SHRI KIRTIKUMAR VASANTBHAI THAKKAR,,PATAN vs. THE INCOME TAX OFFICER, WARD-1,, PATAN

आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-

This assessee’s appeal for A.Y. 2008-09, arises from order of the CIT(A), Gandhinagar dated 01-08-2014, in proceedings under section 271(1)(c) of the Income Tax Act, 1961; in short “the Act”.

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“1.1 That on the facts and in the circumstances of the case and as per law, learned CIT (Appeals) erred in sustaining penalty under section 271(1)(c) of the Act, of Rs. 5,85,773, levied by the Assessing officer 1.2 That learned CIT (Appeals) was ought to have consider the fact that additions made to the returned income by the A.O. is solely on estimate basis and on the hypothesis that appellant had inflated the purchase price. Additions has been made without considering the fact that appellant had proved the Purchases, disallowed by the AO, in terms of quantity and value. Hence, no penalty is leviable under section 271(1)(c) of the Act in respect of additions sustained, on estimate basis, and same is deserves to be deleted. 1.3 That as per law and as per settled legal propositions, penalty under section 271(1)(c) is not applicable when additions are made on estimate basis without any cogent material or findings on record that assessee concealed the income or provided inaccurate particulars of income.”\

All the above mentioned three grounds of appeal are interconnected to the same issue therefore they are adjudicated together as below.

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under consideration. During the course of assessment proceedings, the assessing officer has afforded a number of opportunities to the assessee to prove the genuineness of the aforesaid bogus purchases made from M/s Vishal Trader but the assessee was failed to produce the relevant supporting evidences to substantiate his claim of purchases made from M/s Vishal Trader. The assessee in reply to question no. 3 of his statement recorded on 10th October, 2008, has admitted that he had received bills of purchases without any delivery of goods from M/s Vishal Trader for adjustment purposes. Consequently, the total purchases of the amount of Rs. 97,87,524/- made from M/s Vishal Trader under consideration was disallowed by the assessing officer. The assessing officer has also initiated penalty proceedings u/s. 271(1)© of the act for furnishing inaccurate particulars of income. The ld. CIT(A) has confirmed the bogus purchases to the amount of Rs. 19,29,273/- out of the total bogus purchases of Rs. 97,87,524/-. The assessee contended that the ld. CIT(A) has estimated the income @ 25% of purchases and there is no material on record to substantiate that assessee had inflated the purchases by introducing the bogus bills. During the course of penalty proceedings the assessing officer has not accepted the explanation of the assessee and stated that the assessee Shri Kiritbhai V. Thakkar in his statement recorded during the course of survey on 10th October, 2008 has accepted that the adjustment bills were taken by him from M/s Vishal Trader. He further stated that ld. CIT(A) has confirmed the bogus purchases to the extent of Rs. 25% of purchases after considering the fact that purchases made by the

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assesssee from M/s Vishal Trader were not genuine. Consequently, the assessing officer has levied penalty to the amount of Rs. 5,85,773/- for furnishing inaccurate particulars of income. Aggrieved assessee filed appeal before the ld. CIT(A) . The ld. CIT(A) has sustained the penalty levied by the assessing officer by observing as under:- “6. I have considered the facts of the case, assessment order, submission made by the appellant and the case laws relied upon. The AO has made the addition contending that the in appeal the ClT(A) had confirmed the addition to the tune of Rs.19,29,273/- on account of bogus purchases and on this addition confirmed, AO held that appellant has held that appellant had furnished inaccurate particulars of income. No details have been filed before the AO even during the penalty proceedings.

Appellant during the course of appellate proceedings contended that AO had made 100% disallowance of purchases from M/s Vishal Traders on the ground of bogus purchases and that the Hon'ble CIT(A) never afforded any opportunity during the appellate proceedings to substantiate the purchase price of items purchased from Vishal Traders.' Appellant in its contention have also furnished before me a comparative chart for the purchases made of wheat and rice from M/s-Vishal Traders: On careful consideration of the case of the appellant, I find that Bogus purchases were made by the appellant from M/s. Vishal Traders. This fact has been proved from statements recorded of the proprietor of M/s Vishai Traders (532, Market Yard, Virpur, District- Kheda). whose proprietor - Shri Dharmendra. J Pandva in the statements recorded by the department on 9.7.2.008 and 26.9.2008 admitted that he had issued only bogus bills and had not made any delivery of goods. He had stated that he received only cash commission for issuing bills. Copies of statements of the Shri Dharrnendra J. Pandya were provided to the appellant by the AO. The AO had made the addition of Rs.97,87,524/- only because according to him, appellant had shown purchases of Rs.97,87,524/- from Vishal Traders during AY 2008-09. The appellant, in the statement recorded after survey on 10/10/2008 had himself accepted that accommodation bills were taken from Vishal Traders. The relevant portion of the statement in response to question no.3 is relevant which is reproduced below : Statement dated 10.10.2008 of Shri Kiritkumar Vasantbhai Thakkar-proprietor – in response to question no.3 "Q.3 As per this office letter dated 7.10.2008 you had been instructed to prove the purchase of Rs.72,39,874, from M/s. Vishal Traders, Virpur and to bring bills and other evidence in support to the purchase. As informed by you, you have purchased of Rs.72,39,874 from M/s. Vishal Traders, However, as per bank

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statement of M/s. Vishal Traders with "Harij i\lagrik Sahakari Bank Ltd., Harij", you have deposited Rs. 1,10,14,492 in the said bank account. Explain about the same. Further, if you have brought anything in addition to Bills please produce it. ' Ans.I have no other evidences except bills. On 11.9.2008, I have stated that I received the goods from M/s. Vishal Traders. However, I, confirm that I had not received any goods from M/s. Vishal Traders, Virpur. I had received only accommodation, bills from M/s. Vishal Traders. I was benefited by 10% of bill amount. Further, in my statement on 29.9.2008 had stated that I purchased goods worth Rs.72,39,874 from M/s. Vishal Traders. However, as per Bank statement I have done business amounting to Rs. 1,10,14,492 with M/s. Vishal Traders; I have earned 10% of the same i.e. Rs. 11,01,449. I disclose the same as my income. I agree to pay tax thereon. I will deposit the tax in FY 2008-09." Shri Dharmendra Pandya, Prop, of Vishal Traders has also confirmed having issued only bills without goods for which he received .only commission.' For this question number -.13 of statement dated 9/7/2008 of Dharmendra Pandya is reproduced below and also question "number 7 of statement dated 26/9/2008: No. 13 of statement dated 9.7.2008 : "Q. As stated in the bills, has the firm of M/s. Vishal Traders, proprietor Dharmendra D. Pandya, Address- 532, Market Yari, Virpur, Kheda, delivered any goods such as 'Ratda' 'Khol', 'Raido Erando', etc, to M/s. Tirupati Agro Industries, Kadi as well as other various companies such as Guajrat Ambujd Exports Ltd., the traders of Harij and. traders of Ahmedabad, Kalupur ? Give complete details. Ans:The firm of M/s. Vishal Traders, Proprietor Dharmendra D. Pandya, Address: 532; Market Yard, Kheda, has not delivered any goods such as 'Raida1, Khpl', 'Raidp',' 'Erando', oil etc. to anybody and further, it is not doing its business.'' Only bills were being issued upon which, I was being paid the commission of monthly about Rs.2000 to 3000 through Shri Madanlal (Taiodwala). He was personally coming to Godhra and was paying commission to me. Against the payment of commission to me, the said Shri Madanlal (Taiodwala) was taking my signature in the bank account opening forms as well as cheque books of all banks..,,.,.,,.,,,......,....." . Question No 7 of statement dated 26.9.2008 "Q.7 As stated by you hereinabove, you have delivered any type of goods and have only issued bogus bills to the parties. So how did you benefit from the same? How were the parties to whom you had issued the bogus bills, benefiting from the same ? Please explain. Ans. As stated by me hereinabove, I have not delivered any type of goods but have only issued bogus bills. In these transactions, in case of one bag of grains (100 kgs.), I was getting Rs 1 as commission and in case of oilseeds, per one bag (100 kgs), I was getting commission of Rs.0.25 paise as commission. And these bogus bills were demanded by the above referred parties and hence, they were given the same. I am not aware as to what benefit they were getting from the same. I had issued the said bogus bill only because I was getting commission against them." On analysis of the bank account of the appellant maintained at Harij Nagrik Sahakan Bank Ltd., Harij and of Vishal Traders in the same bank, my predecessor noticed that appellant deposits cash in his bank account before issuing any cheque to Vishal Traders and Vishal traders withdraws cash of the

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same amount immediately after depositing the cheque received from the appellant. The appellant has not brought on record any new evidences in support of its contention other than what was produced before my predecessor during the quantum proceedings or before the AO. In view of the above, it is held that the AO is justified in levying penalty of Rs.5,85,773/- u/s 271(1)(c) of the Act relying, on the decision of the Hon'ble Gujarat High Court in the case of A. K. Shah & Co. vs CIT reported in 238 ITR 415. The penalty levied is therefore held justified and is hereby confirmed.”

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purchases by the ld. CIT(A) to the extent of 25% is not a general estimation but it is based on specific undisputed facts that the genuineness of the purchase was not proved because it was substantiated with relevant material and complete modus operandi of receiving bogus bills of purchases without any delivery of goods. After considering the above facts and findings we considered that the decision of the ld. CIT(A) is justified in sustaining the penalty levied by the assessing officer. Therefore, the appeal of the assesse is dismissed.

Order pronounced in the open court on 19-12-2017

Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 19/12/2017 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद