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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee under Section 253 of Income-tax Act is directed against the order of ld. CIT(A)-2, Pune dated 15.02.2017 for Assessment Year 2009-10. The assessee has raised the following grounds of appeal:
I. Reopening is Bad in Law 1. The learned CIT (A) erred in confirming the action or the A.O. issuing the notice u/s. 148 dt. 24-03-2014 merely on the basis or information received from sales tax department, thus there was no independent application of mind by the A.O. it is based on borrowed satisfaction of some other authority, hence the reopening is bad in la« and is liable to be quashed. II. Addition of Rs. 15,77,845/- of alleged bogus purchases is had in law.
2. The learned CIT(A) erred in confirming the addition or Rs. 15,77,845/- on the basis of information received from DG(Inv.) treating the purchases as bogus, without appreciating that the details of purchase Bills. Purchase register, details of sales, stock register, ledgers, confirmation from parties, bank statements, quantitative tally etc. were furnished in the reassessment Mum 2018-Sudhir M. Amlani proceedings, thus the addition of Rs.15,77,845/- may be deleted as the genuineness of the purchases were proved beyond doubt and sales are accepted.
3. The learned CIT(A) failed to appreciate that all the purchases were by account payee cheques and the details of bank statements, quantitative tally were furnished before Assessing Officer, therefore merely on the information received from the DGIT(llw.) purchases cannot be treated as non-genuine. More so over, when the assesse was never confronted with the content of alleged information/statement/affidavits etc.
Without prejudice to the above, when the sales are accepted as a genuine and the assessee has produced complete details of purchases, no addition can be made once the books of accounts are accepted, then purchases of the Assessee cannot be aid to be as bogus purchase, merely on some alleged information, therefore addition of Rs.15,77,845/- may be deleted.
5. Without prejudice to the above, as the assessee has GP of 15.38% estimating addition of Rs. 15,77,845 is not justified and on very higher side.
The learned ell' Appeal has wrongly relied on M/s Indian Woollen Carpet Factory (Supra) as the facts & circumstances of that case is different from that or the Appellant.
Brief facts of the case are that the assessee is a proprietor of M/s Krishna Enterprises and engaged in trading of hardware item and general merchant. The assessee filed his return of income for Assessment Year 2009-10 on 30.09.2009. The return of income was processed under section 143(1) of the Act. Subsequently, the assessment was re-opened on the basis of information received from Sale Tax Department, Government of Maharashtra about the hawala dealers, who were engaged in providing accommodation entry without delivery of goods. As per the information received, the assessee was also shown as one of the beneficiary who has obtained bogus bill of Rs. 15,77,148/- from seven such hawala dealers.
The assessment was re-opened on 24.03.2014 by recording the reasons of reopening. The assessee was served with the notice under section 148 of Mum 2018-Sudhir M. Amlani the Act. In response to the said notice, the assessee filed its reply dated 18.04.2014 contending the return already filed may be treated as return in response to the notice under section 148. The Assessing Officer issued notice under section 133(6) to all seven parties. The notice sent to one of the parties M/s K.C. Enterprises was complied vide their reply dated 12.12.2014 wherein they denied having any business with the assessee.
Remaining notices were returned back by postal authorities with the remark “Unserved”. During the assessment proceeding, the assessee was asked to prove the genuineness of purchases and to produce the parties for verification. The assessing officer recorded that assessee could not produce the parties and failed to furnish the copy of bills or other supporting evidence. The Assessing Officer made the disallowance of entire purchases from all seven parties, thereby made 100% addition of the alleged bogus purchases. On appeal before the ld. CIT(A), the action of Assessing Officer confirmed. Thus, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
We have heard the ld. Authorised Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. Ground No.1 relates to validity of re- opening. The ld. AR of the assessee has not made any submission in support of this ground of appeal
. Therefore, the ground of appeal is treated as not pressed and hence dismissed.
3. Mum 2018-Sudhir M. Amlani
4. Ground no.2 relates to addition of Rs. 15.77 lakhs on account of alleged bogus purchases. The ld. AR of the assessee submits that Assessing Officer made the addition of entire purchases from seven alleged bogus parties. The ld. CIT(A) confirmed the action of Assessing Officer. The ld. AR of the assessee submits that the sales of assessee were not disputed by Assessing Officer. The Assessing Officer has not rejected the books of account of assessee. It was submitted that in absence of purchase, no sale can be affected. The ld. AR of the assessee submits that though the assessee has made genuine purchases from dealers. In alternative, the ld. AR of the assessee submits that a reasonable percentage of alleged bogus purchase may be confirmed for avoiding the possibility of revenue leakage.
On the other hand, the ld. DR for the Revenue supported the order of authorities below. The ld. DR for the Revenue further submitted that Investigation Wing of Income-tax Department and the Sale Tax Department, Government of Maharashtra made a full-fledged enquiry, the parties from whom the assessee has shown the purchases are bogus hawala dealers. The hawala dealers were engaged in issuing the bogus bills without delivery of any material or goods. The assessee is one of the beneficiaries who have availed accommodation bill only to inflate the expenses and to bring out the profitability in order to avoid the tax. Mum 2018-Sudhir M. Amlani
6. We have considered the rival submission of the parties and perused the order of authorities below. We have noted that during the assessment proceeding, the Assessing Officer disallowed the entire purchases thereby made 100% addition of the alleged bogus purchases. The Assessing Officer has not rejected the books of account. The Assessing Officer has not disputed the sale of the assessee. The basis of addition is information received from Sale Tax Department about the hawala traders. The ld. CIT(A) also confirmed the addition holding that the finding of Sale Tax Department are adverse and that the assessee procured accommodation bill without actual transactions. We have noted that neither the Assessing Officer nor the ld. CIT(A) rejected the sales of assessee. The books of account maintained by assessee were not rejected. We have noted that lower authorities disallowed the entire amount of purchases from said hawala dealers. We have also noted that the assessee has placed on record the party-wise purchase along with corresponding sale which consist of ledger account, purchase bill, bank statement showing the payment and sales bill (page no. 61 to 173 of PB). The assessee has certified that these documents were furnished before the Assessing Officer as well as before the ld. CIT(A). We have noted that the lower authority has not discussed the documentary evidences of all those documents. In our view, under the Income-tax Act only real income can be taxed by the revenue, even in cases where whole transaction is not verifiable due to various reasons, the 5 Mum 2018-Sudhir M. Amlani only taxable is the taxable income component and not the entire transaction. The Hon’ble Bombay High Court in case of CIT vs. Hariam Bhambhani in ITA 313/2013 decided on 04.02.2015 also held that revenue is not entitled to bring the entire sale consideration to tax but only profit attributable on such unrecorded sale consideration alone can be subject to income-tax. After considering the nature of business activities of the assessee conducted during the relevant period. We are of the view that in order to fulfil the revenue leakage, the disallowance of reasonable percentage of impugned/disputed purchases would meet the end of justice.
Thus, we are of the view that disallowance made on account of bogus purchase be restricted to 12.5% of the impugned/disputed/bogus purchases. The Assessing Officer is directed accordingly. Hence, this ground of appeal is allowed.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 03/10/2018.