DCIT 13(1)(1), MUMBAI V. UNITED ASPHALTERS P.LTD, MUMBAI

ITA 1728/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8367 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 23-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Capital asset; Depreciation; Question of law
• Section: 69C; 143(3); 147

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NOS.1728 & 1729/MUM/2016 ASSESSMENT YEARS: 2010-11 & 2011-12 INCOME TAX OFFICER-13(1)(2), 02 ND FLOOR, ROOM NO.225, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S UNITED ASPHALTERS PVT. LTD. 3-A/6, MAJITHA NAGAR, S.V. ROAD, KANDIVALI (W), MUMBAI-400067 ( / REVENUE) ( '#$ % /ASSESSEE) PAN. NO. AAACU4547K ITA NOS.2598, 2599 & 2600 /MUM/2016 ASSESSMENT YEARS: 2009-10, 2010-11 & 2011-12 M/S UNITED ASPHALTERS PVT. LTD. 3-A/6, MAJITHA NAGAR, S.V. ROAD, KANDIVALI (W), MUMBAI-400067 / VS. INCOME TAX OFFICER-13(1)(2), 02 ND FLOOR, ROOM NO.225, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 ( '#$ % /ASSESSEE) ( / REVENUE) PAN. NO. AAACU4547K ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 2 & ' % ( / DATE OF HEARING : 06/12/2017 ' % ( / DATE OF ORDER: 07/12/2017 / O R D E R PER JOGINDER SINGH(JUDICIAL MEMBER) THIS BUNCH OF FIVE APPEALS IS BY THE REVENUE AS WEL L AS THE ASSESSEE AGAINST THE IMPUGNED ORDERS ALL DATED 29/01/2016 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, ON ACCOUNT OF BOGUS PURCHASES AND THE CONSEQUENT AD DITION MADE U/S 69C OF THE INCOME TAX ACT, 1961 (HEREINAFT ER THE ACT). 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI DHARMESH SHAH, RELIED UPON THE DECISION OF THE TRIBUNAL FOR ASSESSMENT YEAR 2009-10, IN THE APPEAL OF THE REVENUE (ITA NO.1823/MUM/2016), ORDER DATED 06/07/2017 AND FURNISHED THE COPY OF THE SAME. THE LD. DR, SHRI PURUSHOTTAM KUMAR ALONG WITH SHRI RAJAT MI TTAL, POINTED OUT TYPOGRAPHICAL MISTAKE IN THE AFORESAID ORDER DATED 06/07/2017. THE LD. REPRESENTATIVES FROM BOT H SIDES AGREED THAT THE MISTAKE, IF ANY, MAY BE RECTIFIED. AFTER THE '#$ % ! / ASSESSEE BY SHRI DHARMESH SHAH ! / REVENUE BY SHRI PUROSHOTTAM KUMAR-DR ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 3 HEARING IS OVER, THE MATTER WAS TAKEN UP WITH RESPE CT TO ITA NO.1823/MUM/2016 AND CORRIGENDUM WAS ISSUED WITH TH E CONSENT OF THE LD. REPRESENTATIVES FROM BOTH SIDES. AS PER WHICH, THE ORDER WAS RECTIFIED WITH RESPECT TO ADOP TION OF NET PROFIT AT 12.50% AND THE WORD MINUS GP WAS REMOVE D AND THUS, THE ORDER OF THE LD. COMMISSIONER OF INCOME T AX (APPEAL) WAS AFFIRMED. 2.1. IN THE APPEAL FOR ASSESSMENT YEAR 2009-10, IT IS NOTED THAT THE TRIBUNAL DISMISSED THE APPEAL OF THE REVENUE VIDE AFORESAID ORDER DATED 06/07/2017. THE RELEVANT PORTION OF THIS ORDER IS REPRODUCED HEREUNDER:- THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 29/01/2016 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, RESTRICTING THE ADDITION TO 12.5% ON ACCOUNT OF NO N-GENUINE PURCHASES IGNORING THAT THE ASSESSEE HAS NOT SUBSTA NTIATED AS TO HOW THE ALLEGED PURCHASES WERE USED IN THE MANUF ACTURING PROCESS AND FURTHER RESTRICTING THE ADDITION TO RS. 5,367/- AS AGAINST RS.60,6696/- MADE ON ACCOUNT OF COMMISSION AT THE RATE OF 1% PAID TO NON-GENUINE PURCHASE PARTY FOR A RRANGING THE BILL AND OTHER RELATED PAPER WORK AS THE ASSESS EE COULD NOT DISPROVE THE STATEMENTS OF HAWALA PARTIES. 2. DURING HEARING, NONE WAS PRESENT FOR THE REVENUE. HOWEVER, WRITTEN SUBMISSIONS HAVE BEEN FIL ED BY SHRI RAJAT MITTAL, LD. DR, BY PLACING RELIANCE UPON THE DECISION FROM HON'BLE GUJARAT HIGH COURT IN THE CASE OF N.K. INDU STRIES LTD. VS DCIT (IT APPEAL NO.240 OF 2003) AND FURTHER PLAC ING RELIANCE UPON THE DECISION IN N.K. PROTEINS LTD. VS DCIT (SL P NO.769 OF 2017). ON THE OTHER HAND, SHRI DHAVAL SHAH, LD. COU NSEL FOR THE ASSESSEE, DEFENDED THE CONCLUSION CONTAINED IN THE IMPUGNED ORDER. 2.1. BEFORE ADVERTING FURTHER AND TO ANALYZE, THE FACTS OF THE PRESENT APPEAL BEFORE US, WE DEEM IT APPROPR IATE TO CONSIDER VARIOUS DECISIONS FROM HON'BLE HIGH COURTS /HON'BLE ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 4 APEX COURT, SO THAT WE CAN REACH TO A PROPER CONCLU SION. THE HON'BLE GUJARAT HIGH COURT IN SANJAY OILCAKES INDUS TRIES VS CIT (2009) 316 ITR 274 (GUJ.) HELD AS UNDER:- 11 . HAVING HEARD THE LEARNED ADVOCATES APPEARING FOR THE RESPECTIVE PARTIES, IT IS APPARENT THAT NO INTERFER ENCE IS CALLED FOR IN THE IMPUGNED ORDER OF THE TRIBUNAL DATED APRIL 2 9, 1994, READ WITH THE ORDER DATED SEPTEMBER 29, 1994, MADE IN MI SCELLANEOUS APPLICATION. IN THE PRINCIPAL ORDER THE TRIBUNAL HA S RECORDED THE FOLLOWING FINDINGS : '8.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE FACTS ON RECORD. IN OUR OPINION, THE ACTION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) CONFIRMING 25 PER CENT. OF THE AMOUNTS CLAIMED IS FAIR AND REASONABLE AND NO INTERFERENCE IS CALLED FOR. THE COMMIS SIONER OF IN COME-TAX (APPEALS) HAS GONE THROUGH THE PURCHASE PRICES OF T HE RAW MATERIAL PREVALENT AT THE TIME AND RIGHTLY CAME TO THE CON CLUSION THAT THE DISALLOWANCE TO THE EXTENT OF 25 P ER CENT. WAS CALLED FOR. IT IS ESTABLISHED THAT THE PARTIES WERE NOT TRACEABLE ; THEY OPENED THE BANK ACCOUNTS IN WHICH THE CHEQUES WERE CREDITED BUT SOON THEREAFTER THE AMOUN TS WERE WITHDRAWN BY BEARER CHEQUES. THAT FAIRLY LEADS TO T HE CONCLUSION THAT THESE PARTIES WERE PERHAPS CREATION OF THE ASSESSEE ITSELF FOR THE PURPOSE OF BANKING PURCHASE S INTO BOOKS OF ACCOUNT BECAUSE THE PURCHASES WITH BILLS W ERE NOT FEASIBLE. THUS, THE ABOVENOTED PARTIES BECOME CONDU IT PIPES BETWEEN THE ASSESSEE-FIRM AND THE SELLERS OF THE RA W MATERIALS. UNDER THE CIRCUMSTANCES, IT WAS NOT IMPO SSIBLE FOR THE ASSESSEE TO INFLATE THE PRICES OF RAW MATERIALS . ACCORDINGLY, AN ADDITION AT THE RATE OF 25 PER CENT . FOR EXTRA PRICE PAID BY THE ASSESSEE THAN OVER AND ABOVE THE PREVALENT PRICE IS FAIR AND REASONABLE AND WE ACCOR DINGLY CONFIRM THE FINDING OF THE COMMIS SIONER OF INCOME- TAX (APPEALS).' 12. THUS, IT IS APPARENT THAT BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE CONCURRENTLY ACCEPT ED THE FINDING OF THE ASSESSING OFFICER THAT THE APPARENT SELLERS WHO HAD ISSUED SALE BILLS WERE NOT TRACEABLE. THAT GOOD S WERE RECEIVED FROM THE PARTIES OTHER THAN THE PERSONS WH O HAD ISSUED BILLS FOR SUCH GOODS. THOUGH THE PURCHASES A RE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENT THEREOF BY ACCO UNT PAYEE CHEQUES, THE CHEQUES HAVE BEEN DEPOSITED IN B ANK ACCOUNTS OSTENSIBLY IN THE NAME OF THE APPARENT SEL LERS, THEREAFTER THE ENTIRE AMOUNTS HAVE BEEN WITHDRAWN B Y BEARER CHEQUES AND THERE IS NO TRACE OR IDENTITY OF THE PERSON WITHDRAWING THE AMOUNT FROM THE BANK ACCOUNT S. IN THE LIGHT OF THE AFORESAID NATURE OF EVIDENCE IT IS NOT POSSIBLE TO RECORD A DIFFERENT CONCLUSION, DIFFERENT FROM TH E ONE RECORDED BY THE COMMISSIONER (APPEALS) AND THE TRIB UNAL ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 5 CONCURRENTLY HOLDING THAT THE APPARENT SELLERS WERE NOT GENUINE, OR WERE ACTING AS CONDUIT BETWEEN THE ASSE SSEE- FIRM AND THE ACTUAL SELLERS OF THE RAW MATERIALS. B OTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE, THERE FORE, COME TO THE CONCLUSION THAT IN SUCH CIRCUMSTANCES, THE LIKELIHOOD OF THE PURCHASE PRICE BEING INFLATED CAN NOT BE RULED OUT AND THERE IS NO MATERIAL TO DISLODGE SUCH FINDING. THE ISSUE IS NOT WHETHER THE PURCHASE PRICE REFLECT ED IN THE BOOKS OF ACCOUNT MATCHES THE PURCHASE PRICE STATED TO HAVE BEEN PAID TO OTHER PERSONS. THE ISSUE IS WHETHER TH E PURCHASE PRICE PAID BY THE ASSESSEE IS REFLECTED AS RECEIPTS BY THE RECIPIENTS. THE ASSESSEE HAS, BY SET OF EVID ENCE AVAILABLE ON RECORD, MADE IT POSSIBLE FOR THE RECIP IENTS NOT BEING TRACEABLE FOR THE PURPOSE OF INQUIRY AS TO WH ETHER THE PAYMENTS MADE BY THE ASSESSEE HAVE BEEN ACTUALLY RE CEIVED BY THE APPARENT SELLERS. HENCE, THE ESTIMATE MADE B Y THE TWO APPELLATE AUTHORITIES DOES NOT WARRANT INTERFER ENCE. EVEN OTHERWISE, WHETHER THE ESTIMATE SHOULD BE AT A PARTICULAR SUM OR AT A DIFFERENT SUM, CAN NEVER BE AN ISSUE OF LAW. IN THE AFORESAID CASE, THE HON'BLE HIGH COURT ACCEP TED THAT THE APPARENT SELLERS, WHO ISSUED THE SAID BILLS WER E NOT TRACEABLE AND THE GOODS RECEIVED FROM PARTIES OTHER THAN THE PERSONS, WHO HAD ISSUED THE BILLS FOR SUCH GOODS. THE PURCHASES WERE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENTS, THROUGH BANKING CHANNEL AND THUS THE APPARENT SELLERS WERE NOT GENUINE OR W ERE ACTING AS CONDUIT BETWEEN THE ASSESSEE AND THE ACTUAL SELLER. IN SUCH A SITUATION, THE CONCLUSION DRAWN BY THE LD. COMMISSI ONER OF INCOME TAX (APPEAL) AS WELL AS BY THE TRIBUNAL WAS AFFIRMED. HON'BLE APEX COURT IN KACHWALA GEMS VS JCIT (2007) 158 TAXMAN 71 OBSERVED THAT AN ELEMENT OF GUESSWORK IS INEVITA BLE IN CASES, WHERE ESTIMATION OF INCOME IS WARRANTED. 2.2. THE HON'BLE GUJARAT HIGH COURT IN CIT VS BHOLANATH POLY FAB. PVT. LTD. (2013) 355 ITR 290 (G UJ.) HELD/OBSERVED AS UNDER:- 5. HAVING COME TO SUCH A CONCLUSION, HOWEVER, THE TRIBUNAL WAS OF THE OPINION THAT THE PURCHASES MAY HAVE BEEN MADE F ROM BOGUS PARTIES, NEVERTHELESS, THE PURCHASES THEMSELVES WER E NOT BOGUS. THE TRIBUNAL ADVERTED TO THE FACTS AND DATA ON RECORD A ND CAME TO THE CONCLUSION THAT THE ENTIRE QUANTITY OF OPENING STOC K, PURCHASES AND THE QUANTITY MANUFACTURED DURING THE YEAR UNDER CON SIDERATION WERE SOLD BY THE ASSESSEE. THEREFORE, THE PURCHASES OF T HE ENTIRE 1,02,514 METRES OF CLOTH WERE SOLD DURING THE YEAR UNDER CON SIDERATION. THE TRIBUNAL, THEREFORE, ACCEPTED THE ASSESSEE'S CONTEN TION THAT THE ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 6 FINISHED GOODS WERE PURCHASED BY THE ASSESSEE, MAY BE NOT FROM THE PARTIES SHOWN IN THE ACCOUNTS, BUT FROM OTHER SOURC ES. IN THAT VIEW OF THE MATTER, THE TRIBUNAL WAS OF THE OPINION THAT NO T THE ENTIRE AMOUNT, BUT THE PROFIT MARGIN EMBEDDED IN SUCH AMOU NT WOULD BE SUBJECTED TO TAX. THE TRIBUNAL RELIED ON ITS EARLIE R DECISION IN THE CASE OF SANKET STEEL TRADERS AND ALSO MADE REFERENCE TO THE TRIBUNAL'S DECISION IN THE CASE OF VIJAY PROTEINS LTD. V. ASST . CIT [1996] 58 ITD 428 (AHD). 6. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTE D NO ERROR. WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHET HER THE PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MAD E WERE BOGUS IS ESSENTIALLY A QUESTION OF FACT. THE TRIBUNAL HAV ING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE THE CLOTH AND SELL THE FINISHED GOODS. IN THAT VIEW OF THE MATTER, AS NATURAL COROLLARY, NOT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDED THER EIN WOULD BE SUBJECT TO TAX. THIS WAS THE VIEW OF THIS COURT IN THE CASE OF SANJAY OILCAKE INDUSTRIES V. CIT [2009] 316 ITR 274 (GUJ). SUCH DECISION IS ALSO FOLLOWED BY THIS COURT IN A JUDGMENT DATED AUG UST 16, 2011, IN TAX APPEAL NO. 679 OF 2010 IN THE CASE OF CIT V. KI SHOR AMRUTLAL PATEL. IN THE RESULT, TAX APPEAL IS DISMISSED. 2.3. LIKEWISE, THE HON'BLE GUJARAT HIGH COURT IN C IT VS VIJAY M. MISTRY CONSTRUCTION LTD. (2013) 355 ITR 498 (GUJ.) HELD/OBSERVED AS UNDER:- 6. AS IS APPARENT FROM THE FACTS NOTED HEREINABOVE , THE COMMISSIONER (APPEALS) AFTER APPRECIATING THE EVIDE NCE ON RECORD HAS FOUND THAT THE ASSESSEE HAD IN FACT MADE THE PU RCHASES AND, HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN D ISALLOWING THE ENTIRE AMOUNT. HE, HOWEVER, WAS OF THE VIEW THAT THE ASSES SEE HAD INFLATED THE PURCHASES AND, ACCORDINGLY, BY PLACING RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF VIJAY PROTEINS (SUPRA) RESTRICTED THE DISALLOWANCE TO 20 PER CENT. THE TRIBUNAL IN THE IM PUGNED ORDER HAS FOLLOWED ITS EARLIER ORDER IN THE CASE OF VIJAY PRO TEINS TO THE LETTER AND ENHANCED THE DISALLOWANCE TO 25 PER CENT. THUS, IN BOTH CASES, THE DECISION OF THE COMMISSIONER (APPEALS) AS WELL AS T HAT OF THE TRIBUNAL IS BASED ON ESTIMATE. THIS HIGH COURT IN THE CASE O F SANJAY OIL CAKE [2009] 316 ITR 274 (GUJ) HAS HELD THAT WHETHER AN ESTIMATE SHOULD BE AT A PARTICULAR SUM OR AT A DIFFERENT SUM CAN NE VER BE A QUESTION OF LAW. 7. THE APEX COURT IN THE CASE OF KACHWALA GEMS [200 7] 288 ITR 10 (SC) HAS HELD THAT IN A BEST JUDGMENT ASSESSMENT TH ERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT, THE AUTHORI TIES SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT AND SHOULD NOT ACT TOTALLY ARBI TRARILY BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED I N A BEST JUDGMENT ASSESSMENT. ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 7 8. EXAMINING THE FACTS OF THE PRESENT CASE IN THE L IGHT OF THE AFORESAID DECISIONS, THE DECISION OF THE TRIBUNAL, BEING BASE D ON AN ESTIMATE, DOES NOT GIVE RISE TO ANY QUESTION OF LAW SO AS TO WARRANT INTERFERENCE. 9. IN SO FAR AS THE PROPOSED QUESTIONS (C), (D) AND (E) ARE CONCERNED, THE SAME ARE SIMILAR TO THE PROPOSED QUE STION (A) WHEREIN THE TRIBUNAL HAS RESTRICTED THE ADDITION TO 25 PER CENT. ON SIMILAR FACTS. IN THE CIRCUMSTANCES, FOR THE REASONS STATED HEREINABOVE, THE SAID GROUNDS OF APPEAL DO NOT GIVE RISE TO ANY QUES TION OF LAW. 10. AS REGARDS THE PROPOSED QUESTION (B) WHICH PERT AINS TO THE DELETION OF ADDITION OF RS. 7,88,590 MADE ON ACCOUN T OF INFLATION OF EXPENSES PAID TO METAL AND MACHINE TRADING CO. (MMT C), THE ASSESSING OFFICER HAS FOUND THAT MMTC WAS A PARTNER SHIP FIRM OF SHRI NITIN GAJJAR ALONG WITH HIS FATHER AND BROTHER OPER ATING FROM BHAVNAGAR. A PERUSAL OF THEIR TRANSACTIONS WITH THE ASSESSEE INDICATED THAT THERE IS SOME INFLATION OF EXPENSES AS DETAILED IN PARAGRAPH 6.1 OF THE ASSESSMENT ORDER. AFTER CONSID ERING THE EVIDENCE ON RECORD, THE ASSESSING OFFICER DISALLOWE D THE AMOUNT RS. 7,88,590 ON ACCOUNT OF PAYMENT MADE TO MMTC. 11. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COM MISSIONER (APPEALS), WHO UPON APPRECIATION OF THE EVIDENCE ON RECORD FOUND THAT THE ASSESSING OFFICER HAD NOT REJECTED THE GEN UINENESS OF THE PURCHASES MADE FROM MMTC WHILE MAKING THE DISALLOWA NCE. HIS OBSERVATIONS WERE BASED ON INFLATION OF RATES WHICH WERE BEING CHARGED FROM THE ASSESSEE. ACCORDING TO THE COMMISS IONER (APPEALS), THOUGH MMTC IN SOME RESPECT COULD BE ATT RIBUTED TO BE ASSOCIATED WITH THE ASSESSEE-COMPANY, STILL IT COUL D NOT BE EXPECTED THAT MMTC WAS CARRYING OUT ITS BUSINESS WITHOUT ANY MOTIVE OR PROFIT. ACCORDING TO THE COMMISSIONER (APPEALS), IT WAS PRO VED BY THE ASSESSEE THAT THE RATES CHARGED BY MMTC WERE COMPAR ABLE WITH THE PREVAILING MARKET RATES, NO SUCH ADDITION CAN STAND . THE COMMISSIONER (APPEALS) TOOK NOTE OF THE FACT THAT I T WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE PURCHASES HAD BEE N DIRECTLY EFFECTED FROM THIRD PARTIES AND NOT DIRECTLY FROM MMTC ; THE DIFFERENCE COULD NOT BE THE NET PROFIT IN THE HANDS OF MMTC ; AND TH AT WHILE CONDUCTING THE ENTIRE EXERCISE MMTC WOULD HAVE TO I NCUR CERTAIN EXPENDITURE IN TRANSPORTATION, IN ENGAGING PERSONNE L IN THE OFFICE AND OTHER OPERATIONS AND WAS ACCORDINGLY OF THE VIEW TH AT THERE WAS NO CASE OF ACTUAL INFLATION OF RATES AND DELETED THE A DDITION. 12. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS CONCUR RED WITH THE FINDINGS RECORDED BY THE COMMISSIONER (APPEALS) AND HAS FOUND THAT THE ASSESSEE HAD MADE PURCHASES FROM MMTC AT THE PR EVAILING MARKET RATES AND THAT MMTC HAD INCURRED CERTAIN EXP ENDITURE IN ENGAGING PERSONNEL IN THE OFFICE AND OTHER OPERATIO NS AND WOULD MAKE SOME INCOME FROM THE ENTIRE EXERCISE. IN THE C IRCUMSTANCES, THE PURCHASES MADE BY THE ASSESSEE FROM MMTC WOULD NOT BE HIT BY THE PROVISIONS OF SECTION 40A(2) OF THE ACT. 13. THUS, THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS BASED ON CONCURRENT FINDINGS OF FACT RECORDED BY THE COMMISS IONER (APPEALS) AS WELL AS THE TRIBUNAL. IT IS NOT THE CASE OF THE REVENUE THAT THE TRIBUNAL HAS TAKEN INTO ACCOUNT ANY IRRELEVANT MATE RIAL OR THAT ANY ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 8 RELEVANT MATERIAL HAS NOT BEEN TAKEN INTO CONSIDERA TION. IN THE ABSENCE OF ANY MATERIAL TO THE CONTRARY BEING POINT ED OUT ON BEHALF OF THE REVENUE, THE IMPUGNED ORDER BEING BASED ON C ONCURRENT FINDINGS OF FACT RECORDED BY THE TRIBUNAL UPON APPR ECIATION OF THE EVIDENCE ON RECORD, DOES NOT GIVE RISE TO ANY QUEST ION OF LAW IN SO FAR AS THE PRESENT GROUND OF APPEAL IS CONCERNED. 14. IN RELATION TO THE PROPOSED QUESTION (F) WHICH RELATES TO THE DELETION OF ADDITION OF RS. 44,54,426 MADE ON ACCOU NT OF PURCHASE OF CRANE AND ALLOWING DEPRECIATION ON THE SAME, THE AS SESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PURCHASED A CRAWLER CRANE FOR AN AMOUNT OF RS. 24,61,000 EXCLUDING THE COST OF SPARE PARTS OF RS. 14,98,490. THE ASSESSING OFFICER AFTER EXAMINING TH E EVIDENCE ON RECORD AND CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE, MADE ADDITION OF RS. 44,54,426, RS. 39,59,490 BEING THE PURCHASE PRICE OF THE CRANE ALONG WITH ITS SPARE PARTS AND RS. 4,94,9 36 BEING DEPRECIATION CLAIMED BY THE ASSESSEE. THE COMMISSIO NER (APPEALS), UPON APPRECIATION OF EVIDENCE ON RECORD, WAS OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACTS OF THE CASE PROPERLY AND HAD MADE DISALLOWANCE WHICH WAS NOT PERMITTED B Y THE INCOME- TAX ACT. IT WAS HELD THAT DISALLOWANCE COULD ONLY H AVE BEEN MADE IN RESPECT OF EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT WHEREAS IN THE PRESENT CASE THE PURCHASE OF CRANE AND SPARE PA RTS OF THE CRANE AND OTHER MACHINERIES WERE IN THE NATURE OF ACQUISI TION OF CAPITAL ASSET. ACCORDING TO THE COMMISSIONER (APPEALS), THE DISALLOWANCE COULD HAVE BEEN MADE ON DEPRECIATION ONLY IF AT ALL THE ASSESSING OFFICER CONCLUSIVELY PROVED THAT THE PURCHASES OF C RANE AND OTHER PARTS ARE BOGUS. UPON APPRECIATION OF THE MATERIAL ON RECORD THE COMMISSIONER (APPEALS) FOUND THAT THE ASSESSING OFF ICER HAS SIMPLY BRUSHED ASIDE ALL THE EVIDENCE ON ACCOUNT OF TECHNI CAL INFIRMITIES AND THAT THE EVIDENCE SUCH AS OCTROI RECEIPT ; HYPOTHEC ATION OF THE CRANE TO THE BANK; EXISTENCE OF THE CRANE EVEN TILL DATE WITH THE ASSESSEE CONCLUSIVELY PROVED THAT THE CRANE WAS PURCHASED AN D IT WAS IN USE EVEN AS ON DATE WITH THE ASSESSEE. THE COMMISSIONER (APPEALS) ACCORDINGLY FOUND THAT THERE WAS NO SCOPE FOR ANY D ISALLOWANCE AND ACCORDINGLY DELETED THE DISALLOWANCE MADE ON ACCOUN T OF PURCHASE OF CRANE AND ALLOWED THE DEPRECIATION AS CLAIMED BY TH E ASSESSEE. 15. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS NOTED THAT THE COST OF CRANE WAS NEVER CLAIMED BY THE ASSESSEE IN THE RETU RN OF INCOME. BEFORE THE TRIBUNAL, THE ASSESSEE PRODUCED THE EVID ENCE THAT THE CRANE IN QUESTION WAS REGISTERED WITH THE RTO AND T HE SAME WAS WHOLLY AND EXCLUSIVELY USED FOR THE PURPOSES OF ITS BUSINESS. THE TRIBUNAL, THEREFORE, HELD THAT THE COMMISSIONER (AP PEALS) WAS LEGALLY AND FACTUALLY CORRECT IN DELETING THE DISALLOWANCE OF COST OF CRANE AS WELL AS DEPRECIATION THEREON. 16. FROM THE FACTS EMERGING FROM THE RECORD, IT IS APPARENT THAT THE ASSESSEE HAD NEVER CLAIMED THE COST OF THE CRANE IN THE RETURN NOR HAD IT DEBITED THE EXPENSES TO THE PROFIT AND LOSS ACCOUNT, AND AS SUCH THE QUESTION OF DISALLOWING THE SAME AND ADDIN G THE SAME TO THE INCOME WOULD NOT ARISE. MOREOVER, IN THE ABSENCE OF ANY EVIDENCE TO INDICATE THAT THE PURCHASE WAS BOGUS OR THAT THE CR ANE IN FACT DID NOT EXIST, THE QUESTION OF DISALLOWING THE DEPRECATION IN RESPECT OF THE SAME ALSO WOULD NOT ARISE. WHEN THE ASSESSEE HAD CO NCLUSIVELY PROVED THE PURCHASE AND EXISTENCE OF THE CRANE, AND HAD NOT DEBITED ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 9 THE EXPENSES TO THE PROFIT AND LOSS ACCOUNT, NO ADD ITION COULD HAVE BEEN MADE IN RESPECT OF THE PURCHASE PRICE NOR COUL D HAVE DEPRECIATION BEEN DISALLOWED IN RESPECT THEREOF. TH E TRIBUNAL WAS, THEREFORE, JUSTIFIED IN DELETING THE ADDITION AS WE LL AS DISALLOWANCE OF DEPRECIATION. 17. IN THE LIGHT OF THE AFORESAID DISCUSSION, IT IS NOT POSSIBLE TO STATE THAT THERE IS ANY LEGAL INFIRMITY IN THE IMPUGNED O RDER MADE BY THE TRIBUNAL SO AS TO WARRANT INTERFERENCE. IN THE ABSE NCE OF ANY QUESTION OF LAW, MUCH LESS, A SUBSTANTIAL QUESTION OF LAW, T HE APPEAL IS DISMISSED. 2.4. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ASHISH INTERNATIONAL LTD. (ITA NO.4299/2009) ORDER DATED 22/02/2011, OBSERVED/HELD AS UNDER:- THE QUESTION RAISED IN THIS APPEAL IS, WHETHER THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF BO GUS PURCHASES ALLEGEDLY MADE BY THE ASSESSEE FROM M/S. THAKKAR AG RO INDUSTRIAL CHEM SUPPLIES P. LTD. ACCORDING TO THE REVENUE, THE DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. IN HIS STATEMENT HAD STATED THAT THERE WERE NO SALES / PUR CHASES BUT THE TRANSACTIONS WERE ONLY ACCOMMODATION BILLS NOT INVO LVING ANY TRANSACTIONS. THE TRIBUNAL HAS RECORDED A FINDING O F FACT THAT THE ASSESSEE HAD DISPUTED THE CORRECTNESS OF THE ABOVE STATEMENT AND ADMITTEDLY THE ASSESSEE WAS NOT GIVEN ANY OPPOR TUNITY TO CROSS EXAMINE THE CONCERNED DIRECTOR OF M/S. THAKKA R AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. WHO HAD MADE THE A BOVE STATEMENT. THE APPELLATE AUTHORITY HAD SOUGHT REMAN D REPORT AND EVEN AT THAT STAGE THE GENUINENESS OF THE STATEMENT HAS NOT BEEN ESTABLISHED BY ALLOWING CROSS EXAMINATION OF THE PE RSON WHOSE STATEMENT WAS RELIED UPON BY THE REVENUE. IN THESE CIRCUMSTANCES, THE DECISION OF THE TRIBUNAL BEING B ASED ON THE FACT, NO SUBSTANTIAL QUESTION OF LAW CAN BE SAID TO ARISE FROM THE ORDER OF THE TRIBUNAL. THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 2.5. THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS NIKUNJ EXIM ENTERPRISES PVT. LTD. (2015) 372 ITR 61 9 (BOM.) HELD/OBSERVED AS UNDER:- 7. WE HAVE CONSIDERED THE SUBMISSION ON BEHALF OF THE REVENUE. HOWEVER, FROM THE ORDER OF THE TRIBUNAL DATED APRIL 30, 2010, WE FIND THAT THE TRIBUNAL HAS DELETED THE ADDITIONS ON ACCO UNT OF BOGUS PURCHASES NOT ONLY ON THE BASIS OF STOCK STATEMENT, I.E., RECONCILIATION STATEMENT BUT ALSO IN VIEW OF THE OTHER FACTS. THE TRIBUNAL RECORDS THAT THE BOOKS OF ACCOUNT OF THE RESPONDENT-ASSESSE E HAVE NOT BEEN REJECTED. SIMILARLY, THE SALES HAVE NOT BEEN DOUBTE D AND IT IS AN ADMITTED POSITION THAT SUBSTANTIAL AMOUNT OF SALES HAVE BEEN MADE TO THE GOVERNMENT DEPARTMENT, I.E., DEFENCE RESEARCH A ND DEVELOPMENT LABORATORY, HYDERABAD. FURTHER, THERE W ERE CONFIRMATION LETTERS FILED BY THE SUPPLIERS, COPIES OF INVOICES FOR PURCHASES AS WELL AS COPIES OF BANK STATEMENT ALL O F WHICH WOULD ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 10 INDICATE THAT THE PURCHASES WERE IN FACT MADE. IN O UR VIEW, MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME-TAX (APPEALS), ONE CA NNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT- ASSESSEE. THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF IN COME-TAX (APPEALS) HAVE DISALLOWED THE DEDUCTION OF RS. 1.33 CRORES ON ACCOUNT OF PURCHASES MERELY ON THE BASIS OF SUSPICI ON BECAUSE THE SELLERS AND THE CANVASSING AGENTS HAVE NOT BEEN PRO DUCED BEFORE THEM. WE FIND THAT THE ORDER OF THE TRIBUNAL IS WEL L A REASONED ORDER TAKING INTO ACCOUNT ALL THE FACTS BEFORE CONCLUDING THAT THE PURCHASES OF RS. 1.33 CRORES WAS NOT BOGUS. NO FAULT CAN BE F OUND WITH THE ORDER DATED APRIL 30, 2010, OF THE TRIBUNAL. 2.6. THE HON'BLE GUJARAT HIGH COURT IN CIT VS M.K. BROTHERS (163 ITR 249) HELD/OBSERVED AS UNDER:- BEING AGGRIEVED BY THE AFORESAID ORDER, THE ASSESS EE WENT IN SECOND APPEAL BEFORE THE TRIBUNAL. IT WAS URGED ON BEHALF OF THE ASSESSEE THAT THE TRANSACTIONS IN QUESTION WERE NORMAL BUSINESS T RANSACTIONS AND THE ASSESSEE HAD MADE PAYMENTS BY CHEQUES. THE PARTIES DID NOT COME FORWARD AND IF THEY DID NOT COME, THE ASSESSEE SHOU LD NOT SUFFER. HOWEVER, ON BEHALF OF THE REVENUE, IT WAS URGED THA T DETAILED INQUIRIES WERE MADE AND THEREAFTER THE CONCLUSION WAS REACHED . THE TRIBUNAL FOUND THAT THERE WAS NO EVIDENCE ANYWHERE THAT THES E CONCERNS GAVE BOGUS VOUCHERS TO THE ASSESSEE. NO DOUBT, THERE WER E CERTAIN DOUBTFUL FEATURES, BUT THE EVIDENCE WAS NOT ADEQUATE TO CONC LUDE THAT THE PURCHASES MADE BY THE ASSESSEE FROM THE SAID PARTIE S WERE BOGUS. THE TRIBUNAL ACCORDINGLY, DID NOT SUSTAIN THE ADDITION RETAINED BY THE APPELLATE ASSISTANT COMMISSIONER. HENCE, AT THE INS TANCE OF THE REVENUE, THE AFORESAID QUESTION HAS BEEN REFERRED T O THIS COURT FOR OPINION. ON A PERUSAL OF THE ORDER OF THE TRIBUNAL, IT CLEAR LY APPEARS THAT WHETHER THE SAID TRANSACTIONS WERE BOGUS OR NOT WAS A QUEST ION OF FACT. THE TRIBUNAL HAS ALSO POINTED OUT THAT NOTHING IS SHOWN TO INDICATE THAT ANY PART OF THE FUND GIVEN BY THE ASSESSEE TO THESE PAR TIES CAME BACK TO THE ASSESSEE IN ANY FORM. IT IS FURTHER OBSERVED BY THE TRIBUNAL THAT THERE IS NO EVIDENCE ANYWHERE THAT THESE CONCERNS GAVE VOUCH ERS TO THE ASSESSEE. EVEN THE TWO STATEMENTS DO NOT IMPLICATE THE TRANSACTIONS WITH THE ASSESSEE IN ANY WAY. WITH THESE OBSERVATIO NS, THE TRIBUNAL ULTIMATELY HAS OBSERVED THAT THERE ARE CERTAIN DOUB TFUL FEATURES, BUT THE EVIDENCE IS NOT ADEQUATE TO CONCLUDE THAT THE PURCH ASES MADE BY THE ASSESSEE FROM THESE PARTIES WERE BOGUS. IT MAY BE S TATED THAT THE ASSESSEE WAS GIVEN CREDIT FACILITIES FOR A SHORT DU RATION AND THE PAYMENTS WERE GIVEN BY CHEQUES. WHEN THAT IS SO, IT CANNOT BE SAID THAT THE ENTRIES FOR THE PURCHASES OF THE GOODS MADE IN THE BOOKS OF ACCOUNT WERE BOGUS ENTRIES. WE, THEREFORE, DO NOT FIND THAT THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS AGAINST THE WEIGHT OF EVIDENCE. IN THAT VIEW OF THE MATTER, WE ANSWER THE QUESTION IN THE AFFIRM ATIVE, THAT IS, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACC ORDINGLY, THE REFERENCE STANDS DISPOSED OF WITH NO ORDER AS TO CO STS. ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 11 2.7. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS RAJEEV G. KALATHIL (2015) 67 SOT 52 (MUM. T RIB.)(URO), IDENTICALLY, HELD AS UNDER:- 2.2.AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PRE FERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BE FORE HIM IT WAS ARGUED THAT ASSESSEE HAD FILED COPIES OF BILLS OF P URCHASE FROM DKE AND NBE, THAT BOTH THE SUPPLIERS WERE REGISTERE D DEALERS AND WERE CARRYING PROPER VAT AND REGISTRATION NO.S, THA T LEDGER ACCOUNTS OF THE PARTIES IN ASSESSEE'S BOOKS SHOWED BILLS ACCOUNTED FOR, THAT PAYMENT WAS MADE BY CHEQUES, TH AT A CERTIFICATE FROM THE BANKER GIVING DETAILS OF CHEQU E PAYMENT TO THE SAID PARTIES WAS ALSO FURNISHED. COPIES OF THE CONSIGNMENT, RECEIVED FROM THE GOVERNMENT APPROVED TRANSPORT CON TRACTORS SHOWING THAT MATERIAL PURCHASED WAS ACTUALLY DELIVE RED AT THE SITE WAS FURNISHED BEFORE THE AO. IT WAS ALSO ARGUED THA T SOME OF THE MATERIAL PURCHASED FROM THE SAID PARTIES WERE LYING PART OF CLOSING STOCK AS ON 31.03.2009 AS PER THE STATEMENT SUBMITTED ON RECORD. AFTER CONSIDERING THE ASSESSMENT ORDER A ND THE SUBMISSIONS MADE BY THE ASSESSEE, FAA HELD THAT THE TRANSACTIONS WERE SUPPORTED BY PROPER DOCUMENTARY E VIDENCES, THAT THE PAYMENTS MADE TO THE PARTIES BY THE ASSESS EE WERE IN CONFIRMATION WITH BANK CERTIFICATE,T HAT THE SUPPLI ERS WAS SHOWN AS DEFAULT UNDER THE MAHARASHTRA VAT ACT COULD NOT BE SUFFICIENT EVIDENCES TO HOLD THAT THE PURCHASES WERE NON-GENUI NE, THAT THE AO HAD NOT BROUGHT ANY INDEPENDENT AND RELIABLE EVI DENCES AGAINST THE ASSESSEE TO PROVE THE NON-GENUINENESS O F THE PURCHASES, THAT THERE WAS NO EVIDENCE REGARDING CAS H RECEIVED BACK FROM THE SUPPLIERS. FINALLY, HE DELETED THE AD DITION MADE BY THE AO . 2.3.BEFORE US, DEPARTMENTAL REPRESENTATIVE ARGUED THAT BOTH THE SUPPLIERS WERE NOT PRODUCED BEFORE THE AO BY TH E ASSESSEE, THAT ONE OF THEM WAS DECLARED HAWALA DEALER BY VAT DEPARTMENT, THAT BECAUSE OF CHEQUE PAYMENT MADE TO THE SUPPLIER TRANSACTION CANNOT BE TAKEN AS GENUINE. HE RELIED UPON THE ORDER OF THE G BENCH OF MUMBAI TRIBUNAL DELIVER ED IN THE CASE OF WESTERN EXTRUSION INDUSTRIES. (ITA/6579/MUM /2010- DATED 13.11.2013). AUTHRORISED REPRESENTATIVE (AR) CONTENDED THAT PAYMENTS MADE BY THE ASSESSEE WERE SUPPORTED B Y THE BANKERS STATEMENT, THAT GOODS RECEIVED BY THE ASSE SSEE FROM THE SUPPLIE WAS PART OF CLOSING STOCK,THAT THE TRAN SPORTER HAD ADMITTED THE TRANSPORTATION OF GOODS TO THE SITE.HE RELIED UPON THE CASE OF BABULA BORANA (282 ITR251), NIKUNJ EXIM P ENTERPRISES (P) LTD. (216TAXMAN171)DELIVERED BY THE HONBLE BOMBAY HIGH COURT. 2.4.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AO HAD MADE THE AD DITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWALA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING PO INT FOR ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 12 MAKING FURTHER INVESTIGATION AND TAKE IT TO LOGICAL END. BUT, HE LEFT THE JOB AT INITIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DETAILS OF THE BANK ACCOUNTS OF THE SUPPLIERS TO FI ND OUT AS WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FRO M THEIR ACCOUNT. WE FIND THAT NO SUCH EXERCISE WAS DONE. TR ANSPORTATION OF GOOD TO THE SITE IS ONE OF THE DECIDING FACTOR T O BE CONSIDERED FOR RESOLVING THE ISSUE. THE FAA HAS GIVEN A FINDIN G OF FACT THAT PART OF THE GOODS RECEIVED BY THE ASSESSEE WAS FORM ING PART OF CLOSING STOCK. AS FAR AS THE CASE OF WESTERN EXTRUS ION INDUSTRIES. (SUPRA)IS CONCERNED, WE FIND THAT IN THAT MATTER CA SH WAS IMMEDIATELY WITHDRAWN BY THE SUPPLIER AND THERE WAS NO EVIDENCE OF MOVEMENT OF GOODS. BUT, IN THE CASE BEF ORE US, THERE IS NOTHING, IN THE ORDER OF THE AO, ABOUT THE CASH TRAIAL. SECONDLY, PROOF OF MOVEMENT OF GOODS IS NOT IN DOUB T. THERERFORE, CONSIDERING THE PECULIAR FACTS AND CIRC UMSTANCES OF THE CASE UNDER APPEAL, WE ARE OF THE OPINION THAT T HE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY AN D THERE ARE NOT SUFFICIENT EVIDENCE ON FILE TO ENDORSE THE VIEW TAKEN BY THE AO. SO, CONFIRMING THE ORDER OF THE FAA, WE DECIDE GROUND NO.1 AGAINST THE AO . 2.8. THE RATIO LAID DOWN IN THE CASE OF M/S NEETA TEXTILES VS INCOME TAX OFFICER 6138/MUM/2013, ORDER DATED 27/05/2013, SHRI JIGAR V. SHAH VS INCOME TAX OFFICE R (ITA NO.1223/M/2014) ORDER DATED 22/01/2016, M/S IMPERIA L IMP. & EXP. VS INCOME TAX OFFICER ITA NO.5427/MUM/2015, ORDER DATED 18/03/2016 SUPPORTS THE CASE OF THE ASSESSEE AND THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. HOWEVER, AS RELIED BY THE LD. DR, THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF N.K. INDUSTRIES LTD.,ETC VS DCIT (SUPRA) CONSIDERING VAR IOUS DECISIONS DECIDED THE ISSUE IN FAVOUR OF THE REVENU E AND THE HON'BLE APEX COURT DISMISSED THE SLP VIDE ORDER DAT ED 16/01/2017 (SLP NO.(C) 769 OF 2017). WE FIND THAT I N THAT CASE, DURING SEARCH PROCEEDINGS, CERTAIN BLANK SIGNED CHE QUE BOOKS AND VOUCHERS WERE FOUND AND THUS THE PURCHASES MADE FROM THESE CONCERNS, WERE TREATED AS BOGUS BY THE ASSESS ING OFFICER. 2.9. THE HON'BLE GUJARAT HIGH COURT IN N.K. INDUST RIES LTD. VS DCIT (IT APPEAL NO.240, 261, 242, 260 AND 2 41 OF 2003), VIDE ORDER DATED 20/06/2016 CONSIDERED THE D ECISION OF THE TRIBUNAL AND VARIOUS JUDICIAL DECISIONS INCLUDI NG THE CASE OF VIJAY PROTEINS AND SANJAY OILCAKES INDUSTRIES LT D., M/S WOOLEN CARPET FACTORY VS ITAT (2002) 178 CTR 420 (R AJ.), THE TRIBUNAL WAS HELD TO BE JUSTIFIED IN DECIDING THE C ASE AGAINST THE ASSESSEE. THE HON'BLE APEX COURT CONFIRMED THE DECISION OF THE HIGH COURT FOR ADDING THE ENTIRE INCOME ON ACCO UNT OF BOGUS PURCHASES (SLP (C) NO.S 769 OF 2017, ORDER DA TED 16/01/2017. ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 13 2.10. BROADLY, THE LD. DR PLACE RELIANCE UPON THE DECISION FROM HON'BLE GUJARAT HIGH COURT IN THE CAS E OF N.K. INDUSTRIES LTD. VS DCIT (IT APPEAL NO.240 OF 2003 & ETC.). AND IN THE CASE OF N.K. PROTEINS LTD. VS DCIT (SLP NO.7 69 OF 2017), WHICH WAS DISMISSED, CONFIRMING THE DECISION OF THE HON'BLE HIGH COURT FOR MAKING THE ADDITION OF ENTIRE INCOME ON ACCOUNT OF BOGUS PURCHASES, WHEREAS, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS BASED UPON V ARIOUS DECISIONS INCLUDING HON'BLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS M/S NIKUNJ EXIMP ENTERPRISES PVT. LT D. (ITA NO.5604 OF 2010) AND IN ACIT VS MAHESH K. SHAH (IT A NO.5194/MUM/2014) ORDER DATED 31/01/2017, CIT VS AS HISH INTERNATIONAL (ITA NO.4299/2009) (BOM.) AND INCOME TAX OFFICER VS M/S VAMAN INTERNATIONAL PVT. LTD. (ITA NO.794/MUM/2015) ORDER DATED 16/11/2016. 2.11. IN SUCH TYPE OF CASES, BROADLY, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AS WELL AS THIS TRIBUNAL HAS FOLLOWED THE DECISIONS FROM HON'BLE GUJARAT HIG H COURT IN THE CASE OF SIMIT P. SETH (2013) 356 ITR 451 (GUJ.) , CIT VS VIJAY M. MISTRY CONSTRUCTION LTD. (2013) 355 ITR 498 (GUJ .), CIT VS BHOLA NATH POLY FAB. (P.) LTD. (2013) 355 ITR 290 ( GUJ.) AND VARIOUS OTHER DECISIONS OF THE TRIBUNAL AND THE DEC ISION OF M/S NIKUNJ EXIMP(SUPRA) FROM HON'BLE JURISDICTIONAL HIG H COURT, WHEREIN, THE AGGREGATE DISALLOWANCE WAS RESTRICTED TO 12.5%. THE CASE OF THE REVENUE IS THAT THERE IS BOGUS NATU RE OF PURCHASES MADE FROM SUPPLIERS AND THE PARTIES WERE NOT FOUND EXISTING AT THE GIVEN ADDRESSES. WE FIND THAT THE F ACT IN THE PRESENT APPEAL IS DIFFERENT BECAUSE IN THESE CASES BEFORE US, AS THE ASSESSEE IS A TRADER AND AS MENTIONED EARLIER T HERE CANNOT BE SALE WITHOUT ANY PURCHASES. IN THE PRESENT APPEA L, THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE B USINESS OF RUNNING HOT MIX PLANT AND EXECUTION OF ROAD CONSTRU CTION CONTRACTS, DECLARED INCOME OF RS.15,53,320/- IN ITS RETURN FILED ON 28/09/2009, WHICH WAS PROCESSED U/S 143(1) OF TH E ACT. LATER ON THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 AND THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S 147 O F THE ACT BY MAKING THE ADDITION OF RS.61,48,013/-, ASSESSING THE TOTAL INCOME AT RS.77,01,333/-. DURING ASSESSMENT PROCEE DINGS, THE LD. ASSESSING OFFICER RECEIVED INFORMATION FROM THE INVESTIGATION WING THAT THE ASSESSEE MADE BOGUS PUR CHASES OF RS.60,69,679/- FROM THREE PARTIES. THE CASE OF THE REVENUE IS THAT THE ASSESSEE COULD NOT EXPLAINED THE GENUINENE SS OF SUCH PURCHASES/EXPENDITURE AND THUS THE ADDITION WAS RIG HTLY MADE U/S 69C OF THE ACT. WHEREAS, THE CASE OF THE ASSES SEE IS THAT NECESSARY DETAILS FOR THE ALLEGED BOGUS PURCHASES W ERE DULY FILED BY THE ASSESSEE, EXPLAINING THE GENUINENESS O F THE PURCHASES. THE FIRST APPELLATE AUTHORITY CONSIDERED VARIOUS JUDICIAL DECISIONS INCLUDING BHOLANATH POLY FAB PVT . LTD. (2013) ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 14 355 ITR 290 AND CIT VS SIMIT P. SETH (2013) 219 TAX MAN 85 (GUJ.) AND THEREAFTER DECIDED THE ISSUE. THE STAND OF THE REVENUE IS THAT THE ASSESSEE FAILED TO PROVE, BEYON D REASONABLE DOUBT, THAT THE ASSESSEE MADE PURCHASES FROM THE GE NUINE PARTIES, THEREFORE, THE ADDITION OF RS.61,30,375/- WAS RIGHTLY MADE. 2.12. IF THE OBSERVATION MADE IN THE ASSESSMENT OR DER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD , IF KEPT IN JUXTAPOSITION AND ANALYZED, ADMITTEDLY, IN SUCH TYP E OF CASES, THERE IS NO OPTION BUT TO ESTIMATE THE PROFIT WHICH DEPENDS UPON THE SUBJECTIVE APPROACH OF AN INDIVIDUAL. HOWE VER, KEEPING IN VIEW THE PRINCIPLE OF JUDICIAL DISCIPLIN E, RATIO LAID DOWN IN THE AFORESAID CASES (DISCUSSED HEREINABOVE) , TO PLUG THE LEAKAGE OF REVENUE, WE DEEM IT APPROPRIATE TO A DOPT THE NET PROFIT OF 12.50% OF THE PURCHASES MADE BY THE ASSES SEE MINUS THE GP, ALREADY DECLARED/ SHOWN BY THE ASSESSEE. S O FAR AS, THE CASE RELIED UPON BY LD. DR IN HIS WRITTEN SUBMI SSIONS IS CONCERNED, THAT IS DIFFERENT ON FACT AS THE PRESENT ASSESSEE IS A TRADER IN GOODS, THUS, WE AFFIRM THE STAND OF THE L D. COMMISSIONER OF INCOME TAX (APPEAL). 3. SO FAR AS, RESTRICTING THE ADDITION TO RS.5367/ - AS AGAINST RS.60,696/- MADE ON ACCOUNT OF COMMISSION A T THE RATE OF 1% PAID TO NON-GENUINE PURCHASE PARTIES FO R ARRANGING THE BILL AND OTHER RELATED WORK IS CONCERNED, CONSI DERING THE TOTALITY OF FACTS. WE AFFIRM THE STAND OF THE LD. C OMMISSIONER OF INCOME TAX (APPEAL). RESULTANTLY THE APPEAL OF THE REVENUE IS DISMISSED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. WE ARE ALSO REPRODUCING HEREUNDER THE CORRIGENDUM ISSUED IN THE AFORESAID ORDER ON 06/12/2017 FOR REA DY REFERENCE:- CORRIGENDUM WE FIND THAT THE TRIBUNAL DISPOSED OFF THE AFORESA ID APPEAL OF THE REVENUE VIDE ORDER DATED 06/07/2017. DURING HEARING OF THE REMAINING APPEALS OF DIFFERENCE ASSE SSMENT YEARS INCLUDING ASSESSMENT YEARS 2009-10, (APPEAL O F THE ASSESSEE), THE LD. COUNSEL FOR THE ASSESSEE CITED O RDER OF THE TRIBUNAL DATED 06/07/2017, WHEREIN AN INADVERTENT TYPOGRAPHICAL ERROR WAS NOTICED. THE LD. COUNSEL F OR THE ASSESSEE, SHRI DHARMESH SHAH AS WELL AS SHRI RAJAT MITTAL, ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 15 LD. DR, AGREED THAT THE MISTAKE MAY BE RECTIFIED. B OTH WERE HEARD. AFTER HEARING BOTH SIDES, IT WAS FOUND THAT DUE TO INADVERTENT TYPOGRAPHICAL ERROR, SOME MISTAKE OCCUR RED IN THE ORDER IN PARA 2.12 (PAGE-16 OF THE ORDER), WHIC H IS REPRODUCED HEREUNDER:- 2.12. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME , CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AV AILABLE ON RECORD, IF KEPT IN JUXTAPOSITION AND ANALYZED, A DMITTEDLY, IN SUCH TYPE OF CASES, THERE IS NO OPTION BUT TO ES TIMATE THE PROFIT WHICH DEPENDS UPON THE SUBJECTIVE APPROACH O F AN INDIVIDUAL. HOWEVER, KEEPING IN VIEW THE PRINCIPLE OF JUDICIAL DISCIPLINE, RATIO LAID DOWN IN THE AFORESAID CASES (DISCUSSED HEREINABOVE), TO PLUG THE LEAKAGE OF REVENUE, WE DE EM IT APPROPRIATE TO ADOPT THE NET PROFIT OF 12.50% OF TH E PURCHASES MADE BY THE ASSESSEE MINUS THE GP, ALREAD Y DECLARED/ SHOWN BY THE ASSESSEE. SO FAR AS, THE CA SE RELIED UPON BY LD. DR IN HIS WRITTEN SUBMISSIONS IS CONCERNED, THAT IS DIFFERENT ON FACT AS THE PRESENT ASSESSEE IS A TRADER IN GOODS, THUS, WE AFFIRM THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL). WE NOTE THAT (ON GOING THROUGH THE RECORD) THE TRIBUNAL ADOPTED THE NET PROFIT AT 12.50% OF THE PU RCHASES MADE BY THE ASSESSEE MINUS THE GP ALREADY DECLARED/ SHOWN BY THE ASSESSEE. THE LD. COMMISSIONER OF INCOME TAX (APPEAL) ADOPTED THE FIGURE OF 12.50% AND THE TRIBU NAL AFFIRMED THE STAND OF THE LD. COMMISSIONER OF INCOM E TAX (APPEAL). HOWEVER, IF THE PROFIT AT THE RATE OF 12. 50% OF THE BOGUS PURCHASES IS AFFIRMED THEN THERE IS NO QUESTI ON OF MINUS THE GP ALREADY DECLARED BY THE ASSESSEE, THER EFORE, THE NECESSARY CORRECTION IS MADE AND THE PARA 2.12 MAY BE READ AS UNDER:- 2.12. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME , CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AV AILABLE ON RECORD, IF KEPT IN JUXTAPOSITION AND ANALYZED, A DMITTEDLY, IN SUCH TYPE OF CASES, THERE IS NO OPTION BUT TO ES TIMATE THE PROFIT WHICH DEPENDS UPON THE SUBJECTIVE APPROACH O F AN INDIVIDUAL. HOWEVER, KEEPING IN VIEW THE PRINCIPLE OF JUDICIAL DISCIPLINE, RATIO LAID DOWN IN THE AFORESAID CASES (DISCUSSED HEREINABOVE), TO PLUG THE LEAKAGE OF REVENUE, WE DE EM IT APPROPRIATE TO ADOPT THE NET PROFIT OF 12.50% OF TH E PURCHASES, ADOPTED BY THE LD. COMMISSIONER OF INCOM E TAX (APPEAL). SO FAR AS, THE CASE RELIED UPON BY LD. DR IN HIS WRITTEN SUBMISSIONS IS CONCERNED, THAT IS DIFFERENT ON FACT AS THE PRESENT ASSESSEE IS A TRADER IN GOODS, THUS, WE AFFIRM THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (AP PEAL). ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 16 THE LD. ASSESSING OFFICER IS DIRECTED TO ACT UPON T HE CORRIGENDUM ORDER ISSUED HEREINABOVE. THIS CORRECTION/CORRIGENDUM WAS TOLD TO THE LD. REPRESEN TATIVES FROM BOTH SIDES AND THEY AGREED TO IT. THUS, THIS CORRIG ENDUM IS ISSUED TODAY ON 06/12/2017. IN THE LIGHT OF THE ABOVE, SINCE, WE HAVE UPHELD TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL ), THEREFORE, ON THE AFORESAID REASONING/JUDICIAL PRONOUNCEMENTS, WE DISMISSED APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2009-10 (ITA NO.2598/MUM/2016) AS T HE SAME IS BORNE OUT FROM THE SAME ORDER AND THE ORDER OF THE TRIBUNAL DATED 06/07/2017 (ITA NO.1823/MUM/2016) IN THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2009- 10 (INCLUDING THE CORRIGENDUM ISSUED) SHALL BE APPLICA BLE, THEREFORE, THE APPEAL OF THE ASSESSEE FOR ASSESSMEN T YEAR 2009-10 IS DISMISSED. 3. THE GROUND WITH RESPECT TO REOPENING OF ASSESSME NT WAS NOT ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, DISMISSED AS NOT PRESSED. FINALLY, THE APPEAL FOR ASSESSMENT YEAR 2009-10, FI LED BY THE ASSESSEE, IS DISMISSED. 4. IN THE CROSS APPEALS FOR ASSESSMENT YEAR 2010-1 1 (ITA NO.1728/MUM/2016) (APPEAL OF THE REVENUE) AND (ITA ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 17 NO.2599/MUM/2016) (APPEAL OF THE ASSESSEE), THE GRO UND WITH RESPECT TO REOPENING OF ASSESSMENT AS INVALID WAS NOT ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE, THEREFO RE, IT IS DISMISSED AS NOT PRESSED. 5. THE ONLY GROUND SURVIVES FOR OUR CONSIDERATION IS WITH RESPECT TO BOGUS PURCHASES U/S 69C OF THE ACT. THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AFTER CONSIDERI NG THE VARIOUS DECISIONS ADOPTED THE PROFIT AT 12.5% OF TH E BOGUS PURCHASES, WHICH WAS ACCEPTED BY THE ASSESSEE AS IS EVIDENT FROM PARA-30 OF THE IMPUGNED ORDER. IN THE LIGHT OF OUR DISCUSSION FOR ASSESSMENT YEAR 2009-10, WE AFFIRM T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL). THI S WILL AUTOMATICALLY DISMISSED THE CONTENTION OF THE REVEN UE RAISED IN THE CROSS APPEAL RESTRICTING THE ADDITION TO 12.50% ON ACCOUNT OF BOGUS PURCHASES, THUS, FOLLOWING THE ORDER FOR ASSESSMENT YEAR 2009-10, THE APPEAL OF THE ASSESSE E AS WELL AS OF THE REVENUE ARE DISMISSED. 6. IDENTICAL IS THE SITUATION/FACTS FOR ASSESSMENT YEAR 2011-12, THEREFORE, FOLLOWING THE ORDERS FOR A SSESSMENT YEAR 2009-10, WHICH WAS FOLLOWED FOR ASSESSMENT YEA R 2010-11 ALSO, RESULTING INTO UPHOLDING THE ORDER OF THE FIRST ITA NO. 1728, 1729, 2598, 2599 & 2600/MUM/2016 M/S. UNITED ASPHALTERS P. LTD. 18 APPELLATE AUTHORITY, THE APPEAL OF THE ASSESSEE AS WELL AS OF THE REVENUE ARE DISMISSED, FINALLY, (I) THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2009 -10 IS DISMISSED. (II) THE APPEAL OF THE ASSESSEE AS WELL AS OF THE REVEN UE FOR ASSESSMENT YEAR 2010-11 ARE DISMISSED. (III) THE APPEAL OF THE ASSESSEE AS WELL AS OF THE REVENU E FOR ASSESSMENT YEAR 2011-12 ARE ALSO DISMISSED THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 06/12/2017. SD/- SD/- ( MANOJ KUMAR AGARWAL ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER & MUMBAI; * DATED : 07/12/2017 F{X~{T? P.S / /. . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. /0-. / THE ASSESSEE. 3. 1 1 2% ( , ) / THE CIT, MUMBAI. 4. 1 1 2% / CIT(A)- , MUMBAI, 5. 45 /%' , 1 ,( ' 6 , & / DR, ITAT, MUMBAI 6. # 7& / GUARD FILE. ! / BY ORDER, 04,% /% //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , & / ITAT, MUMBAI