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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI SANDEEP GOSAIN, JM
2 to 7208/M/16 & CO Nos. 188 to 190/M/17 (A.Ys. 2009-10 to 2011-12) M/s. Gauges Bourdon India Pvt. Ltd. आदेश / O R D E R Per Shamim Yahya, A. M.: These are appeals by the Revenue and the cross objections by the assessee emanating out of the orders of learned CIT(A) for assessment year’s 2009-10, 2010- 11 and 2011-12 respectively.
The common issue raised in Revenue’s appeal is that the ld. CIT(A) erred in sustaining an addition of 12.5% of the bogus purchases, as against 100% added by the assessing officer.
The common ground raised by the assessee in the cross objection is that the ld. CIT(A) has erred in sustaining even 12.5% of bogus purchase as addition.
In these cases, the assessing officer has made 100% disallowance of bogus purchases as under:
A.Y. 2009-10 Sr. No. Name of the party Amount 1 Atlas Enterprises 788 2 Rajratan Metal Industries 45556415 3 Ronak Industries 8904167 Total 13461370 A.Y. 2010-11 Sr. No. Name of the party Amount 1 Atlas Enterprises 18547 2 Malani Metal India 1969566 3 Dhruvil Traders 146237 4 Rakesh Enterprises 191875 5 Pradeep Enterprises 726700 6 Ronak Industries 1178188
3 to 7208/M/16 & CO Nos. 188 to 190/M/17 (A.Ys. 2009-10 to 2011-12) M/s. Gauges Bourdon India Pvt. Ltd. 7 Rajratan Metal Industries 5468443 8 Fortune Sales Corporation 5957533 Total 1,56,57,089
A.Y. 2011-12 Sr. No. Name of the party PAN Amount 1 D K Steel & Engineering Co. AAHFD2610C 15,82,334 2 Dhruval Traders BEIPK4877G 11,81,817 3 Dinesh Steel (India) AJCPC9820C 17,20,238 4 Rajeshwari Metal Industries ABLPA9744H 50,70,442 Total 84,91,831
Upon the assessee’s appeal, the learned CIT(A) has referred to assessee's letter, in which 12.5% addition was accepted and has accordingly sustained the addition at the rate of 12.5% of the bogus purchase.
Since facts are identical, we are referring to the facts and figures from assessment year 2009-10.
In this case, the AO had received information from the Sales Tax Department that the assessee had debited the bogus purchases from the following three parties whose details are given hereunder.
Sr. no. Name of the party (M/s) Amount (in Rs.) 1 Atlas Enterprises 788/- 2 Rajratan Metal Industries 45, 56,415/- 3 Ronak Industries 89,04, 167/-
Total 1, 34,61, 370/- 1961 (hereinafter referred to as the 'Act') and duly provided the assessee with the reasons for reopening. The AO also issued notices under section 133(6) of the Act to all the three parties. However, they came back unserved. On its part, the assessee could not produce any of the parties to prove the genuineness of the purchases.
Accordingly, the AO concluded that purchases in question were indeed bogus, disregarding the assessee’s contention that the documentation in the form of invoices, ledger accounts, etc. of the respective parties would indicate that they were indeed genuine purchases. According to the AO, the assessee had actually made purchases out of its books and then made the payments in question to regularise those purchases.
It had produced bills from the aforementioned three parties and sought to give the colour of genuineness to these transactions. They however remained unexplained. The AO had made an addition on account of the entire bogus purchases stating that he had not disputed the fact of the purchase of the goods and the consequent sale of the finished products. Rather, what he had disputed was the source of investment in the said purchases. Accordingly, he had added back the entire bogus purchases amounting to Rs.1.34 crore.
Against the above order, the assessee appealed before the ld CIT(A). The ld. CIT(A) restricted the addition of 12.5% of the bogus purchase. In this regard, he referred to the letter of the assessee in which the assessee has accepted addition at the rate of 12.5% of the bogus purchase, as under:
5 to 7208/M/16 & CO Nos. 188 to 190/M/17 (A.Ys. 2009-10 to 2011-12) M/s. Gauges Bourdon India Pvt. Ltd. 6.2 It is on the background of the issues discussed in the preceding two sub- paragraphs that the appellant’s offer to buy peace and cease litigation has to be seen. Vide its letter dated 14th Septermber, 2016 and filed on the same date, the appellant has offered to tax an element of profit of 12.5% as embedded in the allegedly bogus purchases sought to added back by the A.O. in their totality. On careful consideration of all the aspects of this case, the A.O. is directed to restrict his addition to 12.% of the allegedly bogus purchases of Rs.1,34,61,370/-.
Against the above order of learned CIT-A, the assessee has filed cross objection and the Revenue has filed appeal before the ITAT.
We have heard both the counsel and perused the records. We 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. Assessee was found to have taken accommodation entry/bogus purchase bills during the concerned assessment year from different parties. Based upon this information, the assessment was reopened. The credibility of information relating to reopening remains un-assailed. In such factual scenario, the assessing officer has made the necessary enquiry. The issue of notice to all the parties have returned unserved. Assessee has not been able to provide any confirmation from any of the party. In this factual scenario, it is amply clear that assessee has obtained bogus purchase bills. Mere preparation of documents for purchases cannot controvert overwhelming evidence that the providers of these bills are bogus and non-existent.
The sales tax Department in its enquiry have found the parties to be providing bogus accommodation entries. The assessing officer also issued notices to these
6 to 7208/M/16 & CO Nos. 188 to 190/M/17 (A.Ys. 2009-10 to 2011-12) M/s. Gauges Bourdon India Pvt. Ltd. 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 circumstance there is no doubt that these parties are non-existent. We find at 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 as genuine. This proposition is duly supported by Hon’ble Apex Court decision in the case of Sumati Dayal 214 ITR801 and Durga Prasad more 82 ITR 540. 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 above apex court decisions.
In these circumstances, the ld. DR 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 order dt 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 against this order along with others has been dismissed by the Hon’ble Apex Court vide order dt. 16.1 2017.
We further find that Hon’ble Jurisdictional High Court in the case of Nikunj Enterprises has upheld 100% allowance for the purchases when the sales have not been doubted. However, the facts of that case were different. Furthermore, the sales in that case were basically to government departments. Hence, the ratio from this decision is not applicable on the facts of the case.
In the facts and circumstances of the present cases, we find that the sales have not been doubted. Though the purchase bills are bogus. In such circumstances, 100% disallowance of bogus purchases is not permissible. In such circumstances, disallowance of 12.5% of the bogus purchases have been found to be meeting ends of justice in several judgements at the ITAT Mumbai following honourable Gujarat High Court decision in the case of Simit P. Seth.
Accordingly, we affirm the order of learned CIT-A wherein 12.5% of the bogus purchases has been sustained in addition. We also take note that before the learned CIT-A assessee had by a letter accepted addition at the rate of 12. 5% of the bogus purchase. Hence, we do not find any infirmity in the order of learned CIT-A.
Accordingly we confirm the same.