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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-2, Nashik dated 16-12-2015 for the assessment year 2011-12.
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The brief facts of the case as emanating from records are : The assessee is a wholesale dealer in ferrous and non ferrous metals. On the basis of information received from Maharashtra Sales Tax Department that the assessee is one of the beneficiaries from the Hawala operators engaged in providing bogus entries and invoices, the assessment of the assessee was reopened. During the course of assessment proceedings the Assessing Officer sought various details with respect to purchase of goods, transportation, delivery invoices, etc. from the assessee. The Assessing Officer also issued notice u/s. 133(6) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) to the parties from whom the assessee had allegedly made purchases i.e. M/s. Vinayak Sales Corporation and M/s. Kanak Metal Corporation. The notice issued to the first party was served, however no reply was received. The notice issued to the second party was received back un-served with remarks „left place‟. The Assessing Officer made addition of the entire purchases i.e. Rs.71,39,807/- made by the assessee form the aforementioned suspicious dealers.
Aggrieved by the assessment order dated 27-11-2014 passed u/s. 143(3) r.w.s. 147 of the Act, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) after taking into consideration the submissions of assessee, documents on record and various judicial pronouncements restricted the addition to 10% of the alleged bogus purchase. Against the findings of Commissioner of Income Tax (Appeals) the Revenue is in appeal before the Tribunal.
Dr. Vivek Aggarwal representing the Department submitted that the assessee has indulged in bogus purchases from the parties named in the
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list circulated by Maharashtra Sales Tax Department. In assessment proceedings, the assessee was asked to substantiate genuineness of the purchases and the genuineness of the dealers from whom purchases were made. The Assessing Officer issued notice to the suspicious dealers on the address furnished by the assessee. The dealers did not respond to the notice/the notice was returned back un-served. No confirmations from the dealers were filed by the assessee. Therefore, the assessee failed to discharge his onus in proving genuineness of the purchases made. The ld. DR pointed that the Commissioner of Income Tax (Appeals) has erred in coming to the conclusion that the impugned goods might have been purchased by the assessee from grey market. The assessee before the Commissioner of Income Tax (Appeals) agreed for the addition to the extent of 5% of the impugned purchases i.e. Rs.3,57,000/-. However, the Commissioner of Income Tax (Appeals) estimated bogus purchases @ 10% of the total bogus purchases Rs.7,14,000/-. The findings of Commissioner of Income Tax (Appeals) that the assessee has filed details of stock statement showing opening stock, quantity and value of closing stock is contrary to tax audit report furnished by the assessee wherein it has been mentioned that the quantitative details of opening stock and closing stock, sales and purchases are not maintained by the assessee. The ld. DR submitted that the case of the assessee falls within clause (II) and (III) of para 40 of the decision of Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. Vs. Deputy Commissioner of Income Tax in ITA No. 795/PUN/2014 for assessment year 2010-11 decided on 28-04-2017.
On the other hand Shri M.K. Kulkarni appearing on behalf of the assessee vehemently defended the order of Commissioner of Income Tax (Appeals). The ld. Counsel submitted that the assessee had given complete
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trail of goods before the lower authorities. The assessee had furnished the details of stock statement, details of payment made, details of sales etc. The ld. Counsel further submitted that the Assessing Officer has not rejected the books of account nor the Assessing Officer has disbelieved the sales disclosed by the assessee. Once, the sales have been accepted there are bound to be purchases. The ld. Counsel prayed for dismissing the appeal of Revenue.
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The solitary issue raised in the appeal by the Department is against the action of Commissioner of Income Tax (Appeals) in restricting alleged bogus purchases to 10% as against 100% added by the Assessing Officer.
A perusal of the assessment order shows that the Assessing Officer has neither rejected books of the assessee nor has raised any doubt over the sales made by assessee. In fact the Assessing Officer has recorded contrary findings in para 8 of the assessment order. On the one hand, the Assessing Officer has observed that the assessee has inflated purchases by Rs.71,39,807/- and has obtained fake bills from Hawala dealers. On the other hand the Assessing Officer records that this is a case where assessee has made cash purchases from unknown parties and to accommodate cash purchases assessee has obtained fake bills. In the later part the Assessing Officer has admitted that assessee has made purchases. The Commissioner of Income Tax (Appeals) in the impugned order allowed relief to the assessee on the ground that the assessee might have procured the goods from grey market. The possibility of assessee purchasing goods from grey market cannot be ruled out as the sales have not been disputed by
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the Assessing Officer. The sales are possible if there are purchases. Under such circumstances making addition of entire purchases is unjustified. Taking into consideration the entire facts we are of considered view that the order of Commissioner of Income Tax (Appeals) in restricting the addition to 10% of the total bogus purchases over and above the GP declared by the assessee is justified and hence warrants no interference. Accordingly, the impugned order is upheld and the appeal of Revenue is dismissed.
In the result, the appeal of Revenue is dismissed.
Order pronounced on Monday, the 08th day of October, 2018.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 08th October, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-2, Nashik 3. 4. The Pr. Commissioner of Income Tax-2, Nashik ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune