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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 13.12.2022, which in turn arises from the order passed by the A.O. under Sec. 143(3) r.w.s. 147 of the Income-tax Act, 1961 (in short ‘the Act’) dated 03.12.2019 for the assessment year 2013-14. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. On the facts and circumstances of the case and in law, the Commissioner of Income Tax, appeals erred in disallowing the purchase of Rs.3097731.00. 2. The appellant prays that the disallowance of Rs.3097731 made out of purchase be deleted. 3. The appellant craves leave to add, amend, alter, vary and or withdraw any or all the above grounds of appeal.”
Succinctly stated, the assessee company which is engaged in the business of manufacturing of vegetable oil, animal oil and fats had filed its return of income for A.Y.2013-14 on 29.08.2013, declaring an income of Rs.37,77,888/-.
On the basis of information received by the A.O that the assessee was one of the beneficiary of bogus purchase bills that were provided by M/s. Chhattisgarh Enterprises, a concern engaged in the business of 3 Jayshree Solvex India Private Limited Vs. ACIT-1(1), Bhilai railway catering and hotel business, the case of the assessee was reopened by him u/s.147 of the Act. Notice u/s.148 of the Act dated 28.03.2019 was issued to the assessee company. In compliance, the assessee company filed its return of income on 10.04.2019 declaring its income as originally returned.
During the course of assessment proceedings, the A.O called upon the assessee to substantiate the authenticity of the purchase of de-oil rice bran that was stated to have been purchased during the year from M/s. Chhattisgarh Enterprises (supra). In reply, the assessee placed on record photocopy of the purchase bills aggregating to Rs.30.97 lacs (approx.). Also, it was the claim of the assessee that the sales corresponding to the aforesaid purchases were duly recorded in its books of account for the year under consideration. It was also the claim of the assessee company that payment of the purchase consideration to the aforementioned supplier viz. M/s. Chhattisgarh Enterprises (supra) was made through banking channel. As the assessee had failed to substantiate the authenticity of the purchases claimed to have been made from M/s. Chhattisgarh Enterprises (supra), therefore, the A.O dubbed the entire amount of Rs.30.97 lacs (supra) as bogus and made an addition of the same to the assessee’s returned income.
4 Jayshree Solvex India Private Limited Vs. ACIT-1(1), Bhilai
Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without any success. The CIT(Appeals) while approving the view taken by the A.O had observed as under:
“6.8 In the light of the above discussion, I have come to the conclusion that:- (a) The appellant has 'arranged' sales but never actually 'purchased' & sold the items in question. (b) The stock has never been picked up/stored/transported by the appellant's firm. (c) The appellant's firm does not store/stock any of the items in its godown/storage. (d) The goods have supposedly moved from party from whom the purchase was made to the premises of the party to whom apparently sale has been made with only book entries being made in the appellant’s books of accounts. (e) While the party from whom the purchase has apparently been made has given a sworn statement that 'no goods were sold-only accommodation entries were arranged; the parties to whom sales were apparently made do not wish to confirm the same. (f) The transportation details are mentioned in ledger but no vouchers/bills/trip sheets for the same are available for verification. (g) The items supposedly sold are exempt from VAT therefore; cross verification of sales from other government department is also not possible. (h) The sales have been made through a broker and brokerage has been paid for the same. No sales made directly to parties. 6.9 Thus, the appellant only has ledgers written by him recording the purchases & sales which are not corroborated by any independent evidences. The AO has based his assessment on the sworn statement of the parties from whom the supposed purchase has been made there is no reason to doubt the same. 6.10 On the basis of the above, the assessment of the AO is confirmed and the grounds of appeal of the appellant are dismissed.”
5 Jayshree Solvex India Private Limited Vs. ACIT-1(1), Bhilai
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and material available on record.
As observed by the lower authorities and, rightly so, it is a matter of fact that the assessee had failed to substantiate the authenticity of the purchases of Rs.30.97 lacs (supra) which were claimed to have been made from M/s. Chhattisgarh Enterprises (supra). At this stage, we may hereinabove observe that as the A.O on receipt of information that Shri Mahendra Sharma, proprietor of M/s. Chhattisgarh Enterprises (supra) had admitted in his statement recorded on oath on 16.08.2018 that he had provided bogus sale bills to M/s. Jayshree Solvex India Pvt. Ltd., therefore, a very heavy onus was cast upon the assessee company to dislodge the claim of the aforesaid person and dispel all doubts as regards the authenticity of the purchases in question on the basis of supporting material. However, we find that the assessee except for placing reliance on the photocopies of purchase bills, had failed to place on record any material in the course of proceedings before the lower authorities which would substantiate to hilt the authenticity of its claim of having made genuine purchases from the aforementioned party i.e. M/s. Chhattisgarh
6 Jayshree Solvex India Private Limited Vs. ACIT-1(1), Bhilai Enterprises (supra). We, thus, in terms of our aforesaid observations, find no infirmity in the view taken by the lower authorities that the assessee company had not made any genuine purchases from M/s. Chhattisgarh Enterprises (supra) but only procured bogus accommodation purchase bills in order to route the purchase transactions through its regular books of account. At the same time, we cannot remain oblivion of the fact that now when the sales corresponding to the aforementioned purchases were duly accounted by the assessee in its books of account, therefore, there was no justification for the A.O to have made addition of the entire amount of impugned purchases in the hands of the assessee company.
Ostensibly, the assessee company had only procured accommodation bills and has not made any genuine purchases from the aforementioned party, viz. M/s. Chhattisgarh Enterprises (supra), and had procured goods in question at a discounted value from the open/grey market. Considering the fact that the A.O while framing assessment had not rejected the books of accounts of the assessee company, therefore, in our considered view addition its case was only liable to be restricted to the extent of profit which the assessee company would have made by procuring the goods at a discounted value from the open/grey market.
Apropos the quantification of profit which the assessee would have made by procuring the goods in question from the open/grey market, we
7 Jayshree Solvex India Private Limited Vs. ACIT-1(1), Bhilai find that the Hon’ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company, of 2016, dated 11.02.2019 while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate of other genuine purchases. The Hon’ble High Court while concluding as hereinabove had observed as under:
“8. In the present case, as noted above, the assessee was a trader of brics. The A.O found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sale declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trade. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- "So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66% Therefore, considering 5.66 % of Rs.3,70,78,125/- which comes to Rs.20,98,62 1.88 we think it fit to direct the revenue to add Rs.20,98,621.88 as gross profit and make necessary deductions
8 Jayshree Solvex India Private Limited Vs. ACIT-1(1), Bhilai accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue." 9. In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order at costs."
It was, thus, observed by the Hon’ble High Court that the addition in respect of the purchases which were found to be bogus in the case of the assessee before them, who was a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of other genuine purchases. On the basis of the aforesaid observations of the Hon’ble High Court, we are of the considered view that on the same lines the profit made by the assessee in the case before us by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases.
We, thus, in terms of our aforesaid observations restore the matter to the file of the A.O, with a direction to him to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchases by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. Needless to say, the A.O shall in the course of set-aside proceedings afford a reasonable opportunity of being heard to the assessee company.
9 Jayshree Solvex India Private Limited Vs. ACIT-1(1), Bhilai
In the result, appeal of the assessee is allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced in open court on 04th day of August, 2023.