M/S G. D. ENTERPRISE,KOLKATA vs. ACIT, CIR-40, KOLKATA, KOLKATA

आयकर अपील�य अधीकरण, �यायपीठ – “C” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “C” KOLKATA Before Shri S.S.Godara, Judicial Member and Dr. A.L. Saini, Accountant Member ITA No.585/Kol/2016 Assessment Year :2012-13 M/s G.D. Enterprise V/s. ACIT, Circle-40 1/H/1, Raja Janmenjoy 3, Government Place Road, Kolkata-700010 (West), Kolkat- [PAN No.AACFG 4533 A] 700001 .. अपीलाथ� /Appellant ��यथ�/Respondent Shri J.M. Thard, Advocate अपीलाथ� क� ओर से/By Appellant Shri Sourav Kumar, Addl. CIT-SR-DR ��यथ� क� ओर से/By Respondent 14-01-2019 सुनवाई क� तार�ख/Date of Hearing 15-03-2019 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER S.S.Godara, Judicial Member:- This assessee’s appeal for assessment year 2012-13 arises against the Commissioner of Income Tax (Appeals)-13, Kolkata’s order dated 31.12.2015, passed in case No.1046/CIT(A)-13/Kol/Cir-45/2014-15, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties case file perused. 2. The assessee’s sole substantive ground seeks to reverse both the lower authorities’ action treating its purchases amounting to ₹3,39,04,027/- as bogus in assessment as affirmed in lower appellate proceedings. The CIT(A)’s detailed discussion to this effect reads as under:- “5. Decision 5.1 Appellant's submission and facts available on record is carefully considered. The assessee has argued that it had made all payments through account payee cheque and from your petitioner site there is no mistake as per Law and Income tax Act. So the disallowance of purchase against payment through account payee cheque would not be false and it may be accepted

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 2 and delete the illegal demand of Tax and submitted the party Invoice, Ledger copy with Bank statement. 5.2 While making the addition the AO has bring on record fallowing points:- 1. During the Proceedings vide hearing dated 18-06-2014, Assesse it self admitted that the transactions are not verifiable. It was stated by the Authorised representative of the assessee that purchases in respect of afore said parties are not verifiable and this parties are not registered with State VAT Authorities and cannot be produced for verification 2. Assessee failed to make any explanation as to why the amount be not added to income as unverifiable and bogus purchases even after giving several opportunities on 29-8-2014, 05-09-2014, 09-09-2014 & 16-09-2014. 3. The AO conducted Inquiry and found that the purchase are not genuine party wise observation is given in the forth coming para . 3.1 on enquires made by the office on 09-10-2014 MI5 M.D Leather 15F Paymental Garden no Business premise, godown actual existence of business and supply of goods, any leather goods (stock) found at address given as above and Person living in a slum area in an un- hygienic condition, hardly living their life and struggle for earning their livelihood cannot do such huge transaction. It is found vide detailed statement on oath dated 09-10-2014 (also confirmed in local Bengali language) by Sh Sitngshy Datta as under that, he was asked by the assessee to work for his commission agent for making transaction for assessee. Assessee opened his bank account in the united bank of India baliagata branch and got issued to him cheque bank from the bank and he signed the cheque book as directed by assessee and received commission of Rs 500 to 1000 in cash for such transaction. He is not assessed to income tax/State VAT tax as Income is below taxable limits and not maintained any account books/records. He never sold any goods other assess M/s G.G Enterprises, and he is selling scrap of leather for the last 5 year and monthly income is about 5000 per month.(As per bank statement of the party amount shown received by the party against sales withdrawn in cash through cheques and amount received by the assessee in cash shown against purchases by the assessee.) 3.2 On enquiries made by the office on 09-10-2014, M/s M.D Enterprises 19/2/A South Topsia Road Kolkata-46, no Business premise, godown actual existence of business and supply of goods, any leather goods stock found at the any of the address given as above. Also As per the report of the postal authority firm not found at Address of firm M/s M.O Enterprises 19/2/A South Topsia Road KOlkata-46, given by the assessee. the person found at given address was an electrical mechanic and his income Is or repairing of Fans, motors etc as stated to the inspector of this office by his father Sh Krishsana Chandra Das , hardly living their life and struggle for earning

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 3 their livelihood cannot do such huge transaction. As per statement on oath dated 10-10-2014 (also confirmed in local bangla language) by Sh Molay Das that he is earning Rs 3000 per month only and made sales to the assessee of Rs. 30,000 during the year. He had no knowledge of any whereabouts and name and complete addresses any of the purchases parties, transporters and vehicle n etc for the financial year 11-12 to till date. No account books/records sale/purchase/bills etc available with the him as per statement recorded and neither produced on 10-10-2014 in response to summons u/s 131 and also as per enquiries made. As stated he made sales to Assessee (M/s G. D Enterprises at Rs 30000 (Thirty Thousand per annum) during the relevant period and for the last 4-5 years. he also denied having knowledge of the address of the Assessee. 3.3 On enquiries made by the office on 09-10-2014, at premises of M/s Loknath at 43/H/19/25, " chawal pattl Road, Kolkaata-700010, not found and Premises at 43/H/12/2, Chawal pti Road, Kolkata-700010 vide detailed report, person found to be a poor labourer in the factory, no Business premise, godown or actual existence of business, no leather goods (stock )no machinery, no account records, no receipt or and supply of goods found at address a above {Address of firm at premises of M/s Loknath at 43/H/19/25, , chawal patti Road, Kolkata- 700010, not found and Premises at 43/H/12/2, Chawal Pti Road, Kolkata-700010 found totally a residence (small one room only) and situated in a slum area 3-4 family members were living there. Person Sh Debasish Saha found to be working as labour in a leather factory (as told by his mother also) having not any business transaction with assessee and living a slum area and struggle for earning their livelihood. No account books/records of sale/purchase/bills etc available with the above person as per enquiries and as stated by the person and neither produced, in response to summons u/s 131.State At returns are not filled. In the detailed statement recorded on 13-10- 2014 by Sh Debashish Saha (also confirmed in local Bangal language) that he does not know any of the purchase party, transporter or vide no etc, no accounts/ records and does not know anything about return of income and Its details etc, and does not have any explanation and knowledge about the amount withdrawn from the bank In cash through cheques and audit report Is not based on accounts and documents and he did not submit any record before the accountant and the Auditor and Sh Uttam Dass accountant got the report from Sh T.K panda and Co, On enquiry it was found that Sh Uttam Dass also found to be part time accountant of the assessee in the past as stated him on 16-10-2014 and when asked that As stated by Debashish Saha on 13-10-2014 that the Audit Report is not based on accounts and documents and he is not paying any salaries, etc, He didn't submit any record before him and Auditor and he (Uttam Dass) got the report from M/s TK Panda & Co.. Please explain as to why the matter may not be referred to higher authorities for necessary action and also as per the IT Act. For prosecution u/s 277 A and 278, Sh Uttam Dass Could not give any satisfactory explanation and only stated that without papers, he could

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 4 not have got the Audit Report from M/s TK Panda & Co. It is also observed by the AO that the alleged supplier is not having any business premises and any godowns and only 2 room residence at above address (two rooms each of 8x9 sq.ft) and has four members in his family and paying rent of Rs 200/-p.m. as house rent and have not any other residence. 3.4 On enquiries made by the office on 09-10-2014, no Business premise, godown actual existence of business and supply of goods found at any of the address given as above and person found to be house wife and did not attend to summons issued u/s 131 for examination on oath. Her husband Sh Rajib Poddar, informed that he is not having any business premises and nor any godowns, and he never had any link of relation at address of the firm given by the assessee at 74 South TANGARA Road Kolkata. Detailed statement on oath dated 10-10-2014 (also confirmed In local bangle language) by Sh Rajib Poddar husband of above that; He handles the business and has no records of the business transactions Including sale-purchase and bills of sale-purchase and hence not produced. He doesn't know the identity, whereabouts and address of any of the purchase parties. He doesn't Know the name & address or identity and whereabouts of the transporter for supply of goods. He is not having any business premises an any godowns; He have only 3-room residential house (two rooms each of 12x12 sq.ft and one room of 9x7 sq.ft). This property is ancestral house of five members of my family. He is not filling any state VAT return and he don't know the Bank account No of his concern. When asked to her