M/s. Arman Fashion Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(1), Surat

ITA 2400/AHD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2073 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-03-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Keywords: Bogus purchase; Business income; Accommodation entries
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI G. C. GUPTA, VP AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.2400 AND 2407/AHD/2012 A. Y.: 2009-10 M/S. ARMAN FASHION PVT. LTD., 128D, SANGHVI TOWER, BUILDING NO.2, ADAJAN ROAD, SURAT 395009 P. A. NO. AAGCA 7474 H THE INCOME TAX OFFICER, WARD -1 (1), SURAT, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS VS THE INCOME TAX OFFICER, WARD -1 (1), SURAT, AAYAKAR BHAVAN, MAJURA GATE, SURAT M/S. ARMAN FASHION PVT. LTD., 128D, SANGHVI TOWER, BUILDING NO.2, ADAJAN ROAD, SURAT 395009 P. A. NO. AAGCA 7474 H (APPELLANT) (RESPONDENT) ASSESSEE BY: NONE DEPARTMENT BY: SHRI SHELLEY JINDAL, SR. DR DATE OF HEARING: 04-03-2013 DATE OF PRONOUNCEMENT: 10-05-2013 O R D E R PER A. MOHAN ALANKAMONY: THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE AR E PREFERRED AGGRIEVED BY THE COMMON ORDER OF THE LEARNED CIT (A )-I, SURAT DATED 22-08-2012 IN APPEAL NO. CAS.I/242/11-12 FOR THE AS SESSMENT YEAR 2009-10 U/S 250 READ WITH SECTION 143(3) OF THE I. T. ACT. THESE CROSS APPEALS WERE HEARD TOGETHER AND THE SAME ARE DISPOS ED OFF BY THIS COMMON AND CONSOLIDATED ORDER FOR THE SAKE OF CONVE NIENCE. ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 2 ITA NO.2400/AHD/2012 (ASSESSEES APPEAL FOR AY 2009-10) 2. THE ASSESSEE IN ITS APPEAL HAS RAISED THREE GROU NDS WHEREIN GROUNDS NO.2 AND 3 ARE GENERAL IN NATURE AND DO NOT SURVIVE FOR ADJUDICATION. THE LONE GROUND NO.1 SURVIVING FOR AD JUDICATION IS REPRODUCED HEREIN UNDER FOR REFERENCE: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN SUSTAINING ADDITION EXTENT TO RS.9.12 LAKHS ON ESTIMATING NET PROFIT AT 0.5% ON TURNOVER. ITA NO.2407/AHD/2012 (REVENUES APPEAL FOR AY: 2009-10) 3. THE REVENUE HAS RAISED FOUR GROUNDS IN ITS APPEA L WHEREIN GROUND NOS. 3 AND 4 ARE GENERAL IN NATURE AND DO NO T SURVIVE FOR ADJUDICATION. GROUNDS NO.1 AND 2 ARE REPRODUCED HER EIN UNDER FOR REFERENCE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-I, SURAT HAS ERRED IN RESTRICTING TH E ADDITION OF RS.2,73,09,640/- MADE BY DISALLOWING 25% OF TOTA L PURCHASES BY THE ASSESSEE TO RS.9.12 LAKHS AS HE HA S IGNORED THE FACT THAT THE ASSESSEE NEVER ADMITTED B EFORE THE A. O. THAT ALL THE TRANSACTIONS WERE MADE ONLY FOR BANK FINANCE AND NO PROOF OF RECEIPT OF GOODS WERE PRODUCED BY THE ASSESSEE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A)-I, SURAT HAS ERRED IN ADMITTING THE ASSESSEES SUBMISSION THAT IT WAS A CASE OF CIRCULA R ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 3 TRANSACTIONS TO FULFILL TURNOVER CRITERIA OF BANKS FOR GETTING FINANCE, WITHOUT CALLING FOR A REMAND REPORT UNDER RULE 46A. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING OF FABRICS FILED ITS RETURN OF INCOME DECLARING INCOME OF RS.28,860/ - ON 27-09-2009 SHOWING GROSS PROFIT AT 0.04% AMOUNTING TO RS.81,21 4/- AND NET PROFIT AT 0.02% AMOUNTING TO RS.28,855 AGAINST TOTAL TURNO VER OF RS.18,23,44,070/-. SUBSEQUENTLY, THE CASE WAS SELE CTED FOR SCRUTINY UNDER CASS U/S 143(2) AND ASSESSMENT ORDER WAS PASS ED U/S 143(3) OF THE ACT ON 29-11-2011 DETERMINING THE TOTAL INCO ME OF THE ASSESSEE AT RS.2,73,38,500/- WHEREIN THE LEARNED AO MADE AN ADDITION OF RS.2,73,09,640/- BY TREATING 25% OF BOG US PURCHASES OF RS.10,92,38,563/- AS PROFIT OF THE ASSESSEE FOLLOWI NG THE DECISION OF THE CASE VIJAY PROTEIN LTD. REPORTED IN 58 ITD 428 (AHD). 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON V ERIFICATION OF THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE, THE LEAR NED AO NOTICED THAT THE ASSESSEE HAD DEBITED RS.18,22,62,856/- ON ACCOU NT OF PURCHASE OF FABRICS AGAINST SALES OF RS.18,23,44,070/-. THE LEARNED AO ON FURTHER EXAMINATION OF THE CASE, VARIOUS QUERIES WE RE RAISED FOR WHICH THE ASSESSEE NEITHER COOPERATED NOR FURNISHED THE D ETAILS. FINALLY, THE LEARNED AO SUMMARIZED THE DISCREPANCIES AS FOLL OWS: (I) THE ASSESSEE DID NOT FURNISH THE DETAILS OF MON TH WISE PURCHASE AND SALES ACCORDING TO THE FORMAT FURNISHE D BY THE REVENUE. ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 4 (II) FOR THE VARIOUS SUMMONS ISSUED THERE WAS LACK OF COOPERATION BY THE ASSESSEE AND OFTEN FAILED TO APP EAR BEFORE THE AO. (III) NOTICE ISSUED U/S 133 (6) OF THE ACT TO THE C REDITORS AND DEBTORS WERE ALSO RETURNED UN-SERVED WITH THE REMAR KS INCOMPLETE. (IV) FROM THE COPY OF THE ACCOUNTS OF THE CREDITORS AND DEBTORS FURNISHED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, IT WAS REVEALED THAT THE TOTAL PURCHASES DURING THE PERIOD 05-04-2008 TO 23-04-2008 FROM M/S. RAMAN FABRICS PVT. LTD. SHOWS AN AMOUNT OF RS.7,49,92,911 /- WHILE AS THE CONFIRMATION STATEMENT FROM M/S. RAMAN FABRICS PVT. LTD. SHOWS THAT THE ABOVE STATED AMOUN T REPRESENTS LOAN TO SUBSIDY COMPANY. THE ABOVE FACT ESTABLISHES THAT THE ASSESSEE HAD NOT MADE ANY PURCHASES FROM M/S. RAMAN FABRICS PVT. LTD. (V) SIMILARLY, ON VERIFYING THE CONFIRMATION STATEM ENT OF KALANIKETAN SYNTEX PVT. LTD. AN AMOUNT SHOWN AS PURCHASES BY THE ASSESSEE FOR RS.3,42,45,652/- PRO VED TO BE BOOK ENTRY IN THE SIMILAR FASHION AND DID NOT REPRESENT THE PURCHASES MADE BY THE ASSESSEE. (VI) THE ASSESSEE HAD FAILED TO FURNISH PURCHASE BI LLS, REGISTERS ETC. IN SUPPORT OF ITS EXPENSES. (VII) SINCE, THE ASSESSEE COULD NOT SUBSTANTIATE TH E ABOVE PURCHASES WITH ANY COGENT EVIDENCE TO PROVE ITS CLA IM OF PURCHASES AFTER AFFORDING SUFFICIENT OPPORTUNITY, T HE LEARNED AO HELD THE SAME TO BE BOGUS PURCHASES TOTA LING TO RS.10,92,38,563/- AND HELD AS UNDER: 13. HENCE, IT IS PROVED BEYOND DOUBT THAT THOUGH T HE ENTRIES IN THE BOOKS AS CLAIMED BY THE ASSESSEE IS MADE AS PURCHASES, THE ASSESSEE HAS COMPLETELY FAILED TO PRODUCE ANY M ATERIAL EVIDENCE IN RESPECT OF ACTUAL PURCHASE MADE AS WELL AS RECEIPT OF GOODS IN THE FORM PURCHASE BILLS, DELIVERY CHALL AN, INWARD ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 5 RECORDS, PAYMENTS BY ACCOUNT PAYEE CHEQUES ETC. FOR VERIFICATION. 14. IN VIEW OF THE ABOVE POSITION OF THE CASE, AND ALSO THE FOLLOWING FACTS WHICH COME ACROSS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS CLEAR THAT THE PURCHA SES AMOUNTING TO RS.7,49,911 PLUS RS.3,42,45,652/- TOTALING TO RS.10,92,38,563/- FROM M/S.RAMAN FABRICS P. LTD. AND KALANIKETAN SYNTEX P. LTD., RESPECTIVELY CLAIMED TO HAVE BEEN MADE WERE BOGUS AND NOT GENUINE IN THE ABSENCE OF DOCUMENTS SUCH AS PURCHASE INVOICES, VOUCHERS STOCK BOOK ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS DE SPITE REPEATED NOTICES AND SUMMONS AS DETAILED ABOVE. THE REFORE, THE ASSESSEE FAILED TO PROVE THAT HT GOODS WERE ACT UALLY PURCHASED. THE DIRECTORS OF THE ASSESSEE COMPANY WA S GIVEN AN OPPORTUNITY TO EXPLAIN THE MATTER BY ISSUING SU MMONS ON 5- 9-2011, WHICH WAS NOT AVAILED BY THEM:- A). THE BANK STATEMENT FURNISHED IN RESPECT OF CANA RA BANK SHOWS ONLY OPENING BALANCE OF RS.5748/- AND NO OTHE R ENTRY IS SHOWN; B) THE ASSESSEE IS NOT HAVING ANY EVIDENCE INCIDENT AL TO THE SALE/PURCHASE IN THIS LINE OF BUSINESS EXCEPT ADMINISTRATIVE EXPENSES OF RS.52,359/- WHICH WOUL D BE GLARINGLY OBVIOUS THAT NO BUSINESS CAN BE CARRIED O UT WITHOUT ANY SUCH EXPENSES; C) AS MENTIONED IN THE SHOW CAUSE NOTICE AT PARA 1, THE ADDRESS OF THE ASSESSEE IS SHOWN AT 128D, BUILDING NO.2, SANGHVI TOWER, ADAJAN SURAT. THE NOTICES ISSUED IN THESE ADDRESS ARE NEVER DELIVERED IN THE ADDRESS GIVEN, B UT LATER RECEIVED BY THE AUTHORISED REPRESENTATIVES O FFICE; D) THE COPY OF RETURN OF INCOME FILED BY M/S. RAMAN FABRICS P. LTD., AND M/S. KALANIKETAN SYNTEX, P. LTD. SHOWS THEIR SALE FIGURE AS LOAN TO SUBSIDIARY COMPANY, WHICH WERE SHOWN TO THE AUTHORIZED REPRESENTATIVE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS DEMANDED BY ITS LETTER, BUT THERE IS NOT SATISFACTORY EXPLANATION T HEREON FURNISHED BY HIM LATER ON; ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 6 E) THESE SALES BY THESE COMPANIES TO THE ASSESSEE A RE SHOWN IN THEIR BOOKS OF ACCOUNTS AGAINST THE LOANS GIVEN; 15. IT IS ALSO IMPERATIVE TO MENTION HERE THAT NON MAINTENANCE OF DAY TO DAY STOCK RECORDS IS A DEFECT WITHIN THE MEANING OF SECTION 145(3) OF THE ACT. THE HONBLE APEX COURT H AS ALSO INTERPRETED SO IN THE CASE OF S. N. NAMASIVAYAM CHE TTIAR (SC) 38 ITR 579, WHEREIN, IT WAS HELD AS FOLLOWS: KEEPING OF STOCK REGISTER IS OF GREAT IMPORTANCE B ECAUSE THAT IS A MEANS OF VERIFYING ASSESSEES ACCOUNT BY HAVING A QUANTITATIVE TALLY. IF, AFTER TAKING INTO ACCOUNT ALL THE MATERIALS INCLUDING THE WANT OF A STOCK REGISTER, IT IS FOUND THAT FROM THE METHOD OF ACCOUNTING THE CORRECT PROFITS OF THE BUS INESS ARE NOT DEDUCTIBLE, THE OPERATION OF THE PROVISO TO SECTION 13 OF THE INCOME TAX ACT WOULD BE ATTRACTED. THE INCOME TAX O FFICER EVEN IF HE ACCEPT THE ASSESSEES METHOD OF ACCOUNTI NG IS NOT BOUND BY THE FIGURE OF PROFITS SHOWN IN THE ACCOUNT S. IT IS FOR THE INCOME TAX AUTHORITIES TO CONSIDER THE MATERIAL WHI CH IS PLACED BEFORE THEM AND, IF , AFTER TAKING INTO ACCOUNT IN ANY CASE THE OPINION THAT CORRECT PROFITS AND GAINS CANNOT BE DE DUCED, THEN THEY WOULD BE JUSTIFIED IN APPLYING THE PROVISO TO SECTION 13. IN THE CASE OF BRITISH PAINTS (SC) 186 ITR 44 ALSO , THE HONBLE SUPREME COURT HAS HELD THAT, IF, AFTER TAKING INTO ACCOUNT THE ABSENCE OF STOCK REGISTER COUPLED WITH OTHER MATERIALS, THE ASSESSING OFFICER IS OF THE VI EW THAT CORRECT PROFITS AND GAINS OF THE BUSINESS OF THE AS SESSEE CANNOT BE ARRIVED AT, THEN THE ASSESSING OFFICER WO ULD BE JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 14 5 OF THE ACT. IN THE CIRCUMSTANCES, THE BOOK RESULTS DISCLOS ED BY THE ASSESSEE ARE REJECTED UNDER SECTION 145(3) OF T HE I. T. ACT. 16. KEEPING ALL THESE FACTORS IN MIND AFTER DULY CO NSIDERING ALL THE DOCUMENTS/REPLY FURNISHED BY THE ASSESSEE REPR ESENTATIVE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, 25% OF THE TOTAL PURCHASES AS SHOWN IN THE LEDGER ACCOUNT THROUGH SU CH BOGUS/FICTITIOUS PURCHASE BY THE ASSESSEE FROM TWO PARTIES I.E. ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 7 M/S. RAMAN FABRICS P. LTD., AND M/S. KALANIKETAN SY NTEX P. LTD. TOTALING TO RS.10,92,38,563/- IS DISALLOWED AN D ADDED TO THE TOTAL INCOME OF THE ASSESSEE. RELIANCE IS PLACED ON THE DECISION OF THE HONBLE I. T.A. T., AHMEDABAD BENCH C IN THE CASE OF VIJAY PROTINS LTD. [1996] 48 ITD 428 (AHD). PENALTY PROCEEDINGS ARE INITIATED FOR DEFAULT U/S 271 (1) ( C ) OF THE I. T. ACT. 6. THE LEARNED CIT(A) AFTER THOROUGHLY EXAMINING TH E ISSUE ARRIVED AT THE FOLLOWING DECISION:- 9. DECISION: IT IS AN UNDISPUTED FACT THAT ALL PURCHASE PARTIES ARE ASSESSED TO TAX AND SALE APPELLANT HAS BEEN SHOWN IN THEIR TRAD ING ACCOUNTS. WRONG CLASSIFICATION OF DEBIT BALANCE IN THEIR BOOKS AS LOAN INSTEAD OF DEBTORS CANNOT BE A GROUND FOR D ISALLOWANCE IN THE CASE OF APPELLANT. MOREOVER, IF A. O. DOUBTE D PURCHASES FROM TWO PARTIES, THAN THE ENTIRE PURCHASES SHOULD HAVE BEEN DISALLOWED. THERE IS NO BASIS FOR ACCEPTING 75% OF AMOUNT AS GENUINE AND TREATING 25% OF THE AMOUNT AS BOGUS PUR CHASES IN RESPECT OF THE SAME PARTY. BESIDES DOUBTING THE PURCHASES, THE A. O. ALSO DOUB TED THE SALES MADE BY THE APPELLANT AS MENTIONED ON PAGE -7 (6 TH LINE) OF THE ASSESSMENT ORDER, REPRODUCED ON PAGE 8 OF TH IS ORDER. MOREOVER IT IS NOTICED THAT M/S. RAMAN FABRICS PVT. LTD., A PURCHASE PARTY HAS SIMILAR ADDRESS AS THE SALE PART Y M/S. BANI THANI FASHIONS PVT. LTD. THE ONLY DIFFERENCE IS IN SHOP NO. WHICH IS 128E, SANGHVI TOWER IN THE CASE OF PURCHAS E PARTY AND 128B, SANGHVI TOWER IN THE CASE OF SALE PARTY. ANOTHER SALE PARTY M/S. NAKODA TEXTILE INDUSTRIES LTD. HAS THE ADDRESS 128D, SANGHVI TOWER. THE APPELLANTS ADDRESS RELATE TO FEW PARTIES AND ALMOST THE ENTIRE AMOUNT OF PURCHASE AS WELL AS SALES IS OUTSTANDING NOR ONLY ON 31.03.2009 BUT ALS O ON 31.03.2010. BOTH THE SUNDRY DEBTORS AND CREDITORS O N 31.03.2009 ARE RS.10.92 CRORES EACH. THERE ARE ONLY TWO PARTIES IN SUNDRY CREDITORS. IN RESPECT OF BOTH THE SE PARTIES 25% ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 8 DISALLOWANCE HAS BEEN MADE BY A.O. THERE ARE FIVE P ARTIES IN SUNDRY DEBTORS. THE APPELLANT HAS CLAIMED THAT PAYM ENTS HAVE BEEN MADE/RECEIVED IN RESPECT OF THESE CREDITORS/DE BTORS IN A. Y. 2012-13. THEREFORE, IT IS NOT A CASE WHERE PURCH ASE PARTIES DONT EXIST OR HAVE DENIED HAVING TRANSACTIONS WITH APPELLANT. 10. THE APPELLANT VIDE LETTER FILED ON 09.08.2012 A DMITTED THAT IT WAS A CASE OF CIRCULAR TRANSACTIONS. THE SAID LE TTER IS REPRODUCED HEREIN UNDER: . THE ASSESSEE IS DOING BUSINESS OF TRADING I N FABRICS. IN ADDITION TO OUR PREVIOUS REPLY WE WOULD LIKE TO SUBMIT AS UNDER: THE TRANSACTIONS ARE AS SHOWN IN THE BOOKS OF ACCOU NTS OF PURCHASES AND SALES WERE MADE BY THE ASSESSEE TO FULFILL TURNOVER CRITERIA OF BANKS OF FOR GETTING FINANCE. IT IS PERTINENT TO NOTE THAT THE SAME WAS TO CREATE A TUR NOVER BY INTERNAL SALES AND PURCHASES TO HAVE A REASONABL E TURNOVER WHICH IN RETURN WOULD FACILITATE A RESPECT ABLE PROJECT REPORT FOR BANK FINANCE. THE FACT OF FDR OF SPECIFIC AMOUNT WAS KEPT WITH BANK ADDED FORCE TO OUR SUBMISSION AS FDR WERE PUT SO THAT THE SAME SHALL F ULFILL THE CRITERIA OF COLLATERAL SECURITY. HENCE THE TURNOVER AS MENTIONED IN THE TRADING AND PROFIT AND LOSS ACCOUNT OF THE ASSESSEE WAS IN FAC T NOT A ACTUAL TURNOVER IN COMMON BUSINESS PARLANCE AND HEN CE THE QUESTION OF TAXING ANY HYPOTHETICAL PROFIT OUT OF SUCH STRUCTURED TURNOVER DOES NOT ARISE.. 11. IN THIS BACK GROUND WHEN WE SEE FACTS LIKE A TU RNOVER 18.23 CRORES WITH GROSS PROFIT OF 0.4% AND NET PROFIT OF 0.02%, NO SALES IN SUBSEQUENT YEAR I.E. A. Y. 2010-11, NEGLIG IBLE ADMINISTRATIVE EXPENSES OF RS.46,187/- AND OUTSTAND ING DEBTOR/CREDITOR, IT IS APPARENT THAT BOTH THE PURCH ASES AND SALES IN THIS CASE ARE BOGUS AND ONLY BOOK ENTRIES FOR PURCHASE/SALE HAVE BEEN MADE. SUCH TRANSACTIONS MAY BE FOR THE PURPOSE OF GIVING BOGUS ENTRIES TO OTHER CO NCERNS TO ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 9 HELP THEM EVADE TAX OR JUST CIRCULAR TRANSACTION WH ETHER THE GROUP TO GENERATE A FAKE HEALTHY BALANCE SHEET TO D ECEIVE FINANCIAL INSTITUTIONS OR FOR SOME OTHER PURPOSE. 12. ETHICAL ASPECTS OF SUCH AN EXERCISE CAN BE DEBA TED AND THERE MAY BE ADVERSE CONSEQUENCES UNDER OTHER ACTS/ RULES FOR SUCH CONDUCT. HOWEVER, AS FOR INCOME TAX ACT IS CONCERNED, WHAT IS REQUIRED TO BE SEEN IS THE CORRE CT AMOUNT OF TAXABLE INCOME GENERATED FROM SUCH TRANSACTION. AS NOTICED (SUPRA) THE TOTAL SALES OF APPELLANT ARE ON RS.18.23 CRORES. SINCE GP IS ONLY 0.04%, PURCHASES ARE ALSO OF ALMOST EQUAL AMOUNT. IF THE APPELLANT HAS GIVEN BOG US ENTRIES TO OTHERS, APPROPRIATE COMMISSION INCOME FO R GIVING BOGUS ENTRIES NEED TO BE ESTIMATED AS TAXABLE INCOM E OF THE APPELLANT. IN CASE APPELLANT HAS ONLY INDULGED IN C IRCULAR TRANSACTIONS, THEN THERE MAY NOT BE ANY TAXABLE INC OME IN THE HANDS OF APPELLANT EXCEPT WHAT HAS BEEN SHOWN I N THE RETURN OF INCOME. HOWEVER, IF AOS VIEW IS ACCEPTED THAT PURCHASES ARE NOT VERIFIABLE, EVEN THEN IT WILL BE A CASE OF NET PROFIT ESTIMATION. 13. APPELLANTS DECLARED BUSINESS IS TRADING IN TEXT ILES. IN THE CASE OF M/S. OPULENT JEWELS PVT. LTD., A. Y. 2007-0 8, WHEREIN 25% OF UNVERIFIABLE PURCHASES WERE ADDED MY PREDECESSOR HELD THAT IT WAS A CASE OF GIVING BOGUS ENTRIES AND ESTIMATED A NET PROFIT OF 1.5% ON PURCHASES AS INCOME FOR GIVING ACCOMMODATION ENTRIES OR PURCHASES/SALES . THE SAID ESTIMATION WAS MADE ON THE BASIS OF VARIOUS DE CISION OF ITAT DISCUSSED IN THE APPELLATE ORDER NO. CAS-I/273 /2009- 10 DATED 31.03.2010. FOLLOWING THE SAID ORDER SIMIL AR ESTIMATION WAS MADE IN A. Y. 2008-09 IN THE CASE OF M/S. OPULENT JEWELS PVT. LTD. IN THE APPELLATE ORDER CAS - I/208/2010-11 DATED 02.04.2012. IN THE SAID CASE BO GUS PURCHASE/SALE ENTRIES WAS GIVEN FOR DIAMONDS AND NO T FOR TEXTILES. IN THE CASE OF TEXTILE BUSINESS APPELLANT HAS FURNISHED FOLLOWING DECISION FOR ESTIMATION OF COMM ISSION FOR GIVING ACCOMMODATION ENTRIES, WITHOUT PREJUDICE TO ITS CLAIM THAT ITS PURCHASES AND SALES ARE GENUINE. ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 10 DECISION DATE DETAILS OF THE CASE PERCENTAGE ESTIMATION 51/05/11 IT(SS)A NO.608 TO 612/AHD/2010 0.125% 14. CONSIDERING THE FACTS OF THE CASE AND THE DECIS IONS RELIED UPON BY APPELLANT, THE ESTIMATION OF INCOME IN THIS CASE MAY BE BETWEEN WHAT IS SHOWN IN THE RETURN OF INCOME TO 1. 5% OF TURNOVER DEPENDING UPON WHETHER IT IS A CASE OF CIR CULAR TRANSACTIONS, UNVERIFIABLE PURCHASE OR BOGUS ENTRIE S. IN CASE OF GIVING ACCOMMODATION ENTRIES THE PROFIT ESTIMATION IN DIAMOND CASES REFERRED TO SUPRA HAS BEEN AT 1.5% WHILE FOR TEXTILE CASE THE ITAT AHMEDABAD HAS TAKEN A PERCENTAGE OF 0.125% . SINCE RATE OF COMMISSION FOR GIVING ENTRIES IN TEXTILE TR ADE ARE BOUND TO BE LOWER THAN THE RATES FOR DIAMOND TRADE, ESTIM ATE HAS TO BE CLOSER TO 0.125% AND NOT 1.5%. ALTERNATIVELY, IF IT IS CASE OF UNVERIFIABLE PURCHASES IN TEXTILE BUSINESS, THEN TH E ESTIMATE OF NET PROFIT FOR A TURNOVER OF THIS SIZE MAY BE BETWE EN 0.5% TO 1%. THE PRESENT CASE FALLS IN NEITHER OF THE CATEGO RIES. IT IS A CASE OF CIRCULAR TRANSACTIONS TO SHOW A FAKE HEALTH Y BALANCE SHEET. HOWEVER, THE APPELLANT CANNOT ESCAPE THE PRO VISIONS OF SECTION 40A(2)A/40A(2)B EVEN IN CASE OF CIRCULAR TR ANSACTIONS WITHIN GROUP CONCERNS. THEREFORE A REASONABLE ESTIM ATE OF PROFIT IS REQUIRED EVEN IN THAT CASE IN VIEW OF SEC TION 40A(2)A/40A(2)B. CONSIDERING ALL THESE FACTS A NET PROFIT OF 0.5% IS ESTIMATED ON TURNOVER OF RS.18.23 CRORES. T HEREFORE, ADDITION IS SUSTAINED TO EXTENT OF RS.9.12 LAKHS. 7. NONE APPEARED ON BEHALF OF THE ASSESSEE WHILE AS THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED AO AND PRAYED THAT THE SAME MAY BE SUSTAINED. 8. WE HAVE CAREFULLY PERUSED THE MATERIALS PLACED B EFORE US AND ALSO HEARD THE ARGUMENTS ADVANCED BY THE LEARNED DR . FURTHER, PERUSING THE ORDER OF THE LEARNED CIT(A) WE FIND TH AT THE LEARNED CIT(A) AFTER DELIBERATING THE ISSUE HAS MADE THE FO LLOWING FINDINGS:- ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 11 (I) ALL THE PARTIES FROM WHOM THE ASSESSEE HAD MADE PURCHASES WERE ASSESSED TO TAX AND WERE DISCLOSED I N THEIR TRADING ACCOUNT. (II) THE PARTIES FROM WHOM THE ASSESSEE HAD MADE PURCHASES HAD ONLY WRONGLY CLASSIFIED IN THEIR BOOK S OF ACCOUNTS AS LOAN INSTEAD OF SHOWING THE BALANCE DUE TO THE ASSESSEE AS RECEIVABLE FROM THE ASSESSEE AS DEBTORS. (III) IN SUCH CIRCUMSTANCES, THE TRANSACTIONS OF TH E PURCHASES AND SALES MADE BY THE ASSESSEE NEED NOT BE DOUBTED. (IV) HOWEVER, DURING THE YEAR THE ASSESSEE HAD A TU RNOVER OF RS.18.23 CRORES WITH GROSS PROFIT AT 0.04% AND NET PROFIT AT 0.02%. DURING THE SUBSEQUENT ASSESSMENT YEAR, TH E TURNOVER DECLARED WAS NIL AND HAD SHOWN NEGLIGIBLE ADMINISTRATIVE EXPENSES OF RS.46,187/- AND HAD OUTSTANDING DEBTORS AND CREDITORS. FROM THESE FACTS IT COULD BE INFERRED THAT BOTH THE PURCHASES AND SALES ARE BOGUS AND ONLY BOOK ENTRIES. SUCH TRANSACTIONS ARE GENERALLY MADE TO EXTEND BOGUS ENTRIES TO OTHER CON CERNS IN ORDER TO HELP THEM TO EVADE TAX OR IT COULD BE A CIRCULAR TRANSACTION TO GENERATE A HEALTHY BALANCE SHEET TO DECEIVE FINANCIAL INSTITUTIONS OR FOR OTHER PURPOSE S. (V) FROM THE ABOVE FACTS, THE INCOME OF THE ASSESSE E COULD NOT BE TO THE EXTENT OF 25% OF UNVERIFIABLE PURCHAS ES. FURTHER, DRAWING SUPPORT FROM THE OTHER DECISIONS O F THE ITAT AHMEDABAD BENCHES, NET PROFIT COULD BE ESTIMAT ED AT 0.05% ON THE TOTAL TURNOVER OF RS.18.23 CRORES. 9. THE ABOVE FINDINGS OF THE LEARNED CIT(A) IS QUIT E REASONABLE. FURTHER, EITHER PARTIES DID NOT PRODUCE ANY MATERIA LS ON RECORD TO DISLODGE THE FINDINGS OF THE LEARNED CIT(A). IN THE SE CIRCUMSTANCES, WE DO NOT HAVE ANY HESITATION TO CONFIRM THE ORDER OF THE LEARNED ITA NOS. 2400 AND 2407 /AHD/2012(AY- 2009-10) M/S. ARMAN FASHION PVT. LTD. 12 CIT(A). CONSEQUENTLY, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS APPEAL OF THE ASSESSEE, BOTH ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WE LL AS THE APPEAL OF THE REVENUE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10-05-2013 SD/- SD/- (G. C. GUPTA) VICE PRESIDENT (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, IT AT, AHMEDABAD 1. DATE OF DICTATION: DIRECT ON COMPUTER: 04-03-13/ 01-05-13 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 01-05-13 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: