GEOLIFE ORGANICS,MUMBAI vs. ASST CIT 23(2), MUMBAI

आदेश / O R D E R PER R.C.SHARMA (A.M): These are the appeals filed by the assessee against the order of CIT(A)—40, Mumbai dated 03/03/2016 for the Assessment Year 2009-10 in the matter of order passed u/s.143(3) r.w.s.147 of the Act. 2. The following grounds have been taken by the assessee:-

ITA No.4276/Mum/2016 1. (a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in upholding the action of the AO in re-opening of the assessment u/ s.147 of the Income Tax Act, 1961. 2.a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition of ~ 18,77,658/- made by the AO to the income of the Appellant on M/s. Geolife Organics, Mumbai and others account of possible profit element @ 12.5% embeded in purchases made through alleged non-genuine parties on the basis of information of the Sales Tax Department about suspicious dealers having rejected the accounts u/s.145(3). b) The Id. CIT(A) failed to appreciate that :- i) all the purchases are genuine beyond doubt and supported by sufficient materials; ii) all the goods purchased from these parties have been backed by corresponding sales which are accepted to be genuine; iii) the gross profit ratio shown by the Appellant is quite reasonable; iv) nothing has been brought on record by the AO that money has been exchanged in the hands in lieu of payment made for these purchases by account payee cheque; and v) the AO had neither provided copy of materials and statements relied upon by him nor allowed any opportunity to the Appellant to cross examine those parties who have been alleged to have provided the accommodation entries of such purchases. c) In reaching to the conclusion and confirming such addition made by the AO, the Id. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. d) Without prejudice, the rate or percentage of profit element embeded in such purchases as fixed by the AO and confirmed by the CIT(A) is excessive and unreasonable on the facts of the case.

3. The Id. CIT(A) erred in holding that levy of interest u/s.234B of the Income Tax Act, 1961 is mandatory. The Appellant denies its liability for such interest.

4. The Id. CIT(A) erred in holding that the ground raised disputing initiation of penalty proceedings u/s.271(1)(c) is premature. The Appellant denies its liability for such penalty.

1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the re-opening of the assessment U/s.14 7 of the Income Tax Act, 1961 made by the AO as the prescribed conditions therein are not satisfied.

M/s. Geolife Organics, Mumbai and others 2.a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition of Rs. 17,67,445/- made by the AO to the income of the Appellant on account of possible profit element @ 12.5% embeded in purchases made through alleged non-genuine parties on the basis of information of the Sales Tax Department about suspicious dealers having rejected the accounts u/s.145(3). b) The Id. CIT(A) failed to appreciate that :- i) all the purchases are genuine beyond doubt and supported by sufficient materials; ii) all the goods purchased from these parties have been backed by corresponding sales which are accepted to be genuine; iii) the gross profit ratio shown by the Appellant is quite reasonable; iv] nothing has been brought on record by the AO that money has been exchanged in the hands in lieu of payment made for these purchases by account payee cheque; and v) the AO had neither provided copy of materials and statements relied upon by him nor allowed any opportunity to the Appellant to cross examine those parties who have been alleged to have provided the accommodation entries of such purchases. c) In reaching to the conclusion and confirming such addition made by the AO, the Id. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. d) Without prejudice, the rate or percentage of profit element embeded in such purchases as fixed by the AO and confirmed by the CIT(A) is excessive and unreasonable on the facts of the case.

4. The Id. CIT(A) erred in holding that the ground raised disputing initiation of penalty proceedings u/s.271(1)(c) is premature. The Appellant denies his liability for such penalty.

M/s. Geolife Organics, Mumbai and others

1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the re-opening of the assessment U/s.14 7 of the Income Tax Act, 1961 made by the AO as the prescribed conditions therein are not satisfied. 2.a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition of Rs. 11,50,339/- made by the AO to the income of the Appellant on account of possible profit element @ 12.5% embeded in purchases made through alleged non-genuine parties on the basis of information of the Sales Tax Department about suspicious dealers having rejected the accounts u/s.145(3). b) The Id. CIT(A) failed to appreciate that :- i) all the purchases are genuine beyond doubt and supported by sufficient materials; ii) all the goods purchased from these parties have been backed by corresponding sales which are accepted to be genuine; iii) the gross profit ratio shown by the Appellant is quite reasonable; iv] nothing has been brought on record by the AO that money has been exchanged in the hands in lieu of payment made for these purchases by account payee cheque; and v) the AO had neither provided copy of materials and statements relied upon by him nor allowed any opportunity to the Appellant to cross examine those parties who have been alleged to have provided the accommodation entries of such purchases. c) In reaching to the conclusion and confirming such addition made by the AO, the Id. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. d) Without prejudice, the rate or percentage of profit element embeded in such purchases as fixed by the AO and confirmed by the CIT(A) is excessive and unreasonable on the facts of the case. 3. The Id. CIT(A) erred in holding that levy of interest u/s.234B of the Income Tax Act, 1961 is mandatory. The Appellant denies his liability for such interest.

M/s. Geolife Organics, Mumbai and others

disputing initiation of penalty proceedings u/s.271(1)(c) is premature. The Appellant denies his liability for such penalty.

3. Rival contentions have been heard and record perused.

4. Common grievance of all the assessee pertains to upholding addition of 12.5% on the alleged bogus purchase. Facts are similar in case of all the assessees. In the case of Shri Jabarsingh B Daiya, we found that the assessee is an individual, engaged in the business of trading in ferrous and non ferrous metals under the proprietary concern by name, M/s Ankur Steel & Engineering Company. The return of income for the year under appeal was filed on 10-08-2009 declaring total income of Rs. 3,17,810/-. The case was reopened u/s 147, by issuing notice u/s 148 of the Act on 26-02-2014, on the basis of 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. Assessment u/s 143(3) r.w.s. 147 of the IT. Act, 1961 was completed by the Ld. AD on 09- 03-2015 determining the total income at Rs. 20,85,250/-. The AO relying on the case of CIT Vs Simit P. Sheth [2013] reported in 356 ITR 451 (Guj.) and also considering the fact that purchases are recorded in the books of account, profit element embedded in such purchases was taken as the profit earned from purchases shown to have been made from the eighteen parties and estimated the profit @12.5% of the total non genuine M/s. Geolife Organics, Mumbai and others purchases of Rs.1,41,39,565/- which worked out to Rs.17,67,445/-, and added the same to the total income of the assessee.

5. By the impugned order, CIT(A) confirmed the action of the AO against which assessee is in further appeal before us.

6. It was contended by learned AR that the Assessee has furnished all the details of purchases, payment of which was made by account payee cheque, quantitative tally of purchases and sales so as to substantiate the fact that all the goods so purchased were sold by the assessee. He placed reliance on the decision of Bombay High Court in case of Nikunj Exim Enterprises Pvt. Ltd., 372 ITR 619 and Goolamally Hasanjee (ITA/3740-41/Mum/2012 – A.Y.06-07 and 08-09 dt. 10.06.2014). He also referred to the case of Ashok Talreja – HUF (ITA / 4629/Mum/2014 & Ors. A.Y.s07-08 to 09-10 dated 17/03/2016) and stated that facts of that case were similar to the case under consideration.

We have considered the submission on behalf of the Revenue. However, from the order of the Tribunal dated April 30, 2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement, i.e., reconciliation statement but also in view of the other facts. The Tribunal records that the books of account of the respondent- assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, i.e., Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the Commissioner of Income-tax (Appeals), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as the Commissioner of Income-tax (Appeals) have disallowed the deduction of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs. 1.33 crores was not bogus. No fault can be found with the order dated April 30, 2010, of the Tribunal.

M/s. Geolife Organics, Mumbai and others i) CIT v/s Nikunj Eximp Enterprise Pvt. Ltd. 372 ITR 619 (Bom.); ii) A"CIT v/s Tarla R. Shah, ITA no.5295/Mum./2013, dated 2nd February 2016; and iii) Shri Harilal Chunilal Jain v/s ITO, ITA no.4547/Mum./2014, dated 1 January 2016.