husband that As per the account statement in the books of M/s GD Enterprise for the FY 2011-12, confirmed by her, you have received an amount of Rs.1,63,68,706/- it is stated that the payment is against sale to M/s GD Enterprise. The name and identity and address of any of the parties (person) to whom payments made against this amount is not known to them;. her husband could not explain as why amounts has been withdrawn from the bank in cash through self-cheque, he could also not informed about return of income filled, He stated that, he only knew that return has been filled, but did not know the details of the returns filled. Even when the proprietor could not attend and explain anything going to conclude that transactions and business not real and no actual supply of goods to the assessee. 3.5 The assessee did not furnish any explanation and denied for cross examination of the aforesaid parties and their statement was not controverted Neither finding of the AO were controverted. 4. The assessee has submitted photo copy of purchase bills and invoices of M/s S.R. Enterprises, M/s B.D. Enterprises, M/s Lokenath Enterprises & M/s M.O. Enterprises. I have perused the bills & invoices of above parties submitted by assessee during the course of appellate proceedings. These purchase bills do not have any telephone no. or sale tax registration no. The so called claimed bills are shown to be received from different four parties

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 5 namely M/s S.R. Enterprises, M/s B.O. Enterprises, M/s Lokenath Enterprises & M/s M.O Enterprises but these all bills and challans are having same handwriting, which clearly shows that these bills are written by only one person. Even challans are also written by the same person. This peculiar feature of these bills Is not possible In ordinary course of purchase because the address of all these four parties are different and distantly located. Close perusal of the bills of M/s M.D Enterprises and M/s S.R. Enterprises shows that their printed pro forma is also same. Considering the same handwriting, same pro forma of purchase bill and invoices, without any sale tax detail or telephone no. I don’t find any infirmity with the finding of the AO that these bills are cooked by the assessee without any supporting evidence (scand copy of four bills in order to show the handwriting and provision forma is placed). 5. Appellant main reliance is payment to suppliers by cbeques. In the case of CIT v. Precision Finance (P) Ltd. (1994) 208 ITR 465 Hon'ble Calcutta High Court has held that it was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. 1/ the identity of the creditors had not been established, consequently, the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, it was to be presumed that the transactions were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the assessee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque was not sacrosanct nor could It make a non- genuine transaction genuine. Hence, the Tribunal was not justified in deleting the additions of unexplained cash credits and interest thereon .Hence, appellant argument that payment is made through bank account does not make in genuine purchase into genuine purchase. 6. In the case of La Medica (2001) 250 ITR 575 Hon'ble Delhi High Court has held that Though essentially the conclusions of the Tribunal had the colour of factual findings, still it was found that the Tribunal had not taken into consideration relevant materials and had also acted on irrelevant materials. The fact that the alleged sellers had been found to be persons with no means to effect purchases or to carry on business was a factor which did not appear to have been considered by the Tribunal in its proper perspective. What was under consideration was whether the purchases were made from KE as was claimed by the assessee. Ample material had been br-ought on record by the revenue to show that the purchases were, in fact, not made from KE. These were some of the relevant materials which had not been considered by the Tribunal. Once it was accepted that the supplies were not made by KE to whom payments were alleged to have been made, the question as to whether

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 6 the purchases were made from some other source ought not to have weighed with the Tribunal as a factor in favour of the assessee. The conclusions of the Tribunal were, therefore, clearly erroneous, contrary to materials on record and had been arrived at without taking into consideration relevant material and placing reliance on irrelevant materials. A question of fact becomes a question of law if the finding is not founded on any evidence or material or if it is contrary to evidence. Similar is the position if it is perverse or there is no direct nexus or link between conclusion of fact and the primary fact upon which the conclusion is based. Where the Tribunal has acted on partly relevant and partly irrelevant materials, and it is not possible to say as to what extent latter has influenced its mind, the finding is vitiated because of use of irrelevant material. That gives rise to a question of law. Hence, the Tribunal had no material to come to the conclusion that the impugned sum could not be treated as the assessee's income from undisclosed source. The above observations of Hon' ble Delhi High Court is clearly applicable in case of assessee as the above parties in question were mans of no mean and merely booked entry was made by assessee in order to reduce to taxable profit. 7. From the above facts and legal positions, it is ample clear that appellant inflated his purchases to reduce his taxable profits. In support of his claim he failed to produce any material except his own documents and bank account. Assessing officer made inquiries and given proper opportunity to explain the genuineness of the purchase, but assessee failed to produce any material or controvert the finding of assessing officer. I not find any infirmity in the order of assessing officer. Hence, I confirm the addition of Rs.3,39,04,027 made by assessing officer.” 3. We have given our thoughtful consideration to rival contentions. The assessee’s detailed paper book running into 122 pages comprising of account copies of M/s M.D, Leather, M.D. Enterprises, Lokenath Enterprise and S.R. Enterprise, copy of stock register, finished goods and copy of tax audit report u/s 44AB for the impugned assessment year; stands perused. Its latter paper book in Volume-2 provides details of bank statements regarding the said four parties’ ledger accounts, audited accounts statement giving purchase rate(s) of four parties and profit percentage for three years also forms part of record before us. The sole issue in the instance case is that of genuineness of assessee’s purchases claims amounting to ₹3,39,04,027/- on various facts. There is no dispute that the assessee has placed on record all documentary

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 7 particulars before the lower authorities who are of the view that said parties are non-genuine engaged in bogus purchase entry providing business. We find in this backdrops of facts that the tribunal’s co-ordinate bench’s decision in ITA No.4736 vis-a-vis 5207/Mum/2014 in Shri Ashwini Purshotama Bajaj vs.ITO decided on 14.12.2016 holds that it is only the profit component in case of such an issue what required to be added as under:- “4. The Brief facts of the case are that the assessee is an individual running a proprietorship firm namely M/s The Shoe Box INC Retail Store of footwear, bags, belts, wallets and leather goods, boutique etc. having shops at Pune, Ahmedabad, Jalandhar and office at Mumbai. It was observed by the A.O. that the assessee had incurred expenditure in terms of purchases of Rs.4,89,88,555.31 , out of which it was alleged by the AO that purchases of Rs.1,13,44,77/- was made from the allegedly bogus parties as per information received from Sales Tax Department, Government of Maharashtra , who as per Government of Maharashtra web-site are suspicious parties providing accommodation entries and are thus bogus bill giving entities without doing any business , as detailed hereunder: S No. Name of parties TIN Financial year Amount 1 Rohit Enterprises 27020680974V 2009-10 Rs. 8,84,584 2 Deep Enterprises 27750595164V -do- Rs. 18,09,710 3 Kwality Enterprises 27790284742V -do- Rs. 60,33,496 4 V3 Enterprises 27860613194V -do- Rs. 26,16,988 Total Rs.1,13,44,778/- The sales tax department conducted independent enquiries in each of the above parties and concluded that these parties were engaged in the business of providing accommodation entries only. The notices were issued by the AO u/s 133(6) of the Act to these four parties which returned back unserved. The assessee was asked by the AO to produce all these parties. The assessee failed to produce these parties before the AO to prove genuineness of the claim. The assessee submitted that the purchases were made through brokers who are now not co-operating with the assessee. The assessee requested that GP ratio be estimated at 46% on these purchases. The assessee also could not offer explanation regarding the source of the said expenditure as well that purchases are genuine. The AO observed that these parties denied to supplying goods as being accommodation entries, hence the AO observed that the human probability is that goods as mentioned in the paper transactions have been purchases by the assessee through an undisclosed entity, whose identity the assessee does not wish to disclosed and also purchases were made from undisclosed source of income. The said unexplained expenditure of Rs. 1,31,88,227/- (being maximum credit balance outstanding in the ledger accounts of the parties, as against purchases of Rs.1,13,44,778/- from these four parties) was deemed to be the income of the assessee and was added to the income of the assessee u/s 69C of the Act which was alleged to be expended through an undisclosed source of income to carry out purchase from an undisclosed entity, vide assessment order dated 28-03-2013 passed by the AO u/s 143(3) of the Act. 5. Aggrieved by the assessment order dated 28.03.2013 passed by the A.O. u/s 143(3) of the Act, the assessee filed first appeal before the ld. CIT(A). 