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Income Tax Appellate Tribunal, ‘ D’ SMC BENCH : CHENNAI
Before: SHRI GEORGE MATHAN
आदेश / O R D E R
These appeals are filed by the assessee against the consolidated order of the Commissioner of Income-tax (Appeals)- 1,Madurai in appeal Nos.0046,0047 & 0048/2015-16 dated 12.06.2018 for the assessment years 2009-10 to 2011-12. to 2278/chny/2018 :- 2 -:
Shri A.S.Sriraman represented on behalf of the Assessee and 2.
Smt M.subashri represented on behalf of the Revenue.
It was submitted by the ld.AR that in the course of assessment, the ld.Assessing Officer had disallowed the entire purchases made by the assessee from the persons mentioned in the chart in page-2 of the assessment order (A.Y 2009-10). It was a submission that the Assessing Officer had received certain information from the Sales Tax Department(VAT), Investigation Division, Mumbai, Maharastra wherein the proprietors of those companies had specifically confirmed that they were providing accounting entries and the transactions in their names were bogus. It was submitted by ld.AR that the assessee does not have evidence to prove that the transactions specifically on account of fact that the business of the sellers have closed. It was a submission that the purchases have also been included in the stock and the same have also been sold and if at all what is disallowable was only the gross profit in respect to the transactions. It was a further submission that in fact, no addition was liable to be made in view of the decision of the Co-ordinate Bench of this Tribunal in the case of M/s.VBC Jewellery Vs. The DCIT, in 1464 & 1465/Chny/2017 dated 24.10.2018 wherein it had been held as follows:- to 2278/chny/2018 :- 3 -:
“10. We have considered the rival contentions and perused the orders of the authorities below. Purchases made by the assessees, from M/s. Mohit Enterprises, M/s. Maan Diamonds, M/s.Rajan Diamonds and M/s. Marvin Enterprises were considered as bogus, based on Investigation done by the Department on a group headed by one Shri. Bhanwarlal Jain pursuant to a search conducted in their premises on 03.10.2014. What we find is that Revenue had relied on oath statements taken from number of persons connected to the concerns run by Shri. Bhanwarlal Jain for coming to a conclusion that the concerns run by Shri. Bhanwarlal Jain and family, were providing accommodation entries in the nature of bogus purchases. We also find that these statements and the investigation reports relied on by the ld. Assessing Officer, were never put to the assessees, during the course of assessment proceedings. Ld. Assessing Officer had relied on such statements and reports for resorting to a best of judgment assessment and made an addition of 25%, of what was considered by him as bogus purchases. It is not disputed that assessees had produced invoices from the concerned vendors and said invoices carried TIN as well as GST details of the vendors. It is also not disputed that the receipt of the material were properly recorded by the assessees in their stock registers. The sales effected by the assessees was never disbelieved. When the sales are accepted, we cannot say that there were no corresponding purchases. Nevertheless, it is true that assessee despite claiming the purchases to have been effected through some intermediaries, were unable to produce the intermediaries or file confirmations from them. Hence, we cannot say that assessee had made all necessary efforts for proving the purchases claimed to have been made from the parties mentioned in the table above, beyond preponderance of probability. A similar case, where an to 2278/chny/2018 :- 4 -: addition was made disbelieving purchases, based on search operations conducted in M/s. Bhanwarlal Jain Group, had come up before the Mumbai Bench of the Tribunal in & 3761/Mum/2016, dated 11.12.2017). What was held by the Mumbai Bench at paras 9 & 10 are reproduced hereunder:-
‘’9. We have heard both the counsel and perused the record. As regards the reopening, we find the Commissioner of Income Tax (Appeals) has passed an apposite order. The reopening has been done on the basis of cogent information regarding the assessee dealing with hawala operators. The case laws referred by the Commissioner of Income Tax (Appeals) are germane and support the validity of reopening in this case.
As regards the merits of the case, facts of the case indicate that the assessee has engaged into obtaining bogus purchase bills. Since, sales have not been doubted; entire disallowance of purchase is not sustainable in light of Hon'ble jurisdictional High Court decision in the case of Nikunj Enterprises. We further note that the Assessing Officer has also himself not done any investigation and enquiry. The assessee's request for cross examination has not been entertained by the Assessing Officer. In these circumstances, 6% disallowance of bogus purchase sustained by the Commissioner of Income Tax (Appeals) is appropriate and does not need any interference on our part. Both the Id. Counsel also fairly agreed to this proposition’’.
Assessees have also submitted that its gross profit including that of purchases considered by the lower authorities as bogus, came to 8.91% to 20.88% for the impugned assessment years. Even if we accept the contention of the Revenue that 25% mark up was justified based on the judgment of Gujarat High Court in the case of Sanjay Oil Cake Industries (supra), what could at the best be added is only the shortfall between declared gross profit and the estimated gross profit of 25%, and such shortfall fell within the range of 5 to 6%. In such circumstances, in order to give a quietus to the matter, we are inclined to follow the to 2278/chny/2018 :- 5 -: decision of Mumbai Bench in the case of M/s. Ralf Jems Pvt. Ltd (supra). Addition that are to be made is fixed at 6%, of what is considered as value of the alleged bogus purchases and nothing more. We direct the ld. Assessing Officer to recalculate the addition accordingly.”
It was also submitted that under identical circumstances in the case of Mr.Syed Mubarak Ali Vs. The ACIT in to 311/Chny/2019 for assessment years 2009-10 to 2011-12 dated 12.09.2018 wherein the Co-ordinate Bench had held as follows:-
“10.We have considered the rival contentions and perused the orders of the authorities below. It is not disputed that assessee had produced bills for purchases. However, these purchases were disbelieved for a reason that notices issued u/s.133(6) of the Act to these parties were returned unserved. Ld. Commissioner of Income Tax (Appeals) also states that assessee had failed to bring in sufficient evidence to prove the purchases. Nevertheless what we find from the assessment orders for the impugned assessment years is that ld. Assessing Officer had not found any defects in the books of accounts produced by the assessee, nor rejected it. Assessments were completed u/s.143(3) of the Act after verifying the books of accounts produced by the assessee. In the tax Audit report for the impugned assessment years filed by the assessee in Form 3CD, quantitative details have been given at Sl. No. 28(a) as under:-
Assessment year 2009-10 :
(a) In the case of a trading Plastic Granules & Oil concern, give quantitative (Qty in Kg) details of principal items of goods traded to 2278/chny/2018 :- 6 -:
(i) Opening Stock : 113370.000 (ii) Purchases during the previous year : 4967237.000 (iii) Sales during the previous year : 4609134.000 (iv) Closing Stock : 471473.000 (v) Shortage/excess, if any : 0.000 Assessment year 2010-11 :
(a) In the case of a trading Plastic Granules & Oil concern, give quantitative (Qty in Kg) details of principal items of goods traded (i) Opening Stock : 471473.000 (ii) Purchases during the previous year : 2615725.920 (iii) Sales during the previous year : 2710986.000 (iv) Closing Stock : 376212.920 (v) Shortage/excess, if any : 0.000 Assessment year 2011-12:-
(a) In the case of a trading Plastic Granules & Oil concern, give quantitative (Qty in Kg) details of principal items of goods traded (i) Opening Stock : 376212.920 3(ii) Purchases during the previous to 2278/chny/2018 :- 7 -: year : 1972992.000 (iii) Sales during the previous year : 1983006.000 (iv) Closing Stock : 366198.920 (v) Shortage/excess, if any : 0.000 The above quantity particulars were not found to be incorrect by ld. Assessing Officer. It is clear from the above, that assessee had maintained records which gave the quantity of granules in stock , its purchases and its sales. As mentioned by the ld. Authorised Representative, the sales made by the assessee were never disbelieved. In our opinion, assessee could not have effected the sales without corresponding purchases. If the Revenue disbelieved the purchases the corresponding quantity ought have been reduced from the sales also. In our opinion, the ld. Assessing Officer fell in error in disbelieving the purchases while accepting the quantity of plastic granules sold by the assessee, that too without rejecting the books of the assessee. It is not disputed that assessee had produced the bills for all purchases and these were paid through banking channel. Just because the notices to vendors of the assessee came back unservd, the purchases could not have been disbelieved. A businessman who purchases goods in the normal course of his business is not expected to keep a track of the address of all the vendors who supplied goods to him. There is nothing on record to substantiate the inference drawn by the lower authorities that part of the sales accounted by the assessee was only to bring in his unaccounted income to the main stream. The existence of unaccounted income was not evidenced by any record. In a similar situation where a part of the purchases were disbelieved, the Mumbai Bench of the Tribunal in the case of M/s. Imperial Imp & Exp (supra) had held as under at para 5 & 6 of its orders. to 2278/chny/2018 :- 8 -:
‘’5. On the other hand, the Ld. Departmental Representative supported the orders of the authorities below by pointing out that the addition has been made on account of the enquiries conducted by the Sales Tax Department of the Government of Maharashtra and no effort has been made by the assessee to controvert such information.
6. We have carefully considered the rival submissions. The entire discussion in the assessment order reveals that purchases from four parties namely Dhruv sales Corporation - Rs.13,67,640/-; Subhlaxmi Sales Corp. - Rs.20,20,800/-; Dharshan Sales Corporation -Rs.9,64,656/-; and Paras (India)- Rs.33,98,400, totalling to Rs.77,51,496/- have been treated to be bogus based on the purported enquiries conducted by the Sales Tax Department of the Government of Maharashtra. Ostensibly, the Assessing Officer ought to have brought on record material which is relevant to the transactions of the assessee with the aforesaid four parties instead of making a general observation about the information received from the Sales Tax Department of the Government of Maharashtra. Quite clearly, the Assessing Officer as well as CIT(Appeals) have taken note of the fact that no sales could have been effected by the assessee without purchases. In the present case, assessee has explained that all its sales are by way of exports. The books of account maintained by the assessee show payment for effecting such purchases by account payee cheques and also the vouchers for sale and purchase of goods, etc. Notably, no independent enquiries have been conducted by the Assessing Officer. Under identical circumstances, our Co-ordinate Benches in the cases of Deepak Popatwala Gal (supra), Shri Rajeev G. Kalathil(supra)and Ramesh Kumar and Co.(supra) have held that the Assessing Officer was not justified in making additions merely on the basis of information obtained from the Sales Tax Department of the Government of Maharashtra without conducting any independent enquiries. Before the CIT(Appeals), one of the points raised by the assessee was with respect to an opportunity to cross examine the four parties, but we find that no such opportunity have been allowed. Considering the entirety of facts and circumstances of the case and the aforesaid precedents, which have been rendered under identical circumstances, in our view, the CIT(Appeals) erred in sustaining the addition to the extent of Rs.4,19,356/- instead of deleting the entire addition of Rs.9,68,937/- made by the Assessing Officer. We direct accordingly’’.
to 2278/chny/2018 :- 9 -:
Considering the facts and circumstances of the case, we are of the opinion that purchases could not have been considered as bogus. Disallowances made for the impugned assessment years stand deleted. Related grounds are allowed.”
Ld.AR submitted that in fact the addition itself was not called for and in the worst case what could be added was only gross profit. It was a prayer that the addition was liable to be deleted.
In reply, ld.DR strongly supported the orders of the ld.CIT(A) and the ld.Assessing Officer
I have considered the rival submissions. A perusal of the facts clearly shows that the Assessing Officer has received information from Sales Tax Department(VAT), Investigation Division, Mumbai intimating that bogus sellers having specified TIN And PAN numbers were operating. The transactions in respect of the assessee has already been categorically identified and specified in respect of the three assessment years. The said documents had been given to the assessee for his rebuttal. The assessee has failed to prove the genuineness of the Purchasers affected with the material evidence. It is very much open to the assessee to produce the concerned persons, who it has dealt with and to prove its claim. Assessee has clearly not taken that opportunity to prove that the purchases had admittedly been made to 2278/chny/2018 :- 10 -:
from the identified firms and companies. The claim of assessee that the purchases have gone into their stock and sales have also been effected would in fact show that all is not well with the books of the assessee, most specifically Stock Register. It could also mean that the assessee has done some undisclosed purchases, or undisclosed sales, which it is attempting to cover up by the transactions with the said bogus entries. The actual picture is known only to the assessee. It is for the assessee to substantiate its claim. The assessee admittedly has failed to prove its claim before the Assessing Officer and the ld.CIT(A).
Even before the Tribunal, the assessee is unable to place the facts in its entirety. This being so, I find no reason to interfere with the order of the ld.CIT(A) on this issues. Consequently, the appeals filed by the assessee stand dismissed.
In the result, all the appeals filed by the assessee are dismissed. Order pronounced on 12th July, 2019, at Chennai.