ACIT-27(3), MUMBAI vs. M/S.TIRUPATI TRADERS & COMPUTECHNICS, MUMBAI

स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AABFT0586F (अपीलाथी /Appellant) (प्रत्यथी / Respondent) .. Revenue by: Shri R. Manjunatha Swamy/ Ms. Neelima Nadkarni (DR) Assessee by: Shri Subodh Ratnaparkhi सुनवाई की तारीख / Date of Hearing: 22/04/2019 घोषणा की तारीख /Date of Pronouncement: 30/04/2019 आदेश / O R D E R

PER AMARJIT SINGH, JM:

2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not considering the Hon'ble Supreme Court decision in the case of NK Proteins Ltd. v/s DT [292 CTR (Guj) 354(2016), upholding the decision of Hon'ble Gujrat High court 2 A.Y. 2009-10 wherein it was held that addition on basis of undisclosed income could not be restricted to certain percentage when the entire transaction was found as bogus.

3. The appellant prays that the order of the CIT(A) on the Above grounds be reversed and that of the assessing Officer be restored.

4. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”

3. The brief facts of the case are that the assessee filed its return of income on 29.09.2009 declaring total income to the tune of Rs.46,24,327/-. The return was assessed u/s 143(3) of the Act on 25.10.2011 assessing the total income to the tune of Rs.47,31,034/-. The case was reopened after recording the reasons. Accordingly, notice u/s 148 of the Act dated 14.03.2014 was issued and served upon the assessee. In pursuance of notice, the assessee filed the return of income which he had already filed. Notices u/s 143(2) & 142(1) of the Act were also issued and served upon the assessee. The assessee is in the business of trading in UPS systems & batteries and during the year under consideration, the assessee derived its income from business and other sources. An information was received from the DGIT (Inv.), Mumbai in which it was conveyed that the assessee has taken the accommodation entries from the following 5 parties.: - S. TIN of Hawala Hawala PAN Name of the Hawala Supplier Amount No. Supplier (Rs.) 1 27600606547V AMDPM6129K Omkar Trading Co. 18,38,048 2 27750595164V AMTPS9884P Deep Enterprises 10,16,719 3 27200506372V AETPP1119A Crystal Commercial Co. 69,94,338 4 27870543397V AAIPU8001H Rumggt Enterproses 20,91,887 5 27790554111V ADXPN8117B Yash Impex 10,16,887 Total 1,29,57,789 On appraisal of the P&L Account, it was observed that the assessee debited the purchase in sum of Rs.1,29,57,789/-. The assessee also furnished the details of purchase for the period of 1.04.2008 to 31.03.2009. The assessee failed to produce the parties. The notices u/s 133(6) of the Act dated 09.12.2014 were issued which return back unserved. Thereafter, the peak of the purchase was worked out in sum of Rs.1,21,86,039/- and added to the 3 A.Y. 2009-10 income of the assessee u/s 69C of the I.T. Act. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 12.5% of the bogus purchase. The revenue was not satisfied, therefore, the revenue has filed the present appeal before us. ISSUE NOs. 1 & 2 4. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The Ld. Representative of the revenue has argued that the assessee has failed to produce the parties and failed to substantiate his claim in connection with the bogus purchase because purchase invoices, delivery challan and other relevant documents were not produced, therefore, the CIT(A) has ought to confirm the finding of the AO by confirming the addition of peak purchase in sum of Rs.1,21,86,039/- which has been wrongly restricted to the extent of 12.5%, therefore, in the said circumstances, the finding of the CIT(A) is wrong against law and facts and is liable to be set aside. In support of these contentions, the Ld. Representative of the CIT(A) has strongly relied upon the order passed by Mumbai Bench in the case of titled as M/s. Shoreline Hotel Pvt. Ltd. Vs. CIT-1 in ITA. No.964/M/2015 dated 19.06.2015 which was confirmed by Bombay High Court in appeal No. 332 of 2016 dated 11th September, 2018. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.: - “5.3 having considered the assessment order of the AU and the submissions of the appellant, it is seen that the main plank of appellant's arguments regarding the genuineness of the purchases was that the payment has been made by cheque/banking channels and which has not found favour with court's/Tribunal's pronouncements like in the case of M/s. Kanchivalti Gems vs. JCIT IITA No. 1 34/JP/2002 dated 10.12.2003 by the Hon’ble ITAT, Jaipur wherein it is held that payment by account payee cheque is not sufficient to establish the genuineness of purchases. The said decision of the ITAT, Jaipur has been affirmed by the Hon'ble 4 A.Y. 2009-10 Supreme Court in the case of M/s. Kanchwala Gems vs. JCIT (2006) 206 CTR (SC) 585 288 ITR 10 (SC). Thus, the main contention of the appellant does not hold much water. The AU has formed his views about the bogus nature of the purchases made by the appellant from the above parties on the basis of statements recorded by the Sales Tax Authorities as well as further inquiries carried out by him independently. The information received from the Sales Tax authorities was only a piece of evidence to initiate in-depth independent investigation on the issue. The appellant has not been able to establish one to one relationship/nexus between the purchases and sales. The appellant has not been able to produce the parties from whom purchases have been alleged to have been made. The appellant has also failed to produce before the AU, the corroborative evidence in the form of transportation bills etc. to establish that the alleged purchases were actually transported to its premises and entered in stock register. It is also a fact that the AO has not confronted the appellant with all the information in his possession like statements of the alleged hawaka operators. Further, the AO stopped his investigation with the return of his 133(6) notices. He did not go ahead with money trail of cheques debited in the appellant's bank account towards the alleged purchases though such investigation do not lead to concrete results in the case of hawala dealers and investigators often reach dead end in such cases. It is not the case of the AO that the impugned purchases have conclusively been established as not having been effected at all. The AO has only found the impugned supplier as a bogus party.”

5. On appraisal of the above mentioned order, we find that the CIT(A) has decided the matter of controversy on the basis of the decision in the case of CIT vs. Nikunj Eximp Enterprises (P.) Ltd. 372 ITR 619 (Bom) and in the case of CIT-1 Vs. Simit P. Sheth ITA. No.553 of 2012 dated 16.01.2013 and in the case of CIT Vs. Bholanath Poly Fab (P) Ltd., ITA. No. 63 of 2012 dated 23.10.2012 and other cases which has been mentioned in the order depicted above. The CIT(A) has considered the profit embedded in the bogus purchase if any. In the instant case, the books of account have not been rejected and the sale is not doubted. No sale could not be effected without purchase. The law relied by the Ld. Representative of the department in the case of M/s. Shoreline Hotel Pvt. Ltd. Vs. CIT-1 in ITA. No.964/M/2015 dated 19.06.2015 is concerned, we find that the facts of this case is quite different to the case of the present case. In the case of M/s. Shoreline Hotel Pvt. Ltd (supra). The party purchased the