6. Before the ld. CIT(A), the assessee has made the following submissions:-

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 8 “Ground No.1 to 5 : Addition of Unexplained expenditure u/s.69C of Rs.1,31,88,2271- is erroneous: The appellant humbly submits that the addition made in assessment u/s.69C of alleged unexplained expenditure of purchase made from 4 parties named M/s Rohit Enterprises, M/s Deep Enterprises, M/s Kwality Enterprises and M/s V3 Enterprises of Rs.1,13,44,776/- and of the Opening balance of such 4 parties of Rs.18,43,451/- totaling to Rs.1,31,88,227/- is erroneous and is unjustified on understated reasons :- 1.1 The entire addition had been made purely on the basis of assumption and surmise. There is absolutely no evidence or material on record to justify that the appellant had incurred any unexplained expenditure to purchase the goods. The Ld. AO had not brought any evidence on record that the appellant had made the unexplained payments to any unidentified parties, in absence of which the provision of Sec 69C cannot be invoked. The appellant, during course of assessment, furnished various documentary evidences such as purchase and sale bills, confirmation of account, PAN of suppliers, details of purchase, payments made to the said 4 parties and bank statements to justify the genuineness of the recorded purchase and payments thereon. The appellant also furnished a detailed statement displaying the purchase made from such 4 parties and corresponding sales made against such purchases and profit earned thereon. The Ld. A.O, ignoring the above stated documents, erred seriously in holding that the appellant's purchase as ingenuine and assumed that the appellant would have incurred unexplained purchase expenditure to source the sales; 1.2 The Ld. A.O is not justified in making a harsh presumption that the appellant would have procured the goods from some unidentified sources and incurred unexplained expenditure (purchases) against the sales accepted as genuine. In this context, the appellant submits that its purchases had been made only through brokers who supplied the goods at premise (on site) of the appellant and furnished the bills of such 4 parties to the appellant for making the payment at agreed terms. The appellant, as desired by brokers, made only the cheque payments against these purchase bills and appellant had not made any unaccounted cash payment for purchase of goods. The appellant alternatively submits that even it is presumed that the appellant had not made purchases from such 4 parties, then it is possible that such brokers would have procured the goods from grey (local) market and had supplied the physical goods with alleged ingenuine bills. The Ld. A.O had not denied the fact that the appellant had actually received the goods, through brokers, at its site office and such goods had been actually sold by the appellant at profit margin of over 85 % on purchase (45.49% on sales). The appellant does not have any source of unaccounted income, thus the possibility of unexplained payment would not arise. In any case, Ld. A.O did not bring any evidence on record to justify any sort of unexplained payments made to the alleged unidentified parties, accordingly the addition u/s.69C is unjustified, (92 TTJ 1126 (Ahd), 31 DTR 456 (Jp), 147 TTJ 308 (Del), 10 DTR 281 (Jp); 1.3 The Ld. A.O had not rejected the appellant's books of accounts u/s.145(3) of the Act and having accepted the book results is not justified in invoking the provision of Sec 69C of the Act on incorrectly assuming that the appellant had incurred unexplained expenditure to source the purchase made from unknown parties; 1.4 The appellant also submits that the addition of entire purchase is unjustified as it would lead to a case of taxing the entire sales without allowing

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 9 the deduction of the corresponding purchase. There cannot be a case of only sales without the purchases. In short, if there is a sale, then it is required to the presumed that there is a corresponding purchase against each such sale and moreover, in impugned case, there is a direct nexus of sales with the purchases. [38 Taxmann.com 385 (Guj), 355 ITR 290 (Guj), 263 ITR 610 (MP), 304 ITR 52 (MP), 258 ITR 654 (Gu)); As per comparative chart of sales vis-a-vis purchase (copy enclosed), it is evident that each purchase corresponds to the sales. For example : The purchase of 257 pairs of footwear made vide bill no 16 on 17th September, 2009 aggregating to Rs. 126,333 from Deep Enterprises were sold on 23rd September, 2009 at Rs. 1,44,273/-. 1.5 The appellant in audited P&L account, disclosed a higher Gross profit @ 45.49 % on sales (85% on purchase) which is most reasonable in trading activity of footwears. In respect of disputed purchase made from the 4 parties, the appellant disclosed the Gross profit @ 41.75 % on sales, stated as under :- Purchase from the 4 parties = Rs. 1,13,44,778/- Sales corresponding to above purchases = Rs. 1,93,83,886/- Closing stock from above purchase = Rs. 52,882/- Gross profit =Rs.80,91,990/-(41.75%) Without prejudice, the appellant makes a prayer to adopt the concept of real income and estimate the total income @ 45.49 % on sales which would take care of the ingenuine purchase. It is to further submit that even in case of best judgment assessment is passed , after rejecting the books of accounts, then, in such case, the total income is estimated, on the basis of honest guess work as per the normal profit in the industry. [Kachwala Gems - 288 ITR 10(SC). The appellant makes a prayer to adopt the concept of real income and estimate the suppressed income of Rs. 7,24,957/- (@ 45.'49% - 41.75% on Rs.1,93,83,886/-) that reasonably would have been earned in such trading activity; 1.6 The appellant to substantiate, the genuineness of the disclosed purchase and corresponding sales, relied upon the understated documents as under:- " a) Details of the four purchases parties along with their address and PAN; b) A tabular chart (quantitywise and valuewise) displaying Purchase vis-a-vis Sales displaying the bill numbers of suppliers/customers, quantity and amounts; c) Bill wise and quantity wise details of purchase made from such 4 suppliers; d) Details of payments made to such 4 purchase parties by A/c payee cheques and bank statements; e) Purchase bills; The appellant on furnishing the abovestated details/documents had reasonably discharged his primary onus to substantiate the genuineness of the purchase. However, Ld.AO had not discharged the heavy onus casted upon him to prove contrary the facts and harshly made the addition of unexplained expenditure u/s.69C of the Act. [29 DTR 267 (Pune), 10 SOT 319 (Hyd) (TM)J. 1.7 The appellant submits that no contrary evidence had been brought on record to justify that the appellant's purchases are ingenuine. The said 4 purchase parties irresponsibly gave a general statement, without stating

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 10 name of the appellant, that it had issued only accommodation bills. Such general statement was recorded at back of the appellant and a copy of the statement was not provided to the appellant for confrontation and even no opportunity of cross examination Was allowed to the appellant, thus addition u/s 69C on the basis of mere statement is unjustified and may kindly be deleted (Kishinchand Chnelterem decision); 1.8 The appellant further submits that Ld. AO is not justified in making the addition of the Opening balance of such 4 parties of Rs.18,43,451/-. The appellant had not claimed the purchase expenses of Rs.18.43,451/- in impugned year, thus addition of such purchases (related to earlier year) cannot be made in impugned year. Further, Ld. A.O. had already issued the notice u/s 148 of earlier year viz. A.Y. 2009-10 and had proposed to make the addition of the purchase of earlier year viz. A. Y- 2009-10, thus the addition of purchase made in earlier year whose closing balances are disclosed as opening balance in impugned year is unjustified. Further, there is absolutely no evidence on record that the opening balance of earlier year (purchase of last year) would have been paid in impugned year out of unaccounted source of funds, thus addition of opening balance of Rs. 18,43,451/- is unjustified, The appellant relies on understated direct judicial decisions :- Addition u/s. 69C cannot be invoked in absence of the full proof evidence . i) ITO vs. Sunsteel 92 TTJ 1126 (Ahd-ITAT) ii) Nisraj Real Estate & Export(P) Ltd vs. ACIT 31 DTR 456 (JP-ITAT) (Trib) iii) ACIT vs. Kishan Lal Jewels (P) Ltd 147 TTJ 308(Del-ITAT) iv) Shubh Laxmi Exports vs. ITO 10 DTR 281 (Jp-ITA T) (Trib) Onus is the on the Revenue to prove the payment to invoke Sec.69C i) Himalaya Distributors vs. ITO 29 DTR 267 (Pune-ITAT) ii) M.P. Malliwal vs. JCIT 10 SOT 319 (Hyd-ITA T) (TM) iii) Rajmal Leknicnenc: vs. ACIT 791TD 84 (Pune-ITA T) Only profit embedded in the ingenuine purchase could be brought to tax. i) CIT vs. Simit P. Sheth 38 Taxmann.com 385 (Guj-HC) ii) CIT vs. Bholanath Poly Fab Pvt Ltd 355 ITR 290 (Guj-HC) iii) CIT vs. President Industries 258 ITR 654 (Guj-HC) iv) CIT vs. Balchand Ajit Kumer 263 ITR 610 (MP-HC) v) Man Mohan Sadani vs. CIT 304 ITR 152 (MP-HC) vi) CIT vs. Leaders valves (P) Ltd 285 ITR 435 (P&H-HC) Merely non appearance of suppliers would not conclude the purchase as ingenuine i) CIT vs. Nikunj Eximp Enterprises (P) Ltd 35 Taxmann.com 384 (Bom-HC) In view of the above, a humble prayer is made :-. a) To delete the addition u/s 69C of Rs 1,31,88,227/- or alternatively, b) To adopt the concept of real income and restrict the addition on estimating the suppressed income of Rs 7,24,957/- being 45.49% on sales corresponding to alleged ingenuine purchase (45.49% minus 41.75 % on Rs. 1,93,83,886) for which the appellant shall ever remain grateful and oblige.” The ld. CIT(A) after considering the submissions of the assessee came to the conclusion that quantitative details were maintained and the assessee being

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 11 a trader of goods, the A.O. has not doubted the genuineness of sales, could not have gone ahead and made addition in respect of maximum credit balance of purchases especially when the A.O. himself recorded a finding that the assessee made the purchases from some other party. The ld. CIT(A) observed that the element of profit embedded in bogus purchases which the assessee would have made from some unknown entities needs to be computed. It was observed by learned CIT(A) that the purchases made from four parties during the year was Rs. 1,13,44,778/- on which the GP reflected was 41% as against 46% reflected on over all basis, hence, there was a suppression of GP ratio to the tune of 5%. The learned CIT(A) observed that the A.O. had held that the assessee must have purchased the goods from someone else and not from the four parties in whose names the bills were procured and hence, the only recourse left is to estimate the profit element embedded in the purchases made during the year of Rs. 1,13,44,778/- , rather than on Rs. 1,31,88,227/- (which included opening balance added by the A.O.), which were estimated by learned CIT(A) @12.5% of the purchases made during the year of Rs.1,13,88,227/-. The ld. CIT(A) accordingly partly allowed the appeal of the assessee vide appellate orders dated 02-05-2014. 7.Aggrieved by the appellate orders dated 02-05-2014 passed by the ld. CIT(A) , both the assessee and Revenue are in appeal before the Tribunal. 8. The assessee is challenging the addition made of the undisclosed profit of Rs.14,18,097/- @12.5% on purchases of Rs.1,13,44,778/-, while the Revenue in its appeal is challenging deletion of addition made by the AO u/s 69C of the Act to the tune of Rs.1,31,88,227/- which was restricted to profit element embedded in the purchases to the tune of 12.5% of Rs.1,13,44,778/. The ld. Counsel for the assessee submitted that the following parties were included in the list of bogus parties by Sales Tax Department of Government of Maharashtra with whom the assessee had made purchases: S No. Name of parties TIN Financial year Amount 1 Rohit Enterprises 27020680974V 2009-10 Rs. 8,84,584 2 Deep Enterprises 27750595164V -do- Rs. 18,09,710 3 Kwality Enterprises 27790284742V -do- Rs. 60,33,496 4 V3 Enterprises 27860613194V -do- Rs. 26,16,988 Total Rs.1,13,44,778/- The A.O. observed that the above parties are suspicious parties who were providing accommodation entries without doing any business as per the information received from Sales Tax Department, Government of Maharashtra and the assessee had made purchases from these parties without actual supply of goods. The A.O. also issued notice u/s 133(6) of the Act asking to furnish certain documents of the above parties but the notices were returned back unserved. The assessee was also asked to produce the parties but the assessee failed to produce the parties. The A.O. has made addition u/s 69C of the Act on the peak credit outstanding in the books of accounts, whereby addition of Rs. 1,31,88,227/- was wrongly made , as against total purchases of Rs. 1,13,44,778/- made by the assessee from these 4 parties. The A.O. added the entire amount while the ld. CIT(A) has restricted the addition by estimating GP ratio of 12.5% of Rs. 1,13,44,778/- being total purchases made from these four parties. The ld. Counsel for the assessee submitted that the sales are not in doubt which is accepted by the Revenue. The ld. Counsel also drew our attention to the orders of authorities below. While, the ld. D.R. relied on the order of the A.O. 9. We have considered the rival contentions and also perused the material available on record. We have observed that the assessee is an individual running a

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 12 proprietorship firm namely M/s The Shoe Box INC Retail Store of footwear, bags, belts, wallets and leather goods, boutique etc. having shops at different places , and office at Mumbai. Information was received by the AO from the Sales Tax Authorities, Government of Maharashtra that the assessee has made bogus purchases to the tune of Rs. 1.13 crores from following four parties who are in the list of hawala dealers giving accommodation entries without supplying any goods:- S No. Name of parties TIN Financial year Amount 1 Rohit Enterprises 27020680974V 2009-10 Rs. 8,84,584 2 Deep Enterprises 27750595164V -do- Rs. 18,09,710 3 Kwality Enterprises 27790284742V -do- Rs. 60,33,496 4 V3 Enterprises 27860613194V -do- Rs. 26,16,988 Total Rs.1,13,44,778/- The AO issued notices u/s 133(6) of the Act to the above stated parties to seek relevant information/documents but the notices were returned unserved. The assessee was asked by the AO to produce these four parties but the assessee could not produce the parties from whom the purchases were made. The AO made additions u/s 69C of the Act of the peak credit outstanding to be payable to these four parties during the year to the tune of Rs.1,31,88,227/- as against purchases of Rs.1,13,44,778/-.The credit for purchases from these four parties of Rs.1,13,44,778/- are appearing in the books of accounts of the assessee. The assessee has to discharge the primary onus as to the genuineness and bonafide of the transaction of purchase of goods. It is observed that the A.O. has made addition of the entire purchases amount to Rs.1.13 crores by making additions of Rs.1,31,88,227/- being peak credit payable during the year for purchases to these parties which included balance of Rs.18,43,451/- for purchases made in the earlier year, while the AO has , however , not doubted the sales made by the assessee against these purchases. The assessee has reconciled the quantitative details of the stock reflected in these purchases with quantitative details of stock as per sale invoices. The A.O. has doubted the purchases from these four alleged accommodation entry providers being hawala dealers as concluded by Sales Tax Department of Government of Maharashtra to be bogus purchases, that these four parties only provided accommodation bills and the goods were never supplied by these parties and the assessee allegedly made purchases from some other parties for which payments were made through undisclosed income. Thus, the A.O. observed that the assessee has purchased the ITA 4736/Mum/2014 & ITA No. 5207/Mum/2014 13 material from someone else while bogus bills were organized by these hawala dealers, hence, section 69C of the Act was invoked by the AO and additions were made by the AO. The conclusion of the ld. CIT(A) that the assessee has purchased material from some other dealers but quantitative reconciliation of the stock was duly done by the assessee of the sale and purchase and hence the profit element in this accommodation entries are to be added to the income cannot be faulted . The ld. CIT(A) restricted the addition by estimating GP ratio of 12.5% of Rs.1,13,44,778/- being purchases from these alleged four accommodation entry providers. We do not find any infirmity in the well reasoned order of the ld. CIT(A) whereby net profit was estimated which was a reasonable estimation made by learned CIT(A) and we sustain/affirm the order of learned CIT(A). In the result, we dismiss both the appeal of the assessee as well of Revenue. We order accordingly.”

ITA No.585/Kol/2016 A.Y. 2012-13 M/s G.D. Enterprise Vs. ACIT, Cir-40,Kol. Page 13 disputing the assessee’s corresponding sales claim as genuine. We therefore direct the Assessing Officer to restrict the impugned disallowance @ 12.5% only then the entire purchase sums in issue of ₹339,04,027/- in the peculiar facts and circumstances of the case. It is made clear that our instant estimation shall not be taken as a precedent in any other case or assessment year; as the case may be. 5. This assessee’s appeal is partly allowed in above terms. Order pronounced in the open court 15/03/2019 Sd/- Sd/- (लेखा सद%य) (�या'यक सद%य) (Dr.A.L. Saini) (S.S.Godara) (Accountant Member) (Judicial Member) Kolkata, *Dkp, Sr.P.S (दनांकः- 15/03/2019 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-M/s G.D.Enterprise, 1/H/1, Raja Janmenjoy Rd. Kolkat-10 2. ��यथ�/Respondent-ACIT, Cir-40, 3, Govt. Place (West), Kolkat-700001 3. संबं3धत आयकर आयु4त / Concerned CIT Kolkata 4. आयकर आयु4त- अपील / CIT (A) Kolkata 5. 7वभागीय �'त'न3ध, आयकर अपील�य अ3धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड< फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ3धकरण, कोलकाता ।