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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI MANOJ KUMAR AGGARWAL, HONBLE
O R D E R PER C.N. PRASAD (JM) 1. These two appeals are filed by the Revenue against different orders of the Learned Commissioner of Income Tax (Appeals)-3, Thane, dated 21.09.2015 for the Assessment Years 2009-10, 2010-11. The only grievance of the Revenue in its appeal is that the Ld.CIT(A) erred in restricting the disallowance to 25% of the bogus purchases.
2 Vijay Balkrishna Naik 2. Inspite of issue of notice none appeared on behalf of the assessee nor any adjournment was moved by the assessee. Therefore, we proceed to dispose off these appeals on hearing the Ld. DR on merits.
Briefly stated the facts are that the assessments of the assessee were reopened u/s. 147 and reassessments were completed on 07.10.2013 u/s. 144 r.w.s. 147 of the Act determining the income of the assessee at ₹.88,31,880/- and ₹.1,68,92,140/- for the Assessment Years 2009-10, 2010-11 respectively. The Assessing Officer while computing the income of the assessee treated purchases of ₹.68,48,091/- and ₹.70,18,032/- as non-genuine/bogus purchases for these two assessments respectively for the reason that the purchases made by the assessee from some of the dealers referred to in Page No.2 of the Assessment Orders are non-genuine. According to the Assessing Officer the dealers are providing only the accommodation entries as deposed by them before Investigation Authorities of Sales Tax Department of Maharashtra Government and the notice issued to the dealers by the Assessing Officer were returned and two of the dealers have not replied though the notices were received by them. The Assessing Officer also observed that confirmation of the concerned party, copy of transport receipts, copy of stock register, etc., were not furnished by the assessee. Therefore, for these reasons Assessing Officer concluded that the 3 Vijay Balkrishna Naik purchases made by the assessee are non-genuine and entire purchases from the dealers referred to in Page No.2 of the Assessment Order were treated as bogus purchases.
On appeal the Ld.CIT(A) restricted the addition/disallowance to 25% of the bogus purchases for these two assessment years. Ld. DR vehemently supported the orders of the Assessing Officer in bringing to tax the entire bogus purchases.
We have heard the Ld. DR, perused the orders of the authorities below. The Ld.CIT(A) restricted the addition/disallowance to 25% observing as under: - “(i). I have carefully considered the submissions of the appellant, the observations of the AO in the assessment order, case laws relied upon by the appellant and the facts of the case, and therefore, I proceed to decide the appeal of the appellant. (ii) Besides the information and affidavits received from Sales Tax Department regarding about accommodation entry provided by the Hawala dealers to appellant, the Assessing officer has also observed that the appellant is not maintaining any stock register. No transportation receipts and delivery challans of goods were produced but the appellant has stated that delivery is made by supplier by tempo or other vehicle on hire basis by them, however on the invoices nothing was mentioned about the mode of transportation. The appellant, vide letter dated 03.09.2015 has stated that the said goods were purchased through brokers appointed by the suppliers. (iii) The proprietor of M/s.Bhumi Sales Corporation, one of the Hawala dealers has categorically denied any purchase/sale transaction with the assessee, vide letter dated 05.08.2013. During the time of assessment proceedings, the assessee never 4 Vijay Balkrishna Naik asked for cross examination and even before me, the appellant has not insisted for cross examination except filed the ledger account showing closing balance of Rs.8,64,506/-. Therefore, the total purchase of Rs.17,86,421/- is taken as bogus purchases and added to the total income of the appellant. (iv) Before me, the appellant has not produced any further details, besides what is furnished before the AO. The appellant has placed reliance on various judicial pronouncements, without looking into the facts of each case, and each case at every stage from Assessing Officer, CIT(A) and Hon'ble ITAT is different from the facts of this case, therefore, the reliance place on various Hon'ble judicial pronouncements by the appellant is not acceptable. The reasons being that the Assessing Officer has already discussed in the assessment order and the relevant points are discussed below: (a) The aforesaid purchases are booked by the assessee in his books of accounts as expenses. Therefore, the onus to prove the genuineness and correctness of these purchases transactions lies upon the assessee. (b) ln response to notice issued u/s133(6) to 9 parties, the notices have returned back by the postal authorities with the remarks 'not known/unclaimed/refused'. In the case of one party, M/s. Bhurni Sales Corporation, the proprietor categorically denied any purchase/sale transaction with the assessee vide letter dated 05.08.2013. (c) The assessee was given an opportunity to furnish the supporting documentary evidences like confirmation of the concerned party, copy of transport receipts, copy of stock register, etc. However, the assessee furnished only ledgers of aforesaid evidences. (d) The purchase bills furnished by the assessee in respect of the aforesaid parties contain none of the details like the lorry no., the mode of transport, etc. The persons who have signed these bills are not identifiable, the signatures appearing on these bills differ from the signatures as per affidavits/statements given to sales tax authorities, and in most of the cases, the persons are putting signatures on behalf of some persons or firms.
5 Vijay Balkrishna Naik (e) In some of the cases, the bank statements of the Hawala TIN parties are also provided. It is clearly seen that the cheques are deposited and cash is withdrawn immediately. In some of the cases, it is stated that the bank account was not operated by them but operated by the other person. The statements/affidavits of some of the aforesaid parties filed by the aforesaid parties are enclosed as Annexure-A to this order as part of the order. (f) The assessee is trying to rely upon his constant rate of consumption of material and subsequent gross profit ratio. As already mentioned above, the consumption of the material by the assessee is not being doubted. However, the source of material purchased and consumed be claimed to be from the hawala dealers is being rejected for want of proper supporting evidences. (g) Further the assessee relies upon the case laws i) M.K. Brothers 163 ITR 249 (Guj) & ii) Nlkunj Eximp Enterprises Pvt. Ltd. 216 Taxmann 171 (Bom.) in support of his claim. Both the aforesaid case laws are perused and it is noticed that in both the cases purchases were treated as genuine by the Hon'ble High Courts when they were not verifiable due non availability of the purchase parties. However, in the case of the assessee, the facts are different as the purchase parties themselves have denied any transactions with the assessee. Hence, the cases laws relied upon by the assessee are distinguished on account of difference in the facts and circumstances. (h) The above findings clearly demonstrate and prove that the purchases are bogus. The affidavits filed by the Hawala Parties before the Sales Tax Authorities & letter submitted in the office by one of the parties, have proved beyond doubt that the entire transactions are hawala accommodation entries only. The assessee has adopted the modus operandi of hawala transactions in order to suppress his income. As directed earlier, the purchases from the aforesaid parties are treated as bogus purchases and the assessee's unaccounted stock brought in, in the guise of purchases from outsiders is treated as unexplained expenditure u/s 69C of the Income Tax Act, 1961.
6 Vijay Balkrishna Naik (v) From the above discussion, it is seen that the appellant could not produce the hawala dealers before the Assessing Officer and notices issued u/s.133(6) had come back unserved; no lorry/truck receipts for transportation of goods and no weigh bridge receipts were produced; Inward register and stock registers were also not maintained, however, the appellant has stated that on these purchases corresponding sales have taken place and payments were made through banking channel, therefore, the disallowance of entire purchases made from hawala dealers is not justified. (vi) There are various reasons as to why the hawala dealers were absconding and also not appeared before the Assessing Officer for cross examination during assessment proceedings, whereas in other purchases no such anomaly have been found by the Assessing Officer. At least, the appellant could have produced copy of return filed along with P & L a/c and B/S of hawala dealers before Assessing Officer but fail to do so. (vii) The statement or affidavits filed by the hawala dealers before the Sales Tax Department has evidentiary value, which cannot be ignored. (viii) From the above discussion, it can be concluded that, it is case where the goods were received from the parties other than the persons who had issued the bills of such goods. Though the purchases were shown to have been made by making payment to hawala dealers but goods must have come from grey market, therefore, under such circumstances, the chances of purchase cost being inflated could not be ruled out.”
Further, the Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. Similar view has been taken by the Hon'ble Gujarat High Court in the case of CIT v. Simit P.
7 Vijay Balkrishna Naik Seth [38 taxman.com 385]. Simply because the parties were not produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171]. Thus, we do not see any infirmity in the order passed by the Ld.CIT(A) in sustaining the addition to the extent of 25% of the purchases treated as non-genuine by estimating the profit element in such bogus purchases.
In the result, Revenue appeals are dismissed.
Order pronounced in the open court on the 27th September, 2017.