of the assessee in view of section 69C of the Income Tax Act, 1961.
2. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in confirming the addition of Rs.36,54,193/- being peak credit of cash deposits in bank account as unexplained cash credit u/s 68 of the Income Tax Act, 1961
3. On the facts and circumstances of the case and in law the Ld.CIT(A) erred in confirming the initiation of the reassessment proceedings under section 147. On the facts and circumstances of the case and in law the Ld.CIT(A) failed to consider that reassessment proceeding cannot be initiated a) No reassessment can be made just to make an enquiry or verification. b) Reassessment proceeding cannot be initiate merely on the information received from investigation wing c) Reassessment proceeding cannot be initiated when the Ld.CIT(A) have reason to suspect and not reason to believe.
4. On the facts and circumstances of cse and law the Ld.CIT() ered in confirming the assessment order under section 143 sub section 3 r.w.s. 147 of Income tax Act, which is passed against the principal of natural justice. 5. On the facts and circumstances of case and law the Ld.CIT(A) erred in confirming and rejecting the books of accounts under section 145(3) of the Income Tax Act, 1961 6. The Ld.CIT(A) erred in confirming the charging of interest under section 234A, 234B,234C and 234D of the Income tax Act, 1961 7. The Ld.CIT(A) erred in confirming the initiation of the penalty proceedings under the section 274 r.w.s. 271(1)(c) of the Income Tax act, 1961.
The brief facts of the case are that the assessee is engaged in the business of TradING in Ferrous and Non-Ferrous Metals, filed his return of income for AY 2009-10 on 30/09/2009, declaring the total income at Rs. 4,02,066/- and the 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 various parties as listed by the AO in para 5 of his assessment order amounting to Rs. 6,44,34,369/-. 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 27/03/2015 and determined total income of Rs. 1,21,10,560/-, after making additions of 12.50% gross profit on alleged bogus purchase from those parties and made additions of Rs. 80,54,296/-.
Aggrieved by the assessment order, the assesee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assesse has reitrated the submissions made before the ld. AO. The sum and substance of arguments of the assessee before the Ld.CIT(A) are that purchase from the above party is genuine, which is supported by necessary evidences. Therefore, no additions could be made on the basis of information received from third party. The Ld.CIT(A), after considering relevant submission of the assessee and also, by following certain judicial decisions has enhanced the assessment and made 100% additions towards alleged bogus purchases from those parties. The ld. CIT(A) has also confirmed addition made towards unexplained cash deposits to bank account u/s 68 of the Income Tax Act, 1961. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
The first issue that came up for our consideration is addition towards alleged bogus purchases. We have heard both the parties, perused the material available on record and gone through orders of the authorities below along with case laws cited by both parties. We find that the Ld. AO has made addition of 12.50% profit on alleged bogus purchases on the ground that the assessee is one of the beneficiary of accommodation entries of bogus purchase bills issued by Hawala dealers. According to the Ld. AO, although assesee has filed certain basic evidences, but failed to file further evidence in the backdrop of clear finding by the Sales Tax Department, Maharashtra that those parties are involved in providing accommodation entries without actual delivery of goods. The Ld. AO had also taken support from the investigation conducted during the course of assessment proceedings, as per which notice issued u/s 133(6) to the parties were returned un-served by the postal authorities. Therefore, he came to the conclusion that purchases 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 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 addition of 12.50% profit, whereas the ld. Ld.CIT(A) has enhanced addition to 100% on alleged bogus purchases. Although, both authorities have taken different rate of profit for estimation of income from 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 filed necessary evidences to prove that profit estimated by the ld. AO as well as the ld. CIT(A) is on higher side when compared to nature of business of the assessee. The assessee has also filed comparative gross profit earned by the assessee for immedieatly preceeding three financial years and argued for lower rate of profit on alleged bogus purchases. In this regard, he has relied upon the decisions of Hon’ble Bombay High Court in the case of Mohamed Haji Adam & Co vs. PCIT, of 2016 dated 11-2-2019. We, find that, estimation of profit on alleged bogus purchases is purely a factual issue which depends upon facts of each case and, hence, it is difficult to accept the arguments of the assessee that facts of its case is similar to facts considered by Hon’ble Bombay High Court in case of Mohamed Haji Adam & Co (Supra) and hence, the case laws cited by the assessee counsel are rejected. Further, the gross profit declared by the assessee in earlier year cannot be considered as good yardstick for comparision, because the books of account of the assessee does not give true and correct figure. Therefore, considering facts and circumstances of this case and also consistent with view taken by the Co-ordinate Bench in number of cases, we are of the considered opinion that the ld. AO has taken a fair view and made addition of 12.50% gross profit on alleged bogus purchases. But, the ld. CIT(A) without assigning any reasons enhanced addition to 100% profit on alleged bogus purchases. Hence, we are not inclined to agree with the findings of the ld. CIT(A) and accordingly, reversed the findings of the ld. CIT(A) and upheld the findings of the ld. AO and also sustained 12.50% addition on alleged bogus purchases.
The next issue that came up for our consideration is addition towards peak cash deposits to bank account u/s 68 of the Income Tax Act, 1961. The AO has made addition of Rs. 36,54,193/-, being peak credit balance of cash deposits to bank account on the ground that no explanation has been offered for cash deposits. It was the submission of the assessee before the ld. AO that cash depoist has been explained out of cash withdrwals and cash sales.
Having considered arguments of both sides, we find that the assessee is engaged in trading business and his sales consist of cash and credit sales. The cash deposits to bank has been explained out of cash sales and cash withdrawals of earlier period and for which necessary cash book has been prepared and produced before the AO. Even, before us, the cash book has been filed and explained source for cash deposits to bank account. We, therefore, are of the considered view that the ld. AO was erred in making addition towards peak credit for cash deposits u/s 68 of the Income Tax Act, 1961. Hence, we direct the ld. AO to delete addition made towards cash deposits u/s 68 of the I. T. Act, 1961.
The other grounds taken by the assessee challenging reopening assessment u/s 147 of the Income tax Act, 1961 is not pressed during the course of hearing and hence, all other grounds are dismissed as not pressed.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on this 13 /03/2020