SUNIL B. VORANI (HUF),MUMBAI vs. ITO 20(3)(4), MUMBAI

सुनवाई की तायीख/ : 23/08/2017 Date of Hearing घोषणा की तायीख/ : 08/11/2017 Date of Pronouncement आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

Sunil B. Vorani (HUF) 1. Ld. CIT (A). erred in confirming the assessment order wherein Ld assessing officer estimated the GP on assumption and presumption basis ignoring the material facts brought on record 2. Ld. CIT (A). erred in confirming the additions of 25% of the total sales amounting of Rs. 25154779/- as Gross Profit Rs. 62,88,700/- determined by the AO.

2. As per the facts of the case, the assessee is conducting business under the name and style of M/s S .S. Traders which is engaged in the Business of trading in Iron, Steel, Hardware, etc. The return of income was filed on 30.09.09 declaring an income of Rs. 3,59,130/-. The return was processed u/s 143(1) of the I.T. Act. Subsequently, on receiving information from the office of the DGIT(Inv.) Mumbai regarding involvement of assessee in taking accommodation entries from the parties declared as hawala dealers by Sunil B. Vorani (HUF) Maharashtra Sales Tax Depatment, therefore, the assessment was reopened u/s 147/148 of the Act and after serving statutory notices and seeking reply /objections of the assessee, order of assessment u/s 143(3) r.w.s. 147 of the I.T. Act was passed thereby making additions by holding that out of the total purchases, the assessee could not establish the genuiness of the purchase amounting to Rs. 2,26,39,391/-, therefore 25% out of the total sales of Rs. 2,51,54,779/- which comes to Rs. 62,88,695/- was treated as gross profit. The AO after rejection of books of accounts estimated the total income of the assessee at Rs. 62,88,695/-.

3. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties dismissed the appeal of the assessee. Now before us, the assessee has preferred the present appeal by raising the above grounds. Ground No. 1 to 3. 4. These grounds raised by the assessee are inter connected and inter related and relates to challenging the action of Ld. CIT(A) in confirming the addition of 25% of the total sales amounting to Rs. 25,154,773 as gross profit as determined by the AO, therefore we thought it fit to dispose of by this common order.

Sunil B. Vorani (HUF) 5. We have heard the counsels for both the parties and also perused the material placed on record as well as the orders passed by lower authorities. The Ld. AR submitted that the identical grounds have already been decided by the Coordinate Bench of Hon’ble ITAT in for AY 2009-10 in assessee’s own case. The relevant portion is reproduced below:- 4. Up on careful consideration of the facts of the case, I find that overwhelming evidence have been referred by the authorities below that the impugned purchases are bogus There is no evidence of the actual movement of the goods under dispute In these circumstances learned Departmental Representative has referred to Hon'ble Gujarat High Court dçion in the case of Tax Appeal No 240 of 2003 in the case of N K Industries vs Dy CIT, order dated 20.06.2016, wherein 100% of the bogus purchases will 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. 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.

Apart from above, before we decide the merits of the case, it is necessary to evaluate the impugned order passed by Ld. CIT(A) while dealing with the said ground. The operative portion of CIT(A)’s order is contained at page no. 4 to 7 of its order and the same is reproduced below:-

The AO rightly observed that this has not shifted the onus on the appellant In any manner and the consequential follow-up investigation has given credence to the conclusion drawn. Further even in the tax audit report it has been stated that the assessee is not maintaining any stock register -all these facts cumulatively lead to the conclusion that the books of accounts ought to be rejected. The AO thereafter judiciously held that out of the total purchases genuineness of purchases amounting to Rs. 2.26 crores could not be established. He therefore proceeded to add 25% out of the total sales that is Rs. 62.88 Lacs to be treated as income of the appellant. In the hearing conducted on 19th of October 2016 the AR of the appellant was required to give data regarding opening stock, purchases during the year, sales and closing stock. Profit percentages for this year and preceding two years was also required. Submission on the findings of the AO given in para 4.3 of the assessment order was also required. However on the next hearing conducted on 17th of November 2016 these queries were not responded to; It was stated that no disallowance is called for on the basis of case authorities cited in the written submissions because normal GP had already been shown An exhaustive paper book has been filed but no paper therein has been indicated to in Sunil B. Vorani (HUF) the hearing which would substantiate the claim of the appellant and controvert the findings of the AO. Merely filing copies of Ledger accounts and invoices of the parties concerned does not meet the allegation of the AO in any manner. On the other hand I find that AO has been probably extra judicious in adding only 25% of the amount which was found to be non- verifiable. Under the circumstances and on facts of the case I'm unable to see how I can interfere on a legally educated guess to reach at the disallowed percentage. The appellant has not helped its cause by not responding to the queries raised by the undersigned as well as to meet the objections raised by the AO in the assessment order. Instead the AR has gone at a complete tangent and she has argued on lines which are completely alien to the issue under question. Merely filing of a exhaustive paper book without indicating which part is applicable to the facts of the case and in what manner would not help her cause. What is astonishing and I am constrained to bring this on record, is that the appeal Is of HUF and still In the opening lines of the statement of facts it is stated that the appellant is an individual assessee. Throughout the appellate proceedings the term HUF Is hardly referred save the paper book, be it adjournment application or otherwise, creating needless confusion. Merely creating a maze of papers and creating a mountain thereof does not help the cause of the appellant at all. In absence of any cogent counter argument and I'm unable to interfere in the addition made and the same is hereby confirmed.

After having heard the counsel for the parties at length and after perusal of both the above orders, we find that the coordinate bench of Hon’ble ITAT while exercising the powers of ‘SMC’ had dismissed the appeal of the assessee.

Sunil B. Vorani (HUF) However, in the said order in for AY 2009-10, it has been categorically held that the purchases made by the assessee were bogus and there was no evidence of the actual movement of the goods. Since the revenue had not filed any appeal in that case, therefore the Coordinate SMC Bench while dismissing the appeal of the assessee had specifically mentioned that since the revenue has not filed any appeal and the assessee cannot be denied the benefit already granted by Ld. CIT(A). Therefore, assessee cannot take advantage of the Coordinate SMC Bench. Now as per the facts of the present case for the year under consideration, while upholding the order of AO, Ld. CIT(A) has categorically mentioned that the assessee has not discharged his onus in any manner and was not maintaining stock register. Apart from above, the Ld. CIT(A) has also recorded his finding that the assessee could not substantiate its claim and has not responded to the queries raised by the revenue authorities. Be that as it may, after evaluating the entire facts, grounds raised by the assessee, perusal of the records and judgments relied by the parties, we find that Ld. CIT(A) has upheld the findings of AO in estimating the profit @ 25% of the total sales. In our considered view, considering the facts of the present case and while relying upon the following judgments:- 1) ClT vs Bholanath Poly Fab Ltd. (2013) 355 ITR 290 (Guj). (HC),

2. CIT v Simit D, Sheth Sunil B. Vorani (HUF) (2013) 356 ITR 451 (Guj)-(HC) and 3. CIT vs. Sanjay Oil Cake Industries (2009) 316 ITR 274 (Guj) (1C) and taking into consideration the facts of the present case, and also considering the order passed by the Coordinate Bench of SMC in assessee’s own case and to account for the profit element embedded in these purchase transactions to factorize profit earned by assessee against purchase of material in the grey market and undue benefit of VAT against bogus purchases, we are of the considered view that upholding the additions @ 25% of the sales by Ld. CIT(A) is unreasonable. The ends of justice would be met in case the additions are restricted @ 12.5 % of purchase amount of Rs. 2,26,39,391/-. Consequently orders passed by Ld. CIT(A) are set aside and hence we direct the AO to restrict the additions to the extent of 12.5% of the bogus purchases of Rs. 2,26,39,391/-. made from the parties. Accordingly these ground raised by the assessee is partly allowed. Ground No. 4

6. This ground is general in nature, thus requires no specific adjudication.

7. In the net result, the appeal filed by the revenue stands dismissed. Order pronounced in the open court on 8th November, 2017 Sd/- Sd/- (R.C. Sharma) (Sandeep Gosain) रेखा सदस्म / Accountant Member न्मायमक सदस्म / Judicial Member भुंफईMumbai;ददनांकDated : 08/11/2017