M/S.BLAST CARBOBLOCKS PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER-15(1)(3), MUMBAI

Per Pawan Singh, Judicial Member :

CIT(A)-24, Mumbai dated 28-02-2017 and 31-05-2017 for

assessment years (AY) 2009-10 and 2010-11, respectively. In

both the appeals, the assessee has raised identical grounds of

appeal; facts in both the appeals are also almost identical except

variation in figures of disallowance on account of bogus purchases.

Therefore, with the consent of parties, both the appeals were

clubbed, heard together and are decided by this common order.

For appreciation of facts, the appeal for AY 2009-10 is treated as

lead case. The assessee has raised the following grounds of

appeal:-

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business of manufacturing of chemical process equipments, filed its

return of income for AY 2009-10 on 24-09-2009 declaring total

income of Rs.27,15,269 which was processed u/s 143(1) of the

Income Tax Act (Act) on 25-05-2011. Subsequently, on the basis

of information received by Director General Investigation of Income

tax (DGIT), from Sales-tax department Government of

Maharashtra the certain traders were indulging in providing

accommodation entries of sales and purchases invoices without

actual delivery of goods. The list of such hawala dealers was sent

to the (DGIT) (investigation), wherein the assessee was shown as

one of the beneficiary of certain purchases. On the basis of such

information the assessment of the assessee for AY 2009-10 was

reopened u/s 147 of the Act, by issuing notice u/s 148. In response

to the notice under section 148 the assessee contended that return

filed under section 139(1) be treated as return in response to the

said notice. In the re-assessment proceedings, the assessing

officer noticed that the assessee has shown bogus purchases from

following parties for the amounts shown against each:

1) Bright Corporation Rs. 8,840 2) Kameshwar Trading Pvt Ltd Rs. 21,53,948 3) Mehta Enterprises / Sweta

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Enterprises Rs. 14,960 4) Naman Enterprises Rs. 2,288 5) Sheetal Trading Co. Rs. 1,575 6) Trichipuram Trading Pvt Ltd Rs. 21,95,768 7) Victor Traders Rs. 52,942 Total Rs. 44,30,321 3. The assessing officer further noticed that these hawala parties

were indulged in issuing of only bills and not delivering any goods,

not maintaining any stock and not keeping stock register, not

effecting any purchases; there was no transaction of goods; and

entries were being provided for commission.

been made from these hawala parties. The assessee submitted

that purchases shown from these parties were not bogus

purchases; that the goods purchased from these parties were sold

to the customers; that payments were made through account

payee cheques and that they received amount for the

corresponding sales through account payee cheques. The assessee

vide reply dated 22-03-2016, furnished statement along with the

purchase bills and ledgers reflecting the purchases and the bank

statement showing payments to the said purchase parties. The

assessee further stated that out of the above purchases, the major

purchase was made from M/s Shree Ganesh Trading Company,

payments were made during the year and the balance payment of

M/s Shree Ganesh Trading Company was made in FY 2010-11.

However, the assessee expressed its inability to produce the

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parties for confirmation. The explanations of the assessee did not

find favour with the assessing officer. According to him, except for

purchase invoice, statement of purchases and bank statement, the

assessee failed to furnish corroborative evidences, viz. delivery

challans, transportation details, etc. to substantiate the claim of

purchases from aforesaid parties. No documentary evidences

establishing the receipt of goods purported to have been purchased

from the aforesaid parties were produced by the assessee. The AO

concluded that the assessee has furnished copies of bank

statements and has tried to substantiate that the purchases made

were genuine as the payments have been made through banking

channel. The AO further concluded that the payment through

banking channel does not give certificate to the assessee that the

purchases were from genuine parties. Further with regard to the

contention of the assessee that goods came into the business of

the assessee and were consumed in manufacturing Carbon and

Graphite which have been subsequently shown in sales, the

assessing officer observed that the assessee has not produced

transportation bill or delivery challans or any confirmations from

the alleged purchasers but has produced some goods receipts

notes in support of their claim of receipt of goods. The assessing

officer has also concluded that before the sales-tax authorities the

hawala parties have clearly stated that they have not done any

business activities and were involved merely in providing

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accommodation entries, though on record they showed themselves

as traders in the particular items shown in the invoices raised.

However, the AO accepted that that the assessee has shown sales

against the consumption of goods purchases. Therefore, AO

considering the overall facts and circumstances of the case

concluded that the assessee has intentionally inflated the value of

purchase by taking accommodation bills to reduce the gross profit

and thereby reduced the taxable income and thus, even if the

purchase of goods was considered to be good, the value shown by

the assessee was not accepted. The AO concluded that by showing

purchases the assessee suppressed profit. Therefore, the assessing

officer made estimated disallowance of 20% of aggregate of

purchases of Rs.44,30,321/-. The AO worked out disallowance of

Rs.8,86,064/- and added to the total income for the assessment

year 2009-10.

disallowance on account of bogus purchase on estimate basis was

upheld. Further aggrieved, the assessee is in appeal before the

Tribunal.

(AR) of the assessee and the learned departmental representative

(DR) for the revenue and perused the material available on record.

The learned AR of the assessee submits that there is delay of 232

days in filing the present appeal. The order impugned in the appeal

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was passed by ld CIT(A) on 28th February 2017, the appeal was filed before the tribunal on 20th March 2018, therefore, there is a

delay of 232 days in filing the present appeal. In support of

condonation of delay the assessee has filed the affidavit of Mr

Sudheer Saxena. The learned AR of the assessee submits that the

due to wrong belief that the Chartered Accountant (CA) of assessee

may have filed appeal before the Tribunal, the delay occurred in

filing the appeal. However, soon after coming to know that his CA

has not file appeal, the assessee immediately filed this appeal. The

assessee came about non-filing of appeal, when the revenue

started the recovery of the tax. On coming to know about the fact

that no appeal in time is filed, the assessee immediately filed the

appeal before the tribunal. There was no intentional or deliberate

act for causing delay in filing the appeal. The delay may be

condoned and the appeal of the assessee may be heard and decide

on the merit and that the assessee has good case on merit.

made from those parties are not bogus. The purchases made from

these parties were consumed in manufacturing and were sold in

the market. The assessee made the payment of all purchase

through banking channel. The assessing officer has not rejected

the books of account nor disputed the consumption and sales of

assessee. The assessing officer disallowed 20% of the purchases

on account of suppressed profit on ad-hock basis. The learned

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Commissioner (Appeals) confirmed the action of assessing officer

by following the decision of Hon’ble Gujarat High Court in case of

Smith P. Sheth (356 ITR 451). The learned AR further submits that

once the AO accepted the consumption and sales of the assessee,

no disallowances were warranted. In without prejudice and in

alternative the ld AR for the assessee submits that the ad-hock

disallowance of 20% of the alleged bogus purchases is excessive,

however, to end the litigation the Tribunal may considering the

facts of the case may reasonably disallowed some percentage of

the impugned/ alleged bogus purchases.

order of lower authorities. The learned DR for the revenue further

submits that not only the Sales tax Department of Government of

Maharashtra but Investigation wing of Income tax Department

made full-fledged investigation about the modus operandi of

Hawala traders who were indulging in providing the bogus bill

without actual delivery of material. The assessee is one of the

beneficiaries who have availed such accommodation entries. The

assessee is manufacturer and obtained the bogus bill to inflate the

profit. The learned DR for the revenue further submits that the

assessing officer has given sufficient relief to the assessee and that

the assessee is not entitled for any further relief. The learned DR

for the revenue prayed for dismissal of the appeal. On the

condonation of delay the ld DR submits that the assessee has not

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shown sufficient cause and the affidavit of the assessee is self

serving and no cognizance of the affidavit may be taken.

perused the material of available on record. We have noted that

the present appeal is filed beyond prescribed period of limitation.

The assessee has filed application for condoning of delay which is

supported by the affidavit of Sudheer Saxena. In the affidavit it is

contended that he came to know about non-filing of appeal when

recovery proceedings were initiated by revenue. It is further stated

that he was under the impression that their C.A. has already filed

appeal before the Tribunal. On coming to know that no appeal is

filed before the Tribunal, the assessee immediately filed the

present appeal. We have noted that the approach of assessee is

very casual in filing appeal before the Tribunal. However, keeping

in view the cause shown by assessee and the fact that in non-filing

of appeal before the Tribunal in time, the assessee would not get

any benefit rather the assessee has suffered as recovery

proceeding were initiated. Considering the submission of the

learned AR of the assessee and the contents of affidavit of Sudheer

Saxena the delay in filing of the present appeal has not benefited

the assessee, hence the delay in filing of the appeal is condone.

and perused the material available on record. We have noted that

in the re-assessment order the assessing officer disallowed 20% of

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the bogus purchases by taking view that the assessee is one of the

beneficiaries of the accommodation bills. The assessee by availing

accommodation bills has inflated the value of purchase. The

assessing officer by following the decision of Gujarat High Court in

Bholanath Poly Fab (supra) took the view that reasonable

percentage of disputed but purchases would be sufficient to avoid

the revenue leakage. The learned Commissioner (Appeals) also

confirmed the action of assessing officer on similar lines. Before us

the learned AR of the assessee vehemently submitted that the

purchase shown by assessee were genuine. The assessee had

furnished sufficient evidence to prove the genuineness of purchase.

The learned AR submitted that, though, the assessing officer has

restricted the disallowance at the rate of 20% of the alleged bogus

purchases; however the same is on very higher side. We have

noted that the AO accepted that that the assessee has shown sales

against the consumption of goods purchases. Considering the fact

and circumstances of the case and submissions of the ld. AR for

the assessee that to avoid the further litigation a reasonable

percentage may be disallowed by the Tribunal. Therefore, in our

view to avoid the revenue leakage on the alleged bogus purchases,

if 5% of the bogus purchases is disallowed that would meet the

end of justice. Therefore, we direct the AO to restrict the

disallowance of the bogus purchases accordingly. In the result the

ground No. 2 of the appeal is partly allowed.

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I.T.A. No. 1819/Mum/2018 for AY 2010-11

raised identical grounds of appeal as raised in appeal for AY 2009-

10 in ITA No.1818/Mum/2018. The facts in the appeal under

consideration are also similar except variation of figure of

disallowance on account of bogus purchases. The appeal for the

year is also filed after prescribed period of limitation. The assessee

has shown similar cause for condonation of delay. Considering the

facts that we have condoned the delay in filing of appeal for AY

2009-10, hence, the delay is condoned in this appeal as well with

similar observation. On merit we have seen that the has raised

identical grounds as raised in appeal for earlier year. The facts and

circumstances being pari materia, the decision arrived at therein

shall apply mutatis mutandis to this appeal also.

allowed.

Order pronounced in the open court on 07-08-2019.

Sd/- Sd/-

(Shamim Yahya) (Pawan Singh)

ACCOUNTANT MEMBER JUDICIALMEMBER Mumbai, Dt : 7th August, 2019 Pk/- Copy to : 1. Appellant 2. Respondent

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Asstt. Registrar, ITAT, Mumbai