Shri Pravin Shivlal Shah, Vadodara V. The ITO, Ward-5(3), Baroda

ITA 1379/AHD/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7984 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 23-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L MEENA
• Assessee Lawyers: M J SHAH
• Keywords: Bogus purchase; Unexplained investment; Business income; Opportunity of cross examination; Cost of acquisition; Third party statement; Assessment record; Reason to believe
• Section: 143(3); 142(1); 133(6); 147; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NOS: 1379 & 1380/AHD/2016 (ASSESSMENT YEARS: 2010-11 & 2011-12) SHRI PRAVIN SHIVLAL SHAH 404, RATANPURI COMPLEX, BARANPURA NAKA, BARANPURA, VADODARA 390001 V/S INCOME TAX OFFICER, WARD- 5 (3), BARODA (APPELLANT) (RESPONDENT) PAN: AJFPS4748F APPELLANT BY : SHRI M.J. SHAH, AR RESPONDENT BY : SHRI B.L. MEENA, SR. D.R. ( )/ ORDER DATE OF HEARING : 18 -09-201 8 DATE OF PRONOUNCEMENT : 25 -09-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE ORDER OF THE LD. CIT(A)-1, VADODARA DATED 25.02.2016 PERTAINING TO A .YS. 2010-11 & 2011-12 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 2 1.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF APP ELLANT'S CASE AND IN LAW, THE ID. CIT (APPEALS) HAS ERRED IN NOT CONSIDERING THE SUBMISSIONS OF THE APPELLANT REGARDING REOPENING THE ASSESSMENT AND FOR DISPOSING OF THE OBJECTIONS RAISED BY THE APPEL LANT, (THOUGH DEALT AT PARA 4.3 - ON PAGE 30 OF THE APPELLATE ORDER FOR A.Y.2011-12) AND THEREBY ERRED I N NOT HOLDING THAT THE IMPUGNED ORDER OF THE ID. A.O. IS BAD IN LAW AND TO BE QUASHED. APPELLANT SUBMITS THAT FROM THE CONTENTS OF THE ORD ER/REPLY OF THE ID. A.O. STATED AT PARA 3 OF THE IMPUGNED ASSESSMENT ORDER DTD.24-3-2014 CANNOT BE C ALLED A 'REASONED ORDER DISPOSING OF THE OBJECTIONS' RAISED BY THE APPELLANT. APPELLANT'S SU BMISSIONS BEFORE THE ID. CIT(APPEALS) ARE NOT DEALT WITH BY THE ID. CIT (APPEALS) IN THE IMPUGNED APPELLATE ORDER DTD. 25-2-2106. THE ID. A.O. IS BOUND TO DISPOSE OF THE OBJECTIONS BY PASSIN G A SPEAKING ORDER. THE REPLY OF THE LD AO IS NOT AT ALL A REASONED ORDER AGAINST THE OBJECTIONS BY APPELLANT. HENCE, YOUR APPELLANT SUBMITS THAT THE IMPUGNED ASSESSMENT ORDER IS BAD IN LAW, SINCE THE OBJECTIONS RAISED BY THE APPELLANT ARE NOT PROPERLY REPLIED/DEALT WITH BY THE ID. A.O.. YOUR AP PELLANT THEREFORE, PRAYS YOUR HONOUR TO HOLD SO NOW AND QUASH THE IMPUGNED ASSESSMENT ORDER. APPELLANT FURTHER SUBMITS THAT SUBSTRATUM FOR THE F ORMATION OF BELIEF, AS INDICATED IN THE IMPUGNED ASSESSMENT ORDER IS THE INFORMATION AVAILABLE FROM MAHARASHTRA SALES-TAX DEPARTMENT, MUMBAI WHICH HAS GOT NO RELATION WITH THE REASONS RECORDED AND REOPENING WAS THEREFORE NOT SUSTAINABLE AND HENCE THE IMPUGNED ASSESSMENT ORDER IS BAD IN LAW. YOUR APPELLANT THEREFORE, PRAYS YOUR HONOUR TO HOLD SO NOW AND QUASH THE IMPUGNED ASSESSMENT ORDER . YOUR APPELLANT SUBMITS THAT THE GROUND RAISED BEFOR E THE ID. CIT (APPEALS) ALSO INCLUDED ERRING BY THE LD AO IN LAW POINT ALSO WHICH HAS NOT BE CONSIDE RED BY THE LD CIT (A). YOUR APPELLANT, OTHERWISE ALSO REQUEST YOUR HONOUR TO ADJUDICATE TH IS GROUND SINCE IT GOES TO THE ROOT OF THE MATTER. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF APPELLANT'S CASE AND IN LAW, THE ID. C1T (APPEALS) HAS ERRED IN CONFIRMING ADDIT ION AT 10% OF THE PURCHASES AGGREGATING TO RS. 30,93, 637/-MADE FROM 3 SUPPLIERS ALLEGED AS NOT GE NUINE, ON THE GROUND THAT THE SAID AMOUNT HAS ESCAPED ASSESSMENT SINCE THE APPELLANT HAS FAILED T O PROVE THE RENUINENESS OF THE TRANSACTIONS WITH THE SAID PARTIES, THOUGH THE FACT OF RECEIPT OF MAT ERIAL IS NOT DISPUTED. APPELLANT SUBMITS THAT EVEN IF THEY ARE TREATED AS PURCHASES FROM NON GENUINE SELLERS, SINCE THE QUANTITY PURCHASED IS GENUINE AND SOLD ALSO AND MOR EOVER APPELLANT'S BUSINESS IS LIKE A INTERMEDIARY BUSINESS EARNING A MEAGER % OF NET PROFIT HARDLY AB OUT 1% TO 2% LIKE NOMINAL COMMISSION EARNED BY A COMMISSION AGENT, ASSUMING 10% OF THE PURCHASE S FROM THE ALLEGED NON-GENUINE SUPPLIERS AS UNDISCLOSED BUSINESS INCOME (AS AGAINST UNDISCLOSED INCOME U/S 69 AS PER THE IMPUGNED ASSESSMENT ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 3 ORDER) BY THE ID. CIT(APPEALS) IS HIGHLY UNJUSTIFIA BLE, UNREASONABLE AND DISPROPORTIONATE TO THE PROFITS EARNED AS PER ASSESSMENT RECORDS. YOUR APPE LLANT THEREFORE PRAYS YOUR HONOUR TO HOLD SO NOW AND KINDLY DIRECT THE ID. AO TO DELETE THE IMPUGNED ADDITION. 3.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF APPELL ANT'S CASE AND IN LAW, THE ID. CIT (APPEALS) HAS ERRED IN NOT DELETING THE ADDITION MADE U/S 69 OF T HE ACT BY THE ID. A.O., EVEN THOUGH HELD THAT THE PROVISION OF SECTION 69 OF THE ACT ARE NOT APPLICABL E AND THEREBY FURTHER ERRED IN CONFIRMING IMPUGNED ADDITION AS UNDISCLOSED BUSINESS INCOME AT 10% OF THE PURCHASES AGGREGATING TO RS. 30,93, 697/- FROM 3 SUPPLIERS ALLEGED AS NOT GENUIN E. APPELLANT SUBMITS THAT THE ID. A.O. MADE THE IMPUGNE D ADDITION U/S 69 OF THE ACT WHICH RELATES TO UNEXPLAINED INVESTMENT AND HENCE THE ACTION OF T HE ID. CIT(APPEALS) IN NOT DIRECTING THE ID. A.O. TO DELETE THE IMPUGNED ADDITION MADE U/S 69 OF THE ACT EVEN AFTER ACCEPTING THAT PROVISIONS OF SECTION 69 OF THE ACT ARE NOT APPLICABLE AND INSTEAD CONFIRMING ADDITION AS UNDISCLOSED BUSINESS INCOME IS UNJUSTIFIABLE AND UNWARRANTED. YOUR APPEL LANT THEREFORE PRAYS YOUR HONOUR TO HOLD THAT ACTION OF THE ID. CIT (APPEALS) IS BAD IN LAW AND D IRECT THE ID. AO TO DELETE THE IMPUGNED ADDITION MADE BY HIM U/S 69 OF THE ACT WHICH IS THOU GH CONFIRMED BY THE ID. CIT (APPEALS) AS UNDISCLOSED BUSINESS INCOME. 4.0 YOUR APPELLANT CRAVES LEAVE TO ADD, TO AMEND AN D OR ALTER THE GROUNDS HEREIN ABOVE RAISED. 2. SO FAR GROUND NO. 1 IS CONCERNED WITH REGARD TO REO PENING OF THE ASSESSMENT IS CONCERNED, LD. A.R. DOES NOT WANT TO PRESS THIS GRO UND, HENCE, SAME IS DISMISSED AS NOT PRESSED. GROUND NOS. 2 & 3 ARE INT ERCONNECTED. 3. THE A.O. IN HIS ORDER HAS STATED AS FOLLOWS: 'IN THIS CASE, ON PERUSAL OF INFORMATION AVAILABLE O N RECORD, IT IS NOTICED THAT DURING THE FINANCIAL YEAR 2010-11, ASSESSEE HAS PUR CHASED GOODS THROUGH HAWALA DEALERS, NAMELY APEX METAL CORPORATION, ASIA N METAL INDUSTRIES, KRISHNA STEEL INDUSTRIES, SARADGI SYNDICATE & SUNRISE ENTER PRISES TO THE TUNE OF RS.30,58,856/-, RS. 26,70,467/-, RS. 51,00,624/-, R S. 4,45,603 & RS. 5,83,054 RESPECTIVELY. ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 4 AS PER THE INFORMATION AVAILABLE WITH THIS OFFICE, THE ABOVE MENTIONED TRANSACTIONS ARE BOGUS PURCHASE ACCORDING TO MAHARA SHTRA SALES TAX DEPTT, MUMBAI. THE EVIDENCE WITH RESPECT TO BOGUS NATURE O F TRANSACTION REVEALS THAT ASSESSEE HAS NOT DISCLOSED CORRECT FINANCIAL TRANSA CTION IN HIS RETURN OF INCOME. FURTHER, THROUGH BOGUS PURCHASE ENTRIES, ASSESSEE H AS EVADED HIS ACTUAL TAX LIABILITY. THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS. 1,18,58,604/- ESCAPED ASSESSMENT IN THE CASE OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS, THE AO HAD REASON TO -B ELIEVE THAT ASSESSEE HAD SUPPRESSED PRIMARY FACTS REGARDING BOGUS NATURE OF THE ABOVE TRANSACTION TO THE TUNE OF RS. 1,18,58,604 - AND INCOME OF RS. 1,18,58 ,604/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT, FOR WHICH THE ASSESSMENT NEEDS TO BE RE-OPENED BY ISSUING NOTICE US. 148 OF THE ACT.' 2. THE ASSESSEE, HAS NOT FILED ANY RETURN IN RESPON SE TO THE SAID NOTICE. THEREFORE, NOTICE U/S. 142(1) OF THE I.T.ACT DATED 12.8.2013 A LONG WITH A DETAILED QUESTIONNAIRE HAS BEEN ISSUED AND DULY SERVED UPON THE ASSESSEE ON 13.8.2013 FIXING THE HEARING ON 13.8.2013. IN RESPONSE TO THE ABOVE, THE ASSESSEE'S AUTHORIZED REPRESENTATIVE VIDE LETTER DATED NIL REC EIVED IN THIS OFFICE ON 17.1.2014 HAS REQUESTED TO TREAT THE RETURN FILED ON 24.12.20 11 AS THE COMPLIANCE TO NOTICE U/S. 148 OF THE I.T.ACT. THE ASSESSEE HAS ALSO FURN ISHED THE DETAILS AS CALLED FOR. FURTHER, THE ASSESSEE VIDE THE ABOVE REFERRED LETTE R HAS REQUESTED TO ISSUE CERTIFIED COPY OF THE REASON RECORDED FOR REOPENING THE ASSESSEE. THE SAME WAS PROVIDED TO THE ASSESSEE VIDE THIS OFFICE LETTER DA TED 20.01.2014. 3. THEREAFTER, THE ASSESSEE'S AUTHORIZED REPRESENTA TIVE VIDE LETTER DATED 22.01.2014 HAS OBJECTED TO THE RE-OPENING OF THE AS SESSMENT U/S. 147 OF THE I.T.ACT, FOR THE YEAR UNDER CONSIDERATION. THE OBJE CTION RAISED BY THE ASSESSEE AGAINST THE REOPENING OF THE ASSESSMENT U/S. 147 HA S BEEN DISPOSED OFF VIDE THIS OFFICE LETTER DATED 23.1.2014 WHICH IS REPRODUCED A S UNDER:- 'PLEASE REFER TO YOUR LETTER DATED 22.01.2014 WHEREI N YOU HAVE OBJECTED TO THE ISSUE OF NOTICE ISSUED UNDER 1,48 OF THE I.T.ACT DA TED 22.3.2013 AND STATED THAT ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 5 THERE IS NO INCOME WHICH HAS ESCAPED ASSESSMENT IS BAD IN LAW AND NOT TENABLE IN VIEW OF THE FOLLOWING :- 1. THE ASSESSEE IN HIS RETURN OF INCOME FILED ON 24.12.2-11 HAS NOT REVEALED PRIMARY FACTS OF CORRECT INCOME AS PURCHASES SHOWN BY ASSESSEE IN HIS BOOKS OF ACCOUNTS ARE NOT GENUINE. 2. THE INCOME SO COMPUTED ON THE SALE AND PURC HASE TRANSACTION AND DISCLOSED IN THE RETURN OF INCOME IS NOT CORRECT AS THE ALLEGED PURCHASE PARTIES ARE MERE HAWALA ENTRY PROVIDER AND THE FACT IS ADMI TTED BY THESE PARTIES I.E. M/S. APEX METAL CORPORATION, M/S./ASIAN METAL INDUS TRIES, M/S. KRISHNA STEEL INDUSTRIES,M/S. SAROGI SYNDICATE AND M/S. SUNRISE E NTERPRISE, BOMBAY). 3. RE-OPENING OF THE ASSESSMENT HAS BEEN MADE WITHIN 4 YEARS I.E. ON 22.3.2013. 4. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCE S OF THE CASE, IT IS CLEAR THAT INCOME HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YE AR UNDER CONSIDERATION, AND THEREFORE, THE OBJECTION RAISED BY YOU IS HEREB Y REJECTED AND FILED. ' 4. THEREAFTER, NOTICE U/S. 143(2) OF THE I.T.ACT DA TED 14.2.2014 ALONG WITH A DETAILED QUESTIONNAIRE HAS BEEN ISSUED AND DULY SER VED UPON THE ASSESSEE ON THE SAME DAY CALLING FOR VARIOUS DETAILS / INFORMATION IN CONNECTION WITH THE ASSESSMENT PROCEEDINGS FOR THE ASSTT. YEAR 2010-11. IN RESPONSE TO THE ABOVE, SHRI HARIN PARIKH, C.A., ATTENDED THE PROCEEDINGS F ROM TIME TO TIME AND FURNISHED THE DETAILS AS CALLSD FOR. THE CASE IS DISCUSSED WI TH HIM IN DETAIL. 5. THE ASSESSEE IS A PROPRIETORSHIP CONCERN ENGAGED IN THE BUSINESS OF FERROUS AND A/ON -FERROUS METALS, S.S.SHEETS. S.S. PATA. S. S PIPES. S.S.COILS AND OTHER NON- FERROUS METALS TRADING OF THESE ITEMS IS MAINLY DON E ON WHOLE SALE BASIS. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER CONSIDERATION,- THE ASSESSEE HAS SHOWN GROSS PROFIT OF RS.5,76,583/- ON THE TOTAL TURNOVER OF RS,.5,96.24,546 - WHICH WORKS OUT THE GROSS PROFIT RATE AT 0.97% AND NET PROFIT OF RS.2,93,838/- WHICH WORKS OUT THE NET PROFIT RATE A T 0.49% AS AGAINST THE GROSS PROFIT OFR.S.5.35,721/- ON THE TOTAL SALES OF RS.3, 05,26,734/- WHICH WORKS OUT THE ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 6 GROSS PROFIT RATE AT 1.75% AND NET PROFIT OF RS.2,8 4,822/- WHICH WORKS OUT TO 0.93% SHOWN IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. BOOKS OF-ACCOUNTS, BILLS, VOUCHERS ETC. PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAVE BEEN VERIFIED ON TEST CHECK BASIS. FURTHER, ON VERI FICATION OF THE PURCHASE BILLS, IT IS' SEEN THAT NONE OF THE PURCHASE BILLS HAVE NO SI GNATURE OF THE RECIPIENT OF MATERIALS. 6. INFORMATION HAS BEEN RECEIVED FROM SALES-TAX AUT HORITIES, MUMBAI, THAT ASSESSEE HAS MADE PURCHASES FROM FOLLOWING SUSPICIO US PARTIES DURING THE YEAR PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. (A) M/S. APEX METAL CORPORATION RS. 30,58,856/- (B) M/S. ASIAN METAL INDUSTRIES RS, 26,70,467/- (C) M/S. KRISHNA STEEL INDUSTRIES RS. 51.00.624/- (D) M/S. SARADGI SYNDICATE RS. 4,45,603/- (E) M/S. SUN RISE ENTERPRISE RS. 5,83,054/- TOTAL RS. 1.18,58.604/- 6.1 ON VERIFICATION OF THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE RETURN OF INCOME, IT 'IS SEEN THAT DURING THE PREVIOUS YEAR R ELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN PURCHAS ES OF RS.5,93,15,229/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, VIDE T HIS OFFICE QUESTIONNAIRE DATED 12.8.2013, THE ASSESSEE WAS SPECIFICALLY ASKED TO F URNISH DETAILS OF PURCHASES MADE FROM VARIOUS PARTIES DURING THE YEAR UNDER CON SIDERATION WITH COMPLETE NAME AND POSTAL ADDRESS, TOTAL PAYMENT MADE AND MOD E OF PAYMENT. IN CASE, THE PAYMENT IS MADE BY CHEQUE, THE ASSESSEE WAS ASK ED TO FURNISH CHEQUE NO., DATE, AMOUNT AND THE NAME OF THE BANK ON WHICH CHEQ UE IS DRAWN. IN RESPONSE, THE ASSESSEE'S AUTHORIZED REPRESENTATIVE VIDE LETTE R DATED NIL RECEIVED IN THIS OFFICE ON 17.1.2014 HAS FURNISHED DETAILS OF PURCHA SES MADE FROM VARIOUS PARTIES ALONG WITH THEIR POSTAL ADDRESSES, BANK STATEMENT E VIDENCING THE PROOF OF PAYMENT MADE TO THE PARTIES AND ALSO COPIES OF LEDG ER ACCOUNT OF THE PARTIES ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 7 FROM WHOM THE ASSESSEE MADE THE PURCHASES DURING TH E YEAR UNDER CONSIDERATION. 6.2. THEREAFTER, VIDE THIS OFFICE LETTER DATED 14.2 .2014, THE ASSESSEE WAS SPECIFICALLY ASKED TO FURNISH THE FOLLOWING :- I) PLEASE FURNISH COPY OF DAY-TO-DAY STOCK REGIST ER MAINTAINED BY YOU IN RESPECT OF ALL THE ITEMS PURCHASED BY YOU FROM VARIOUS PART IES. II) PLEASE FURNISH PARTY-WISE MONTH-WISE PURCHASE A ND SALES. HI) PLEASE FURNISH COPY OF LEDGER ACCOUNT OF THE PARTIES TO WHOM SALES HAVE BEEN MADE AMOUNTING TO RS.50,000/- AND ABOVE DURING THE YEAR UNDER CONS IDERATION. IV) FROM THE DETAILS FURNISHED, IT IS SEEN THAT YOU HAVE MADE PURCHASES MOSTLY FROM BOMBAY PARTIES. IN THIS REGARD, YOU ARE REQUES TED TO FURNISH THE FOLLOWING INFORMATION DETAILS:- A) HOW YOU HAVE TRANSPORTED THE GOODS PURCHASED FR OM MUMBAI TO BARODA ? B) WHETHER TRANSPORTATION PAYMENTS WERE MET BY TH E PARTIES FROM WHOM YOU HAVE MADE THE PURCHASES? IN THAT CASE, PLEASE JUSTI FY YOUR CLAIM. C) IN CASE, TRANSPORTATION PAYMENTS WERE MADE BY Y OU, THEN PLEASE FURNISH LR IN ORIGINAL FOR VERIFICATION. 6.3. IN RESPONSE TO THE ABOVE, THE ASSESSEE'S AUTHO RIZED REPRESENTATIVE VIDE LETTER DATED NIL RECEIVED IN THIS OFFICE ON 25.2.2014 HAS SUBMITTED DAY TODAY STOCK REGISTER IN RESPECT OF ALL ITEMS PURCHASED BY ASSES SES AND ALSO PARTY-WISE AND MONTH-WISE PURCHASES AND SALES. HOWEVER, THE ASSESS EE HAS NOT FURNISHED ANY SUBMISSION ABOUT THE TRANSPORTATION OF GOODS FROM B OMBAY TO BARODA AND HAS ALSO FAILED TO FURNISH ANY LORRY RECEIPT IN ORIGINA L FOR VERIFICATION. SINCE THE ASSESSEE HAS NOT FURNISHED EVIDENCES IN SUPPORT OF THE PURCHASES MADE AND THEREFORE IN ORDER TO ASCERTAIN THE GENUINENESS OF PURCHASES MADE BY THE ASSESSEE FROM THE ABOVE PARTIES AS PER THE DETAILS / ADDRESS GIVEN, LETTERS U/S. 133(6) OF THE I.T.ACT WERE ISSUED TO THESE PARTIES REQUESTING TO FURNISH COPY OF LEDGER ACCOUNT OF THE ASSESSEE FOR THE PERIOD UNDER CONSIDERATION. IN THIS REGARD, IT IS RELEVANT TO MENTION HERE THAT ALL THESE LETTE RS WERE RETURNED BACK BY THE ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 8 POSTAL AUTHORITIES WITH A REMARK 'NOT KNOWN'. IN VIEW OF THE ABOVE, THE ASSESSEE HAS BEEN GIVEN AN OPPORTUNITY VIDE THIS OFFICE LETT ER DATED 28.2.2014 REQUESTING TO FURNISH, CERTAIN INFORMATION WITH RESPECT TO THE PURCHASES MADE BY THE ASSESSEE. THE QUESTIONNAIRE ISSUED IN THIS REGARD I S REPRODUCED AS UNDER; - 'PLEASE REFER TO THIS OFFICE LETTER OF EVEN NUMBER D ATED 14.2.2014, WHEREIN YOU WERE ASKED TO FURNISH VARIOUS INFORMATION / DETAILS . IN RESPONSE, VIDE SUBMISSION DATED NIL RECEIVED IN THIS OFFICE ON 25.02.2014, YO U HAVE SUBMITTED PART OF THE DETAILS. HOWEVER, YOU HAVE NOT FURNISHED THE FOLLOW ING DETAILS :- I) PARTY-WISE MONTH-WISE PURCHASE AND SALES. II) COPY OF LEDGER ACCOUNT OF THE PARTIES TO WHOM S ALES HAVE BEEN MADE AMOUNTING TO RS. 50,00.0/- AND ABOVE DURING THE YEA R UNDER CONSIDERATION. III) FROM THE DETAILS FURNISHED, IT IS SEEN THAT YO U HAVE MADE PURCHASES MOSTLY FROM BOMBAY PARTIES. IN THIS REGARD, YOU ARE REQUES TED TO FURNISH THE FOLLOWING INFORMATION /DETAILS:- A) HOW YOU HAVE TRANSPORTED THE GOODS PURCHASED F ROM MUMBAI TO BARODA ? B) WHETHER TRANSPORTATION PAYMENTS WERE MET BY TH E PARTIES FROM WHOM YOU HAVE MADE THE PURCHASES ? IN THAT CASE, PLEASE JUST IFY YOUR CLAIM. C) IN CASE, TRANSPORTATION PAYMENTS WERE MADE BY YOU, THEN PLEASE FURNISH LR IN ORIGINAL FOR VERIFICATION. YOU ARE, THEREFORE, REQUESTED TO FURNISH THE ABOVE INFORMATION / DETAILS IMMEDIATELY. IN ADDITION TO THE ABOVE, YOU ARE ALSO REQUESTED TO FURNISH THE FOLLOWING :- I. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LET TERS U/S. 133(6) OF THE I.T.ACT WERE ISSUED TO THE FOLLOWING PARTIES FROM WHOM YOU HAVE MADE PURCHASES AT THE ADDRESS GIVEN BY YOU. HOWEVER, ALL THE LETTERS WERE RETURNED BY THE POSTAL AUTHORITIES WITH A REMARK ' NOT KNOWN '. I) M/S. APEX METAL CORPORATION, MUMBAI II) M/S. ASIAN METAL INDUSTRIES, MUMBAI III) M/S. KRISHNA STEEL INDUSTRIES, MUMBAI ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 9 IV) M/S. SAROGI SYNDICATE, MUMBAI V) M/S. SUNRISE ENTERPRISE YOU ARE, THEREFORE, REQUESTED TO FURNISH THE FOLLOW ING:- A) EVIDENCE IN RESPECT OF DELIVERY OF GOODS I .E. DELIVERY OF CHALLANS, TRANSPORT RECEIPTS / LORRY RECEIPTS. B) RELEVANT ENTRIES IN THE STOCK REGISTER C) PROOF OF PAYMENT ETC. D) THE SUPPLIERS ARE NOT PRESENTLY AVAILABLE AT THE ADDRESS FURNISHED BY YOU. YOU ARE, THEREFORE, REQUESTED TO FURNISH CONFIRMATI ON FROM ALL THE PARTIES WITH CORRECT POSTAL ADDRESS. E) PLEASE PRODUCE ALL THE ABOVE PARTIES FROM WHOM YOU HAVE MADE PURCHASES FOR CROSS EXAMINATION SINCE LETTERS ISSUED TO THESE PARTIES AT THE ADDRESS GIVEN BY YOU VIDE YOUR SUBMISSION DATED NIL RECEIVED IN THIS OFFICE ON 18.1.2014 WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH A REMA RK 'NOT KNOWN '. F) THE ONUS IS NOW SQUARELY LIES ON YOU TO P ROVE THE GENUINENESS OF PURCHASES SAID TO HAVE BEEN MADE FROM THE PARTIES MENTIONED A BOVE AND SUBMITTED TO THIS OFFICE ON 18.1.2014, WHO HAVE DENIED ANY SALES TO Y OU BEFORE SALES-TAX AUTHORITIES. PLEASE NOTE THAT, IN-CASE YOU FAILED TO PROVE THE P URCHASES AS GENUINE FROM THESE PARTIES WITH VERY STRONG AND CLINCHING EVIDENCE, I HAVE LEFT WITH NO OTHER OPTION EXCEPT TO CONSIDER THE ENTIRE PURCHASES MADE FROM T HE ABOVE PARTIES AMOUNTING TO RS.1,18,58,604/- AS BOGUS PURCHASES AND ADDITION WILL BE MADE ACCORDINGLY. 2. PLEASE FURNISH G.P. AND N.P. CHART FOR THE CURRE NT YEAR AND ALSO FOR THE IMMEDIATELY PRECEDING TWO ASSESSMENT YEARS. 3. PLEASE PRODUCE ALL THE BOOKS OF ACCOUNTS, CASH B OOK, BANK BOOK, PURCHASE BILLS, SALES BILLS ETC. FOR VERIFICATION AT THE TIME OF HE ARING. 4. THE CASE IS FIXED UP FOR HEARING ON 10.03.2014 A T 3.00 PM. PLEASE ENSURE TO FURNISH ALL THE INFORMATION / DETAILS AS CALLED FOR . NO ADJOURNMENT WILL BE GRANTED. IN CASE OF NON-COMPLIANCE / NOT ATTENDANCE, THE ASS ESSMENT WILL BE FINALIZED ON ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 10 THE BASIS OF INFORMATION DETAILS AVAILABLE ON RECOR D AND ADDITION WILL HE MADE ACCORDINGLY AS DISCUSSED ABOVE WHICH MAY PLEASE BE NOTED, ' 6.4. IN RESPONSE TO THE ABOVE, THE ASSESSEE'S AUTHO RIZED REPRESENTATIVE HAS MADE WRITTEN SUBMISSION VIDE LETTER DATED NIL RECEIVED I N THIS OFFICE ON 6.3.2014, THE RELEVANT PORTION OF THE SUBMISSION IS REPRODUCED AS UNDER :- 'WHILE IT IS TRUE THAT THE ASSESSEE HAS MADE PURCHAS ES MOSTLY FROM MUMBAI, IT IS ALSO A FACT THAT ALMOST ENTIRE SALES ARE ALSO IN MU MBAI ONLY. HENCE THE MOVEMENT OF MATERIALS IS IN MUMBAI ITSELF AND HENCE THERE IS NO QUESTION OF TRANSPORT GOODS TO VADODARA. THE DELIVERY OF MATERI ALS ARE MOSTLY BY HAND CART OR TEMPO LOCALLY IN MUMBAI AND HENCE PAYMENTS ARE O F RELATIVELY SMALL AMOUNTS ONLY. THE ASSESSEE HAD PAID FOR SUCH EXPENSES OUT I TS NORMAL CASH ON HAND FROM TIME TO TIME AND THE SAME HAS BEEN DEBITED TO THE P ROFIT AND LOSS ACCOUNT. IT APPEARS FROM YOUR ABOVE MENTIONED LETTER DTD. 28 .02.2014 THAT THE NOTICES U/S. 133(6) SENT TO VARIOUS PARTIES AT THE ADDRESSES PRO VIDED DURING THE ASSESSMENT PROCEEDINGS HAVE BEEN RETURNED UNSERVED. WITH REFER ENCE TO THE SAME WE WOULD LIKE TO INFORM YOU THAT, WHEN THE ADDRESSES WERE CA LLED FOR DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THE ADDRESSES AS WERE APPEARING ON THE INVOICES ISSUED BY THE ABOVE PARTI ES DURING THE RELEVANT ASSESSMENT YEAR WITHOUT BEING AWARE THAT THE PARTIE S MIGHT HAVE CHANGED THEIR ADDRESS IN THE INTERMITTENT PERIOD. THE ASSESSEE IS NOW TRYING TO TRACE THE PARTIES IN ORDER TO BE ABLE TO SUBMIT THEIR PRESENT COMMUNI CATION ADDRESSES. HOWEVER, WE HOPE YOU UNDERSTAND THAT THE PROCESS WILL TIME S OME TIME. THE MATTER IS MORE THAN 3-4 YEARS OLD AND IT MAY NOT BE POSSIBLE TO TRACE ALL THE PARTIES NOW. ALSO IT IS UNFAIR TO ASK THE ASSESSEE TO 'PRODUCE' A LL PARTIES FOR VERIFICATION SIMPLY BECAUSE LETTERS ISSUED HAVE COME BACK. THE ASSESSEE CANNOT BE EXPECTED TO HAVE SO MUCH CONTROL OVER THIRD PARTIES HAVING THEIR BUS INESSES IN MUMBAI AND HAVING DEALT WITH THEM 3-0 YEARS BACK TO COMPEL SUCH PARTI ES TO APPEAR BEFORE YOUR GOOD SELF IN VADODARA. FORTUNATELY, THE ASSESSEE HA D THE PRACTICE OF TAKING CONFIRMATIONS FROM VARIOUS PARTIES EVERY YEAR. HENC E, HE ALREADY POSSESSES ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 11 CONFORMATIONS OF MOST OF THE PARTIES OBTAINED DURIN G THE RELEVANT ASSESSMENT YEAR. THE SAME ARE IN THE PROCESS OF BEING COMPILED AND SHALL BE SUBMITTED IN NEXT HEARING. AS SUCH ALL PURCHASES ARE GENUINE AND ALL PAYMENTS HAVE BEEN MADE THROUGH REGULAR BANKING CHANNELS ONLY. ALL PURCHASES ARE BE ING REFLECTED IN THE STOCK REGISTER. SALES HAVE BEEN MADE OUT OF THE SAID PURC HASES FOR WHICH PAYMENTS HAVE BEEN RECEIVED. THERE CANNOT BE SALES WITHOUT P URCHASES. IT IS HIGHLY UNFAIR TO PROPOSE TO TREAT ALL PURCHASES AS BOGUS SIMPLY O N SOME THIRD PARTY STATEMENT WHICH HAS NOT YET BEEN GIVEN TO THE ASSESSEE SPECIA LLY WHEN THERE ARE SALES TOO AND THE SAME ARE NOT BEING DOUBTED. WE ARE ALSO IN THE PROCESS OF COMPILING THE RELEVANT DATA AND THE SAME SHALL ALSO BE SUBMITTED SHORTLY. HOWEVER, SINCE THE MATTER IS OLD AND DATA TO BE COMPILED IS RELATING T O THE ENTIRE PURCHASES OF ASSESSEE FOR THE RELEVANT YEAR, WE WILL NEED SOME M ORE TIME TO COMPILE THE SAME AND PREPARE OUR DEFENCE IN THE MATTER. WE HOPE WE A RE GIVEN SUFFICIENT TIME FOR THE SAME IN THE BEST INTERESTS OF PRINCIPLES OF NAT URAL JUSTICE.' 6.5 AGAIN THE ASSESSEE'S AUTHORIZED REPRESENTATIVE SHRI HARIN PARIKH, C.A., ATTENDED ON 13.3.2014 AND HAS MADE FURTHER WRITTEN SUBMISSION WHICH IS REPRODUCED AS UNDER :- '(1) AS EXPLAINED EARLIER, THE ASSESSEE HAS THE PRAC TICE OF TAKING CONFIRMATIONS FROM VARIOUS PARTIES EVERY YEAR. HENCE HE ALREADY P OSSESSES CONFIRMATIONS OF MOST OF THE PARTIES OBTAINED DURING THE RELEVANT AS SESSMENT YEAR WE ENCLOSE HEREWITH 13 CONFIRMATIONS COVERING ALL THE SUPPLIER S OF GOODS FROM WHOM PURCHASES ARE MADE DURING THE YEAR RELEVANT TO THE YEAR UNDER ASSESSMENT. THIS INCLUDES THE THREE PARTIES WHERE THE PURCHASES ARE DOUBTED BY YOU AS BOGUS AND ALSO WHERE LETTERS SENT U/S 133(6) OF THE IT. ACT A RE ADVISED AS RETURNED BY THE POSTAL AUTHORITIES WITH A REMARK 'NOT KNOWN'. (2) WITH RESPECT TO THE THREE PARTIES WHERE NOTICES U/S. 133(6) WERE RETURNED UNSERVED IT HAS ALREADY BEEN SUBMITTED THAT WHEN TH E ADDRESSES WERE CALLED FOR DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE SUB MITTED THE ADDRESSES AS ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 12 WERE APPEARING ON THE INVOICES ISSUED BY THE ABOVE PARTIES DURING THE RELEVANT ASSESSMENT YEAR WITHOUT BEING AWARE THAT THE PARTIE S MIGHT HAVE CHANGED THEIR ADDRESS IN THE INTERMITTENT PERIOD. THE MATTER IS M ORE THAN 3-4 YEARS OLD AND IT MAY NOT BE POSSIBLE TO TRACE ALL THE PARTIES NOW. A LSO IT IS UNFAIR TO ASK THE ASSESSEE TO 'PRODUCE' ALL PARTIES FOR VERIFICATION S IMPLY BECAUSE LETTERS ISSUED HAVE COME BACK. THE ASSESSEE CANNOT BE EXPECTED TO HAVE SO MUCH CONTROL OVER THIRD PARTIES HAVING THEIR BUSINESSES IN MUMBAI AND HAVING DEALT WITH THEM 3-4 YEARS BACK TO COMPEL SUCH PARTIES TO APPEAR BEFORE YOUR GOODSELF IN VADODARA. FORTUNATELY, THE ASSESSEE HAD THE PRACTICE OF TAKIN G CONFIRMATIONS FROM VARIOUS PARTIES EVERY YEAR. HENCE HE IS ABLE TO SUBMIT THE SAME HEREWITH. (3) AS SUCH ALL PURCHASES ARE GENUINE AND ALL PAYME NTS HAVE BEEN MADE THROUGH REGULAR BANKING CHANNELS ONLY. WE HAVE ALREADY SUBM ITTED THE LEDGER ACCOUNTS OF ALL PARTIES AND THE BANK STATEMENTS EVIDENCING THE PAYMENTS, IN CASE OF TWO PARTIES THE ACCOUNTS HAVE BEEN SQUARED UP DURING TH E YEAR WE ALSO FURTHER ENCLOSED HEREWITH LEDGER ACCOUNTS OF THE ABOVE 3 PA RTIES FOR SUBSEQUENT YEARS WHEREIN ALL AMOUNTS HAVE BEEN PAID OFF. COPIES. OF BANK STATEMENTS WHEREIN THESE SUBSEQUENT PAYMENTS APPEAR ARE ALSO BEING PRO DUCED HEREWITH. (4) FURTHER, ALL PURCHASES ARE BEING DULY REFLECTED IND THE STOCK REGISTER WHICH HAS ALREADY BEEN PRODUCED BEFORE YOU AND EACH INDIVIDUA L PURCHASE AND SALE VERIFIED. SALES HAVE BEEN MADE OUT OF THE SAID PURCHASES FOR WHICH PAYMENTS HAVE BEEN RECEIVED. (5) THIS IS FURTHER EVIDENT FROM THE COPY OF THE TA X AUDIT REPORT U/S 44AB ALREADY SUBMITTED. IT INCLUDES STOCK STATEMENT GIVING FULL PARTICULARS AS A TRADING CONCERN OF VARIOUS ITEMS OF PURCHASES AND SALES AND ALSO TH EIR QUANTITY AND VALUE FORMING PART OF THE SAID TAX AUDIT REPORT AS PER ANNEXURE 3 THERETO. AS PER THE SAID AUDITED ANNEXURE PURCHASES RECONCILE WITH SALES IN QUANTITY AND ALSO IN VALUE PER ITEM OF GOODS. ' 6.6 THE SUBMISSIONS MADE BY THE ASSESSEE, AS REPROD UCED ABOVE, HAS DULY BEEN TAKEN INTO CONSIDERATION. HOWEVER, THE SAME IS NOT FOUND TO BE FULLY TENABLE. ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 13 THEREFORE, THE ASSESSEE HAS BEEN GIVEN ONE MORE LAS T AND FINAL OPPORTUNITY TO JUSTIFY HIS CLAIM VIDE ORDER SHEET ENTRY NOTING DAT ED 13.3.2014. WHEREIN IT HAS BEEN BROUGHT TO THE NOTICE OF THE AUTHORIZED REPRES ENTATIVE THAT 133(6) LETTERS SENT TO FIVE PARTIES VIZ. M/S. APEX METAL CORPORATI ON. ASIAN METAL INDUSTRIES. M/S. KRISHNA STEEL INDUSTRIES, M/S. SAROGI SYNDICATES AN D SUNRISE ENTERPRISE. MUMBAI. WERE RETURNED BACK BY THE POSTAL AUTHORITIES WITH A REMARK ''NOT KNOWN'. THE ASSESSEE WAS THEREFORE REQUIRED TO HOW CAUSE AS TO WHY THE ENTIRE PURCHASES MADE FROM THE ABOVE THREE PARTIES SHOULD NOT BE CON SIDERED AS BOGUS PURCHASES AND WHY ADDITION OF RS.1,18,58,604/- BE MADE AS UNE XPLAINED EXPENDITURE U/S.69 OF THE I.T.ACT, 1961. THE ASSESSEE WAS REQUIRED TO SUBMIT HIS REPLY, IF ANY, BY 20.3.2014, OTHERWISE IT WILL BE PRESUMED THAT THE A SSESSEE HAS NO OBJECTION ABOUT THE PROPOSED ADDITION, AS MENTIONED ABOVE. IN RESPONSE TO THE ABOVE, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ATTENDED ON 20.03.2014 'AND HAS MADE WRITTEN SUBMISSION WHICH IS REPRODUCED AS UNDER :- 'WITH REFERENCE TO THE-5 PARTIES VIZ. APEX METAL COR PORATION, ASIAN METAL INDUSTRIES, KRISHNA STEEL INDUSTRIES, SAROGI SYNDIC ATE AND SUNRISE ENTERPRISES, THE PURCHASES FROM WHOM ARE DOUBTED AS BOGUS, WE WOULD LIKE TO GIVE FOLLOWING SUBMISSIONS : (1) IN RESPECT OF THE NOTICES U/S. 133(6) SENT TO T HE AFORESAID 5 PARTIES WHICH HAVE BEEN REPORTED AS RETURNED UN-SERVED, WE HAVE ALREAD Y INFORMED YOU THAT, WHEN THE ADDRESSES WERE CALLED FOR DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSES SUBMITTED THE ADDRESSES AS WERE APPEARING ON THE IN VOICES ISSUED BY THE SAID PARTIES DURING THE RELEVANT ASSESSMENT YEAR WITHOUT BEING AWARE THAT THE SAID PARTIES MIGHT HAVE CHANGED THEIR ADDRESS IN THE INT ERMITTENT PERIOD. (2) AS YOU KNOW WE HAVE ALREADY SUBMITTED THE CONFI RMATION OF ALL THE 18 SUPPLIERS OF GOODS FROM WHOM ASSESSEE MADE PURCHASE S DURING THE YEAR AND SAME ALSO INCLUDES THE CONFIRMATION OF THE AFORESAI D 5 PARTIES FROM WHOM THE PURCHASES MADE ARE DOUBTED AS BOGUS. ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 14 (3) THE MATTER IS MORE THAN 3-4 YEARS OLD AND IT MA Y NOT BE POSSIBLE TO TRACE ALL THE PARTIES NOW. ALSO IT IS UNFAIR TO ASK THE ASSES SEE TO 'PRODUCE' ALL PARTIES FOR VERIFICATION SIMPLY BECAUSE LETTERS ISSUED HAVE COM E BACK. THE ASSESSEE CANNOT BE EXPECTED TO HAVE SO MUCH CONTROL OVER THIRD PART IES HAVING THEIR BUSINESSES IN MUMBAI AND HAVING DEALT WITH THEM 3-4 YEARS BACK TO COMPEL SUCH PARTIES TO APPEAR BEFORE YOUR GOODSELF IN VADODARA. (3) AS SUCH ALL PURCHASES ARE GENUINE AND ALL PAYME NTS HAVE BEEN MADE THROUGH REGULAR BANKING CHANNELS ONLY. SALES HAVE BEEN MADE FROM THE SAID PURCHASE AND PAYMENTS RECEIVED THROUGH BANKING CHANNELS. WE HAVE SUBMITTED COMPLETE DETAILS OF PURCHASES / SALES AND PAYMENTS / RECEIPT S. EVEN PARTY-WISE AND MONTH- WISE PURCHASES AND SALES DETAILS ARE ALSO ALREADY S UBMITTED. (4) WITH SPECIFIC REGARDS TO PURCHASES, WE HAVE ALR EADY SUBMITTED THE DETAILS OF PURCHASES FROM VARIOUS PARTIES, THE LEDGER ACCOUNTS OF ALL PARTIES AND THE BANK STATEMENTS EVIDENCING THE PAYMENTS. IN CASE OF THE IMPUGNED FIVE PARTIES, THE ACCOUNTS HAVE BEEN SQUARED UP - TWO DURING THE YEAR AND ONE IN SUBSEQUENT YEAR. WE HAVE ENCLOSED LEDGER AND BANK PAYMENT EVID ENCES TILL SQUARING UP OF THE ACCOUNTS IN ALL CASES. (5) DAY TO DAY STOCK REGISTER IN RESPECT OF ALL ITE MS PURCHASED BY ASSESSEE IS ALREADY FURNISHED TO YOU. ALL PURCHASES ARE BEING D ULY REFLECTED IN THE STOCK REGISTER AND IT ALSO INCLUDES THE QUANTITY PURCHASE D FROM THE AFORESAID 5 PARTIES. SALES HAVE BEEN MADE OUT OF THE PURCHASES MADE DURI NG THE YEAR ONLY. THERE CANNOT BE SALES WITHOUT PURCHASES. THIS IS ALSO EVI DENT FROM THE ANNEXURE-4 TO THE TAX AUDIT REPORT. EACH INDIVIDUAL PURCHASE AND SALE HAS BEEN VERIFIED FROM THE SAID STOCK REGISTER. (6) WE HAVE ALREADY SUBMITTED COPY OF THE TAX AUDIT REPORT U/S 44AB, WHICH INCLUDES STOCK STATEMENT GIVING FULL PARTICULARS AS A TRADING CONCERN OF VARIOUS ITEMS OF PURCHASES AND SALES AND ALSO THEIR QUANTIT Y AND VALUE FORMING PART OF THE SAID TAX AUDIT REPORT AS PER ANNEXURE 4 THERETO . AS PER THE SAID AUDITED ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 15 ANNEXURE PURCHASES RECONCILE WITH SALES IN QUANTITY AND ALSO IN VALUE PER ITEM OF GOODS. (7) YOU WILL KINDLY OBSERVE FROM THE AFORESAID ANNE XURE TO THE TAX AUDIT REPORT, THAT THERE IS NO STOCK AT THE COMMENCEMENT OF THE Y EAR AT ALL. THUS ALL SALES ARE AGAINST GOODS PURCHASED DURING THE YEAR. WHEN SALES ARE CONSIDERED GENUINE, IT IS HIGHLY UNFAIR TO PROPOSE TO TREAT THE PURCHASES MADE FROM THE AFORESAID 5 PARTIES AS BOGUS. THERE ARE SALES FROM THE GOODS PU RCHASED BY THE ASSESSEE FROM THESE PARTIES AS WELL. AGAIN, IT IS SUBMITTED THAT THERE CANNOT BE SALES WITHOUT PURCHASES, (8) THUS, ALL PURCHASES ARE GENUINE, DULY REFLECTED IN THE STOCK REGISTER AND ALL PAYMENTS HAVE BEEN MADE THROUGH REGULAR BANKING CHA NNELS ONLY. SALES HAVE BEEN MADE OUT OF THE SAID PURCHASES FOR WHICH PAYME NTS HAVE BEEN RECEIVED. IT IS HIGHLY UNFAIR TO PROPOSE TO- TREAT PURCHASES FROM T HE IMPUGNED FIVE PARTIES AS BOGUS SIMPLY ON SOME THIRD PARTY STATEMENT WHICH HA S NOT YET BEEN GIVEN TO THE ASSESSEE SPECIALLY WHEN THERE ARE SALES TOO AND THE SAME ARE NOT BEING DOUBTED. (9) IF THE PURCHASES FROM THE ABOVE 5 PARTIES ARE D ISALLOWED BY TREATING THEM AS BOGUS, IT WILL LEAD TO AN ABSURD SITUATION SINCE SA LES OF PRODUCTS PURCHASED FROM THESE PARTIES HAVE ALREADY BEEN TREATED AS INCOME T HUS THE SALES RELATED TO THESE PURCHASES WILL BE TAXED ENTIRELY WITHOUT ANY DEDUCT ION TOWARD COST OF PURCHASES. WHAT SHOULD BE TAXED IS ONLY NET INCOME. IN CASE TH E PURCHASES ARE ADDED, WHAT WILL BE TAXED WILL BE GROSS REVENUE AND NOT THE REA L INCOME OF THE ASSESSEE. (10) WHEN THE HARDCORE FACTS OF PURCHASES, SALES, Q UANTITIES, PAYMENTS ETC. CANNOT BE DENIED, ADDITION BASED SIMPLY ON THIRD PA RTY STATEMENT IS TOTALLY UNWARRANTED SPECIALLY WHEN THE STATEMENT IS,NOT GIV EN TO ASSESSEE AND WHERE ASSESSEE HAS NOT BEEN GIVEN OPPORTUNITY TO CROSS EX AMINE. IF DEPARTMENT STARTS MAKING ADDITIONS ON SUCH THIRD PARTY STATEMENT GROS SLY UNJUST ADDITIONS WILL HAPPEN IN ANY AND EVERY CASE AND IT WILL LEAD TO AN ANARCHY LIKE SITUATION. (11) IT MAY ALSO BE NOTED, THAT DURING THE YEAR UND ER ASSESSMENT, SALES AMOUNTED TO RS.596.24 LACS AGAINST PURCHASES OF RS. 593.15 LACS. THE RESULTANT GP ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 16 RS.5 .76 LACS IS HARDLY 1%. LOOKING AT THIS AND THE PAST FINANCIAL DATA TOO, IT IS APPARENT THAT THE ASSESSEE IS ENGAGED ONLY IN TRADI NG ACTIVITIES AND THE MARGIN OF PROFIT IS VERY LIMITED TO HARDLY ABOUT 1 % TO 2% JU ST LIKE COMMISSION TO A COMMISSION AGENT. IT IS LIKE A INTERMEDIARY BUSINES S. THERE CANNOT BE HEAVY MARGIN AT ALL SPECIALLY CONSIDERING THE NATURE OF B USINESS AND THE PRODUCTS INVOLVED. IF ADDITION OF ENTIRE PURCHASES FROM ABOVE 5 PARTIE S IS MADE AS PROPOSED, IT WILL FIRSTLY MEAN AN ABSURD SITUATION OF SALES BEING TAX ED WITHOUT PURCHASES. IT WILL ALSO MEAN THAT ASSESSEE WOULD HAVE EARNED APPROX. R S.L 15 LACS IN SALES OF AROUND RS. 600 LACS I.E. A MARGIN WHICH IS IMPOSSIB LE IN THE NATURE OF BUSINESS OF THE ASSESSEE. (12) WE HAVE ALSO CHECKED THE JUDICIAL PRECEDENTS I N SUCH CASES. IN MOST OF THE CASES, IF THE PARTIES ARE PROVED BOGUS, THE PURCHAS ES ARE STILL TREATED GENUINE SINCE THERE ARE SALES. HOWEVER, IT IS PRESUMED THAT THEY MUST HAVE BEEN MADE FROM SOME OTHER PARTIES, PROBABLY FROM GREY MARKET, AND THE BILLS TAKEN OF BOGUS PARTIES. THE ONLY BENEFIT THAT COULD HAVE BEEN TAKE N BY DOING THIS IS TO INFLATE THE PURCHASE COST AND SHOW REDUCED MARGIN. (13) CONSIDERING THE JURISDICTIONAL COURT PRECEDENT S, THERE IS A RECENT DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. SATHYANARAYAN N. RATHI (2013) 351 ITR 150 (GUJ.). IN THIS CASE, IN SIMILAR CIRCUMSTANCES, THE LD AO HAD ORIGINALLY ADDED THE ENTIRE PURCHASES FROM SUCH PAR TIES WHICH WERE FOUND TO BE BOGUS. ON APPEAL, THE LD CIT (A), OBSERVED THAT THE RE IS COMPLETE QUANTITATIVE TALLY OF THE MATERIAL PURCHASED HENCE IT WAS CLEAR THAT SUCH MATERIALS WERE PURCHASED FROM THE OPEN MARKET AND BILLS WERE PROCU RED FROM VARIOUS SOURCES. HENCE, HE RULED THAT ENTIRE PURCHASES CANNOT BE ADD ED AND RESTRICTED THE ADDITION TO 30% OF THE ALLEGED PURCHASES TO COVER F OR THE PROBABLE INFLATION IN PURCHASE PRICE IN THE BOGUS BILLS. ON FURTHER APPEA L, THE HON. IT AT. ALLOWED FURTHER RELIEF AND REDUCED THE ADDITION TO 12.50%. ON FURTHER APPEAL BY THE DEPT, ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 17 THE HON. GUJARAT HIGH COURT ACCEPTED THE ADDITION O F 12.5% AS REASONABLE AND DECLINE TO INTERFERE WITH THE ORDER OF THE HON. IT AT. (14) IT IS THUS CLEAR THAT ENTIRE PURCHASES FROM SU CH IMPUGNED PARTIES CANNOT BE ADDED AND WHAT CAN BE ADDED IS ONLY THE EXTRA MARGI N THAT COULD HAVE BEEN EARNED. THIS DEPENDS ON FACTS AND CIRCUMSTANCES OF EACH CASE AND THERE CANNOT BE A FIXED FORMULA. (15) LOOKING AT THE HISTORY OF SUCH CASES WHICH IS ALSO EVIDENT FROM THE HON. ITAT DECISION IN THE ABOVE CASE, IT CAN BE SEEN THAT DIF FERENT ADDITIONS ARE MADE IN EACH CASE DEPENDING ON THE FACTS AND CIRCUMSTANCES. FOR EG. IN ITO VS. SUN STEEL 92 TTJ (AMD) 1126, AHMEDABAD TRIBUNAL, IN SIMILAR C IRCUMSTANCES SUSTAINED AD- HOC ADDITION OF RS.50,000/- ON ACCOUNT OF BOGUS PUR CHASES. (16) IN THE CASE OF THE ASSESSEE, IT IS FIRSTLY REI TERATED THAT THE FACTS SHOW THAT ALL PURCHASE ARE GENUINE. THE CONFIRMATION, LEDGERS, PA YMENT DETAILS ETC. HAVE ALL BEEN SUBMITTED. THUS, FIRSTLY THERE IS NO CASE FOR MAKING ANY ADDITION. THE ADDITION BEING PROPOSED IS ONLY BASED ON A THIRD PA RTY STATEMENT WHICH IS UNJUST AND UNFAIR. HOWEVER, IF ANY ADDITION IS TO BE MADE THEN IT IS P RAYED THAT THE SAME CANNOT BE OF ENTIRE PURCHASES FROM ABOVE PARTIES SINCE SALES HAVE BEEN EFFECTED FROM THE SAME WHICH ARE ACCEPTED AS GENUINE. THUS, THE ADDIT ION CAN ONLY BE BY PRESUMING THAT PURCHASES ARE FROM GREY MARKET AND T HE INVOICES ARE INFLATED TO REDUCE TAXABLE MARGIN. HOWEVER, SUCH ADDITION ALSO HAS TO BE BASED ON THE FACTS OF EACH CASE SINCE EACH BUSINESS DIFFERS AND THERE CANNOT BE STRAIGHTJACKET FORMULA APPLICABLE TO ALL. SIMILARLY, OPINION REGAR DING ESTIMATION WILL ALSO DIFFER FROM PERSON TO PERSON ALSO MANY TIMES DIFFER FOR TH E SAME PERSON IN DIFFERENT CASES. HERE, IT IS ONCE AGAIN SUBMITTED THAT THE ASSESSEE IS ENGAGED ONLY IN TRADING ACTIVITIES AND THE ACTUAL MARGIN OF PROFIT IS VERY LIMITED TO HARDLY ABOUT 1% TO 2% LIKE COMMISSION PAID TO COMMISSION AGENT. ASSESSEE' S BUSINESS IS LIKE A INTERMEDIARY BUSINESS. THERE CANNOT BE HEAVY MARGIN AT ALL. ASSESSEE HAS ALREADY ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 18 OFFERED SUCH MARGIN FOR TAX. THE ADDITIONAL MARGIN, IF ANY PRESUMED CANNOT BE HIGH AT ALL. AS SUBMITTED, IF ANY HIGH ADDITION IS MADE, IT WILL LEAD TO A SITUATION OF THE ASSESSEE BEING TAXED ON ABSURDLY HIGH PROFITS W HICH ARE IMPOSSIBLE IN HIS TRADE.' 6.7 THE SUBMISSIONS OF THE ASSESSEE MADE FROM TIME TO TIME, AS REPRODUCED ABOVE, HAS DULY BEEN TAKEN INTO CONSIDERATION. HOWE VER, THE SAME IS NOT FOUND TO BE ACCEPTABLE IN TOTO. ON PERUSAL OF THE EXPLANATIO N OF THE ASSESSEE, IT IS NOTICED THAT THE ASSESSEE HAS MERELY FURNISHED LEDGER ACCOU NT AND INVOICES AND HAS CLAIMED THE RELEVANT PURCHASES AS GENUINE ONLY BECA USE THE PAYMENT HAS BEEN MADE BY CHEQUE. THE INVOICES FURNISHED BY THE ASSES SEE CANNOT BE TREATED AS GENUINE IN VIEW OF THE FACT THAT THE CONCERNED PART IES HAVE CONFESSED BEFORE THE SALES-TAX AUTHORITIES THAT THEY ARE IN THE BUSINESS OF ISSUING BILLS WITHOUT ACTUALLY SELLING ANY MATERIAL. THE LEDGER ACCOUNT IS ONLY A SELF MADE EVIDENCE. THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE AFORESAID PURCHASES, HAS FAILED TO PRODUCE THE SUPPLIERS, FAILED TO PRODUCE THE BROKERS / THIRD PARTY EVIDENCE IN SPITE OF SUFFICIENT OPPORTUNITIES GRANT ED. NO TRANSPORT RECEIPTS OR LORRY RECEIPTS OR OCTROI RECEIPTS HAVE BEEN SUBMITT ED. SOME UNUSUAL AND ABNORMAL FEATURES AND CHARACTERISTICS OF THE TRANSA CTIONS MADE WITH THESE BOGUS PARTIES, INTER ALIA, INCLUDED, THE FOLLOWING FEATUR ES :- (A) PAYMENTS AGAINST THE VARIOUS PURCHASES WERE SHO WN AGAINST THE BOGUS SUPPLIERS THROUGH CROSSED CHEQUES. (B) THE-SUPPLIERS ARE NOT PRESENTLY AVAILABLE AT TH E ADDRESSES FURNISHED BY THE ASSESSEE. FURTHER, THEY HAVE ALSO ADMITTED BEFORE T HE SALES-TAX AUTHORITIES THAT THEY HAVE ONLY ACCOMMODATION BILLS. AT THIS STAGE, THE ASSESSEE IS UNABLE TO PRODUCE THE SUPPLIERS TO REFUTE THEIR ADMISSION MAD E BEFORE SALES-TAX AUTHORITIES. 6.8 THE ASSESSEE HAS TIME AND AGAIN HIGHLIGHTED THI S POINT SAYING THAT THE MATERIAL WHICH IS SHOWN TO HAVE BEEN PURCHASED FROM THE ALLEGED BOGUS SUPPLIERS HAVE REALLY BEEN RECEIVED AND HAS BEEN US ED FOR BUSINESS. THE FACT OF RECEIPT OF MATERIAL IS NOT BEING DISPUTED HERE. THE ONUS LIES ON THE ASSESSEE TO ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 19 ESTABLISH ANY CLAIM FOR DEDUCTION FOR EXPENDITURE W HICH IS CLAIMED AS DEDUCTION IN COMPUTING ITS TAXABLE INCOME. THEREFORE, THE ONUS I N THE PRESENT CASE SQUARELY LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF PU RCHASES, SAID TO HAVE BEEN MADE FROM THE PARTIES, WHO HAVE DENIED ANY SALES TO THE ASSESSEE BEFORE SALES- TAX AUTHORITIES. THE ASSESSEE DID NOT MAKE ANY EFFO RTS TO CONTACT THOSE PARTIES AND PRODUCE THEM DURING THE COURSE OF ASSESSMENT PR OCEEDINGS. HE JUST TRIED TO SHIFT THE BURDEN ON THE REVENUE. SUCH SUBMISSIONS H AVE BEEN MADE IN COMPLETE DISREGARD OF THE FACT THAT THE BURDEN CLEARLY LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTION. IT WAS INCUMBENT ON THE ASSESSEE TO PROVE THAT THE SUPPLIERS WERE GENUINE AND THEY REALLY MADE PAY MENTS BY CHEQUES TO THESE VERY PARTIES AND NONE ELSE. SUCH A BURDEN HAS TO BE DISCHARGED BY THE ASSESSEE WITH VERY STRONG AND CLINCHING EVIDENCE IN VIEW OF A BLATANT DENIAL BY THE PARTIES. NO SERIOUS EFFORTS WERE MADE BY THE ASSESSEE TO DIS CHARGE SUCH BURDEN OF PROVING THE GENUINENESS OF THE TRANSACTIONS WITH TH E PARTY. 7. I AM THEREFORE OF THE CONSIDERED OPINION THAT TH E TRANSACTIONS IN RESPECT OF THE MATERIALS SHOWN AS PURCHASES BY THE ASSESSEE FORM T HE ABOVE MENTIONED PARTIES ARE NOT GENUINE TRANSACTIONS. IT IS REASONABLY CLEA R AND GLARINGLY OBVIOUS THAT THE SALES INVOICES CLAIMED TO HAVE BEEN ISSUED BY THEM ARE FICTITIOUS ONES. THEREFORE, APPLYING THE RATIO OF THE RECENT DECISION OF THE JU RISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS.SATHYANARAYAN P. RATHI, REPORTED IN 351 ITR 150 (GUJ.), I CONSIDER 12.5% OF THE PURCHASES M ADE DURING THE YEAR FROM THE ABOVE MENTIONED THREE PARTIES ARE DISALLOWED AND AD DED TO THE TOTAL INCOME OF THE ASSESSES. THE TOTAL PURCHASES MADE BY THE ASSES SEE FROM THE ABOVE FIVE PARTIES FOR THE YEAR UNDER CONSIDERATION IS RS. 1.1 8,58,604/-. 12.5% OF THIS PURCHASE OF RS. 1,18,58,604/-COMES TO RS. 14,82,326 /-. ACCORDINGLY, AN AMOUNT OF RS. 14,82,326/- IS HEREBY ADDED TO THE TOTAL INC OME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 69 OF THE I.T.ACT, 1961.' ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 20 4. AGAINST THE ADDITION OF 12.5% OF THE TOTAL PURCHASE , ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO HELD THA T THE UNDISCLOSED INCOME OF THE APPELLANT SHOULD BE ASSESSED @ 10% OF PURCHASE SHOWN TO HAVE BEEN MADE BY HIM FROM THE PARTIES WHICH HAVE NOT BEEN ESTABLI SHED TO BE ACCOMMODATION ENTRY PROVIDER. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. ASSESSEE RUNS A PROPRIETORSHIP CONCERN WHICH IS ENGAGED IN THE BU SINESS OF WHOLESALE TRADING IN FERROUS AND NON-FERROUS METALS, SS SHEETS, PATTA , PIPES, COILS ETC. THE BUSINESS IS ORDINARILY OF ONE-TO-ONE PURCHASES AND SALES ON WHOLESALE BASIS WITH VERY LOW GROSS MARGINS OF ABOUT 1 TO 1.5% ONLY. ON THE BASIS IN RECEIVED FROM THAT APPELLANT HAS PURCHASED GOODS THROUGH 5 HAWALA DEALERS VIZ. APEX METAL CORPORATION, ASIAN METAL INDUSTRIES, KRISHNA STEEL INDUSTRIES, SAROGI SYNDICATE AND SUNRISE ENTERPRISES AND IT WAS HELD THAT THESE FIVE PARTIES ARE BOGUS IN NATURE. BUT NO OPPORTUNITY OF CROSS EXAMINATION WAS GIVEN TO THE APPELLANT. THE QUANTITIES IN RESPECT OF THE PURCHASES FROM THE AFORESAID FIVE PARTIES ARE DULY REFLECTED IN THE STOCK REGISTER AND THE QUANTI TIES PURCHASED ARE RECONCILED WITH THE SALES MADE DURING THE YEAR AND SAME ARE AL SO PART OF THE TAX AUDIT REPORT. THE QUANTITIES PURCHASED ARE RECONCILED WIT H THE QUANTITIES SOLD DURING THE YEAR UNDER CONSIDERATION AND ASSESSEES ENGAGED ONLY IN TRADING ACTIVITIES. AND ALL PURCHASES ARE DULY REFLECTED IN DAY TO DAY STOCK REGISTER WHICH WAS SUBMITTED TO THE A.O. ALL SALES ARE FROM GOODS PURC HASED DURING THE YEAR. PAYMENTS HAVE BEEN RECEIVED AGAINST THE SALES. IN O UR CONSIDERED OPINION, WHEN SALES ARE CONSIDERED GENUINE MADE PURCHASE CAN BE BOGUS. LD. A.O. CITED CHART OF PREVIOUS YEAR WHICH IS AS FOLLOWS: A.Y. F.Y . TURNOVER (RS.) GROSS PROFIT (RS) GP RATIO (%) NET PROFIT (RS.) NP RATIO (%) REMARK 2006 - 2005 - 06 2,25,94,732.00 3,47,931.00 1.54 1,48,619.00 0.66 - ITA NOS. 137 9 & 1380/AHD/2016 . A.YS. 2010- 11-2011-12 21 07 2007 - 08 2006 - 07 4,00,44,398.00 3,73,657.00 0.93 1,12,486.00 0.28 ASSESSED U/S 143(3) 2008 - 09 2007 - 08 1,96,84,055.00 4,85,191.00 2.46 2,15,023.00 1.09 - 2009 - 10 2008 - 09 2,71,30,988.00 3,54,798.00 1.31 2,12,179.00 0.78 ASSESSED U/S. 143(3) 2010 - 11 2009 - 10 3,05,26,773.00 5,35,721.00 1.75 2,84,822.00 0.93 - 6. IN ASSESSMENT YEAR 2009-10, ASSESSMENT WAS DONE U/S . 143(3) WHEREIN G.P. RATIO WAS 1.31%. UNDER THESE CIRCUMSTANCES TO MEET THE END OF JUSTICE, IT WILL BE FAIR THAT THE SO CALLED UNDISCLOSED INCOME OF TH E APPELLANT SHOULD BE ASSESSED @ 2.5% OF THE PURCHASE DONE TO HAVE BEEN M ADE BY HIM FROM THE PARTIES WHICH HAVE BEEN SO CALLED ESTABLISHED TO BE ACCOMMODATION ENTRY PROVIDER. 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESS EE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25- 09- 2018 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 25/09/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD.