Sri.Venu B. Pillai, Mumbai V. The ACIT, Alappuzha

CO 20/COCH/2016

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4057 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 19-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 18-05-2016
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: DR P DANIEL
• Keywords: Bogus purchase; Question of law; Accommodation entries; Reason to believe; Set aside
• Section: 133(6); 250; 143(2); 148

Judgement Text

ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 1 , , , , IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN . . , ., !' !' !' !' BEFORE S/SHRI B. P. JAIN, AM & GEORGE GEORGE K., JM # # # # ./ I.TA NO.139/COCH/2016 ( $% & /ASSESSMENT YEAR : 2009-10) THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALLEPPEY. VS SHRI VENU B. PILLAI, 3B, SITA ESTATE, FIRST FLOOR, R.C. MARG, AZIZ BAUG, CHEMBUR, MUMBAI-400 074. ( '( '( '( '( /REVENUE APPELLANT) ( ) )) ) * * * * '( '('( '( /ASSESSEE -RESPONDENT) )* + , /C.O.NO.20/COCH/2016 ( $% & /ASSESSMENT YEAR : 2009-10) SHRI VENU B. PILLAI, 3B, SITA ESTATE, FIRST FLOOR, R.C. MARG, AZIZ BAUG, CHEMBUR, MUMBAI-400 074. VS THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALLEPPEY. ( '( '( '( '( /ASSESSEE APPELLANT) ( )* )* )* )* '( '('( '( / REVENUE-RESPONDENT) ' . . # ./PAN NO. ADHPP 2553R '( - . /REVENUE BY SHRI A. DHANARAJ, SR. DR ) * '( - . /ASSESSEE BY DR. P. DANIEL, ADV. /0 - 12 / DATE OF HEARING 19/07/2016 3 & - 12 /DATE OF PRONOUNCEMENT 25/07/2016 ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 2 4 4 4 4 /ORDER PER BENCH: THIS APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARISE FROM THE ORDER OF THE LD. CIT(A), KOTTAYAM DATED 27 /01/2016 FOR THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), KOTTAYAM IN SO FAR AS THE POINTS STATED BELOW ARE C ONCERNED, IS OPPOSED TO LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. S 2. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN PARTIALLY DELETING THE ADDITION OF RS.51,04,112/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES. 3. THE LD. CIT(A) ACCEPTED THE FACT OF PURCHASE BY THE ASSESSEE WITHOUT ANY EVIDENCE TO THAT EFFECT. 4. THE LD. CIT(A)S RELIANCE ON THE DECISION OF GU JARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. SETH, IS MISPLACED AND WIT HOUT APPRECIATION OF THE FACT THAT THE FACTS BEFORE THE GUJARAT HIGH COURT W ERE DIFFERENT AND ARE NOT APPLICABLE TO THE FACTS IN THE PRESENT CASE. 5. IN THE DECISION RELIED UPON BY THE CIT(A), THE ASSESSEE HAD ACTUALLY MADE PURCHASES, BUT FROM PARTIES OTHER THAN THOSE M ENTIONED IN THE BOOKS OF ACCOUNTS. 6. IN THE INSTANT CASE, THE PURCHASES ITSELF COUL D NOT BE PROVED BEFORE THE ASSESSING OFFICER AND HENCE, THE CIT(A) OUGHT TO HA VE UPHELD THE ADDITION IN FULL. 7. THE LD. CIT(A) DID NOT NOTICE THE DECISION OF THE MP HIGH COURT IN THE CASE OF V.I.S.P. (P) LTD. VS. CIT(186 CTR 718) AND THAT OF THE MUMBAI C BENCH OF ITAT IN I.T.A. NO. 3867/MUM/2013, WHICH AR E SQUARELY APPLICABLE TO THE FACTS OF THIS CASE. ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 3 FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF TH E ASSESSING OFFICER RESTORED. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION:- 1. THE LEARNED CIT(A) ERRED IN REJECTING THE GROUND OF APPEAL REGARDING REOPENING OF THE ASSESSMENT BY THE LEARNED A.O. 2. THE LEARNED CIT(A) ERRED IN RESTRICTING OR SUSTA INING THE ADDITION TO 12.5% INSTEAD OF TOTALLY DELETING THE AFORESAID ADDITION. 3. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THAT THE LEARNED A.O. DID NOT REJECT THE BOOKS OF ACCOUNTS. 4. THE LEARNED CIT(A) DID NOT CONSIDER THAT THE LE ARNED A.O. DID NOT ALLOW TO CROSS-EXAMINE THE DEALER WHO MADE THE STATEMENT TO THE SALES TAX DEPARTMENT. 5. THE LEARNED CIT(A) DID NOT CONSIDER THAT THE ASS ESSEE PRODUCED THE DOCUMENTS/DETAILS SUCH AS INVOICES, DELIVERY CHALLA N, LEDGER CONFIRMATION, BANK STATEMENTS, CONFIRMATION FROM BA NKER FOR PAYMENT TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE THAT THE PUR CHASES ARE GENUINE PURCHASES. 4. THE BRIEF FACTS OF THE CASE ARE THAT AS PER T HE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, MUMBAI COLLECTED BY DGIT(INV. ), THE ASSESSEE HAS MADE BOGUS PURCHASES AMOUNTING TO RS. 51,04,112/- FROM M /S. DEEP ENTERPRISES, THANE. AFTER VERIFYING THE GENUINENESS OF THE PURC HASES MADE BY THE ASSESSEE, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT TH E ASSESSEES INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND ACCORD INGLY, NOTICE U/S. 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 05-04-2013 AN D NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 22-10-2013. THE ASSESSEE SUBMITT ED THE DETAILS OF GOODS ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 4 PURCHASED FROM M/S. DEEP ENTERPRISES DURING THE FY 2009-10. IN ORDER TO VERIFY THE GENUINENESS OF THE CLAIM OF THE ASSESSEE A NOTI CE U/S. 133(6) OF THE INCOME TAX ACT WAS ISSUED BY THE ASSESSING OFFICER TO M/S. DEEP ENTERPRISES TO PROVIDE THE DETAILS OF GOODS SOLD TO THE ASSESSEE BUT THE N OTICE RETURNED UNSERVED. HENCE IT WAS NOT POSSIBLE FOR THE ASSESSING OFFICER TO VERIFY WHETHER THE ENTITY M/S. DEEP ENTERPRISES EXIST OR NOT. MOREOVER THE I NVOICES PRODUCED BY THE ASSESSEE, WHICH IS SAID TO HAVE BEEN ISSUED BY M/S. DEEP ENTERPRISES DID NOT CONTAIN ANY SEAL OR PROPER SIGNATURE OR NAME AND TH IS RAISES A SUSPICION THAT THERE IS NO SUCH SELLER NAMED M/S. DEEP ENTERPRISES . UNDER THESE CIRCUMSTANCES THE ENTIRE PURCHASES MADE FROM DEEP ENTERPRISES AMO UNTING TO RS.51,04,112/- WAS TREATED AS BOGUS PURCHASES AND WAS ADDED TO THE INCOME OF THE ASSESSEE. 5. BEFORE THE LD. CIT(A), THE ASSESSEE HAS RAISED LEGAL OBJECTION FOR RE-OPENING OF THE ASSESSMENT WHICH WAS REJECTED AND WITH REGAR D TO THE MERIT OF THE CASE, THE LD. CIT(A) RELIED UPON THE DECISION OF THE VARI OUS HIGH COURTS AND ITAT, CO- ORDINATE BENCHES AND UPHELD THE DISALLOWANCE OF 12. 5% OF THE BOGUS PURCHASES AND ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS PAR TLY ALLOWED. 6. THE LD. COUNSEL FOR THE ASSESSEE WITH REGARD T O THE CROSS OBJECTION ARGUED THAT NO INDEPENDENT APPLICATION OF MIND HAS BEEN MA DE BY THE ASSESSING ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 5 OFFICER AND HAS ACTED UNDER INFORMATION FROM INVEST IGATION WING. THE LD. AR RELIED UPON THE DECISION OF THE VARIOUS COURTS OF L AW IN THIS REGARD. 7. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT THE ASSESSING OFFICER ISSUED NOTICE U/S. 133(6) OF THE ACT WHICH WAS RETURNED UNSERVED. THE SALES TAX DEPARTMENT HA S RECORDED THE STATEMENT OF CERTAIN HAWALA OPERATORS WHO HAVE CONFIRMED TO H AVE GIVEN BOGUS BILLS TO CERTAIN ASSESSEES INCLUDING THE ASSESSEE COMPANY. T HE INVESTIGATION WING, MUMBAI HAS PROVIDED A LIST OF HAWALA OPERATORS AND ALSO THE LIST OF BENEFICIARIES. THE SALES TAX DEPARTMENT HAS INVESTIGATED THESE CAS ES THOROUGHLY AND HAS UPLOADED THE SAME ON THE WEBSITE. THE ASSESSING OFF ICER HAS APPLIED HER INDEPENDENT MIND THAT THESE HAWALA OPERATORS PROVID ED ONLY ACCOMMODATION ENTRIES AND THE ASSESSEE IS ONE OF THE BENEFICIARIE S TO THE EXTENT OF RS.51,04,112/- IN THE FORM OF BOGUS PURCHASES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. AS REGARDS THE CROSS OBJECTION RAISED BY THE ASSESSEE ON LEGAL ISSUE, THE UNDISPUTED FACT IS THAT THE INFORMATION HAS BEEN RE CEIVED FROM THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT THAT THE SALES TA X DEPARTMENT HAD RECORDED THE STATEMENTS OF CERTAIN HAWALA OPERATORS WHO HAVE CONFIRMED TO HAVE GIVEN BOGUS BILLS TO CERTAIN ASSESSES INCLUDIN G THE ASSESSEE COMPANY. THE ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 6 ASSESSING OFFICER ISSUED NOTICE U/S. 133(6) OF THE ACT TO THE ASSESSEE COMPANY WHICH WAS RETURNED UNSERVED. THEREFORE, THE ASSESS ING OFFICER OBSERVED THAT THESE HAWALA OPERATORS WERE PROVIDING ONLY ACCOMMOD ATION ENTRIES AND THE ASSESSEE IS ONE OF THE BENEFICIARIES OF SUCH BOGUS PURCHASES. THEREFORE, INDEPENDENT APPLICATION OF MIND HAS BEEN MADE BY TH E ASSESSING OFFICER AND ACCORDINGLY, THE OBJECTION RAISED BY THE ASSESSEE I N ITS CROSS OBJECTION IS REJECTED AND THE CASE LAW RELIED UPON BY THE ASSESS EE IN THE CASE OF SARTHAK SECURITIES CO. P. LTD. VS. ITO 329 ITR 110 (DELHI) CANNOT BE MADE APPLICABLE IN THE PRESENT CASE. 9. IF THE ASSESSING OFFICER HAS HIS OPINION AND H AS REASON TO BELIEVE THAT THE ALLEGED BOGUS ENTRY PROVIDERS HAVE BEEN USED BY THE ASSESSEE AS A BENEFICIARY, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN TH E INDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW. THIS VIEW IS SUPPORTED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (2009) 319 ITR (ST.) 5; 216 CTR 1 95 (SC). IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, THE OB JECTION RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS DISMISSED. 10. AS REGARDS THE ISSUE ON MERIT RAISED BY THE R EVENUE AND THE ASSESSEE IN ITS CROSS OBJECTION, THE FACTS HAVE BEEN MENTIONED HERE INABOVE AND THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE DECISI ONS OF VARIOUS COURTS OF LAW ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 7 THAT NO ADDITION CAN BE MADE WHEN THE ASSESSEE HAS SUBMITTED INVOICES, LEDGER CONFIRMATIONS, BANK STATEMENTS ETC. WITH REG ARD TO THE PURCHASES SO MADE AND THEREFORE, THE ADDITION OF 12.5% SUSTAINED BY THE LD. CIT(A) IS TO BE DELETED. 11. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND ARGUED THAT THE TOTAL PURCHASES SHOULD HAVE BEE N DISALLOWED AS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER . 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT NOTICE U/S. 13 3(6) WAS ISSUED BY THE ASSESSING OFFICER TO M/S. DEEP ENTERPRISES BUT THE SAME WAS R ETURNED UNSERVED. THEREFORE, IT WAS NOT POSSIBLE FOR THE ASSESSING OFFICER TO VE RIFY WHETHER M/S. DEEP ENTERPRISES EXISTS OR NOT AND A REASONABLE PRESUMPT ION HAS RIGHTLY BEEN TAKEN ABOUT M/S. DEEP ENTERPRISES AS A NON-EXISTENT PART Y. THOUGH THE SALES TAX DEPARTMENT HAS PUT ON WEBSITE THAT THE ASSESSEE IS A BENEFICIARY TO SUCH HAWALA TRANSACTIONS WHICH SUPPORTS OUR VIEW IN THIS REGARD, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY . IN THE PRESENT CASE, THE ASSESSING OFFICER HAS MADE ENQUIRIES BUT THE NOTICE REMAINED UNSERVED. IN THE CASE RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSE E WITH SPECIFIC REFERENCE TO THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF RAMESH KUMAR & CO. VS. ACIT IN I.T.A. NO. 2959/MUM/2014 DATED 28-11-2014, THE SAME IS DISTINGUISHABLE ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 8 SINCE IN THAT CASE, THE ASSESSING OFFICER DID NOT M AKE ANY ENQUIRY WHEREAS IN THE PRESENT CASE, THE ASSESSING OFFICER HAS MADE THE EN QUIRIES BY ISSUING NOTICE U/S. 133(6) OF THE ACT WHICH REMAINED UNSERVED. THEREFO RE, THE ABOVE DECISION RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE IS NOT APPLICABLE IN THE PRESENT CIRCUMSTANCES AND FACTS OF THE CASE. THE OTHER CASE LAW IN THE PAPER BOOK ARE NOT APPLICABLE IN THE PRESENT CIRCUMSTANCES AND FAC TS OF THE CASE SINCE THEY ARE WITH RESPECT TO THE FACTS IN THAT CASE AND CANN OT BE OF HELP TO THE ASSESSEE IN THE PRESENT CASE. WE CONCUR WITH THE VIEWS OF TH E LD. CIT(A) ESPECIALLY IN PARAS 17 TO 21 WHICH FOR THE SAKE OF CONVENIENCE AR E REPRODUCED HEREINBELOW: 17. IN BHOLANATH POLYFAB PVT. LTD. 355 ITR 290(GUJ) , THE FACTS OF THE CASE WERE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN FINISHED FABRICS. FOR THE AY 2005-06, THE ASSESSING OFFICER HELD THAT THE PURCHASES WORTH RS.40,69,546/- WERE UNEXPLAINED. HE, THEREFO RE, DISALLOWED SUCH EXPENDITURE CLAIMED BY THE ASSESSEE AND COMPUTED TH E TOTAL INCOME OF RS.41,10,187/-. THE ISSUE WAS CARRIED IN APPEAL BY THE ASSESSEE BEFORE THE CIT(A) WHO REJECTED THE APPEAL, UPON WHICH THE ASSE SSEE WENT IN FURTHER APPEAL BEFORE THE HONBLE TRIBUNAL. THE HONBLE TRI BUNAL SUBSTANTIALLY ALLOWED THE ASSESSEES APPEAL. IN SO FAR AS THE QUE STION OF BOGUS PURCHASE IS CONCERNED, THE HONBLE TRIBUNAL CONCURR ED WITH THE REVENUES VIEWS THAT SUCH PURCHASES WERE MADE FROM BOGUS PARTIES. THE TRIBUNAL NOTED THAT THE ASSESSING OFFICER HAD I SSUED NOTICE TO ALL PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MAD E. SUCH NOTICES WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WI TH THE REMARK THAT THE ADDRESS WAS INCOMPLETE. THE INSPECTOR DEPUTED BY T HE INCOME-TAX DEPARTMENT ALSO COULD NOT FIND ANY OF THE PARTIES A VAILABLE AT THE GIVEN ADDRESS. THE ASSESSEE WAS UNABLE TO PRODUCE ANY CON FIRMATION FROM ANY OF THE PARTIES. THOUGH THE ASSESSEE HAD CLAIMED TO HAVE MADE PAYMENT BY ACCOUNT PAYEE CHEQUES, UPON VERIFICATION IT WAS FOUND THAT THE CHEQUES WERE ENCASHED BY SOME OTHER PARTIES AND NOT BY THE SUPPORTED SELLERS. 18. SIMILARLY, IN YET ANOTHER DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT SETH (2013) 38 TAXMANN.COM 38 5(GUJ), HONBLE COU RT ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 9 WAS SEIZED WITH A SIMILAR ISSUE WHERE THE A.O. HAD FOUND THAT SOME OF THE ALLEGED SUPPLIERS OF STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PROVIDED SALE BILLS AND HENCE, PURCHASES F ROM THE SAID PARTIES WERE HELD TO BE BOGUS. THE A.O. IN THAT CASE ADDED THE ENTIRE AMOUNT OF PURCHASES TO GROSS PROFIT OF THE ASSESSEE. THE CIT (A) HAVING FOUND THAT THE ASSESSEE HAD INDEED PURCHASED FROM NAMED PARTIES BU T OTHER PARTIES FROM GREY MARKET, PARTIALLY SUSTAINED THE ADDITION AS PROBABLE PROFIT OF THE ASSESSEE. THE TRIBUNAL HOWEVER, SUSTAINED THE ADDI TION TO THE EXTENT OF 12.5%. TAKING THE ACCOUNT THE ABOVE FACTS, THE HON BLE GUJARAT HIGH COURT HELD THAT SINCE THE PURCHASES WERE NOT BOGUS, BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCO UNTS, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED T O THE ASSESSEES INCOME AND AS SUCH NO QUESTION OF LAW AROSE IN SUCH ESTIMATION. WHILE ARRIVING AT THE ABOVE CONCLUSION, THE HONBLE COURT ALSO RELIED ON THE DECISION IN THE CASE OF VIJAY M. MISTRY CONSTRUCTIO N LTD. 355 ITR 498 (GYJ) AND FURTHER APPROVED THE DECISION OF AHMEDABAD BENC H, ITAT IN THE CASE OF VIJAY PROTEINS 58 ITD 428. 19. IN THE CASE VIJAY PROTEINS (SUPRA), THE HONBLE ITAT WAS SEIZED WITH A CASE OF BOGUS SUPPLIERS OF OIL CAKES WHERE 33 PARTI ES WERE FOUND TO BE BOGUS BY THE DEPARTMENTAL AUTHORITIES EVEN THOUGH P AYMENTS WERE MADE TO THE SAID PARTIES BY CROSS CHEQUES AND IN FA CT THE A.O. IN THAT CASE HAD BROUGHT ADEQUATE MATERIAL ON RECORD TO PRO VE THAT THE CROSS CHEQUES HAD NOT BEEN GIVEN TO PARTIES FROM WHOM SUP PLIES WERE ALLEGEDLY PROCURED BUT THESE WERE ENCASHED FROM A B ANK ACCOUNT IN THE NAME OF ANOTHER ENTITY, POSSIBLY HAWALA DEALER. SU BSEQUENTLY, THE MONEY DEPOSITED IN THAT ACCOUNT WAS WITHDRAWN IN CA SH ALMOST ON THE SAME DAY. THE TRIBUNAL HOWEVER, HELD THAT IF THE P URCHASES WERE MADE FROM OPEN MARKET WITHOUT INSISTING FOR GENUINE BILL S, THE SUPPLIERS MAY BE WILLING TO SELL THE PRODUCT AT A MUCH LESS RATE AS COMPARED TO A RATE WHICH THEY MAY CHARGE IN WHICH THE DEALER HAS TO GIVE GEN UINE SALE INVOICE IN RESPECT OF THAT SALE. KEEPING ALL SUCH FACTORS IN M IND, THE TRIBUNAL ESTIMATED AN ELEMENT OF PROFIT PERCENTAGE OF THE OV ERALL PURCHASE PRICE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS THROUGH FICT IOUS INVOICES. 20. FURTHER, IN THE CASE OF M/S. SANKET STEEL TRA DERS (I.T.A. NO. 2801/AHD/2008 DATED 20-05-2011 IT IS HELD THAT: 3. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITT ED BY THE LEARNED COUNSEL THAT THE ADDITION SUSTAINED IS EXCESSIVE. IN SUPPORT OF THIS CONTENTION HE REFERRED TO THE DECISION OF THE TRIBU NAL IN THE CASE OF ITO VS. SUN STEEL 92 TTJ (AHD) 1126 WHEREIN THE TRI BUNAL HAS SUSTAINED THE ADDITION OF RS.50,000/- ON ACCOUNT OF BOGUS PUR CHASE. HOWEVER, WE FIND THAT THE FACTS IN THE ABOVE CASE W ERE DIFFERENT. IN ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 10 THE ABOVE CASE, THE ASSESSEE HAS SHOWN PURCHASES OF RS.27,39,410/- , SALE OF RS.28,17,207/- AND GROSS PROFIT OF RS.94, 470. THE ASSESSING OFFICER MADE THE ADDITION OF RS.27,39,407/- FOR BOG US PURCHASES. IF THE ABOVE SUM IS ADDED TO THE GROSS PROFIT, THE GRO SS PROFIT WORKS OUT TO RS.2,83,41,247/- WHICH WAS MORE THAN THE SAL E ITSELF. THE TRIBUNAL HELD THAT IT IS IMPOSSIBLE THAT THE GROSS PROFIT IS MORE THAN THE SALE ITSELF. THE TRIBUNAL ALSO FOUND THAT THE A SSESSEE HAS MAINTAINED THE QUANTITATIVE DETAILS IN RESPECT OF M ATERIALS PURCHASED AND SOLD. CONSIDERING PECULIAR FACTS OF T HAT CASE, THE TRIBUNAL ARRIVED AT THE CONCLUSION THAT IT WOULD BE FAIR AND REASONABLE TO ESTIMATE THE ADDITION OF RS.50,000/- AS AGAINST THE ADDITION OF RS.27,39,407/- MADE BY THE ASSESSING OF FICER. HOWEVER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CON SIDERING THE FACTS OF THE ASSESSEES CASE, HAS SUSTAINED THE ADD ITION AT 12.5%. WHILE DOING SO, HE HAS ALSO RELIED UPON THE DECISIO N OF THE TRIBUNAL IN THE CASE OF M/S. VIJAY PROTEINS LTD. 55 TTJ (AHD ) 76. IN THE CASE OF M/S. VIJAY PROTEINS LTD. THE TRIBUNAL HAS SUSTAINED THE ADDITION OF 25% OF THE BOGUS PURCHASES. HOWEVER, CONSIDERING THE F ACTS OF THE ASSESSEES CASE THE CIT(A) RESTRICTED THE DISALLOWA NCE TO 12.5% AS AGAINST 25% MADE IN THE CASE OF M/S. VIJAY PROTEINS LTD. FROM THESE FACTS IT IS EVIDENT THAT THE CIT(A) HAS SUSTAINED T HE ADDITION OF 12.5% OF THE NON-GENUINE PURCHASE CONSIDERING THE FACTS O F THE ASSESSEES CASE . WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO IN TERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGARD. THE SAME I S SUSTAINED. AFTER CONSIDERING THE FACTS AND ARGUMENTS OF BOTH THE SIDES, WE ARE OF THE OPINION THAT IT WOULD MEET ENDS OF JUSTI CE, IF THE DISALLOWANCE IS SUSTAINED AT 12.5% OF THE PURCHASE FROM THESE TWO PARTIES. THE ASSESSING OFFICER IS DIRECTED TO WORK OUT THE DISALLOWANCE ACCORDINGLY. 21. SINCE THE FACTS OF THE ASSESSEES CASE ARE IDEN TICAL, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE ITAT, I DIRECT THE AO TO DISALLOW12.5% OF THE NON-GENUINE PURCHASES MADE DUR ING THE YEAR UNDER CONSIDERATION. BY CONSIDERING THE DECISION RENDERED BY THE LD. CIT (A) AND THE PRESENT CIRCUMSTANCES AND FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE SALES HAVE NOT BEEN DOUBTED IN THE PRESENT CASE, PURCHASE BILLS HA VE BEEN MANAGED BY THE ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 11 ASSESSEE THROUGH HAWALA OPERATORS BUT PURCHASES HAV E BEEN MADE FROM SOME OTHER PARTIES AND ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH BOGUS PURCHASES HAS TO BE DISALLOWED IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT SETH (SUPRA), VIJAY M. MI STRY CONSTRUCTION LTD. (SUPRA) AND VIJAY PROTEINS (SUPRA) 13. THOUGH THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSEE HAS PRODUCED THE BILLS, BANK ACCOUNTS ETC. WITH REGARD TO THE SAID BOGUS PURCHASES, WHEN THE QUESTION WAS ASKED BY THE BENCH IF THE CON FIRMATIONS WERE NOT GIVEN AT THE ASSESSMENT STAGE, WHETHER THE SAME WERE GIVE N AT THE FIRST APPELLATE STAGE BEFORE THE LD. CIT(A) OR EVEN IF THE CONFIRMA TION IS THERE WHETHER THE SAME HAS BEEN PLACED BEFORE US, THE REPLY OF THE LD. AR WAS IN NEGATIVE, MEANING THEREBY THAT THE PARTIES ARE NON-EXISTENT TILL DATE AND NOTHING HAS BEEN PRODUCED TO PROVE THAT THE PARTIES EXISTED AND THE PURCHASES WERE GENUINE. WE RELY UPON THE JUDGMENT OF THE HONBLE SUPREME CO URT IN THE CASE OF CHUHARMAL VS. CIT, 172 ITR 250 IN WHICH IT HAS BEEN HELD THAT THE EVIDENCE ACT DOES NOT APPLY TO PROCEEDINGS UNDER THE INCOME TAX ACT. THE EXISTENCE OF THE PARTIES COULD NOT BE PROVED AND THEREFORE, PURCHASE S SHOWN BY THE ASSESSEE IN THE NAME OF NON EXISTENT PARTIES ARE NOT GENUINE AN D THE EVIDENCE LIKE SALES TAX, PAN ARE IRRELEVANT WITH RESPECT TO NON EXISTEN T/NON CO-OPERATIVE PARTIES. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. GOLCHA PROPERTIES HELD ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 12 THAT THE PRIMARY FACT OF NON EXISTENCE OF PARTIES L EADS TO NON GENUINE TRANSACTIONS OR SALES TO THE ASSESSEE. IN THE CIRC UMSTANCES AND FACTS OF THE CASE AND THE DECISIONS RENDERED HEREINABOVE, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY SUSTAINED 1 2.5% OF THE BOGUS PURCHASES FROM THE SAID PARTIES. 14. IN THE RESULT, BOTH THE APPEAL OF THE REVENU E AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 25-07-2016 SD/- SD/- . ) (GEORGE GEORGE K.) ( . . ) ( B.P. JAIN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER ' /PLACE: /COCHIN 7 /DATED: 25 TH JULY, 2016 GJ/ 4 - )18 98&1 /COPY TO: 1. '( / SHRI VENU B. PILLAI, 3B, SITA ESTATE, FIRST FLOOR, R.C. MARG, AZIZ BAUG, CHEMBUR, MUMBAI-400 074. 2. )* '( /THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1 , ALLEPPEY. 3. /: 1 ( )/THE COMMISSIONER OF INCOME-TAX(APPEALS),KOTTAYAM ITA NO.139/COCH/2016 & C.O.NO.20/COCH/2016 13 4. /: 1 /THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. 8;< )1 , /THE DR/ITAT, COCHIN BENCH. 6. <= >0 /GUARD FILE. 4/ /BY ORDER ? /ASSISTANT REGISTRAR 0 . @2 . A . @2 ., /I.T.A.T., COCHIN