DCIT 11(2)(1), MUMBAI vs. SHREE GANESH RETAILS P.LTD, MUMBAI

आदेश / O R D E R

PER RAVISH SOOD, JUDICIAL MEMBER:

P a g e | DCIT Vs. M/s Shree Ganesh Retails passed by the CIT(A) had raised before us the following grounds of appeal:- “1. On the facts and circumstances of the case, the learned CIT(A) erred in restricting the disallowance to 12.5% of Rs.64,11,801/- in respect of bogus purchases without appreciating the fact that the Hon’ble Apex Court in the recent judgment in the case of N.K. Proteins Ltd (2017- TIOL-23-SC-IT) has decided the issue in favour of the revenue wherein the assessee was engaged in the trading activity.

2. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the A.O be restored.

3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”

2. Briefly stated, the facts of the case are that the assessee company which is engaged in the business of trading in readymade garments, hosiery, fabrics, shoes and allied items had filed its return of income on 30.09.2009, declaring total loss of Rs. 1,79,18,756. The return of income filed by the assessee was processed as such u/s 143(1) of the ‘Act’. That information was received by the A.O, that the assessee company had during the year under consideration obtained accommodation entries from certain entities which had been proclaimed by the Sales tax department as provider of accommodation bills, as under :-

Sr. No. Particulars Amount 1. M/s Sheetal Trading Co. Rs. 31,25,964/- 2. M/s Payal Enterprises Rs. 32,85,837/- Total Rs. 64,11,801/- The case of the assessee on the basis of the aforesaid information was reopened by the A.O u/s 147 of the ‘Act’. The A.O in the course of the assessment proceedings in order to verify the genuineness of the aforesaid purchase transactions issued notices u/s 133(6) to the respective parties, therein calling upon them to furnish the requisite

P a g e | DCIT Vs. M/s Shree Ganesh Retails detail in respect of the purchases claimed by the assessee to have been made from them. The aforesaid notices u/s 133(6) were however returned by the postal authorities with the remark ‘left’. The A.O in the backdrop of the aforesaid facts thus called upon the assessee to furnish the requisite supporting evidence which could go to substantiate the genuineness and veracity of the purchase transactions which were claimed by the assessee to have been made from the aforementioned parties. The assessee in compliance to the directions of the A.O placed on record the copies of purchase bills, ledger accounts, bank statements etc. The A.O in the backdrop of the impeccable information received from the Sales tax department that the assessee had taken accommodation entries from the aforementioned hawala dealers, therefore, directed the assessee to produce the respective parties for necessary examination. However, the assessee failed to comply with the direction of the A.O and failed to produce the aforementioned parties before the A.O. The A.O not being satisfied with the documentary evidence which were placed on record by the assessee in its attempt to fortify the genuineness and veracity of the purchase transactions, and rather holding a strong conviction that merely making of the payments vide banking channels would not conclusively evidence the genuineness of the purchase transactions, therefore, characterized the purchase transactions as bogus transactions and disallowed the purchase expenses aggregating to Rs. 64,11,801/- claimed by the assessee to have been made from the aforementioned parties.

P a g e | DCIT Vs. M/s Shree Ganesh Retails of 12.5% of the total purchases of Rs. 64,11,801/-. The Ld. D.R in order to drive home his aforesaid contention relied upon the order passed by the Hon’ble Supreme Court while dismissing the ‘Special Leave Petition’ (‘SLP’) of the assessee in the case of N.K Proteins Ltd. Vs. DCIT [SLP(C)…CC No(s).769 of 2017], and submitted that the addition of the entire amount of the ‘bogus purchases’ of Rs. 64,11,801/- was called for in the hands of the assessee. It was submitted by the ld. D.R that the CIT(A) had erred in restricting the addition in the hands of the assessee only upto 12.5% of the value of the purchases under consideration. It was thus submitted by the Ld. D.R. that the order of the CIT(A) may be set aside and that of the A.O be restored.

P a g e | DCIT Vs. M/s Shree Ganesh Retails are in agreement with the view taken by the CIT(A) that as the consumption/sale of the goods under consideration had not been doubted by the A.O, therefore, it could safely be concluded that the assessee had made purchases of the goods under consideration, though not from the aforementioned parties, but from the open/grey market, as a result whereof the addition in the hands of the assessee was liable to be restricted to the extent of the profit element that would be involved in making of the purchases from the open/grey market. We have given a thoughtful consideration to the reliance placed by the ld. D.R on the order passed by the Hon’ble Supreme Court while dismissing the ‘Special Leave Petition’ (‘SLP’) of the assessee in the case of N.K Proteins Ltd. Vs. DCIT [SLP(C)…CC No(s).769 of 2017], and are of the considered view that the same is distinguishable as against the facts involved in the case of the present assessee. We find that the reliance placed by the ld. D.R on the order of the Hon’ble Supreme Court while dismissing the ‘SLP’ of the assessee in the case of N.K Proteins Ltd. (supra) is distinguishable on facts. We are of the considered view that in the case of N.K Proteins Ltd. (supra) search proceedings were conducted on the assessee, in the course of which certain signed blank cheques and vouchers of the parties from whom the assessee claimed to have been making purchases were found. It was thus in the backdrop of the aforesaid factual matrix, that the revenue held that the cash deposited in the bank accounts of the said respective supplier parties was the Undisclosed income of the assessee, and the purchases made there from, as bogus. We are of the considered view that as observed by us hereinabove, the facts involved in the case of the present assessee are absolutely distinguishable as against the peculiar and irrebutable facts as had emerged in the case of N.K Proteins Ltd. (supra). We are thus of the considered view that the judicial pronouncement relied

P a g e | DCIT Vs. M/s Shree Ganesh Retails upon by the Ld. D.R. being distinguishable on facts as against those involved in the case before us, therefore, the same would not support his contentions. We are further of the considered view that the CIT(A) taking cognizance of the facts involved in the case of the assessee, had in all fairness by relying on the judgment of the Hon’ble High Court of Gujarat in the case of CIT Vs. Simit P. Sheth (2013) 38 Taxmann. Com, 385 (Guj) had rightly estimated the suppressed profit involved in making of the aforesaid bogus purchases to the extent of 12.5% of the aggregate of the purchases which were claimed by the assessee to have been made from the aforementioned parties. We find no infirmity in the aforesaid well reasoned order of the CIT(A) and finding ourselves as being in agreement with the view taken by him, thus uphold his order.

Order pronounced to the open court on 25/10/2017