MILIND PADMAKAR MUDAWADKAR,DHULE vs. ASSISTANT COMMISSIONER OF INCOME TAX, DHULE

PER D. KARUNAKARA RAO, AM:

This is the appeal filed by the assessee against the order of CIT(A)- 1, Nashik, dated 06-03-2017 for the Assessment Year 2010-11.

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as well as to the above parties to verify the genuineness of the

transactions. The assessee filed purchase bills and claimed that the said

purchases from the parties are genuine. Eventually, the AO made

addition of Rs.13,14,950/- treating the same as fictitious entries to

reduce the profit and assessed the income of the assessee at

Rs.28,87,720/-. In the First Appellate Proceedings, the CIT(A)

confirmed the addition made by the AO.

appeal before the Tribunal with the following grounds :

“1. The Ld.CIT(A) erred in confirming the disallowance of Rs.13,14,950/- made by the AO by holding that the entire purchases made from three alleged hawala parties are not genuine on the basis of information obtained from Maharashtra Sales Tax Dept.

despite service of notice. Acknowledgement is placed on record.

However, considering the facts, issues, orders of the Revenue and

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availability of assistance of Ld. DR for the Revenue, I proceed to

adjudicate the appeal. As per the assessee, there is no delay in filing the

appeal before the Tribunal.

Revenue authorities. I find this is a case where assessee’s case was

reopened u/s.147/148 of the Act based on the information received from

Sales Tax Department of Maharashtra Govt. Assessee made purchases

from various parties and out of them, the purchases made from 3

suppliers were alleged to have been held bogus parties by the AO. In the

assessment, AO made the entire addition of these purchases as bogus

one. CIT(A) confirmed the addition made by AO. In the instant case, I

find the assessee filed purchase bills and the assessee could not

establish with the evidence regarding trail of goods. I find the Pune

Bench of the Tribunal passed series of decisions on the issues relating to

bogus purchase. In the background of the above facts, I perused the

decision of Coordinate Bench of the Tribunal in the case of M/s. Chhabi

Electricals Pvt. Ltd. (supra) and the classification of points given by the

Tribunal in the said order. I find the facts of the present case are similar

to the facts in the said case. Therefore, I proceed to reproduce the said

paragraphs here as under :

“40. In view of the above said ratios, the present issue of bogus purchases is to be decided on the basis of facts of each case. The first aspect is the information received by the Assessing Officer from the Sales Tax Department in respect of alleged hawala dealers. In many cases, the Assessing Officer has not even received the copy of statement recorded or any other evidence from the Sales Tax Department, except the list of hawala dealers and on the basis of the said list, the assessment proceedings have been completed in the hands of assessee, who had made the purchases from the said parties. In case, no such evidence has been received by the Assessing Officer before making addition, then there is no warrant in making aforesaid addition in the hands of assessee merely on the basis of so called list of hawala dealers. There are other cases, where the Assessing

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Officer had received the statement of the persons who were hawala dealers and who had admitted to have just issued bills of sale without delivery of goods. In such circumstances, there is evidence against the respective assessee that where the seller of the goods, has admitted not to have entered into real transaction of sale of goods. Against such non-transaction, there can be no delivery of goods, then it is case of passing of bills of sale and purchases, against which no VAT has been paid. Such bogus purchases are then to be added in the hands of assessee. Where the Assessing Officer had confronted the assessee with the information received, supplied copies of statements and where the persons have not been traced and no confirmation has been filed by the assessee in this regard, then the addition is to be made in the hands of assessee on account of such bogus purchases. In the facts and circumstances of some cases, the goods have been transferred by such hawala dealers to the respective purchasers, against which the assessee has to discharge onus of establishing the trail of goods which are transferred and further sold by them. Where the assessee is able to produce evidence of purchase of goods by way of weighment bridge receipts, transportation documents, payment of octroi and subsequent sale of goods to the respective parties and / or where the assessee has maintained complete quantitative details of purchase and sale of goods, then total bogus purchases cannot be added in the hands of assessee, but GP rate of 10% is to be applied on bogus purchases. Where the assessee does not establish its case, then the complete bogus purchases are to be added as hawala purchases. Further, in cases, where the statements are recorded and copies of which have been supplied to the assessee and assessee established the case of receipt of goods and its onward transmission by way of sale bills, then the factum of purchases by the assessee stands established in such circumstances. However, the benefit of purchases being made from grey market, needs estimation in the hands of assessee. The Tribunal has already held that the addition be made by estimating the same @ 10% of the alleged hawala purchases. Accordingly, it is so held. In view thereof, the issues which emerge are as under:-

I. In case no information is received by the Assessing Officer from the Sale Tax Department and no copy of statement recorded or any other evidence is received from the Sales Tax Department, then no addition is to be made on the basis of name of hawala dealer in the list prepared by the Sales Tax Department, where the assessee had asked for the said information during assessment proceedings. II. Where the Assessing Officer had received the statements of persons who had admitted to have just issued bills of sale without any delivery of goods. In view of such evidence, where the assessee had not entered into real transaction of purchase of goods and in the absence of any delivery of goods, the sales are bogus and the entire sales are to be added in the hands of assessee. Admittedly, the dealer had not even paid VAT against such passing of goods.

III. The case where the Assessing Officer had confronted the information received from the Sales Tax Department and had supplied copies of statements recorded and had also issued notice under section 133(6) of the Act, where hawala dealer was not traceable and in the absence of the assessee failing to file any documentary evidence of delivery of goods, addition is to be upheld in the hands of assessee on account of such bogus purchases.

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IV. The next instance is the case of goods which have been admittedly sold by the hawala dealer and has been received by the assessee, who in turn had maintained quantitative details and also evidence of its movement i.e. transportation details and quality control details of consumption of the said material or exact details of sale of the same consignment through same transporter directly to the party, then the total purchases cannot be added in the hands of assessee. However, since the purchases are made from the grey market, some estimation needs to be made in the hands of assessee. The Tribunal in M/s. Chetan Enterprises Vs. ACIT (supra) has already held that the addition be made by estimating the same @ 10% of the alleged hawala purchases, over and above the GP shown by the respective assessee.

V. Another set of cases where the statements recorded by the Sales Tax Department have been handed over to the assessee and the copies of same have been supplied to the assessee, then where the assessee established the case of receipt of goods and its onward transmission, then the factum of purchases by the assessee stands established in such circumstances. However, estimation is to be made in the hands of assessee because of purchases from the grey market and following the above said ratio, addition is to be made by estimating the same @ 10% of the alleged hawala purchases, over and above the net profit shown by the assessee.

Considering the above manner of classification of the cases of bogus

purchases, I am of the opinion that the assessee may fall in clause (iii) or

others of the said classification given by the Tribunal. This requires

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investigation into the facts by the AO and also requires application of the

said decision of the Tribunal.

before the CIT(A) stating that (1) proper opportunity was not granted; (2)

no cross-examination was granted; (3) supporting documents used

against the assessee for completing the assessment have not been

provided to the assessee.

Considering the above grounds and in the interest of

administration of justice, I am of the opinion that one more opportunity

be given to the assessee to substantiate his claim.

In view of the above, the issues raised by the assessee in the

grounds are remanded back to the file of AO for considering the decision

of the Pune Bench of the Tribunal in the case of M/s. Chhabi Electricals

Pvt. Ltd. (supra) and the legal grounds raised by the assessee afresh.

Needless to say, the AO shall give reasonable opportunity of being heard

to the assessee in accordance with the set principles of natural justice.

Accordingly, the grounds raised by the assessee are allowed for

statistical purposes.

purposes.

Order pronounced on this 22nd day of June, 2018. Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; िदनांक Dated : 22nd June, 2018. Satish

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आदेश की !ितिलिप अ#ेिषत/Copy of the Order is forwarded to : अपीलाथ� / The Appellant; 1. ��थ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The Pr.CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” 5. / DR ‘SMC’, ITAT, Pune; गाड# फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER,स स�ािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune