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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
Instant appeal of the assessee is directed against the order dated 2nd November 2015, passed by the learned Commissioner (Appeals)– 32, Mumbai, for the assessment year 2009–10.
The only issue in dispute in the present appeal is in relation to ad–hoc addition of ` 2,84,082, sustained by the learned Commissioner (Appeals).
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Brief facts are, the assessee a partnership firm is a wholesale and retail trader of cotton waste, chindi waste and rags waste. For the assessment year under consideration, assessee filed its return of income on 22nd September 2009, declaring total income of ` 1,47,584. In the course of assessment proceedings, the Assessing Officer found that as per the information available on record in the form of letter received from DGIT, who in turn, has received information from Sales Tax Department, the assessee has shown certain purchases from certain entities who provided only accommodation bills / entries, hence, they are bogus purchases. The details of such purchases are as under:–
Name of the Party Amount (`) 86,320 ISK Trading Co. 2,02,800 KRC Trading Co. 13,27,586 Arihant Traders 11,12,228 Rahul Traders 28,28,934 Total:
The Assessing Officer noticed that as per the information obtained from the Sales Tax authorities, the assessee had shown purchases of ` 27,28,934 from the aforesaid parties during the financial year relevant to the assessment year 2009–10 and as per the investigation conducted by the Sales Tax Department, it was found
3 Adamji & Company that these parties were not doing genuine business of purchases and sale and merely indulged in providing accommodation bills. As observed by the Assessing Officer, during the assessment proceedings, the assessee was asked to furnish ledger account, copies of bills along with the payments made, documents relating to transportation and receipts of the goods purchases, copy of bank account, etc. As alleged by the Assessing Officer, though, the assessee submitted the ledger accounts of concerned parties, the bills and bank statements reflecting the payments made, however, the assessee did not produce purchase register, delivery challans, lorry receipts, transportation details, etc. He also noted that the concerned parties had admitted before the Sales Tax Department that they had not made any purchase and sale transactions. Thus, the Assessing Officer ultimately concluded that the purchases shown from these parties are to be treated as bogus purchases and profits have to be estimated @ 12.5% on such purchase turnover shown by the assessee. While so concluding, the Assessing Officer also observed that the assessee had agreed for a reasonable addition on such purchases. Accordingly, the Assessing Officer concluded the assessment by making an addition of ` 3,41,117, being 12.5% of the purchase turnover of ` 27,28,934. Being aggrieved of such assessment order, the assessee preferred appeal before the learned Commissioner (Appeals).
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The learned Commissioner (Appeals), however, was of the view that since the investigation conducted by the Sales Tax Department revealed that the parties concerned are providing accommodation bills and these parties also have admitted before the Sales Tax Department that they are not involved in actual purchase or sale transaction, the purchases shown by the assessee from the concerned parties have to be treated as bogus. However, he was of the view that the estimation of profit on such bogus purchases has to be made @ 10.41% instead of 12.5% adopted by the Assessing Officer.
Disputing the observations of the Assessing Officer that the assessee has admitted for estimation of profit on the purchases the learned Authorised Representative submitted, the assessee in course of assessment proceeding has not made any such admission. As far as merit of the issue is concerned, the learned Authorised Representative submitted, in the course of assessment proceedings, the assessee has submitted all relevant and necessary supporting document such as purchase & sales bills, ledger account copies of concerned parties, bank statement showing payment made to them to prove the genuineness of the purchases. He submitted, the Assessing Officer has not made any enquiry or investigation independently to ascertain the correctness of assessee’s claim. It was submitted, the Assessing Officer simply relying upon the information obtained from the Sales
5 Adamji & Company Tax Department has held the purchases made by the assessee as bogus. The learned Authorised Representative submitted, when the Assessing Officer accepts the sales turnover of the assessee, there is no reason to dispute the purchases, as in the absence of corresponding purchases, the assessee could not have effected sales. He submitted, absence of transportation bills cannot be the sole criteria for treating the purchases as bogus. The learned Authorised Representative submitted, the Assessing Officer, though, has relied upon the statement of the sellers of goods stated to have been given before the Sales Tax authorities, but the assessee was neither confronted with such statements nor was given opportunity to cross– examine the concerned parties. He, therefore, submitted in the absence of any adverse material brought on record to prove the claim of assessee false the addition made by estimating profit on the so called bogus purchase is unjustified. The learned Authorised Representative submitted, under identical facts and circumstances, the Tribunal deleted the additions made by the Department in the following cases:– i) DCIT v/s Rajiv G. Kalathil, ITA no.6727/Mum./2017, dated 20th August 2014; ii) ITO v/s Ashok Talreja, ITA no.4629/Mum./2014 & Ors, dated 17th March 2016;
6 Adamji & Company iii) ACIT v/s Ramila Pravinshah, ITA no.524/Mum./2013, dated 5th March 2015; and iv) CIT v/s Nikunj Exim Enterprises Pvt. Ltd., 372 ITR 619.
Learned Departmental Representative on the other hand relying upon the observations of the learned Commissioner (Appeals) submitted, since on the basis of information obtained from Sales Tax Department, it was found that the concerned parties from whom the assessee claimed to have purchased goods are only providing accommodation bills and have also admitted to that effect before the Sales Tax Authorities, the Assessing Officer was justified in estimating the profit by treating the purchases as bogus.
We have considered the submissions of the parties and perused the material available on record. Before deciding the issue on merits, it is necessary to deal with the observations of the Assessing Officer that the assessee has agreed for a reasonable addition on the bogus purchases. In this context, on a query from the Bench to verify from the assessment records, whether any such admission by the assessee either in writing or by way of endorsement in order sheet is available, the learned Departmental Representative fairly submitted, no such admission by the assessee is available on record. That being the fact emerging from the record we proceed on the basis that no admission was made by the assessee in the course of assessment proceedings
7 Adamji & Company for addition at reasonable basis on the so called bogus purchases. Reverting back to the merits of the issue, on a perusal of the assessment order, it is quite clear that on the basis of information obtained from the Sales Tax Department, the Assessing Officer had concluded that the concerned parties from whom the assessee claimed to have purchased goods were not involved any purchase or sale transaction and are only providing accommodation bills. Though, the assessee in the course of assessment proceedings had submitted the ledger account copies of the concerned parties in the books of the assessee, purchase and sale invoice and bank statement showing payment made to them but the Assessing Officer apparently ignoring these evidences has treated the purchases made by the assessee from the concerned parties as bogus solely on the fact that the concerned parties had admitted before the Sales Tax Authorities that they are providing accommodation bills. It is evident on record that the Assessing Officer has not conducted any independent enquiry from his side to ascertain / verify the fact as to whether the purchases made by the assessee are genuine or not. Moreover, it is evident that the Assessing Officer has relied upon the statement recorded from the parties before the Sales Tax authorities to draw adverse inference against the assessee. As it appears, neither the Assessing Officer had confronted the adverse material to the assessee nor has allowed the 8 Adamji & Company assessee to cross–examine the concerned persons. Therefore, the adverse material used by the Assessing Officer in detriment to assessee’s interest remained uncontested which is in clear violation of principles of natural justice. Moreover, it is a fact on record that the assessee in the course of assessment proceedings has produced documentary evidence to prove the genuineness of the purchases. It is also not disputed that the Assessing Officer has accepted the sales turnover disclosed by the assessee. Therefore, unless, the assessee had made purchases he could not have effected corresponding sales. Therefore, before treating the purchases made by the assessee as bogus, the Assessing Officer should have conducted necessary enquiry keeping in view the aforesaid fact. Without conducting any enquiry, the Assessing Officer solely relying upon the investigation made by the Sales Tax Department cannot make the addition, that too, on the basis of untested material. The decisions relied upon by the learned Authorised Representative referred to above fully support this view. Therefore, in the aforesaid facts and circumstances, we are of the view, the addition made on account of estimation of profit by treating the purchases as bogus has no legs to stand. Accordingly, we delete the same.
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In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 27.05.2016