DEPUTY COMMISSIONER OF INCOME-TAX vs. MOHD. ASHIF SIDDIQUI, RAIGAD

आदेश / ORDER

PER VIKAS AWASTHY, JM

These two appeals by Department are directed against the order of Commissioner of Income Tax (Appeal)-2, Thane dated 14.07.2016 common for the assessment years 2010-11 & 2011-12.

Since the issue raised in both the appeals is identical and is arising from same set of facts, these appeals are taken up together for adjudication and are being disposed of vide this common order.

2 ITA Nos. 2318 & 2319/PUN/2016 A.Y.2010-11 & 2011-12

is engaged in the business of manufacturing and trading of M.S. ERW,

seamless pipes, Electric Poles, etc. Information was received by the

Department from Maharashtra Sales Tax Department that the assessee has

indulged in procuring bogus bills for purchase of goods from hawala

operators. Consequently, assessments for assessment years 2010-11 and

2011-12 were reopened. In re-assessment proceedings, the Assessing Officer

held that the assessee has indulged in bogus purchases of goods from hawala

dealers and thus, made additions of the entire alleged bogus purchases as

under:

Assessment year Addition

2010-11 Rs.8,76,918/- 2011-12 Rs.2,67,82,697/-

passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred

to as ‘the Act’) both dated 23.02.2015, the assessee filed appears before the

Commissioner of Income Tax (Appeals) challenging validity of re-opening of

assessment u/s.147 r.w.s.148 of the Act and the addition on merits.

(Appeal) upheld the validity of re-opening of assessments. However, on merits,

the Commissioner of Income Tax (Appeal) restricted the addition to 15% of the

bogus purchases. Now, the Revenue is in appeal assailing the findings of

Commissioner of Income Tax (Appeal). The Revenue has raised following

grounds of appeal in assessment year 2010-11 assailing the order of

Commissioner of Income Tax (Appeal).

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“1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in relying on the decision of Supreme Court in the case of Kanchwala Gems Vs. JCIT 288 ITR 10(SC) and Hon'ble High Court's decision in the case of Vijay Protein, Sanjay Oil Cake Industries, etc . 2. On the facts and in the circumstances of the case, and in law, the Hon'ble CIT(A) erred in not following the order of ITAT, Pune in ITA No.1411-1415 dated 20.02.2015 in the case of M/s. Kolte Patil Developers Ltd. wherein 100% addition of bogus purchases was confirmed. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in giving relief to the assessee to the extent of suppressed G.P. out of total bogus purchases even though- (i) The assessee could not produce primary evidences like Octroi Receipts, Delivery Challan etc. evidence to prove the genuineness of the purchases before the AO and before CIT(A). (ii) The affidavits filed by the entry providers before Sales Tax Authorities cannot be ignored having evidentiary value. 4. The order of the CIT(A) may be vacated and that of the Assessing Officer may be restored. 5. The appellant craves leave to add, amend, alter or delete any ground of appeal.”

Identical grounds have been raised by the Revenue in appeal for

assessment year 2011-12.

assessee has indulged in bogus purchases from various parties during

impugned assessment year. During the course of assessment proceedings,

the assessee was asked to furnish evidence to prove genuineness of the

purchase transactions. The assessee failed to substantiate the purchases

made and thus, the assessee failed to discharge his onus of proving

genuineness of the purchases. Hence, the Assessing Officer was justified in

making addition of 100% of bogus purchases made by assessee. In First

Appellate proceedings, the Commissioner of Income Tax (Appeal) granted

relief to the assessee by restricting addition to 15% of the bogus purchases

merely on the ground that there was fire in the premises of the assessee in

which the documents got destroyed. The findings of Commissioner of Income

4 ITA Nos. 2318 & 2319/PUN/2016 A.Y.2010-11 & 2011-12

Tax (Appeal) are merely based on presumptions and assumptions. Hence,

they deserve to be quashed and findings of Assessing Officer be restored.

assessee vehemently defended the order of Commissioner of Income Tax

(Appeal). The ld. AR submitted that the Commissioner of Income Tax (Appeal)

while restricting the addition to 15% of bogus purchases has not only taken

into consideration genuine difficulty faced by the assessee in producing

supporting documents as they were destroyed by fire but has also taken into

consideration GP ratio of the earlier and subsequent assessment years. The

ld. AR pointed that while restricting addition to 15%, the Commissioner of

Income Tax(Appeal) has taken into consideration various decisions of the

Hon'ble Supreme Court of India. The ld. AR pointed that it is an undisputed

fact there was fire in the premises of the assessee on 10.10.2011. The

assessee has produced ‘Panchanama’ wherein it is clearly mentioned that the

records are destroyed due to fire. However, the assessee to substantiate

purchases made are genuine, produced bank statement indicating payments

made to the creditors for purchase of goods. The assessee also produce

details of purchases and sales transaction along with party-wise details

disclosed in M-vat report submitted to the Sales Tax Department through E-

form 704. The sales made by the assessee were never disputed by the

Department. Without there being purchase, there could not have been sales.

Thus, findings of the Commissioner of Income Tax (Appeal) are well-reasoned.

The ld. AR prayed for dismissing the appeals of the Department.

and have perused the orders of the Authorities below. During impugned

assessment years, the assessee purportedly indulged in making bogus

purchases from following hawala dealers:

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S.No. Hawala Dealers Amount (in Rs.) A.Y.2010-11 A.Y.2011-12

1 Asian Tube Trading Rs.3,84,093/- Rs.13,61,412/-

2 Rupani & Co. Rs.4,92,825/- -

3 Rehbar Enterprises - Rs.16,95,565/-

4 Gazi Enterprises - Rs.2,37,25,720/- Total Rs.8,76,918/- Rs.2,67,82,697/-

It is an undisputed fact that during re-assessment proceedings, the

assessee failed to produce documentary evidences such as transport receipt,

delivery challan, goods receipts note and octroi receipts to substantiate the

purchases. The assessee also failed to file confirmations from the parties in

support of his contentions. The Assessing Officer made addition of the entire

bogus purchases, however, the Commissioner of Income Tax (Appeal)

restricted the addition to 15%.

Income Tax (Appeal) while estimating bogus purchases to 15% has considered

the fact that assessee could substantiate major part of the purchases 96% in

the year 2010-2011 and 60% in the year 2011-12 of the total turnover from

the regular suppliers. It was only small part of the purchases in assessment

year 2010-11 that the assessee could not substantiate. Whereas, for the

assessment year 2011-12, amount of the alleged bogus purchases is fairly

large. The reasons given by the assessee for not producing the supporting

documents is loss/ damage of records due to fire in the premises of the

assessee. In the absence of supporting documents and reasons beyond

control of assessee for not producing the documents, reasonable estimation of

bogus purchases has been made by Commissioner of Income Tax(Appeals).

6 ITA Nos. 2318 & 2319/PUN/2016 A.Y.2010-11 & 2011-12

The Department has not disputed the sales made by the assessee. Thus, without purchases there cannot be sales. Therefore, the entire purchases cannot be held to be bogus. There could be possibility of assessee procuring goods from grey market and obtaining bills from hawala operators. Taking into consideration entirety of facts, we find that order of Commissioner of Income Tax(Appeal) is well reasoned in estimating addition to 15% of the bogus purchases in the impugned assessment years. We do not find any infirmity in the impugned order, accordingly, the same is upheld.

Order pronounced on Thursday, the 20th day of December, 2018.

Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 20th December, 2018 SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeal)-2, Thane. 4. The Pr. CIT-2, Thane. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.

7 ITA Nos. 2318 & 2319/PUN/2016 A.Y.2010-11 & 2011-12

Date 1 Draft dictated on 20.12.2018 Sr.PS/PS 2 Draft placed before author 20.12.2018 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr. Sr.PS/PS PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order