ASST CIT 27(2), NAVI MUMBAI V. N R CORPORATION, MUMBAI

ITA 1713/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4840 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 10-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SUBRAMANIAN
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained expenditure; Search and seizure; Additional evidence
• Section: 68; 69C; 143(3); 133(6)

Judgement Text

1 ITA 1713/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) ITA NO.1713/MUM/2017 (ASSESSMENT YEAR : 2010-11) ACIT-27(2), MUMBAI VS M/S NR CORPORATION SHOP NO.3, NAVRATNA BLDG NEW MANEKLAL ESTATE LBS MARG, GHATKOPAR WEST MUMBAI 400 086 PAN : AAACFN8943M APPELLANT RESPONDEDNT APPELLANT BY SHRI ARVIND KUMAR RESPONDENT BY SHRI S SUBRAMANIAN DATE OF HEARING 10-01-2019 DATE OF PRONOUNCEMENT 15-02-2019 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE CIT(A)- 25, MUMBAI DATED 30-12-2016 AND IT PERTAINS TO AY 2 010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.16,32,196/- 2) ON THE FACTS AND CIRCUMSTANCE OF THE CAS E THE LD.CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF THE PURCHASES AND HAS FAILED TO PRODUCE THE HAWALA PARTIES FOR EXAMIN ATION BEFORE THE AO DESPITE HAVING BEEN GIVEN OPPORTUNITY AND TIME TO DO SO. 2 ITA 1713/MUM/2017 3) ON THE FACTS AND CIRCUMSTANCE OF THE CASE THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT THE DETAILS FURNISHED BY THE ASSESSEE ARE OF THE NATURE OF SECONDARY EVIDENCE AND NO PRIMARY EVIDENCE IN THE FORM OF PRODUCING TH E RELEVANT PARTIES HAS BEEN DONE TO PROVE THE GENUINENESS OF THE PURCHASES. 4) ON THE FACTS AND CIRCUMSTANCE OF THE CASE THE LD.CIT(A) HAS FAILED TO APPRECIATE THE FINDINGS OF THE ASSESSING OFFICER THAT THE PURC HASES HAVE BEEN MADE OUT OF UNDISCLOSED INCOME AND THE SAME REMAINED UNEXPLAINE D WHICH REQUIRED TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5) ON THE FACTS AND CIRCUMSTANCE OF THE CAS E THE LD.CIT(A) ERRED IN SUSTAINING THE ADDITION ONLY TO THE EXTENT OF RS.4,08,049/- BY TAK ING THE 20% OF THE BOGUS PURCHASES OF RS.20,40,244/- AND NOT CONSIDIERING THE FACT THAT T HE ENTIRE PURCHASES ARE BOGUS. 6) ON THE FACTS AND CIRCUMSTANCE OF THE CASE THE LD.CIT(A) HAS ERRED BY ASKING THE AO NOT TO REDUCE RS.L,00,31,881/- FROM WIP. SINCE T HE AO HAS FACTUALLY PROVED THE NON- GENUINENESS OF 35 UNSECURED LOAN PARTIES DURING THE ASSESSMENT PROCEEDINGS. 7) ON THE FACTS AND CIRCUMSTANCE OF THE CASE THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION, FILED ITS RETURN OF INCOME FOR AY 2010- 11 ON 02-07-2010 DECLARING TOTAL INCOME OF RS. 31,2 1,105. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMPL ETED U/S 143(3) OF THE I.T. ACT, 1961 ON 19-03-2013 DETERMINING TOTAL INCOME AT RS.63,93,730 BY MAKING ADDITION TOWARDS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT, 1961 TOWARDS ALLEGED BOGUS PURCHASES FROM CERTAIN PARTIES, WHO W ERE APPEARING IN THE LIST OF SUSPICIOUS / HAWALA DEALERS OF MVAT, GOVERNMENT OF MAHARASHTRA. THE AO ALSO MADE ADDITION OF RS.24,01,365 TOWARDS ESTIMATE D PROFIT FROM THE PROJECT @7% ON TOTAL EXPENDITURE INCURRED FOR THE YEAR AND DEBITED TO THE P&L ACCOUNT. THE ASSESSEE CARRIED THE MATTER BEFORE TH E FIRST APPELLATE AUTHORITY. THE LD.CIT(A), VIDE HIS CONSOLIDATED ORDER FOR AYS 2008-09 TO 2011-12, HAS SCALED DOWN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES BY ESTIMATING 25% PROFIT ON ALLEGED BOGUS PURCHASES. THE LD.CIT(A) ALSO DELETED 3 ITA 1713/MUM/2017 ADDITION MADE BY THE AO TOWARDS ESTIMATION OF PROFI T FROM THE PROJECT BY REDUCING INTEREST PAID ON ALLEGED LOANS FROM WORK-I N-PROGRESS. AGGRIEVED BY THE ORDER OF LD.CIT(A), THE REVENUE IS IN APPEAL BE FORE US. 3. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITION MADE TOWARDS ALLEGED BOGUS PURCHASES FROM SUSPICIOUS HAW ALA DEALERS. THE LD.AR FOR THE ASSESSEE, AT THE TIME OF HEARING SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUM BAI BENCH B IN ASSESSES OWN CASE FOR AY 2008-09 IN ITA NO.1712/MUM/2017 WHE RE, UNDER SIMILAR SET OF FACTS, THE ITAT, HAS UPHELD FINDINGS OF LD.CIT(A ) IN ESTIMATING PROFIT ON ALLEGED BOGUS PURCHASES. FACTS BEING IDENTICAL FOR THE YEAR UNDER CONSIDERATION, THE LD.CIT(A) HAS, BY FOLLOWING EARL IER ORDER, ESTIMATED 20% PROFIT ON ALLEGED BOGUS PURCHASES AND HENCE, HIS FI NDINGS SHOULD BE UPHELD. 4. ON THE OTHER HAND, THE LD.DR FAIRLY ACCEPTED THA T THE FIRST ISSUE INVOLVED IN THIS APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR EARLIER YEARS. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. WE FIND THAT THE CO- ORDINATE BENCH OF ITAT HAS CONSIDERED IDENTICAL ISS UE IN ASSESSEES OWN CASE FOR AY 2008-09 IN ITA NO.1717/MUM/2017 WHERE, UNDER SIMILAR SET OF FACTS, BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS SIMIT 4 ITA 1713/MUM/2017 P SHETH (2013) 356 ITR 451 (GUJ) UPHELD THE FINDING S OF THE LD.CIT(A) FOR ESTIMATING 20% PROFIT ON ALLEGED BOGUS PURCHASES. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE AS UNDER:- ISSUE NOS.1 TO5:- 4 . ISSUE NOS. 1 TO 5 ARE INTER-CONNECTED THEREFORE A RE BEING TAKEN UP TOGETHER FOR ADJUDICATION. UNDER THESE ISSUES, T HE REVENUE HAS CHALLENGED THE DELETION OF THE ADDITION TO THE TUNE OF RS.4,51,839/-. THE ASSESSING OFFICER HAS RAISED THE ADDITION ON AC COUNT OF NON- PROVING THE GENUINENESS OF THE CLAIM OF THE PURCHAS E REGARDING THE THREE PARTIES I.E., (I) AJAY STON TO THE TUNE OF RS .3,09,818/- (II) RAJ TRADERS TO THE TUNE OF RS.1,30,493/- (III) RIYA ENT ERPRISES TO THE TUNE OF RS.1,24,488/- AND THE TOTAL TO THE TUNE OF RS.5, 64,799/-. THE AO RAISED THE TOTAL ADDITION OF BOGUS PURCHASE AND ADD ED TO THE INCOME OF THE ASSESSEE. THE CIT(A) RESTRICTED THE CLAIM TO TH E EXTENT OF 20% OF THE BOGUS PURCHASE IN VIEW OF THE LAW SETTLED IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. AND CIT VS. SIMIT P. SH ETH ITA. NO.553 OF 2012 ORDER DATED 16.01.2013. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CI T(A) ON THIS ISSUES.: - 6.3 THIS GROUND OF APPEAL RELATES TO THE DISALLOWAN CE OF PURCHASES MADE FROM THE ABOVE MENTIONED PARTIES AMOUNTING TO RS.5,64,799/- U/S 69C OF THE ACT AS UNEXPLAINED EXPENDITURE. MY OBSERVATION IS AS UNDER . 1. THE AO HAS FORMED HIS VIEW ABOUT THE BOGUS NATUR E OF THE PURCHASES MADE BY THE APPELLANT FROM THE ABOVE PARTIES ON THE BASIS OF NO N-COMPLIANCES OF NOTICES U/S 133(6) OF THE I.T. ACT. IN MY OPINION, ONLY ON THE BASIS NON-COMPLIANCE OF NOTICES U/S T33(G) REGARDING ABOVE MENTIONED THREE PARTIES, CAN NOT BE TAKEN AS THE SOLE BASIS TO TREAT THE ENTIRE PURCHASES FROM THESE PARTIES AS BOGUS OR NON-GENUINE. THE AQ IS REQUIRED TO MAKE FURTHER IN-DEPTH INDEPENDENT INVES TIGATION ON THE ISSUE. ON THE GIVEN SET OF FACTS AND CIRCUMSTANCES AND WITHOUT AP PRECIATING THE EVIDENCES SUBMITTED BY THE APPELLANT DURING ASSESSMENT PROCEE DINGS, ENTIRE PURCHASES FROM THESE PARTIES CANNOT BE HELD TO BE BOGUS. I! HAS NO T BEEN APPRECIATED THAT THE GOODS SHOWN TO BE PURCHASED FROM THESE PARTIES WERE USED IN THE BUSINESS OF THE APPELLANT AND WITHOUT WHICH, CORRESPONDING TURNOVER WOULD NOT POSSIBLE. THUS, THERE OUGHT TO BE PURCHASES MADE AND HENCE, ENTIRE DISALL OWANCE IS NOT JUSTIFIED. B. IN THIS REGARD. I FIND THE RATIO RAID DOWN BY TH E HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT V. NIKUNJ EXLMP ENTERPRISES (P.) LTD., QUITE RELEVANT WHEREIN HON'BLE HIGH COURT HAS HELD THAT - 'WHEN THE ASSESSES HAVE FILED LETTER OF CONFIRMATIO NS OF THE SUPPLIERS, BANK STATEMENTS HIGHLIGHTING THE PAYMENT ENTRIES THROUGH ACCOUNT PAYEE CHEQUE COPIES OF STOCK RECONCILIATION STATEMENTS BEFORE TH E AC; AND MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AQ, ONE CANNOT CONCLUDE THAT THE PURCHASES 5 ITA 1713/MUM/2017 WERE NOT MADE BY WE ASSESSEE. THE AQ CANNOT DISALLOW THE PURCHASES ON THE BASIS OF SUSPICION BECAUSE THE SUPPLIERS WERE NOT PRODUCED B EFORE THEM.' C. THE FACTS AND CIRCUMSTANCES AS OUTLINED ABOVE, C LEARLY SUGGEST THAT THE PURCHASES OF MATERIALS BY THE APPELLANT CANNOT BE D OUBTED BUT A MAJOR LACUNA IN THESE TRANSACTIONS IS THE NATURE OF THE PURCHASES F ROM THE PARTIES IN QUESTION, AS THEY COULD NOT BE LOCATED AT THE GIVEN ADDRESSES. THUS T HE PURCHASES PRICES SHOWN ON THESE INVOICES ARE NOT SUBJECTED TO VERIFICATION AN D AS SUCH IT WAS DIFFICULT TO ESTABLISH THE CORRECTNESS OF THE PURCHASE PRICES PA ID FOR THE MATERIALS PURCHASED FROM THEM. SUCH VERIFICATION OF THE SALE PRICE SHOW N ON THE INVOICES/BILLS WAS NECESSARY TO ASCERTAIN THE CORRECTNESS OF THE PROFI TS SHOWN BY THE APPELLANT FOR THE PERIOD UNDER CONSIDERATION. THIS VERIFICATION WAS A LSO VITAL TO DETERMINE AS TO WHETHER THE PURCHASE PRICES SHOWN ON THE ARE AS PER PREVAIL ING MARKET PRICES OF THE MATERIALS PURCHASED AND TO ASCERTAIN THAT THE PRICE PAID FOR THE MATERIALS PURCHASED FROM THESE PARTIES ARE NOT OVER INVOICED IN THE ABS ENCE OF ANY SUCH VERIFICATION OF THE CORRECTNESS OF THE PRICE PAID FOR THE MATERIALS PUR CHASED BY THE APPELLANT, THE PURCHASE PRICE PAID AS MENTIONED ON THE INVOICES/BI LLS CANNOT BE ACCEPTED AS THE CORRECT PRICE PAID FOR THE GOODS PURCHASED FROM SUC H PARTIES. IN VIEW OF THE SAME, THE POSSIBILITY OF OVER-INVOICING OF THE MATERIALS PURC HASED TO REDUCE THE PROFITS, CANNOT BE RULED OUT. THEREFORE, THE GROSS PROFIT RATE SHOW N BY THE APPELLANT FOR THE YEAR UNDER CONSIDERATION CANNOT BE RELIED UPON IN THE CI RCUMSTANCES, [HE CORRECT APPROACH IN SUCH TRANSACTIONS WOULD BE TO ESTIMATE THE ADDITIONAL BANEFUL OR PROFILE EARED ON THESE PURCHASES AND NOI TO DISALLOW ENTIRE PURCHASES FROM THESE PARTIES. THE DISALLOWANCE OF ENTIRE PURCHASES FROM THESE PAR TIES WOULD NOT BE LOGICAL AND WOULD AMOUNT TO TRAVESTY OF JUSTICE. IN MY VIEW EIT HER THE PURCHASES FROM THR-SE PARTIES ARE OVER INVOICED OR THE PURCHASES WERE ACT UALLY MADE BUT NOT FROM THE PARTIES FROM WHICH IT WAS CLAIMED TO HAVE BEEN MADE AND INSTEAD MAY HAVE BEEN PURCHASED FROM GREY MARKET WITHOUT PROPER BILLING O R DOCUMENTATION. D. AS O! NOW THE ISSUE OF SUCH TYPES OF UNVERIFIABL E PURCHASES HAVE BEEN MUCH DISCUSSED AND DEBATED BY THE VARIOUS COURTS AND TRI BUNALS. IN MANY JUDICIAL PRONOUNCEMENTS ON THE ISSUE. THE COURTS HAVE TAKEN A CONSISTENT VIEW THAT IN CASE OF NON-EXISTENT PARTIES FROM WHICH THE PURCHASES AR E SHOWN TO HAVE BEEN MADE, ONRY PART OF SUCH PURCHASES CAN BE DISALLOWED, PARTICULA RLY IN THE SUCH CASES WHERE THE CORRESPONDING SALES ARE NOT DOUBTED. ALTERNATIVELY, THE PROFIT EMBEDDED IN SUCH SALES AGAINST THE ALLEGED BOGUS PURCHASES SHOULD BA BROUG HT TO TAX. E. IN THE CASE OF CTT-1 VS SIMIT P. SHCEH, ITA NO. 553 OF 2012, ORDER DATED 16.01.2013. WHILE DECIDING A SIMILAR ISSUE, THE HON 'BLE HIGH COURT OT GUJARAT HAS HELD THAT: 'WE ARE BROADLY IN ASSESSMENT WITH THE REASONING AD OPTED BY THE COMMI (APPEALS) WITH RESPECT TO THE NATURE OF DISPUTED PU RCHASES OF STIFLE. IT MAY HA THAT THN THREE SUPPLIERS FROM WHOM THE ASSESSES CLAIMED TO HAVE PURCHASED THE STEEL DID NOT OWN UP TO SUCH SALES. HOWSOEVER, VITAL QUES TION WHILE CONSIDERING WHETHER THE ENTIRE AMOUNT OF PURCHASES SHOULD BE AD DED BACK TO THE INCOME OF THE ASSESSEE OR ONLY THE PROFIT ELEMENT EMBEDDED TH EREIN WAS TO ASCERTAIN WHETHER THE PURCHASES THEMSELVES WERE COMPLETELY BO GUS AND NON EXISTENT OR THAT THE PURCHASES WERE ACTUALLY MADE BUT NOT FROM THE PARTIES FRONT WHOM IT WAS CLAIMED TO HAVE BEEN MADE AND INSTEAD MAY HAVE BEEN PURCHASED FROM GREY MARKET WITHOUT PROPER BITING OR DOCUMENTATION, IN THE PRESENT CASE, CIT BELIEVED THAT WHEN AS A TRADER IN STEEL THE ASSESSEE SOLD CERTAIN QUANTIFY OF STEEL, HE WOULD HAVE PURCHASED THE SAME QUANTITY FROM SOME SOURCE. WHEN THE TOTAL SALE IS ACCEPTED BY THE ASSE SSING OFFICER, HE COULD NOT HAVE QUESTIONED THE VERY BASIS OF THE PURCHASES IN ESSENCE THEREFORE, THE COMMISSIONER (APPEALS) BELIEVED ASSESSEE THEORY THAT THE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM THE PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNTS. 6 ITA 1713/MUM/2017 THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PR ICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCO ME OF THE ASSESSEE. SO MUCH IS DEAR BY DECISION OF THIS COURT. IN PARTICUL AR, COURT HAS ALSO TAKEN A SIMILAR VIEW IN CASE OF COMMISSIONER OF INCOME TAX- IV VS. VIJAY M MISTRY CONSTRUCTION LTD. VIDE ORDER DATED W.01, 2011 PASSE D IN TAX APPEAL NO. 1090 OF 2009 AND IN CASE OF COMMISSIONER OF INCOME TAX-I VS BHOFENATH POTY FAB PI/T LTD VIDE ORDER DATED 23 10.2012 PASSED IN TAX APPEAL NO. 63 OF 2012. F. SIMILARLY WHILE DEALING WITH AN IDENTICAL ISSUE, IN THE CASE OR CIT, VS. BHOFANATH POLY FAB (P) LTD., ITA NO. 63 OF 2012, IN THE ORDER DATED 23/10/2012, THE HONBLES HIGH COURT OF GUJARAT HAS HELD AS UNDER:- 'WE ERE OF THE OPINION THAT THE TRIBUNAL COMMITTED NO ERROR. WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PART IES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS IS ESSENTI ALLY A QUESTION OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON REASON CAM E TO THE CONCLUSION THAT THE ASSESSES DID PURCHASE SHE DOTH AND SELL THE FINISHED GOODS, IN THAT VIEW OF THE MATTER, AS NATURAL COROLLARY, NOT THE ENTIRE AM OUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDED THEREIN W OULD BE SUBJECT TO TAX THIS WAS THE VIEW OF THIS COURT IN THE CASE OF SANJAY QI TCAKD INDUSTRIES V. C1T12009] 316 ITR 274 (GUJ). SUCH DECISION IS ALSO FOLLOWED B Y THIS COURT IN A JUDGMENT DATED AUGUST 16,2011, IN TAN APPEAL N0.67Q OF 2010 IN THE CASE OF CIT V. KISHOR AMIVTIST PATII IN TFI& RESULT, TAX APPEAL IS DISMISSED.' G. IN VIEW OF THE FACTS AND CIRCUMSTANCES AND (HE J UDICIAL PRONOUNCEMENTS CITED ABOVE, WHAT CAN BE DISALLOWED OR (AXED IN THE INSTA NT CASE, IS THE EXCESS PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES SHOWN TO HAVE BE EN MADE FROM THESE PARTIES. IN THIS REGARD, THE YARDSTICK LAID DOWN BY AFORESAID JUDICIAL PRONOUNCE MEN IS BY DISALLOWING 20% OF PURCHASES AS THE BENEF IT GARNERED IN SUCH UNVERIFIABLE PURCHASES WHERE SAFES ARE NOT DISAPPRO VED, IS ? SOUND BENCHMARK THAT IS BEING ADOPTED IN THE PRESENT CASE TOO. H. THEREFORE IN THE INSTANT CASE, IT IS FOUND THAT ALL THE FACTS AND CIRCUMSTANCES OUTLINED ABOVE LEAD TO THE CONCLUSION THAT ALTHOUGH THE PURCHASES MADE BY THE APPELLANT FROM THE THREE PARTIES MENTIONED ABOVE DU RING THE YEAR UNDER CONSIDERATION CANNOT BE SUMMARILY REJECTED BUT AT M E SAME TIME IT DIFFICULT TO ACCEPT THAT THE PURCHASES SHOWN ON THE INVOICES/BIL LS ISSUED BY THESE PARTIES ARE AS PER THE PREVAILING MARKET PRICE OF THOSE MAT ERIALS OR ACTUALLY BEEN MADE FROM SUCH PARTIES AND MIGHT HAVE BEEN PURCHASED IN THE GREY MARKET, THE APPELLANT HAS NOT PLACED ANY EVIDENCE ON RECORD THA T THE GOODS WERE PURCHASED FROM THE ABOVE PARTIES AT ARMS' LENGTH PRICE. THE A PPELLANT HAS ALSO NOT PLACED ON RECORD ANY COMPARABLE BILLS/INVOICES FOR PURCHAS ES OF SIMILAR ITEMS MADE FROM OTHER PARTIES TO ESTABLISH THAT THE PURCHASES FROM THE PARTIES IN QUESTION WERE AT PAR WITH THE PURCHASES MADE FROM OTHER PARTIES DURI NG THE PERIOD UNDER CONSIDERATION. THE POSSIBILITY OF SUCH PURCHASES FR OM UNREGISTERED DEALERS WITHOUT INVOICES CANNOT BE RULED OUT. IN VIEW OF TH E ABOVE. THE CORRECTNESS OF THE PURCHASE PRICES MENTIONED ON SUCH BILLS/INVOICES IS SUED BY THE 3BOVE PARTIES IN QUESTION CANNOT BE ACCEPTED AND SOME ADDITIONAL PRO FIT NEEDS TO BE ESTIMATED ON SUCH PURCHASES MADE FROM THE ABOVE PARTIES IN QUEST ION. I. AS STATED ABOVE, FOLLOWING THE GUIDELINES LAID D OWN IN THE ABOVE JUDICIAL DECISIONS, DISALLOWANCE OF 20% ON SUCH ALLEGED BOGU S PURCHASES OF RS.5,64,799/- I.E. RS.1,12,960/- IS CONFIRMED WHICH NEEDS TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF ALLEGED BOGUS PURCHASE FROM THE THREE PARTIES AND THE BALANCE ADDITION OF RS.4,51,839/- I S HEREBY DELETED. THUS, GROUNDS OF APPEAL NO. 3-9 ARE PARTLY ALLOWED. 7 ITA 1713/MUM/2017 5. ON APPRAISAL OF THE ABOVE SAID FINDING, WE NOTICED THAT THE CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF PROFIT ELEMENT EMBEDDED IN THE PURCHASE BY RELYING UPON THE LAW SE TTLED IN CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. AND CIT VS. SIMI T P. SHETH ITA. NO.553 OF 2012 ORDER DATED 16.01.2013 (SUPRA). NO DISTINGUISHABLE MATERIAL HAS BEEN PRODUCED BEFORE U S FROM DEVIATING THE FINDING OF THE CIT(A) ON THESE ISSUES. THEREFOR E, TAKING INTO ACCOUNT OF ALL THE FACTS AND CIRCUMSTANCES MENTIONE D ABOVE, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. 6. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH T HE VIEW TAKEN BY THE CO- ORDINATE BENCH, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN THE FINDINGS RECORDED BY THE LD.CIT(A) WHILE SCALING DO WN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES AND RESTRICTING 20% PROFIT ON SUCH ALLEGED BOGUS PURCHASES. HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF LD.CIT(A) AND REJECT GROUND TAKEN BY THE REVENUE. 7. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS DISALLOWANCE OF INTEREST PAID ON UNSECURED LOAN AND EXCLUDED FROM W ORK-IN-PROGRESS. THE LD.AO HAS EXCLUDED INTEREST PAID ON UNSECURED LOAN ON THE GROUND THAT THE TOTAL UNSECURED LOAN ON WHICH INTEREST HAS BEEN PAI D, HAS BEEN TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT, 196 1 FOR AY 2009-10 AND ALSO CONSEQUENT INTEREST EXPENDITURE IS REDUCED FROM WOR K-IN-PROGRESS. THE LD.CIT(A) HAS CONSIDERED THE ISSUE IN AY 2009-10 AN D AFTER CONSIDERING ADDITIONAL EVIDENCE FILED BY THE ASSESSEE, DELETED ADDITION ON ACCOUNT OF 8 ITA 1713/MUM/2017 UNSECURED LOAN FROM 25 PARTIES AND SUSTAINED THE AD DITION MADE ON ACCOUNT OF UNSECURED LOAN FROM 12 PARTIES. FOR THE YEAR UNDER CONSIDERATION, THE LD.CIT(A), BY FOLLOWING THE FINDING RECORDED FOR AY 2009-10, DIRECTED THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE, IN THE LIGHT OF DOCUMENTARY EVIDENCE AND FINDINGS OF THE LD.CIT(A) FOR AY 2009-10 AND ACCORD INGLY REDUCE INTEREST COMPONENT WITH RESPECT TO GENUINE LOANS. 8. HAVING CONSIDERED THE ARGUMENTS OF BOTH THE SIDE S, WE FIND THAT THIS IS A RECURRING ISSUE WHICH IS EMANATING FROM AY 2009-10. THE AO, INITIALLY MADE ADDITION TOWARDS UNSECURED LOAN TAKEN FROM CERTAIN PARTIES U/S 68 OF THE ACT. THE LD.CIT(A) HAS DELETED ADDITION MADE BY THE AO O N THE BASIS OF ADDITIONAL EVIDENCE FILED BY THE ASSESSEE TOWARDS UNSECURED LO AN TAKEN FROM 23 PARTIES AND CONFIRMED UNSECURED LOAN TAKEN FROM 12 PARTIES. THE LD.CIT(A) ALSO DIRECTED THE AO TO WORK OUT INTEREST COMPONENTS OF GENUINE LOANS AS WELL AS LOANS WHICH WERE CONFIRMED HAS UNEXPLAINED CREDITS. DURING THE CURRENT FINANCIAL YEAR, THE LD.CIT(A) HAS, BY FOLLOWING HIS PREDECESSORS ORDER, DIRECTED THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE IN LIGH T OF ADDITIONAL EVIDENCE AND ALSO KEEPING IN VIEW FINDINGS RECORDED BY THE LD.CI T(A) FOR AY 2009-10. WE FIND THAT THE REVENUE HAS NOT CHALLENGED THE FINDIN GS OF LD.CIT(A) IN DELETING ADDITION MADE BY THE AO TOWARDS UNEXPLAINED LOAN FO R AY 2009-10. SINCE THE ISSUE IS RECURRING FROM AY 2009-10 AND WHICH HAS A CASCADING EFFECT ON 9 ITA 1713/MUM/2017 ADDITION MADE BY THE AO TOWARDS INTEREST DISALLOWAN CE FOR THE YEAR UNDER CONSIDERATION, WE FIND THAT THERE IS NO ERROR IN TH E FINDINGS RECORDED BY THE LD.CIT(A) AND DIRECTING THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE IN THE LIGHT OF EVIDENCE FILED BY THE ASSESSEE AND ALSO KEEPING IN MIND THE FINDINGS RECORDED BY THE LD.CIT(A) FOR AY 2009-10. THEREFOR E, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO MERIT IN THE GROUND TAKEN BY THE REVENUE CHALLENGING THE FINDINGS OF LD.CIT(A). ACCORDINGLY, WE REJECT THE GROUND RAISED BY THE REVENUE. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15-02-2019 . SD/- SD/- (SANDEEP GOSAIN) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 15 TH FEBRUARY, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI