D & D METALLOYS CORPORATION,THANE vs. ITO 24(1)(5), MUMBAI

These are the appeals filed by the assessee against the order of CIT(A) -36, Mumbai dated19/01/2017 for A.Y.2008-09 & 2010-11 in the matter of order passed u/s.143(3) r.w.s. 147 of the IT Act.

In this appeal assessee is aggrieved for upholding addition of 12.5% in respect of bogus purchases.

Nobody appeared on behalf of the assessee inspite of giving opportunity. Even on earlier occasion dated 28/09/2017, the case was fixed for hearing at the request of the assessee, however, nobody appeared on that occasion also. The Bench, therefore, decided to dispose the appeal after hearing learned DR and considering the material placed on record.

In order to verify the genuineness of the purchase, notices u/s. 133(6) of the act were issued to the above parties. However, none of the notices get served and the same have been returned unserved by the 'Postal Authorities'. In response to notice u/s 142(1) issued on various dates, the appellant's AR vide letter dated 13.07.2015 filed on 13.07.2015 submitted as follows:-Tax Audit Report, Profit &Loss Ale and Balance Sheet, Purchase register and Sales register for year under consideration, Purchase bills of Manav Impex & Great International along with ledger of said Hawala party, Corresponding sales bills out of purchases made from Hawala purchases, and Bank statement showing 3529/Mum/2017 D & D Metalloys Corporation, Thane payment made to Hawala parties. Further, the AR of the appellant vide order sheet noting dated 18/12/2015 was asked by the AO to produce the above hawala parties personally along with the following documents in order to prove the genuineness of the .transactions with the parties mentioned above:- 1) Confirmation letter from the above parties that they have sold and delivered goods to the appellant, 2) Detai/s of goods which resofd to the appellant along with delivery details receipts and lorry receipts/transportation bills, 3)Ledger account of appellant in their books of accounts, 4) Bank Statement of the parties reflecting the payment received for the goods sold to the appellant, 5) Statement of corresponding sales/consumption, 6)Copy of bills/ invoices in respect of purchase parties in question along with bank statement showing payment to the abovementioned parties. In response the AR of the appellant furnished statement showing details of purchase made from above parties along with details cordoning sales made out of such purchases and bank statement showing payments made to the above parties. Further, the appellant submitted as foIlows:-'Purchases were on door to door basis so no lorry receipt, Party is not traceable and hence ledger of appellant in the books of appellant, along with confirmation of Hawala party could not be produced, Party is not traceable and hence bank statement of Hawala party could notbe produced, and Party is not traceable and hence party could not be produced. The submission of the appellant was considered thoroughly but not found acceptable by AO. The contention that the payment was made by account payee cheque is not a full-fledged-safe method of substantiating the appellant's claim as it is already accepted by the persons, whose statement, deposition or affidavit was recorded by the sales tax department of 3529/Mum/2017 D & D Metalloys Corporation, Thane Maharastra as discussed above, that cash is returned after deducting commission/ brokerage once cheque is realized. The appellant could not produce any delivery challan, lorry receipt, the mode of transport of goods, store issue vouchers, gate pass of truck / lorry etc. from the alleged suppliers in support of its claim that purchases were genuinely made from the party. It was claimed by the appellant that the purchases from afore-mentioned parties were genuine, however the, appellant failed to produce the parties or furnish any address where a notice could be served on the said parties. The notices issued were not delivered and inquiries conducted by ward inspector established that the party does not exist on the address mentioned in the bills furnished by the appellant AO relied on section 101 of the Indian Evidence Act 1872 states that whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of fact exits. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person. According to Section 103 of the Indian Evidence Act 1872, the burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence. Section 106 of Indian Evidence Act 1872 says that when any fact is especially within the knowledge of any person, then burden of proving that fact is upon it.AII the above provisions are Applicable in the instant case. In this case, appellant claims the purchases made from various parties. Therefore, burden lies on the appellant to prove that the said facts (Section 101 and 103 of Indian Evidence Act 1872). Secondly, the payment made to the purchase parties are within the knowledge of the appellant. Therefore, the burden is on it to establish that fact. However the burden has not been discharged by the 3529/Mum/2017 D & D Metalloys Corporation, Thane appellant. Further, appellant does not maintain stock register and could not produce lorry receipts and corroborating evidences to substantiate his claim.lt is pertinent to note here that without receiving the material the corresponding production/sales would hot have been possible i.e., the material has been received by the appellant from the sources best known to him. At the same time, it is also possible that appellant purchased goods from some other suppliers and received bill from someone else which is commonly known as grey market and this is so; the appellant has been benefited by providing margin of grey markets. Such purchases in this line of business cannot be denied as per the prevailing practice of the market. By recording the bogus purchase at a higher level, the appellant managed to siphon off the profit to the extent of difference between the actual purchases and bogus purchases. Any person indulging in the practice of purchasing the goods from the, grey market and obtaining bogus bills of some of the parties would do so for getting some benefits. The appellant did not make any efforts to controvert the finding recorded by sales tax authorities followed by investigation wing of Income-tax department. The said dealers/sellers had already accepted before the sales tax authorities about their modus operand! of providing accommodation entry on commission basis. AO relied on the case of gimit P Sheth L/R of Sh. Pankaj J Sheth V /s ITO (ITA No. 32^8 and 32937 And/2009), the Hon'ble ITAT, Ahmadabad Bench, has held that malpractice of bogus purchase is mainly to save 10% sales tax. The Hon'ble ITAT has considered the profit margin in the case of the industry in which the appellant was doing business is Rs. 2.5% and accordingly 12.5% of the purchase held to be bogus. The order of the ITAT has been upheld by the Hon'ble Gujrat High Court (ITXA No. 553 of 2012). AO after elucidation of the facts of the case and discussion as above AO's opinion that the aggregate of the sales tax and profit