M/s.Bhavna Automobiles P.Ltd., Surat V. A.CIT, Circle-1(1)(1), Surat

CO 193/AHD/2015

• Counselvise Citation: [2018] 117 COUNSELVISE.COM (IT) 2429 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 26-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J K CHANDNANI
• Assessee Lawyers: MITALI SHAH
• Keywords: Bogus purchase; Rejection of books of accounts; Initiation of penalty proceedings; Wrong claim
• Section: 234B; 133(6)

Judgement Text

BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 1 OF 20 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER S N . . ./ I.T. A NO. / A Y: APPELLANT V. /RESPONDENT 1 2760 /AHD/ 2015 2009 - 10 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1) SURAT V. M/S. BHAVNA AUTOMOBILES PVT. LTD. 4281, VIJAY HOUSE, DANAPITH BEGAMPURA SURAT PAN: AADCB 0029Q 2 276 1 /AHD/ 2015 2011 - 12 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1) SURAT V. M/S. BHAVNA AUTOMOBILES PVT. LTD. 4281, VIJAY HOUSE, DANAPITH BEGAMPURA SURAT PAN: AADCB 0029Q 3 CO. NO. 193/AHD/ 2015 2011 - 12 M/S. BHAVNA AUTOMOBILES PVT. LTD. 4281, VIJAY HOUSE, DANAPITH BEGAMPURA SURAT PAN: AADCB 0029Q V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1) SURAT 4 239/AHD/ 2017 2012 - 13 M/S. BHAVNA AUTOMOBILES PVT. LTD. 4281, VIJAY HOUSE, DANAPITH BEGAMPURA SURAT PAN: AADCB 0029Q V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1) SURAT /ASSESSEE BY MS. MITALI SHAH CA , AND SHRI DEVEN KAPADIA CA /REVENUE BY SHRI J. K. CHANDNANI, SR. D.R. / DATE OF HEARING: 18.06.2018 /PRONOUNCEMENT ON 10.08.2018 /O R D E R PER O.P. MEENA, ACCOUTANT MEMBER: BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 2 OF 20 1. THESE ARE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I SURAT BOTH DATED 02.07.2015 FOR THE ASSESSMENT YEAR 2009-10 AND ASSESSMENT YEAR 2011-12 RESPECTIVELY. WHEREAS THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE ORDER OF CIT (A) -1 SURAT DTD. 02.07.2015 FOR THE ASSESSMENT YEAR 2011-12 AND APPEAL AGAINST THE ORDER OF LEARNED CIT (A)-3 SURAT DATED 28.09.2017 FOR THE ASSESSMENT YEAR 2012-13. THUS, THERE ARE TWO APPEAL BY THE REVENUE AND ONE APPEAL BY THE ASSESSEE HENCE, THREE APPEALS IN ALL AND ONE CROSS OBJECTION BY THE ASSESSEE. THESE APPEALS WERE HEARD TOGETHER HENCE, A COMMON ORDER IS BEING PASSED FOR THE ASSESSMENT YEAR ABOVE ASSESSMENT YEARS FOR THE SAKE OF BREVITY AND CONVENIENCE. FIRST, WE WOULD TAKE UP THE APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2012-13, AS A LEAD CASE OF WHICH FINDING WOULD APPLY TO THE APPEALS OF REVENUE FOR ASSESSMENT YEARS ALSO IS I.E. 2009-10 AND 2011-12 CROSS OBJECTION BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2011-12. I.T.A.NO. 239/SRT/2017/A.Y. 2012-13/ BY THE ASSESSEE: 2. REVISED GROUND NO. 1 RAISED BY THE ASSESSEE STATES THAT LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN THE CIRCUMSTANCES OF THE CASE BY CONFIRMING DISALLOWANCE OF 100% BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 3 OF 20 OF ALLEGED PURCHASES EXPENSES I.E. RS. 48,22,759 ON THE BASIS OF SUSPICIOUS HAWALA DEALERS AND NOT CONFIRMED HAWALA DELIVERY PUBLISHED BY MAHARASHTRA SALES TAX DEPARTMENT , WITHOUT PUTTING ON RECORD ANY OTHER EVIDENCE TO PROVE THAT PURCHASES ARE BOGUS AND IGNORING THE FACT THAT ALL ALLEGED PURCHASES WERE DULY SUPPORTED BY TAX INVOICES , DELIVERY CHALLANS AND PAYMENTS OF SAME WAS MADE THROUGH ACCOUNT PAYEE CHEQUES AND RTGS. 3. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE IS ENGAGED IN SALE AND SERVICING OF VEHICLES, SELLING SPARE PARTS AND ACCESSORIES. THE ASSESSING OFFICER (AO) FOUND THAT THE ASSESSEE HAS MADE PURCHASES FROM VARIOUS PARTIES. IN ORDER TO VERIFY THE GENUINENESS OF PURCHASES, THE AO ISSUED NOTICE UNDER SECTION 133(6) TO VARIOUS PARTIES. HOWEVER, NOTICE UNDER SECTION 133(6) WERE RETURNED UN-SERVED NAME OF THE PART Y AMOUNT IN RS. 1. SAI ENTERPRISE MUMBAI 12,50,511 2. SHREEJI ENTERPRISE , MUMBAI 10,36,699 3. UNIQUE SALES CORPORATION 12,92,071 4. COMEX TRADING CO. 12,43,874 TOTAL 48,22,759 4. THE AO THEREFORE, ISSUED A SHOW CAUSE AS TO WHY ABOVE PURCHASES SHOULD NOT BE TREATED AS BOGUS. IN REPLY, THERETO, THE ASSESSEE HAS EXPLAINED THAT YOUR NOTICE ISSUED UNDER SECTION 133(6) BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 4 OF 20 HAVE RETURNED WITH REMARKS UNCLAIMED 'LEFT' NOT KNOWN. HOWEVER, THE ASSESSEE HAS MANAGED THEIR CURRENT ADDRESS, WHICH IS FURNISHED HEREWITH TO WHOM NOTICE UNDER SECTION 133(6) CAN BE ISSUED NOW. FURTHER, THE COMPANIES ARE BIG AUTOMOBILE DEALERS AND CORPORATES, WHICH ARE AVAILABLE ON GOVERNMENT MCA WEB SITE ALSO. IT WAS SUBMITTED THAT MOST OF COMPANIES ARE OUTSIDE OF SURAT, HENCE, THE ASSESSEE CANNOT COMPEL THEM TO PRODUCE. THE NOTICE UNDER SECTION 133(6) HAVE BEEN RECEIVED IN FIRST PLACE BUT JUST BECAUSE THEY HAVE NOT RESPONDED, THE ASSESSEE CANNOT BE HELD RESPONSIBLE. THE ASSESSEE HAS ALSO FILED COPIES OF BILLS INVOICES AS A PROOF OF GENUINENESS OF TRANSACTION. HOWEVER, THE AO OBSERVED THAT THE ASSESSEE HAS NEITHER PRODUCED THE SAID PARTIES NOR REQUESTED TO SUMMON THEM ON THE GROUND THAT THOSE PARTIES ARE BEYOND ITS CONTROL. THE ASSESSEE HAS CLAIMED THAT PURCHASES ARE THROUGH BROKERS BUT NONE OF PURCHASES BILLS SHOWS THE NAME OF BROKERS. THERE IS CONTRADICTION IN ASSESSEE`S SUBMISSIONS, THEREFORE, THE AO BY INVOKING THE LEGAL MAXIM OF ALLEGANS CONTRARIA NON EST AUDIENDUS (HE IS NOT BE HEARD WHO ALLEGES THINGS CONTRADICTORY TO EACH OTHER). SINCE THE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNTS ALONG WITH ORIGINAL DELIVERY CHALLANS, DAY-TO-DAY QUANTITY RECORDS, AND SUPPLIER PARTIES AS WELL AS THE BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 5 OF 20 BROKERS AND VARIOUS INFIRMITIES DETECTED IN BOOKS OF ACCOUNTS, THE AO REJECTED THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT. THE AO THEREFORE, TREATED THE PURCHASES OF RS. 48,22,759 AS BOGUS CLAIM OF EXPENSES AND DISALLOWED AND ADDED BACK TO TOTAL INCOME. 5. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). IT WAS SUBMITTED THAT THE APPELLANT HAS SUBMITTED COPY OF LEDGER ACCOUNT OF ALLEGED BOGUS PARTIES. THEY ARE REGISTERED WITH MAHARASHTRA VAT DEPARTMENT AND PAID VAT TAX OF RS. 5,35,860 WHICH INCLUDED IN THE SO CALLED PURCHASES OF RS. 48,22,757 HENCE, SAME SHOULD NOT HAVE BEEN DISALLOWED. THE PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQUES AND THE PARTIES DULY ESTABLISHED WITH KYC NORMS BEFORE THE BANK. BY MAKING ADDITION OF RS.48, 22,759 OF ALLEGED BOGUS PURCHASES, THE GROSS PROFIT OF THE ASSESSEE GOES TO 9 % WHICH IS IMPOSSIBLE AS THE GROSS PROFIT RATE OF THE ASSESSEE RANGES BETWEEN 0.29% TO .45% IN AUTOMOBILE INDUSTRY WHEREAS THE GROSS PROFIT RATE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS 0.97% WHICH IS VERY REASONABLE. HENCE, THE AO WAS NOT JUSTIFIED TO TREAT THE GENUINE PURCHASES AS BOGUS. HOWEVER, CIT (A) HAS OBSERVED THAT THE NOTICE ISSUED UNDER SECTION 133(6) HAS RETURNED UN-SERVED FROM ALL PARTIES, WHICH IS IMPROBABLE, PREPOSTEROUS AND FARFETCHED TO ACCEPT. THEREFORE, PURCHASES MADE FROM 7 PARTIES IN BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 6 OF 20 A.Y. 2011-12 AND FROM 4 PARTIES IN A.Y. 2012-12 ARE NON-GENUINE AND MERE SUBMISSION OF LEDGER ACCOUNT COPIES AND BANK ACCOUNT STATEMENT CANNOT PROVE THE GENUINENESS. HENCE, PURCHASES WERE UNESTABLISHED. SINCE NO QUANTUM TALLY IS OR DAILY STOCK REGISTER IS FILED HENCE, DECISION IN THE CASE OF CIT V. BHOLANATH POLY FAB PVT. LTD. [2013] 355 ITR 290 (GUJ)(, SMIT P SHETH (20130 356 ITR 451 (GUJARAT) AND MAYANK DIAMONDS PVT. LTD. V. ITO [2014] 11 (TMI) 812 (GUJARAT) IN WHICH IT WAS HELD THAT PROFIT ELIMINATE BE ADDED IS NOT APPLICABLE. 6. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF SALE OF VEHICLES, SPARES, ACCESSORIES, AND SERVICING OF THE VEHICLE. THE ALLEGED BOGUS PURCHASES WHICH FORM GROUND OF THE ADDITION WERE ACTUALLY REPRESENT ONLY REALLY OF ACCESSORIES LIKE CAR COVER , DOOR LIGHTS, GEAR KNOB, PILLOWS, STEERING KITS ETC., ALL THESE ACCESSORIES WERE SOLD BY RAISING TAX INVOICES DURING THE YEAR UNDER REVIEW AND SALE VALUE WAS DULY ACCOUNTED IN BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. THE SALE VALUE OF SUCH ACCESSORIES INCLUDES VAT @ 12.55, WHICH WAS DULY DEPOSITED WITH VAT DEPARTMENT. THEREFORE, LOOKING TO THE VARIED NUMBER OF ACCESSORIES AND NATURE OF BUSINESS BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 7 OF 20 OF THE APPELLANT. IT IS NOT FEASIBLE TO HAVE ONE TO ONE CORRELATION BETWEEN THE PURCHASES MADE AND THEIR RESPECTIVE SALES. HOWEVER, THE LD. A.R. FILED SOME SAMPLE COPY OF INVOICE SHOWING THE NATURE OF PURCHASES AND THEIR SALES ON WHICH VAT HAS BEEN PAID. IT WAS FURTHER SUBMITTED THAT AFTER DISALLOWANCE OF THE SAID PURCHASES GP AND NP RATIO COMES TO 9% AND 1.46% RESPECTIVELY WHICH IS NOT JUST UNREASONABLE FOR THE NATURE OF BUSINESS OF THE APPELLANT BUT IS NOT JUSTIFIED CONSIDERING THE PROFITABILITY OF OTHER AUTOMOBILES IN MUMBAI AND ELSEWHERE. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER PLACED RELIANCE IN THE CASE OF NIKHIL KISHOR GANDHI V. ACIT I.T.A.NO. 315/MUM/2016 AND RAJESH HIRACHAND DESAI V. ITO I.T.A.NO. 6681/MUM/2016, (COPY FILED AS ANX-5) WHEREIN IT WAS HELD THAT THE ADDITION SUSTAINED 5% OF ALLEGED BOGUS PURCHASES, WOULD MEET THE END OF JUSTICE. HOWEVER, IN THE CASE OF ASSESSEE, IT HAS ALREADY SHOWN GROSS PROFIT OF 8.51% FOR THE RELEVANT ASSESSMENT YEAR WHICH IS BETTER THAN 5% THEN THE ADDITION SUSTAINED IN ABOVE JUDGEMENTS, IS NOT APPLICABLE. 7. THE LD. SR. DR SUBMITTED SUPPORTED THE ORDER OF LOWER AUTHORITIES AND SUBMITTED THAT THE NOTICE UNDER SECTION 133(6) ISSUED WERE RETURNED UN-SERVED AND NOTICE SENT ON NEW ADDRESS PROVIDED BY THE ASSESSEE WERE REMAINED UN-COMPLIED WITH. BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 8 OF 20 FURTHER, THE ASSESSEE WAS NOT ABLE TO RECONCILE THE PURCHASES WITH SALES AS NO QUANTITY STOCK WAS MAINTAINED. HENCE, THE AO AND CIT (A) WERE JUSTIFIED IN CONFIRMING THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, CONSIDERED THE FACTS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS PRODUCE ALL THE RELEVANT PURCHASES AND SALES BILLS AND THE STOCK TALLY REGISTER BEFORE THE LOWER AUTHORITIES. THE ASSESSEE HAS SHOWN THE ALLEGED PAYMENTS BY ACCOUNT PAYEE CHEQUES. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO TOOK US THROUGH THE SOME SAMPLE INVOICES SHOWING PAYMENTS OF VAT WHICH INCLUDED IN THE INVOICE. IT IS ALSO SEEN THAT THE AO HAS NOT DOUBTED THE SALES AND QUANTITY STOCK COULD NOT BE TALLY ONE-TO-ONE AS THE NATURE OF PURCHASES ARE BEING SPARE PARTS AND ACCESSORIES. THEREFORE, IT WOULD BE UNFAIR AND UNREASONABLE TO TREAT THE ENTIRE AMOUNT OF PURCHASES AS INCOME OF THE ASSESSEE. BECAUSE, WHEN THE SALES OF THE ASSESSEE HAVE NOT BEEN DOUBTED BY THE AO. THEN ENTIRE AMOUNT OF BOGUS PURCHASES OF THE ASSESSEE CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE. WE ALSO OBSERVED THAT BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED BY THE TAX AUDITOR AND WHO HAVE NOT MADE ANY ADVERSE COMMENTS ON THE QUANTUM OF PURCHASES AND SALES. THEREFORE, THE BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 9 OF 20 ENTIRE AMOUNT OF PURCHASES CANNOT BE TREATED AS INCOME OF THE ASSESSEE ON ALLEGED BOGUS PURCHASES. WE FIND THAT THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED IN THE CASE OF CIT V. BHOLANATH POLY FAB PVT. LTD. [2013] 355 ITR 290 (GUJ)/ [2013] 40 TAXMANN.COM 494 (GUJARAT) / 220 TAXMAN 82 (GUJ) , CIT V. SMITH P SHETH [2013] 356 ITR 451 (GUJARAT) WHEREIN THE ASSESSEE WAS IN THE BUSINESS OF TRADING OF STEEL SEGMENTS. IN THESE CASES SOME PURCHASES WERE HELD AS BOGUS. THE COURT HAS HELD THAT ESTIMATION OF PROFIT IS ONLY TO BE ADDED TO TOTAL INCOME. THE ASSESSEE HAS CITED DECISION OF MAYANK DIAMONDS PVT. LTD. V. ITO [TAX APPEAL NO. 200 OF 2003] DATED 17.11.2014 [2014] 11 (TMI) 812 (GUJARAT) BEFORE THE CIT (A) WHEREIN, THE IT WAS HELD THAT ADDITION ON ALLEGATION OF BOGUS PURCHASES HAS TO BE MADE BASED ON GROSS PROFIT RATE OF 5% OF TOTAL ALLEGED DISPUTED PURCHASES. WE FIND THAT THE ASSESSEE CANNOT MAINTAIN QUANTITY OF EACH AND EVERY ITEM DUE TO THE NATURE OF ITEMS PURCHASED HOWEVER, THE ASSESSEE HAS GOT ALL INVOICES WITH HIM AND PAYMENTS IS MADE BY ACCOUNT PAYEE CHEQUES AND STOCK WAS SOLD WHICH HAS NOT BEEN DISPUTED BY THE AO, THUS THE ENTIRE AMOUNT OF PURCHASES CANNOT BE ADDED TO THE TOTAL INCOME. IN OUR HUMBLE UNDERSTANDING OF THE PROVISIONS OF THE ACT AND NATURE OF COMMERCIAL TRANSACTIONS, THE ELEMENT OF PROFIT IS BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 10 OF 20 ALLEGED PURCHASES MAY BE MADE TO COVER OF THE POSSIBLE LEAKAGES OF REVENUE AND SAME ALSO SERVE THE PURPOSE OF ENTIRE EXERCISE UNDERTAKEN BY THE TAX AUTHORITIES. THEREFORE, WE ARE INCLINED TO HOLD THAT THE ACTION OF THE AO IN MAKING DISALLOWANCE OF AN ENTIRE ALLEGED BOGUS PURCHASES FROM THE PARTIES BY TREATING THEM AS BOGUS IS NOT CORRECT AND JUSTIFIED AND SUSTAINABLE IN LAW. THEREFORE, WE DEEM IT FIT TO RESTRICT AND ESTIMATE THE GP RATE OF 5% OF TOTAL ALLEGED BOGUS PURCHASES OF RS. 48,22,759-. 9. WE FURTHER NOTICE THAT THE HON`BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAYANK DIAMONDS PVT. LTD. V. ITO [TAX APPEAL NO. 200 OF 2003] DATED 17.11.2014 WHEREIN THE HON`BLE HIGH COURT HAS OBSERVED AS UNDER: 5. WE HAVE HEARD LEARNED ADVOCATES FOR BOTH SIDES AND PERUSED THE ORDERS PASSED BY THE CIT AS WELL AS THE TRIBUNAL. AS A RESULT OF HEARING AND PERUSAL OF RECORDS, IT IS BORNE OUT OF THAT THE AVERAGE PROFIT WHICH HAS BEEN CONSIDERED FOR THIS INDUSTRY IS AROUND 3 TO 7%. THE TRIBUNAL IN THE INSTANT CASE HAS DIRECTED ADDITION AT THE RATE 12.5%, WHICH IS IN OUR OPINION, IS ON HIGHER SIDE. LEARNED ADVOCATE FOR THE APPELLANT HAS FAIRLY CONCEDED THAT EXCESS 7% IS ON HIGHER SIDE AND THAT AT THE MOST 3% MAY BE APPLIED. IN THAT VIEW OF THE MATTER, GOING BY THE PECULIAR FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT ENDS OF JUSTICE WILL BE MET BY TAKING MEAN OF MAXIM AND BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 11 OF 20 MINIMUM OF THE PROFIT RATE WHICH COMES TO 5%. THEREFORE, WE THINK IT FIT TO DIRECT THE ASSESSING OFFICER TO APPLY 5% G.P. RATE AS THE RATE OF 12.5% IS DRASTICALLY HIGHER AND 1.03% IS DRASTICALLY LOWER. GROSS PROFIT RATE OF 5% IS THE AVERAGE RATE OF THE INDUSTRY AND WE THINK IT FIT TO MAKE ADDITION ON ACCOUNT OF 5% GROSS PROFIT RATE. THE ADDITION BE MADE ACCORDINGLY. WE THEREFORE, ANSWER THE QUESTION RAISED IN THE NEGATIVE I.E. AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 10. WE FURTHER OBSERVE THAT GROSS PROFIT RATE DISCLOSED BY THE ASSESSEE IS AS PER THE MARKET RATE OF SIMILAR AUTOMOBILE TRADERS AND HIGHER THAN AS DISCLOSED BY THE ASSESSEE IN EARLIER YEARS. HOWEVER, IT IS ALSO A FACT THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE PURCHASES BY NOT PRODUCING THE PARTIES IN QUESTION. WE MAY ALSO NOTE THE CO-ORDINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF NIKHIL KISHOR GANDHI V. ACIT I.T.A.NO. 315/MUM/2016 AND RAJESH HIRACHAND DESAI V. ITO I.T.A.NO. 6681/MUM/2016, ( COPY FILED AS ANX-5) HAVE HELD THAT THE ADDITION AT 5% OF ALLEGED BOGUS PURCHASES AS REASONABLE PROFIT. THEREFORE, IN THE LIGHT OF ABOVE FACTS AND CIRCUMSTANCES WE DEEM IT FIT TO ADOPT GROSS PROFIT RATE OF 5% CONSIDERING THE GROSS PROFIT OF 5% AS THE AVERAGE RATE OF ADOPTED BY CO-ORDINATE BENCH ADOPTED IN RESPECT OF MAHARASHTRA VAT CASES. THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY CO-ORDINATE BENCH AND HONBLE BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 12 OF 20 JURISDICTIONAL HIGH COURT IN THE CASE OF MAYANK DIAMONDS PVT. LTD. V. ITO [2014] 11 (TMI) 812 (GUJARAT), WE DEEM IT FIT TO RESTRICT THE ADDITION TO 5% OF TOTAL ALLEGED BOGUS PURCHASES OF RS.48,22,759. WE ORDER ACCORDINGLY. THE AO WILL WORKED OUT THE ADDITION ACCORDINGLY. THUS, REVISED GROUND NO. 1 OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. SO FAR GROUND NO. 2 : RELATING TO CHARGING OF INTEREST UNDER SECTION 234B AND 234C IS CONCERNED, WE ARE OF THE VIEW THAT CHARGING OF INTEREST IS MANDATORY AS HELD BY THE HON`BLE SUPREME COURT IN THE CASE OF ANJUM M. H. GHASWALA 252 ITR 1 (SC), THEREFORE, IT IS UPHELD. HOWEVER, THE ASSESSEE IS ENTITLED TO CONSEQUENTIAL RELIEF IF ANY AS ARISE OUT ON GIVING EFFECT TO THIS ORDER. 12. GROUND NO.3 RELATES TO INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1) (C) OF THE ACT. 13. WE FIND THAT THE ASSESSEE HAS BEEN AGGRIEVED WITH THE INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 (1) (C) OF THE ACT. HOWEVER, NO APPEAL LIES AGAINST MERE INITIATION OF PENALTY BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 13 OF 20 PROCEEDINGS. THIS GROUND OF APPEAL, IS THEREFORE, PREMATURE AND ACCORDINGLY DISMISSED. I.T.A.NO. 2760/AHD/2015: A.Y. 2009-10, BY THE REVENUE: 14. GROUND NO. 1 TO 6 BY THE REVENUE RELATES TO DELETION OF ADDITION OF RS. 45,00,000 MADE ON ACCOUNT OF PURCHASES SHOWN FROM M/S. LAXMI TRADING COMPANY WHICH HAS BEEN TERMED AS HAWALA DEALER BY MAHARASHTRA VAT DEPARTMENT HAS TREATED AS SUSPICIOUS WITHOUT APPRECIATING THE GENUINENESS OF PURCHASES IS NOT PROVED AND THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE AND THE SUPPLIER DID NOT REPLY TO NOTICE UNDER SECTION 133(6) ISSUED TO HIM. 15. THE LD. SR. DR SUBMITTED THAT CIT (A) WAS NOT JUSTIFIED IN DELETING THE ENTIRE PURCHASES WHICH ARE OF DOUBTFUL IN NATURE, WHEREAS FACTS ARE IDENTICAL TO A.Y. 2012-13 WHERE THE CIT (A) UPHELD THE ADDITION OF ENTIRE BOGUS PURCHASE MADE BY THE ASSESSEE. THEREFORE, THE ADDITION SO MADE BY THE AO BE RESTORED AND ORDER OF CIT (A) BE SET-ASIDE. 16. PER CONTRA , THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT (A) AND SUBMITTED THAT PURCHASES ARE SUPPORTED BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 14 OF 20 BY INVOICES AND SALES ARE DULY RECORDED IN BOOKS OF ACCOUNTS HENCE, CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION SO MADE BY THE AO. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ISSUE OF BOGUS PURCHASE IS IDENTICAL OF THAT OF A.Y. 2012-13 EXCEPT FIGURES AND NAME OF THE PARTY FROM WHOM PURCHASES WERE MADE BY THE ASSESSEE. AS WE HAVE ALREADY OBSERVED THAT THE FINDING GIVEN AS IN A.Y. 2012-13 WOULD APPLY TO THIS APPEAL ALSO. THEREFORE, FOLLOWING REASONING AND FINDINGS AS GIVEN BY US IN A.Y. 2012-13 IN THE CASE OF THE ASSESSEE IN ABOVE PART OF THIS ORDER, WE HOLD THAT THE CIT (A) WAS NOT JUSTIFIED IN DELETING ADDITION OF THE ENTIRE BOGUS PURCHASES MADE BY THE AO, HENCE, THE ADDITION MADE BY THE AO IS RESTRICTING TO 5 % OF BOGUS PURCHASE OF RS.45,00,000 WHICH WORKED OUT TO RS. 2,25,000/- HENCE, ADDITION TO THIS EXTENT IS CONFIRMED AND BALANCE RS. 42,75,000 AS DELETED BY THE CIT (A) IS SUSTAINED. ACCORDINGLY, GROUND NO. 1 TO 6 OF APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2009-10 ARE PARTLY ALLOWED. BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 15 OF 20 18. IN THE RESULT, THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED. I.T.A.NO. 2761/AHD/2015: A.Y. 2011-12, BY THE REVENUE: 19. GROUND NO. 1 TO 6 BY THE REVENUE RELATES TO DELETION OF ADDITION OF RS.92, 05,989 MADE IN RESPECT OF PURCHASES MADE FROM SIX PARTIES WHICH HAS BEEN TERMED AS HAWALA DEALER BY MAHARASHTRA VAT DEPARTMENT AND HAS BEEN TREATED AS SUSPICIOUS WITHOUT APPRECIATING THE GENUINENESS OF PURCHASES IS NOT PROVED AND THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE AND THE SUPPLIERS DID NOT REPLY TO NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT. 20. THE LD. SR. DR SUBMITTED THAT CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 87, 30,030 OUT OF TOTAL ADDITION OF RS. 92, 05,989 MADE BY THE AO ON ACCOUNT OF ALLEGED BOGUS PURCHASES WHICH ARE OF DOUBTFUL IN NATURE, WHEREAS FACTS ARE IDENTICAL TO A.Y. 2012-13 WHERE THE CIT (A) HAS UPHELD THE ADDITION OF ENTIRE BOGUS PURCHASE MADE BY THE ASSESSEE. THE CIT (A) HAS CONFIRMED THE ADDITION OF RS. 4, 75,959 IN RESPECT OF PURCHASES MADE FROM M/S. MEHTA AUTO ENTERPRISE. THEREFORE, THE ADDITION OF RS. 87, 30,030 MADE BY THE AO BE RESTORED AND ORDER OF CIT (A) BE SET-ASIDE. BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 16 OF 20 21. PER CONTRA , THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF CIT (A) AND SUBMITTED THAT PURCHASES ARE SUPPORTED BY INVOICES OF WHICH SALES ARE DULY RECORDED IN BOOKS OF ACCOUNTS, HENCE, CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 87, 30,030 OUT OF RS. 92, 05,989 MADE BY THE AO. 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ISSUE OF BOGUS PURCHASE IS IDENTICAL AS THAT OF A.Y. 2012-13 EXCEPT FIGURES AND PARTIES FROM WHOM ALLEGED PURCHASES HAVE BEEN MADE BY THE ASSESSEE. AS WE HAVE ALREADY OBSERVED THAT, THE FINDING GIVEN AS IN A.Y. 2012-13 WOULD APPLY TO FACTS OF THIS APPEAL ALSO. THEREFORE, FOLLOWING OUR REASONING AND FINDINGS AS GIVEN BY US IN A.Y. 2012- 13 IN THE CASE OF THE ASSESSEE IN ABOVE PART OF ORDER, WE HOLD THAT THE CIT (A) WAS NOT JUSTIFIED IN DELETING ADDITION OF BOGUS PURCHASES AMOUNTING TO RS. 87,30,030 MADE BY THE AO, HENCE, THE ADDITION MADE BY THE AO IS RESTRICTING TO 5 % OF TOTAL ALLEGED BOGUS PURCHASE OF RS. 92, 05,989 [INCLUDING ADDITION OF RS. 4, 75,959 AS BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 17 OF 20 CONFIRMED BY THE CIT (A) AGAINST WHICH THE ASSESSEE HAS PREFERRED C.O.]. ACCORDINGLY, ADDITION OF RS. 4,52,995/- IS CONFIRMED AS AGAINST THE TOTAL ADDITION OF RS. 92,05,989 AND CONSEQUENTLY, THE ORDER OF CIT (A) IS MODIFIED ACCORDINGLY. CONSEQUENTLY, THE CROSS OBJECTION OF THE ASSESSEE WOULD THEREFORE, BE PARTLY ALLOWED. THE AO WILL RE-COMPUTE THE DISALLOWANCE ACCORDINGLY AND BALANCE ADDITION AS DELETED BY THE CIT (A) IS UPHELD. ACCORDINGLY, GROUND NO. 1 TO 6 OF APPEAL OF REVENUE ARE IS PARTLY ALLOWED 23. IN THE RESULT, THE APPEAL OF THE REVENUE FOR A.Y. 2011-12 IS PARTLY ALLOWED. C.O.NO.193/AHD/2015/A.Y. 2011-12 BY THE ASSESSEE IN APPEAL IN I.T.A.NO. 2761/AHD/ 2015 FILED BY REVENUE FOR A.Y. 2011-12: 24. GROUND NO. 1 TO 2 STATES THAT LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 4,75,959 BY CONSIDERING PURCHASES MADE FROM M/S. MEHTA AUTO ENTERPRISE AS NON- GENUINE BY SOLELY RELYING ON THE CATEGORICAL DENIAL FROM M/S. MEHTA AUTO ENTERPRISE. 25. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT (A) WAS NOT JUSTIFIED IN CONFIRMING ADDITION OF RS. 4,75,959 OUT OF BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 18 OF 20 TOTAL BOGUS PURCHASES OF RS. 92,05,989 BEING SOLELY ON THE BASIS OF DENIAL BY THE PARTY M/S. MEHTA AUTO ENTERPRISE WHEREAS THE CIT (A) HAS RIGHTLY DELETED ADDITION OF RS. 87,30,030 MADE ON ACCOUNT OF BOGUS PURCHASES. 26. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT IN REVENUE APPEAL AGAINST DELETION OF BOGUS PURCHASE ADDITION OF RS. 87,30,030 WE HAVE UPHELD THE ADDITION @ 5% OF GROSS PROFIT OF ALLEGED TOTAL BOGUS TOTAL PURCHASES OF RS. 92,05,989 AND THEREBY PARTLY ALLOWED THE GROUNDS OF APPEAL OF REVENUE. THEREFORE, BASED ON OUR FINDINGS RECORDED FOR A.Y. 2012-13 IN THE CASE OF THE ASSESSEE IN EARLIER PART OF THIS APPEAL ORDER AND OUR FINDINGS IN A.Y. 2011-12 IN APPEAL OF REVENUE, WHEREIN WE HAVE RESTRICTED THE ADDITION 5 % OF PROFIT OF ENTIRE PURCHASES OF 92,05,989 IN WHICH ADDITION OF RS. 4,75,959 SUSTAINED BY THE CIT (A) IS ALSO INCLUDED. CONSEQUENTLY, THE THIS ADDITION OF RS. 4,75,959 IS RESTRICTED TO 5% OF PURCHASE OF RS. 4,75,959/- AND THIS CO OF THE ASSESSEE IS PARTLY ALLOWED. BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 19 OF 20 ACCORDINGLY, GROUND NO. 1 AND 2 OF THE CROSS OBJECTION OF THE ASSESSEE ARE PARTLY ALLOWED. 27. SO FAR GROUND NO. 2 : RELATING TO CHARGING OF INTEREST UNDER SECTION 234B AND 234C IS CONCERNED, WE ARE OF THE VIEW THAT CHARGING OF INTEREST IS MANDATORY AS HELD BY THE HON`BLE SUPREME COURT IN THE CASE OF ANJUM M. H. GHASWALA 252 ITR 1 (SC), THEREFORE, IT IS UPHELD. HOWEVER, THE ASSESSEE IS ENTITLED TO CONSEQUENTIAL RELIEF IF ANY AS ARISE OUT ON GIVING EFFECT TO THIS ORDER. 28. GROUND NO.3 RELATES TO INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1) (C) OF THE ACT. 29. WE FIND THAT THE ASSESSEE HAS BEEN AGGRIEVED WITH THE INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 (1) (C) OF THE ACT. HOWEVER, NO APPEAL LIES AGAINST MERE INITIATION OF PENALTY PROCEEDINGS HENCE; IT IS PREMATURE AND ACCORDINGLY DISMISSED. 30. IN THE RESULT, THE CO OF THE ASSESSEE FOR A.Y. 2011-12 IS PARTLY ALLOWED. BHAVNA AUTOMOBILES PVT. LTD. V. ACIT 1(1) (1) SURAT /I.T.A. NO.2760-61 & 139/AHD/15, 239/AHD/2017/A.Y.:09-10,11-12, & 121-3 PAGE 20 OF 20 31. IN THE LIGHT OF ABOVE FINDINGS, THE APPEAL OF THE ASSESSEE IN I.T.A.NO. 239/AHD/2017 FOR A.Y. 2012-13 IS PARTLY ALLOWED, THE APPEAL OF REVENUE FOR A.Y. 2009-10 IN I.T.A.NO. 2760/AHD/2015 AND IN I.T.A.NO. 2761/AHD/2015 FOR A.Y. 2011-12, ARE PARTLY ALLOWED AND C.O. NO.193/AHD/2015 OF THE ASSESSEE FOR A.Y.2011- 12 IS PARTLY ALLOWED. 32. THE ORDER PRONOUNCED IN THE OPEN COURT ON 10.08.2018. SD/- SD/- ( . . /C.M. GARG) ( . . /O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER DATED: 10.08.2018 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) THE CIT(A)4. / PR. CIT 5. , / D.R. (ITAT) 6. / GUARD FILE ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT