ITO 21(2)(4), MUMBAI vs. YOGESH MAHENDRA PANDYA, MUMBAI

आदेश / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER :

2. The grounds raised by the Revenue read as under:-

ITA 2893/M/12 2

“1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition made of Rs.30,09,819/- on account of difference in purchase as per P&L A/e. & purchase register without appreciating the fact that the subject addition is based on the fact.

2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs.3,06,54,370/- in respect of purchases from Harsh Enterprises & Precision containers without appreciating the fact that these transactions are not genuine & involved parties denied the transaction.

3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs.26,26,083/- in respect of purchase from M/s. Shreeji Enterprises & M/s. International Steel Industries as hawala purchases without appreciating the fact that these transactions were not genuine & the assessee did not produce any evidence to prove its veracity.

4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs.23,00,80S/- on account of purchases made from M/s. Panam Sales Pvt. Ltd. without appreciating the fact that these transactions were not genuine & the assessee did not produce any evidence to prove its veracity.

1. Panam sales Pvt. Ltd.

2. Shreeji Enterprises 3. International steel Industries, 4. Om Shiv Agency 5. J.D. Sales Corporation 6. Harsh Enterprises 7. Precision Containers Ltd.

The assessee was again asked by the AO to furnish the remaining details which was not furnished earlier including party wise details of purchase and sale recorded in Profit and Loss Account.

The A.O. issued Notices u/s 133(6) of the Act to the following parties:-

1. M/s Panam Sales Pvt. Ltd.

The AO observed that the assessee is not maintaining any stock register . the analysis of the bills show that these bills are not proper bills as the order number,date of order, dispatch through whom, lorry etc are not filled up. There is no opening and closing stock and hence the AO treated these purchases as bogus purchases. One of the parties, M/s Harsh Enterprises vide their letter dated 22-12-2009 stated that they have not done any transaction with the assessee during the assessment year. Similarly, M/s Precision Containers Ltd. stated vide letter dated 22-12-2009 that they have not done any transaction with the assessee during the assessment year. The A.O. observed that there was a difference in the purchases debited in the P&L account of Rs.4,85,74,742/- and the details of purchase of Rs.4,55,64,926/- from various parties submitted by the assessee which comes to Rs. 30,09,816/- and accordingly the same amount was added to the income of the assessee by the AO vide assessment orders dated 29-12-2009 u/s 143(3) of Act. The A.O. also made addition of Rs. 3,06,54,370/- u/s 69 of the Act vide assessment orders dated 29-12-2009 u/s 143(3) of Act on the ground ITA 2893/M/12 5 that the assessee has inflated the purchases made from Harsh Enterprises and M/s Precision Containers Ltd. who have filed written confirmation that there were no transactions between the assessee and the said parties during the assessment year. Similarly, another addition of Rs. 23,00,805/- by the AO vide assessment orders dated 29-12-2009 u/s 143(3) of Act was made on protective basis against the purchases made from M/s Panam Sales Pvt. Ltd. as the assessee has not submitted the required details and new address was submitted only on 24-12-2009. Since 25th to 28th of December, 2009 were public holidays, the A.O. could not verify the information from the party. Similarly, addition of Rs. 26,26,083/- was made by the AO vide assessment orders dated 29-12-2009 u/s 143(3) of Act with respect to purchases from M/s Shreeji Enterprises and M/s International Steel Industries on the ground that the assessee has not produced these parties with books of account and the AO treated the purchase from these parties as hawala purchases.

4. Aggrieved by the assessment order dated 29-12-2009 u/s 143(3) of Act passed by the AO, the assessee carried the matter in appeal before the CIT(A).

5.The CIT(A) issued several notices which were served on the assessee but the assessee did not attend the hearing most of the time while adjournments were sought many times which was granted by the CIT(A) and on one occasion on 19-03-2010, the ld. Counsel of the assessee, Mr Amit Jain,CA appeared and filed paper books and reply, as appearing in page 1-2 and 6 of the CIT(A) orders dated 29-02-2012. The CIT(A) disposed of the appeal on the basis of facts mentioned in the assessment order and other material available on record. It was contended by the assessee before the CIT(A) on 19-03-2010, when Mr Amit Jain, CA appeared, that the letters received from Harsh Enterprises and Precision Containers Private Limited were never confronted to the assessee and nor any opportunity was given to the assessee to make ITA 2893/M/12 6 submissions thereon and the additions have been made based on guess work. It was contended by the assessee before the CIT(A) that because of the disputes with the parties, the parties have not submitted the details as called by the AO u/s 133(6) of the Act. It was contended that if there are no purchases , then sales would not have been possible and the AO has not disputed the sales made by the assessee and sales turnover was accepted by the Revenue. It was submitted by the assessee before the CIT(A) that the assesssee is a trader and whenever he receive the order, the goods are purchased and then sold in to other parties and no stock is maintained by the assessee. The assessee relied upon the following decisions in the case of :

2. Kanchan Singh 174 Taxman 383(All.)

3. M.K.Bros. 163 ITR 249(Guj.)

5.Dhakeshwari Cotton Mills 26 ITR 775(SC)

The assessee contended by placing reliance on above judgments that merely because the summons issued to some creditors could not be served or the creditors failed to appear before the AO could not be a ground for treating those creditors to be non-genuine. Similarly, the assessee contended that the AO is not entitled to make guess work and make the assessment without reference to any material at all.

The CIT(A) restricted the addition to GP rate of 20% on turnover of assessee of Rs. 4,90,43,129/- which comes to Rs. 98,08,625/- and after reducing the net ITA 2893/M/12 7 profit of Rs. 1,25,989/- declared by the assessee in return of income filed with the revenue, the differential profit comes to Rs. 96,82,636/- and the additions were restricted to this amount of Rs. 96,82,636/- on the ground that even in the appellate proceedings the assessee is not able to justify the purchases. The CIT(A) held that two parties have denied the transaction with the assessee and the assessee had contended that the assessee was not confronted by the AO and hence the CIT(A) remanded the matter to AO for remand report during appellate proceedings and the AO stated vide remand report that once again the assessee has made only summary statement that some of the intermediaries have cheated him by issuing bogus bills of the assessee’s concern and used them as accommodation bills by other firms but no evidence or details to prove the purchases from the two parties which denied the sale to the assessee was furnished even during the remand proceedings and also books of accounts were not produced on the ground that the same has been lost . Thus, the CIT(A) held that even during the remand proceedings at the appellate stage the assessee is not able to prove the purchases of Rs.2,51,57,526/- from M/s Precision Containers and Rs.54,98,844/- from M/s Harsh Enterprises though it was known to the assessee that these two parties have denied to have made sales to the assessee . The CIT(A) noted that there are discrepancies in the bills submitted by the assessee for purchases made from J D Sales Corporation and Panam Sales Private Limited . The GP offered for taxation by the assessee is 0.95% and the NP offered for taxation of 0.25% of the turnover. There is no opening and closing stock despite the assessee having a turnover of Rs.4.90 crores . The other expenditure debited in the P & L account is very nominal and there are no fixed assets and capital is meager sum of Rs.3,06,255/- and there are no loans also in the books of accounts to justify the turnover of Rs.4.90 crores. There are sundry debtors of Rs.72,500/- and the assessee claims to have made purchases to the tune of 60% from the two parties only which have denied any transactions with the assessee. The books of account ITA 2893/M/12 8 have not been produced by the assessee and the accounts are unreliable and are liable to be rejected u/s 145 of the Act and mere fact that the transaction of purchase and sales are through cheques is not conclusive that the transactions are genuine in the facts and circumstances of the cases. The notices issued u/s 133(6) of the Act were also returned unserved in some cases . These facts indicate that the assessee is not making genuine purchases or sale of iron and steel but there cannot be sale without purchases and hence some deductions for the purchases has to be made, if the sales are to be accepted. The CIT(A) held that estimation of 20% of GP ratio is reasonable and the additions were confirmed to that extent.