PARTH TRADELINKS PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER-13(1)(3), MUMBAI

The common issue raised is that the ld. Commissioner of Income Tax (Appeals) erred in sustaining the disallowance of 6% respectively of bogus purchase. are being referred here.

In this case the Assessing Officer noted that the purchases from the hawala parties were as follows:

Sr. Name of the purchase party PAN F.Y. Amount of No. transaction 1 Raj Traders AIJPD9848G 2009-10 6233269 2 Sthapna Trade Impex Pvt. Ltd. AAKCS6555K 2009-10 1687920 3 Ritesh Corporation AZEPK3051K 2009-10 2080000 4 Mihir Sales Pvt. Ltd. AAFCM6408C 2009-10 3087084 5 Shubham Enterprise AYVPS0870R 2009-10 8339135

Notices u/s. 133(6) were issued but no reply was received. The Assessing Officer asked the assessee to establish the genuineness of the purchases claimed from these parties. In the course of assessment proceedings the assessee agreed that addition of Rs.12,85,644/- as profit represented or embedded in the non genuine purchases booked during the year be made as per the order sheet noting the ld. Counsel of the assessee had accepted the disallowance @ 6% of the total purchases from these parties. The Assessing Officer for the reasons mentioned in para 4.5 held that the profits to the tune of Rs.12,85,644/- being 6% of non genuine purchases of Rs.2,14,27,408/- was suppressed. Accordingly, the addition was made.

Against the above order, the assessee appealed before the ld. Commissioner of Income Tax (Appeals). The ld. Commissioner of Income Tax (Appeals) confirmed the observing as under:

Against the above order of ld. Commissioner of Income Tax (Appeals), the assessee is in appeal before the ITAT.

I have heard the ld. Departmental Representative and perused the records. None appeared on behalf of the assessee. I find that credible and cogent information was received in this case by the assessing officer that certain accommodation entry provider/bogus suppliers were being used by certain parties to obtained bogus bills.

The Sales Tax Department in its enquiry has found the parties to be providing bogus accommodation entries. The assessing officer also issued notices to these parties at the addresses provided by the assessee. All these notices have returned unserved. Assessee has not been able to produce any of the parties. Neither the assessee has been able to produce any confirmation from these parties. In such circumstances, there is no doubt that these parties are non-existent. I find it further strange that assessee wants the Revenue to produce assessee’s own vendors, whom the assessee could not produce. The purchase bills from these non-existent/bogus parties cannot be taken as cogent evidence of purchases. In light of the overwhelming evidence, the Revenue authorities cannot put upon blinkers and accept these purchases case of Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC) and CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC). In the present case, the assessee wants that the unassailable fact that the suppliers are non-existent and, thus, bogus should be ignored and only the documents being produced should be considered. This proposition is totally unsustainable in light of Hon’ble Apex Court decisions.

I further find that Hon'ble jurisdictional High Court in the case of Nikunj Eximp Enterprises (in Writ petition no 2860, order dt. 18.6.2014) has upheld 100% allowance for the purchases said to be bogus when the sales have not been doubted.

In these circumstances, the learned Departmental Representative has referred to Hon’ble Gujarat High Court decision in the case of Tax Appeal No. 240 of 2003 in the case of N K Industries vs. Dy. CIT vide order dated 20.06.2016, wherein 100% of the bogus purchases was held to be added in the hands of the assessee and tribunals restriction of the addition to 25% of the bogus purchases was set aside. It was expounded that when purchase bills have been found to be bogus, 100% disallowance was required. The special leave petition against this order along with others has been dismissed by the Hon’ble Apex Court vide order dated 16.1.2017. decisions of the apex court on the issue of bogus purchases in the case of CIT Jaipur vs Shruti Gems in of 2009. The Hon’ble High Court has referred to the decision of CIT Jaipur vs. Aditya Gems, D. B. in ITA No. 234 of 2008 dated 02.11.2016, wherein the Hon’ble Court had inter alia held as under:

Upon careful consideration I note that this is not an appeal by the Revenue.

In light of the above High Court and Hon’ble Apex Court decision, the decisions of tribunal referred by the ld. Ld. Counsel of the assessee are not being dealt with.