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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: S/SHRI PRAMOD M. JAGTAP & T.R. SENTHIL KUMAR
PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER:
1. This appeal is filed by the assessee against order dated 19.11.2019 passed by the ld.Commissioner of Income Tax (Appeals)- 8, Ahmedabad relating to the Asst.Year 2008-09.
Brief facts of the case is that, this is the second round of appeal before this Tribunal. As against original assessment order dated 24.12.2010 passed under section 143(3) of the Income Tax Act, 1961 ("the Act" for short), the matter travelled before the ITAT, Mumbai Bench ‘F’ and vide order dated 31.5.2017 in ITANo.3357/Mum/2012 has restored the issue of disallowance under section 14A of Rs.2,47,464/- and issue of unproving bogus purchase of Rs.29,97,477/- after examining three parties viz.
Ashirwad Broker, Lalitbhai Dalal and Madhav Broker and allow the assessee to cross-examine them. It is, therefore, the ld.AO issued a notice under section 142(1) of the Act on 8.8.2018 to call for the details of three parties. The assessee sought adjournment vide letter dated 13.8.2018. The case was adjourned to 20.8.2018. The assessee vide letter dated 18.8.2018 filed confirmation letter from three parties, but the assessee has not filed return of income, bank details and any other evidence relating to three parties. The above three confirmation letters are dated 6.1.2011 which were filed in the original assessment itself and not any new documents. Therefore, in order to cross-verify the genuineness of the transactions, summons under section 131 of the Act was issued on 10.9.2018 to Ashirwad Broker, Lalitbhai Dalal and Mahav Broker at the address given in the confirmation letter by speed post. However, all three summons have returned back as unserved by the postal authority with the remarks “not known or insufficient address”. Therefore, the ld.AO issued a letter dated 10.9.2018 to the assessee with a request to ensure personal presence of the above said three parties on 20.9.2018. There was no response against the summons issued to the three parties. Meanwhile, the assessee vide letter dated 20.9.2018 again sought for an adjournment for the reason that the assessee is trying to contact these parties. Since the matter is very old it may take some time to secure their presence before the AO. Considering the request, the case was adjourned to 26.9.2018. Again the assessee vide letter dated 25.9.2018 requested further time, and to ensure presence of thee parties along with details, documents till 1.10.2018. However, the assessee vide his letter dated 29.9.2018 has given same written explanation without any evidence or production of three parties before the AO. After considering the above reply, the ld.AO passed a detailed order which is as follow:
“5.6.The reply of the assessee has been carefully considered but there is no force found in the same. As during the course of original assessment, the assessee was requested to furnish the complete details of suppliers/brokers. On the list given by the assessee, notice u/s 133(6) of the I.T. Act were issued on 20.10.2010 requiring them to give certain information. At that time also the speed post were returned un-served by the postal authorities with following remarks:
Sr.No. Name Postal remarks
1. Ashirwad Broker Incomplete address
2. Lalitbhai Dalai Not known
3. Madhav Broker Left 5.7. Therefore, purchases from the above parties were added as unproved purchases. Thereafter, the assessee went in appeal before the Id.CIT(A) on this issue. The Ld.CIT(A)-6, Mumbai in vide order dated 23.04.2012. The Ld.CIT(A) held that "as the addresses given by the appellant were found to be bogus and there is no evidence of payment for purchases made from Ashirwad Broker, Lalitbhai Dalai & Madhav Broker, the purchases of Rs.29,97,477/- are found to be not genuine and bogus. Aggrieved with the order of the Ld.CIT(A), assessee filed an appeal before Hon'ble ITAT. The Hon'ble ITAT set aside and the same is restored to the file of the AO to pass an order after examining the above three parties and allowing the assessee to cross-examine them.
5.8 Accordingly, further opportunities (thrice) were granted to the assessee and this office has also tries to verify the transactions through summons but the given addresses of the alleged brokers are non-verifiable, the alleged persons are not filing their ROI and even the assessee is not able to produce them. Thus, the assessee has grossly failed to establish the genuineness of the purchases. This shows that the alleged purchases shown from these three parties are bogus and accordingly need to be treated.
5.10. In view of the above discussion, the claim of the assessee for purchase to the tune of Rs. 29,97,477/- from the following parties/brokers is being treated as unproved/bogus:
Sr.No. Name Purchases in (Rs.)
Ashirwad Broker 16,22,425/-
2. Lalitbhai Dalai 10,73,637/-
Madhav Broker 3,01,415/-
Total: 29,97,477/- Further, penalty proceedings u/s 271(l)(c) of the I.T. Act, 1961 are also initiated separately on the unproved/bogus purchases for furnishing inaccurate particulars of income by the assessee company.”
3. Aggrieved against this order, the assessee filed an appeal before the ld.CIT(A)-8, Ahmedabad. In the course of appellate proceedings, the assessee filed written submissions before the ld.CIT(A) stating that the assessee was not able to produce three brokers due to the fact that more than ten years had passed when the impugned transactions were carried out. The ld.CIT(A) held that in the original assessment order dated 24.12.2010 wherein purchase total amounting to Rs.2,06,51,426/- which included purchase of Rs.29,97,477/- which were found to be bogus as the assessee could not prove genuineness of the same. However, the matter reached the ITAT, the Tribunal has set aside the issue to the file of the AO with clear cut direction to examine three brokers mentioned above. Therefore, now the assessee cannot take plea that the matter is ten years old and the assessee could not prove the genuineness of the purchase as disallowed in the original assessment order. The assessee had taken alternative plea that if at all addition is to be made entire purchase of Rs.29,97,477/- cannot be disallowed and only GP at the rate of 3.15% only is to be added as income in the hands of the assessee. This contention of the assessee cannot be accepted as the assessee has debited bogus purchase (expenditure) and reduced its profit to the extent of Rs.29,97,477/-, and hence entire bogus purchase are liable to be disallowed. This view has also been held by the jurisdictional High Court in the case of N.K.
Industries Ltd. Vs. DCIT, (2016 72 taxmann.com 289 (Guj). The relevant part of the judgment is as follow: “6. The Tribunal in the case of Vijay Proteins Ltd. (supra) has observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25% of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd. (supra) In the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to Rs. 2,92,93,288/- and taxing only 25% of these bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come to a categorical finding that the amount of Rs. 2,92,93,288/- represented alleged purchases from bogus suppliers it was not incumbent on it to restrict the disallowance to only Rs.73,23,322/-.”
Further, SLP filed against this judgment is dismissed by the Hon’ble Supreme Court, which is reported in (2017) 84 taxmann.com 195 (SC). Thus, ld.CIT(A) dismissed the appeal of the assessee.
Aggrieved against the same, the assessee is in appeal before the Tribunal raising the grounds of appeal “as per attachment”. But we do not find any such “attachment” with the appeal memo stating grounds of appeal raised by the assessee. However, the assessee filed a written arguments dated 30.4.2022 and non-appeared on behalf of the assessee before the Tribunal. So the case is taken up for hearing with the written submissions dated 30.4.2022 filed by the assessee, and with the help of the ld.DR who has also filed his written submission dated 10.5.2022 on 11.5.2022. The grounds raised by the assessee in the written arguments are as follows: i) Ground No.1 This ground pertains to the action of the AO in treating genuine purchases of Rs.29,97,477/- as unproved/bogus; ii) Ground No.2: This ground pertains to treating the entire purchases of Rs.29,97,477 as bogus and adding the same as income; iii) Ground No.3 : This ground pertains to the reduction from the sales in respect of the purchases as mentioned in ground no.1 and 2.
While going through the written arguments, the submissions are nothing by repetition of the same as filed before the ld.CIT(A) and nothing new submissions or documents or evidence produced before this Tribunal. The ld.DR, Shri S.S.Shukla submitted the following submissions as against each ground of appeal:
Ground No.1 “1.4 It is pertinent to mention that even during the course of original assessment proceedings in the first round, these parties were not verifiable and their address were found to be bogus. Even then, the appellant had failed to produce these parties.
1.5 It was in light of these facts and circumstances that the Hon'ble ITAT had given specific directions to the AO for examining these three parties. Now, during the course of the second round also, the assessee has utterly failed to produce the parties for examination and as such has not discharged the onus cast on it. Moreover, appellant's conduct amounts to non-compliance of Hon'ble ITAT's express directions. Even in the present submissions filed before the Hon'ble Bench, the appellant has essentially harped on the confirmations submitted by it before the AO. The appellant has admitted in the written submissions that it was unable to produce the parties.
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Ground No.2 The question of allowing only a certain percentage of the bogus purchases will need to pass through the rigours another academic inquiry. The entire conceptual edifice of adopting certain ratios over bogus purchases stands on the premise that goods may not have been purchased from the recorded parties but from some parties off the record. But there are 3 difficulties in taking such a apposition in the present case : i. Such a plea has not even been taken by the appellant either as a ground of appeal or as an alternate contention. Request for adopting gross profit percentage has to be preceded by an unequivocal admission of the fact that the appellant has purchased goods from some other parties. That is not the case here; ii. Even if the appellant had expressly taken such a plea, actual delivery and movement of goods and one-to-one quantitative tally would have to be demonstrated before such a plea is admitted; iii. Even where the first two conditions are satisfied as above, the claimed off-the-record purchase transactions from unidentified parties would have to pass through the rigours of technical and mandatory provisions such as Sections 40A(3) and Section 69C.
This fold of reasoning has found even an express approval of the Hon'ble Apex Court in the case -NK Proteins Ltd vs DCIT [2017] 84 taxmann.com 195 (SC). Hence, on the facts and circumstances of the present case, where there is complete failure of the appellant in leading any independent evidence in support of the genuineness of the impugned purchases, the whole of the sum has rightly been disallowed by the Ld AO and upheld by the Ld CIT(A).
….. …. …. ….
Ground No.3 3.2 In this connection, it is respectfully submitted that this contention of the appellant suffers from conceptual infirmity. In the present appeal Revenue’s case is suppression of profits in. the hands of the appellant by way of introducing bogus claims of expenditure pertaining to the three brokers that were found to be practically non- existent. Thus, the core allegation is that goods corresponding to the three alleged purchases never ever came to the business of the appellant. Instead, these transactions are mere paper entries in order to deflate the actual profits. Accordingly, there is no quantitative implication at all on the sales. That being so, the question of reducing sales commensurate to this disallowance does not arise. In other words, the impugned disallowance of bogus purchases only restores assessee's trading results to what they actually were before this bogus claim.
3.3 Without prejudice to the above, as rightly observed by the Ld. CIT(A) in Para 6 of his order at Page No. 13, even otherwise the appellant has not been able to furnish any quantitative and party- wise tally between the impugned purchases and corresponding sales. Unless there is an irrefutable factual demonstration by the appellant that the impugned purchases treated as bogus were, in fact, included in the sales, the question of reversal of that exercise would not at all arise.”
We have gone through the records and written submissions filed by both the parties. In the first round of appeal before this Tribunal, there was categorical direction given to the assessee to produce three parties (brokers) before the AO to prove genuineness of the transaction and also cross-examine the parties. Pursuant to the direction, the AO has given four opportunities to prove the case, and also issued summons calling upon three parties before him; but notices were remained unanswered on the ground that postal authorities returned the same with remark “not known or unsufficient address”. When the assessee was requested to produce three parties, the assessee was unable to produce them, but only filed a letter. The assessee has not filed required evidences viz. return of income filed by the broker, bank statements and any other evidences before the ld.AO. In the absence of the above details, the AO has confirmed the addition and treated the same as bogus purchase. Even during the appellate proceedings, the assessee could not be able to establish the same. From the reading of the assessment order, it is clear that the assessee was given opportunity to prove genuineness of the transaction even in the original assessment proceedings, which were completed on 24.12.2010. Further, the assessee pleaded before this Tribunal in the first round of appeal that he could not produce three parties as well as evidences before the AO. For this reason only, Co-ordinate Bench of this Tribunal had set aside the matter back to the file of the AO for one more opportunity. Now, the assessee simply claims that since the transactions were of more than ten years old, it could not produce three parties before the AO. Thus, the assessee has literally wasted precious time of the AO by once again issuing notices and summons to the third parties and at the end of the proceedings, the assessee expressed inability to prove before the AO the genuineness of the transactions. Thus, both the AO and the CIT(A) have given clear cut finding that the assessee could not able to prove the purchases as genuine, and therefore, grounds of appeal raised by the assessee in the written submissions are hereby rejected, and the appeal filed by the assessee are hereby dismissed. The orders passed by the lower authorities do not require any interference.
In the result, appeal of the assessee is hereby dismissed.