ASSISTANT COMMISSIONER OF INCOME-TAX vs. SHRI AKSHAY RAJESH SAMDARIYA, JALNA

आदेश / ORDER आदेश आदेश आदेश

2 ITA No. 2076/PUN/2016 & Co No.58/PUN/2018 Akshay R. Samdariya

PER VIKAS AWASTHY, JM :

This appeal by the Revenue is directed against the order of

Commissioner of Income Tax (Appeals)-1, Aurangabad dated

27-06-2016 for the assessment year 2009-10 in restricting the

addition on account of the bogus purchases to 3% of the total bogus

purchases. The assessee has filed cross objections against the order of

Commissioner of Income Tax (A)-1, Aurangabad in confirming the

addition of Rs. 8,35,680, i.e. 3% of the alleged Hawala purchases.

assessee is an individual engaged in the business of trading in MS

Steel, MS Scrap, MS Ingots, MS bars, etc. The assessee filed his

return of income for the impugned assessment year on 23-09-2009

declaring total business income of Rs.3,10,520/-. The assessment

order under section 143(3) was passed in the case of assessee on

12-12-2011 determining the total income at Rs.5,49,701/-.

Thereafter, the Department received information from the Maharashtra

Sales Tax Department that the assessee has indulged in bogus

purchases from Hawala operators. On the basis of said information

received, the Assessing Officer reopened the assessment and issued

notice under section 148 of the Income Tax Act, 1961 (hereinafter

referred to as, “the Act”) on 23-04-2013. In the re-assessment

proceedings, the assessee failed to substantiate that the purchases

made from the alleged Hawala dealers were infact genuine. The

Assessing Officer made independent enquiries and collected

information under section 133(6) of the Act. On the basis of

information collected and the information received from the Sales Tax

Department, the Assessing Officer held that the assessee has indulged

3 ITA No. 2076/PUN/2016 & Co No.58/PUN/2018 Akshay R. Samdariya

in bogus purchases to the tune of Rs.2,78,55,984/- from the following

parties :

Sr.No. Name of hawala dealer from whom Amount purchases made 1 Samco Steel & Alloys, Rs.26,04,992/- Prop. Shri Shankarlal Narsingmal Jain 2 M/s. Rajratan Metal Industries Rs.51,32,946/- 3 M/s. Anmol Industries Rs.19,10,064/- 4 M/s. Manav Impex Rs.36,53,286/- 5 M/s. Alliance Steel Industries Rs.1,45,54,696/- Total Rs.2,78,55,984/-

27-03-2015 passed under section 144 r.w.s. 147 made addition of the

entire amount held to be bogus purchases. Aggrieved against the

assessment order, the assessee filed appeal before the CIT(A). The

CIT(A) after taking into consideration the submission of the assessee,

documents on record and various case laws restricted the addition to

Rs.8,35,680/-, i.e. 3% of the total bogus purchases.

Against the findings of the CIT(A), the Revenue is in appeal.

assailing deleting of the addition made and the assessee in Cross

Objections has also assailed the order of CIT(A) in confirming the

addition to the extent of 3%.

that the CIT(A) has erred in granting substantial relief to the assessee

without taking cognizance of the fact that during re-assessment

proceedings the assessee failed to furnish documentary evidences

substantiating purchase of material from the Hawala operators. The

Assessing Officer had carried out independent enquiries which

revealed that the Hawala operators never carried out any business.

4 ITA No. 2076/PUN/2016 & Co No.58/PUN/2018 Akshay R. Samdariya

The income-tax Department received information from the Sales Tax

Department along with the affidavits of the sellers wherein they have

confirmed that they have infact not made any purchases and

consequently have not sold any goods to the assessee. In the

backdrop of these facts, the Assessing Officer rightly made addition of

the entire bogus purchases. The assessee has taken accommodation

entries from the dealers merely to reduce the profits. The ld.

Departmental Representative prayed for setting aside the impugned

order and restoring the findings of the Assessing Officer.

the assessee submitted that the Assessing Officer has erred in coming

to the conclusion that the assessee has indulged in procuring

accommodation entries. The ld. Authorized Representative pointed

that in scrutiny assessment proceedings the assessee had furnished

complete set of books along with supporting sale bills, purchase bills,

bank statements, vouchers etc., and the same were test checked by

the Assessing Officer before passing the assessment order. The

Assessing Officer never doubted the books of account at any stage.

Even in the reassessment proceedings, the books of assessee have not

been rejected. The books of assessee are subject to audit and the

assessee has furnished audited books before the lower authorities.

The ld. Authorized Representative submitted that the sales have not

been doubted by the authorities below. Without purchases there

cannot be sales. The ld. Authorized Representative further submitted

that since all the supporting documents substantiating purchase of

goods were furnished by the assessee, no addition is called for. The ld.

5 ITA No. 2076/PUN/2016 & Co No.58/PUN/2018 Akshay R. Samdariya

Authorized Representative prayed for modifying the impugned order by

deleting the addition made to the extent of 3% of bogus purchases.

orders of the authorities below. The solitary issue raised in the appeal

by the Revenue and Cross objections by the assessee is against

addition deleted/confirmed on account of bogus purchases. The

Assessing Officer in re-assessment proceedings made addition of

Rs.2,78,55,984/- as bogus purchases purportedly made by the

assessee. In first appeal proceedings, the CIT(A) restricted the addition

to 3% of the said purchases, i.e. Rs.8,35,680/-. A perusal of the

impugned order shows that the assessee has failed to produce

documentary evidence in the form of Lorry receipts, weighment slips,

Octroi receipts etc. The assessee has failed to substantiate movement

of goods from the suppliers to the assessee. The Assessing Officer

during assessment proceedings has not discarded total sales of the

assessee. In other words, the sales of the assessee have been accepted

by the Department. Without purchases, there cannot be sales. Thus,

entire alleged bogus purchases cannot be added in the hands of the

assessee. Under such circumstances, the possibility of assessee

purchasing the goods from grey market and procuring bills from the

Hawala dealers cannot be ruled out. The CIT(A) after considering

catena of judgments on various facets including the GP ratio to be

applied in different set of industries estimated 3% of GP addition on

account of bogus purchases in the hands of the assessee. We find the

impugned order is reasoned and hence, requires no interference.

Taking into consideration entirety of facts, the impugned order is

6 ITA No. 2076/PUN/2016 & Co No.58/PUN/2018 Akshay R. Samdariya

upheld. The appeal of the Revenue and the Cross Objections filed by

the assessee are dismissed being devoid of any merit.

filed by the assessee are dismissed.

Order pronounced on Monday, the 31st day of December, 2018.

Sd/- Sd/- (D. KARUNAKARA RAO) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 31st December, 2018 Satish

आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. आयकर आयु� (अपील) / The CIT(A)-1, Aurangabad 3. आयकर आयु� / The Pr.CIT 1, Aurangabad 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

//स�यािपत �ित // आदेशानुसार / BY ORDER,

// True Copy // Senior Private Secretary, आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune

ITA No. 2076/PUN/2016 & Co No.58/PUN/2018 Akshay R. Samdariya

Date 1. Draft dictated on 27-12-18 Sr.PS 2. Draft placed before author 28-12-18 Sr.PS 3. Draft proposed & placed before the AM second member 4. Draft discussed/approved by Second AM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order.