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Income Tax Appellate Tribunal, “SMC”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM
आदेश / O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by assessee against the order of CIT(A)-30, Mumbai dated 21/02/2017 for A.Y.2009-10 in the matter of order passed u/s.143(3) r.w.s. 147 of the IT Act. 2. In this appeal, the assessee is aggrieved for upholding addition of 6.5% of bogus purchases. 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a firm, engaged in the business of 'trading in ferrous and non-ferrous metals. The return of income for the year under appeal was filed on 27/09/2009, declaring total income of Rs.4,10,451/- The return was processed u/s 143(1) of the Act. Subsequently, the case was reopened u/s 147, by issuing notice u/s 148 of the Act on 28/02/2014, based on the information received from the DGIT (Inv.)/ Mumbai, that the assessee is one of the beneficiaries of the accommodation entries provided by some of the MVAT dealers who were indulging in issuing bogus sale/purchase bills, which was investigated and kept on the public domain by the Sales Tax Department. Reassessment, u/s. 143(3) r.w.s. 147 of the IT. Act, 1961 was completed by the Ld. AO on 17/03/2015, determining the total income at Rs.20,14,630/-.
During the course of reopened assessment proceedings, to ascertain the genuineness of purchases shown in the accounts, notices u/s 133(6) was sent to the concerned parties which were returned unserved, with the remark either ‘left’ not traceable', 'not known' etc. Assessee could not produce parties to substantiate the genuineness of the transactions even though the burden of proof lies on it. The assessee could not furnish vital information like proof of delivery, transport receipts, goods inward register maintained at godown. On going through the submissions and contentions of the assessee and analyzing at length, AO concluded that the assessee did not purchase any goods from the above parties and only indulged in such activity of non genuine transactions to suppress the true profits and to reduce the tax liability. Therefore, profit element embedded in such purchases is taken by AO as the profit earned from purchases shown to have been made from the five parties and estimated the profit @15%of the total non genuine purchases of Rs.1,06,94,518/-, which worked out to Rs.16,04,178/- and added to the total income of the assessee.
By the impugned order, CIT(A) reduced the addition to the extent of 6.5% after observing as under:- 7.3 I have carefully considered the rival contentions on the issue. On perusal of the material on record, it is noticed that, in the appellant's case, Ld. AO has made independent verifications by issuing notices u/s. 133(6) of the Act which returned unserved. Apart from the above, there is overwhelming evidence in the form of information with regard to the suppliers from the Sales tax authorities that they were engaged only in issuing hawala bills and no goods were ever supplied by them. After weighing the evidence pros and cons, I find that the appellant has not reconciled the purchases with the items sold and failed to reconcile 1:1 of the items purchased and sold. AO clearly discussed the stock, which is not maintained in the proper form and how the same cannot be ascertained. Onus was always on the appellant to prove as to how the material purchased was firstly obtained. I record a finding of fact here that no proof of delivery of purchases has been filed either before the Ld. AO or before me. In the present proceedings, AR was asked to produce the parties for verification before the AO even at this stage to examine the genuineness of the purchases. In response to the same, AR expressed her inability to do so. Thus, it can be safely presumed that either the party is non-existent or even if exist, they were not backed by sufficient evidence to undergo the test of scrutiny. 7.4 The suppliers were in fact the appellant's witness and the Ld. AO was not required to force their attendance. It was for the appellant to produce them as per Civil Procedure Code, which applies on all fours to the income-tax proceedings. It is trite that once a transaction is shown to be of the nature of income, the onus shifts to the assessee to show that the same was not taxable. It can thus be safely assumed that the appellant has grossly failed in its duty to mitigate the burden cast upon it in so far as proving the genuineness of the transaction from the said party is Concerned. In this regard it is also pertinent to mention that while dealing with the concept of burden of proof, onus of proving is always on the person who makes the claim and not on the Revenue. While dealing with the issue of deciding the burden of Droof, Hon'ble Supreme Court in the cases of CIT Vs. Durgaprasad More 82 ITR 540 and Sumati Dayal Vs. GT 214 ITR 801 has held that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not real and that Taxing Authorities are entitled to look into surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. The Hon'ble court also held that, it is no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden to prove that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. In the case of Durgaprasad More (Supra), the Hon'ble Court went on to add that a party who relies on a recital in a Deed has to establish the truth of this recital, otherwise it will be very easy to make self serving statements in documents either executed or taken by a party who relied on those recitals. If all that an assessee who wants to evade tax has to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. The Hon'ble Court further held that the Taxing Authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look in to the surrounding circumstances to find out the reality of the recitals made in those documents. 7.5 The onus to prove that apparent, is not the real one, is on the party who claims it to be so, as held by the Hon'ble Supreme Court in the case of GT v. Daulat Ram Rawatmull [1973] 87 ITR 349 and CIT v. Durga Prasad More (supra).It is also a settled legal proposition that if no evidence is given by the party on whom the burden is cast, the issue must be found against him. Therefore, onus is always on a person who asserts a proposition or fact, which is not self evident. However, in the instant case, the appellant has miserably failed to lead evidence. 7.6. As per the assessment order, AO made the addition, estimating the profit @15% of the profit margin embedded in the non-genuine purchases. In the case of Simit P Sheth, the reasoning given by the Hon'ble Tribunal, which is confirmed by the High Court, it is stated that 'the malpractice of bogus purchase is mainly to save 10% sales tax etc., It has also been informed that in this industry about 2.5% is the profit margin. Therefore, respectfully following the decisions of trie co-ordinate bench pronounced on identical circumstances, we hereby direct that the disallowance is required to be sustained at 12.5% of the purchase from those parties'. 7.7 Without prejudice to the request of total deletion of the addition, alternative plea of the appellant in the written submissions is that, appellant has already shown gross profit of 6.65% and the rate of tax is 4% therefore no addition to be made of this court. The appellant furnished the copies of the invoices and on perusal of the same in all the bills it is noticed that the percentage of VAT levied is @4%. Since the appellant is also in the same line of business i.e.
trading in ferrous and non-ferrous metals, as per the logic, the profit margin should be adopted @2.5%. In view of the above, if the profit percentage embedded on such purchases is restricted to 6.5%, (i.e. 4% of VAT levied + 2.5% towards profit margin), in my considered opinion, that will meets the ends of justice. Moreover, in the present case, the average GP already admitted is worked out to 6.65%, as per the workings given by the appellant's AR. The appellant's request to delete the addition cannot be considered and the AO is directed to estimate the addition @ 6.5-/in addition to the GP already declared in the regular course of business, as this is the additional benefit the appellant is getting for purchasing the goods in the grey market without any bill. Taking all the facts into consideration and applying the logic of Simit P.Sheth case to the present case for estimating the profit element embedded on non-genuine purchases, the AO is directed to restrict the estimation @ 6.5% ( 4% VAT and 2.5% of profit margin) on the total non genuine purchases of Rs.1,06,94,5187-, made from the five parties. Appeal on these grounds is treated as 'Partly Allowed.
Assessee is in further appeal before us.
It was contended by learned AR that notices issued under section 133(6) of the Act returned unserved with remark left and not known. The parties who are not available on given address and informed left means these parties were available at one point of time when the assessee made purchases from them and now they have shifted elsewhere without informing assessee. Merely because said parties are not available on given address at the time of assessment does not mean the assessee had no transactions with them or they are hawala parties. He further contended that the learned Assessing Officer failed to provide copies of notices issued under section 133(6) of the Act, envelopes and certificate from postal authorities staging therein reason for non service of said notices to addressee. Merely because these parties are not available at the given address at the time of assessment which is more than five years after the date of transactions, by itself it does not prove that said parties are non-existent and never supplied any material to the assessee. With regard to estimation of profit at 6.5%, learned AR relied on the decision of Co-ordinate Bench and submitted that profit rate should be further lowered down. 8. I have heard rival contentions and carefully gone through the orders of the authorities below and found that addition was made by the AO on finding that goods purchases by assessee were from bogus suppliers, accordingly, he estimated profit of 15% on such purchases. However, the AO has not added 100% of such bogus purchases. After recording detailed finding, the CIT(A) has further reduced the addition to the extent of 6.5%. The finding so recorded by CIT(A) has not been controverted by learned AR by bringing any positive material on record. Accordingly, I find that profit rate applied by CIT(A) at 6.5% is very reasonable keeping in view the totality of facts and circumstances of the case. 9. In the result, appeal of the assessee is dismissed.