ITO 19(2)(3), MUMBAI V. MUKESH C. SANGHVI, MUMBAI

ITA 2457/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0695 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 06-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G PANSARI
• Keywords: Bogus purchase; Unexplained expenditure; Principle of natural justice; Question of law; Corroborative evidences; Accommodation entries; Commercial expediency; Onus to prove; Liquidation
• Section: 69C; 143(3); 133(6); 147; 132

Judgement Text

1 ITA 2457/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) ITA NO. 2457/MUM/2017 (ASSESSMENT YEAR : 2009-10) ITO-19(2)(3), MUMBAI VS SHRI MUKESH C SANGHVI PROP M/S RAJENDRA STEEL & ALLOYS ROOM NO.6, GROUND FLOOR, 79, 2 ND PATHAN STREET, 5 TH KUMBHARWADA MUMBAI 400 004 PAN : ANZPS6511Q APPELLANT RESPONDEDNT APPELLANT BY SHRI DG PANSARI RESPONDENT BY NONE DATE OF HEARING 02-05-2019 DATE OF PRONOUNCEMENT 24-05-2019 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-30, MUMBAI DATED 30-01-2017 AND IT PERTAINS TO AY 2009-10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD.CTT(A) WAS JUSTIFIED IN SUSTAINING ONLY AN ADDIT ION @12.5% PROFIT RATE ON TOTAL PURCHASES OF RS.71,19,439/-MADE FROM 13 PARTIES OF A GROUP CONCERN OF M/S BHANWARLAL GROUP OF COMPANIES, WHO WERE IN THE BUSI NESS OF PROVIDING ACCOMMODATION ENTRIES AS ESTABLISHED BY THE INVESTI GATION WING CONSEQUENT TO SEARCH ACTION U/S 132 OF THE I. T.ACT. 1961?' 2 ITA 2457/MUM/2017 2 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, WHETHER THE LD. CTT(A) WAS JUSTIFIED IN SUSTAINING ONLY AN ADDITION @12.5% PROFIT RATE ON TOTAL PURCHASES OF RS.71,19,439/-MADE FROM 13 PARTIES AS THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF SAID PURCHASES WHEN BY AO TO PRO VIDE DAY WISE STOCK REGISTER & DETAILS OF SALES CORRESPONDING THE SAID PURCHASES?' 3 THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED CFT(A) ON THE ABOVE GROUNDS BE SET -SIDE AND THAT OFTHEAO BE RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS META LS UNDER THE NAME AND STYLE M/S RAJENDRA STEEL & ALLOYS, FILED HIS RETURN OF INCOME FOR AY 2009-10 ON 30- 09-2009 DECLARING TOTAL INCOME OF RS.2,09,450. SUB SEQUENTLY, THE ASSESSMENT HAS BEEN REOPENED U/S 147 OF THE ACT, ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT(INV), MUMBAI AS PER WHICH THE ASSESSE E IS ONE OF THE BENEFICIARIES OF ACCOMMODATION ENTRIES PROVIDED BY CERTAIN HAWALA DEALERS / SUSPICIOUS DEALERS AS PER THE REPORT OF SALES-TAX D EPARTMENT. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS B EEN COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 ON 13-03-201 5 WHERE THE AO, AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AN D ALSO TAKING NOTE OF INFORMATION GATHERED DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, MADE ADDITION TOWARDS TOTAL PURCHASES FROM CERTAIN PARTI ES U/S 69C OF THE ACT. THE RELEVANT OBSERVATIONS OF THE AO ARE AS UNDER:- 6.1 IN THE CIRCUMSTANCES, FOLLOWING THE PRINCIPLE OF NATURAL JUSTICE, THE ASSES SEE WAS GIVEN AN OPPORTUNITY FOR ESTABLISHING THE GENUINENESS OF THESE PARTIES AND THE PURCHASES MADE FROM THEM WITH ADEQUATE SUPPORTING EVIDENCES AND ALSO REQUESTED TO PRODUCE THE PARTIES BEFORE THE UNDERSIGNED ALONG WITH THEIR BOOKS OF ACCOUNTS AS T HESE PARTIES WERE 3 ITA 2457/MUM/2017 FOUND TO BE PRIMA FACIE NON-EXISTENT. HOWEVER, THE ASSESSEE COULD NOT PRODUCE THESE PARTIES NOR FURNISH ANY NEW ADDRESSES OF THESE PARTIES BUT SIMPLY FURNISHED LEDGER ACCOUNTS IN THE BOOKS OF TH E ASSESSEE, COPIES OF PURCHASE BILLS AND HIS BANK STATEMENT SHOWING THE P AYMENT MADE THROUGH BANK. UNDER THE ABOVE CIRCUMSTANCES, THE AS SESSEE WAS ASKED TO EXPLAIN AS TO WHY THE PURCHASES SHOWN TO HAVE MADE FROM THE AFORESAID 'NON GENUINE' DEALERS SHOULD NOT BE TREATED AS UNEX PLAINED EXPENDITURE AND THE SAME SHOULD NOT BE ADDED TO THE TOTAL INCOM E OF THE ASSESSEE, AS THE IDENTITY OF SAID PARTIES COULD NOT BE ESTABLISH ED AND THE GENUINENESS OF THE TRANSACTIONS WAS NOT PROVED. THE ASSESSEE WA S ALSO ASKED TO EXPLAIN WHY THE BOOK RESULTS SHOULD NOT BE REJECTED U/S 145(3) OF THE ACT. 6.2 IN RESPONSE, THE AR OF THE ASSESSEE CONTENDED T HAT HE HAS SUBMITTED COPY OF PURCHASE BILLS RECEIVED FROM ABOVE SAID PAR TIES & COPY OF BANK STATEMENT COVERING PAYMENT MADE TO ABOVE SAID PARTI ES TO PROVE GENUINENESS OF PURCHASE PARTIES. 6.3 IT IS A SETTLED POSITION IN LAW THAT, WHEN AN E XPENDITURE IS CLAIMED TO HAVE BEEN INCURRED AND DEBITED TO THE TRADING/ PROFI T & LOSS ACCOUNT, THE ONUS IS ON THE ASSESSEE TO SUBSTANTIATE AND PRO VE THE GENUINENESS OF THE CLAIM AND THE COMMERCIAL EXPEDIENCY OF INCURRIN G SUCH EXPENDITURE, FURTHERMORE, IT MAY BE SUBMITTED AT THIS STAGE ITSE LF THAT THE SALES TAX DEPARTMENT OF MAHARASHTRA GOVERNMENT HAS BEEN INVOL VED IN DETAILED INVESTIGATION IN THE AFFAIRS OF DEALERS WHO HAVE BE EN ISSUING BOGUS PURCHASE BILLS AND AS A RESULT THEREOF, , PUBLICLY DISPLAYED A LIST O F OF NEARLY PERSONS/DEALERS ON THE WEBSITE' OF THE SALES TAX DEPARTMENT, WHO HAVE ADMITTED TO ISSUING NON GENUINE PURCHASE BILLS SHOWING SALES. AS THE NOTICES U/S. 133(6) WERE RETURNED BACK BY TH E POSTAL AUTHORITIES, THE ASSESSEE WAS GIVEN OPPORTUNITY TO PRODUCE THE SAID PARTIES. INSPITE OF HAVING BEEN PROVIDED SPECIFIC OPPORTUNITY, THE ASSESSEE COULD NOT PRODUCE THE ABOVE SAID PARTIES WITH THE D OCUMENTS CALLED FOR FROM THE SAID PARTIES NOR FURNISH THEIR NEW ADDRESSES. 6.4 THE SUBMISSIONS MADE BY THE AR OF THE ASSESSEE HAVE BEEN CAREFULLY EXAMINED. IT MAY HOWEVER BE STRESSED HERE THAT THE SALES TAX INFORMATION, ABOUT HAWALA BILLERS IS NOT CONSIDERED AS THE SOLE BASIS AND THE INVESTIGATION HAS ALSO BEEN CARRIED OUT UNDER THE INCOME TAX ACT, 1961 AND THE ASSESSEE WAS DULY CONFRONTED WITH THE SAME. EVIDENTLY, THE ASSES SEE HAD ADOPTED A MODUS OPERANDI TO DECREASE ITS TRUE PROFITS BY INFLATING ITS EXPENSES INCLUDING PURCHASE EXPENSES BY TAKING ACCOMMODATION ENTRIES F ROM SUCH HAWALA PARTIES. 6.5 ESPECIALLY, IN THE LIGHT OF CATEGORICAL ADMISSI ON BY ALLEGED SELLERS BEFORE THE SALES TAX DEPARTMENT REGARDING ISSUING OF BOGUS PURCHASE AND SALE BILLS, THE DOCUMENTS INCLUDING THE PURCHASE BILLS OR BANK STATEMENTS DO NOT PROVE THE GENUINENESS OF THE PARTIES. MERELY FILING THE COPY OF PURCHASE BILLS IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE PARTIES AND ALSO CONSIDERING THE FACT THAT, NO RESPONSE HAS BEEN RECEIVED FROM THE ABOVE SAID HAWALA PARTIES, IN 4 ITA 2457/MUM/2017 RESPONSE TO THE INFORMATION CALLED FOR U/S. 133(6) OF THE IT ACT,1961. THEREFORE, THE GENUINENESS OF THE SAID PARTIES WAS NOT PROVED BY THE ASSESSEE. 6.6 THE AR OF THE ASSESSEE HAS STATED THAT THE STOC K REGISTER IS NOT MAINTAINED. THE ASSESSEE IS NEITHER ABLE TO PRODUCE THE PARTIES NOR HE IS ABLE TO PROVIDE THE WHEREABOUTS OF THE SAID PARTIES. THE ASSESSEE IS AL SO UNABLE TO PROVIDE ANY OTHER PROOF LIKE DELIVERY CHALLANS, DETAILED STOCK REGISTER HAVING SPECIFIC INWARD AND OUTWARD ENTRIES, ANY OTHER DOCUMENTS/SUB MISSIONS FOR SUBSTANTIATING THE GENUINENESS OF THE SAID TRANSACT IONS. 6.7 THE SUBMISSION/DETAILS FURNISHED BY THE ASSESSE HAVE BEEN CAREFULLY PERUSED AND CONSIDERED, BUT NOT ACCEPTED. SINCE, AL L THE ABOVE SAID HAWALA PARTIES HAVE CONFESSED IN THE STATEMENT RECORDED ON OATH BEFORE SALES TAX AUTHORITIES THAT THEY HAVE NOT DONE ANY GENUINE BUS INESS AS WELL AS THERE WAS NO ACTUAL DELIVERY OF GOODS TO THE PURCHASE PARTIES . THE ONUS IS ALWAYS ON THE ASSESSEE TO EVIDENTLY PROVE BEFORE THE ASSESSING OF FICER THAT WHAT HE STATED /ACCOUNTED IN HIS BOOKS OF ACCOUNTS IS TRUE AS WELL AS GENUINE. ACCORDINGLY, CONSIDERING THE NATURE OF BUSINESS, THE ASSESSE SHO ULD HAVE PRODUCED THE PARTIES ALONG WITH THE INWARD STOCK REGISTER 8& OUT WARD STOCK REGISTER, CORRELATING THE SAID PURCHASES WITH SUBSEQUENT SALE S ETC. HOWEVER, THE ASSESSEE HAS FAILED TO PROVE THE ONUS RELIED UPON HIM BY PRO DUCING THE AFORESAID PARTICULARS. THE ABOVE DISCUSSION CAN BE SUMMARIZED AS FOLLOWS: (I) THE SALES TAX DEPARTMENT HAS CONDUCTED INDEPEND ENT ENQUIRES IN EACH OF THE 'NON-GENUINE' PARTIES AND CONCLUSIVELY PROVED T HAT THESE PARTIES ARE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ONLY. THE PARTIES ARE ISSUING BILLS WITHOUT DELIVERING ANY GOODS AND SERVICES. (LI) INDEPENDENT ENQUIRIES / INVESTIGATIONS HAVE BE EN CARRIED OUT BY THIS OFFICE UNDER THE I. T. ACT AND THE ASSESSEE HAS BEEN DULY CONFRONTED WITH THE SAME. EVIDENTLY, THE ASSESSEE HAD ADOPTED A MODUS OPERAND I TO REDUCE HIS TRUE PROFITS BY INFLATING EXPENSES INCLUDING PURCHASE EXPENSES B Y TAKING ACCOMMODATION ENTRIES FROM SUCH PARTIES. (III) THE ASSESSEE WAS ASKED TO PRODUCE THE SAID 'N ON-GENUINE DEALERS' FOR EXAMINATION, BUT THE ASSESSEE FAILED TO DO SO. THUS , IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE PURCHASES TO THE EXTENT MADE FROM THE ABOVE SAID PARTIES REMAINED UNVERIFIABLE AND HENCE I ARRIVE AT A CONCL USION THAT THE PURCHASES SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS ARE INFLATED AND NON-GENUINE PURCHASES ARE DEBITED TO TRADING ACCOUNT TO SUPPRES S THE TRUE PROFITS TO BE DISCLOSED TO THE DEPARTMENT. (IV) THE ASSESSEE COULD NOT FILE THE VITAL DOCUMENT S SUCH AS DELIVERY CHALLANS, TRANSPORT RECEIPTS, OCTROI RECEIPT FOR PAYMENT OF O CTROI DUTY, RECEIPT OF WEIGHBRIDGE FOR WEIGHING OF GOODS, EXCISE GATE PASS , GOODS INWARD REGISTER MAINTAINED AT GODOWN/ WAREHOUSE/ STORAGE HOUSE ETC. WHATEVER DOCUMENTS PLACED ON RECORD IS NOT CAPABLE OF SUSTENANCE. THE ITEMS SHOWN TO HAVE PURCHASED FROM THE SAID PARTIES ARE OF SUCH IN NATU RE THAT THEY REQUIRE SEPARATE TRANSPORTATION. HENCE THE MODE OF TRANSPORTATION IS NOT EXPLAINED PROPERLY. (V) THE ONUS WAS UPON THE ASSESSEE TO ESTABLISH THE GEN UINENESS OF PURCHASES MADE BY THE ASSESSEE. 5 ITA 2457/MUM/2017 (VI) MERE FILING OF EVIDENCES IN SUPPORT OF PURCHAS ES AND PAYMENT THROUGH ACCOUNT PAYEE CHEQUE CANNOT BE CONCLUSIVE IN A CASE WHERE GENUINENESS OF TRANSACTION IS IN DOUBT. : : ' (VII) THE CONTENTION THAT THE PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQUE IS NOT A FULL PROOF METHOD OF SUBSTANTIATING THE ASSES SEE'S CLAIM, AS IT WAS ALREADY ACCEPTED BY THE PERSONS, WHO HAVE GIVEN STATEMENT, DEPOSITION OF AFFIDAVIT BEFORE THE SALES TAX AUTHORITIES THAT CASH IS GIVEN BACK AFTER DEDUCTION OF COMMISSION/ BROKERAGE ONCE THE CHEQUE IS REALIZED. HENCE, PAYMENT BY ACCOUNT PAYEE CHEQUES ITSELF IS NOT SACROSANCT. (VIII) THE SALES TAX DEPARTMENT CERTIFIED THAT THE AFORESAID PARTIES ARE 'NON- GENUINE OPERATORS' AFTER CONDUCTING INDEPENDENT ENQ UIRIES. IT IS EVIDENT THAT THE ASSESSEE DID NOT MAKE ANY EFFORT TO CONFRONT THE FI NDING RECORDED BY THE DGIT(INV.) AND IT MADE NO EFFORTS TO PRODUCE THE SE LLER PARTIES. (IX) IF ALL THE EVIDENCES POINT TO THE FACT THAT NO ACTUAL GOODS WERE SUPPLIED BY THE ABOVE PARTIES, THEN THE ARGUMENT OF ASSESSEE THAT IT . PURCHASED GOODS IN GOOD FAITH IS NOT TENABLE. 6.8 THE ABOVE DISCUSSIONS ARE LEADING TO THE F OLLOWING FACTS : (A) THE SAID PURCHASE PARTIES WERE NON-EXISTE NT AT THE ADDRESS PROVIDED. INSPITE OF PROVIDING OPPORTUNITY, THE ASSESSEE HAS NEITHER PRODUCED THE SAID : PARTIES NOR PROVIDE THE WHEREABOUTS OF THE SAID PAR TIES. . (B) THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS O F PROVING THE GENUINENESS OF PURCHASES. THIS VIEW IS SUPPORTED BY THE DECISIO N OF HONBLE RAJ. HIGH COURT OF INDIA (2002) 178 CTR (RAJ) 420 MP HIGH COU RT IN THE CASE OF VISP(P) VS. CIT INDORE (2004) 186 CTR 218 (MP). (C) THE PAYMENT MADE BY ACCOUNT PAYEE CHEQUE ITSELF IS NOT SACROSANCT AND IT WOULD NOT MAKE AN OTHERWISE NON-GENUINE TRANSACT ION INTO A GENUINE TRANSACTION AS HELD BY THE CALCUTTA HIGH COURT IN T HE CASE OF CIT VS PRASHANT (P) (1994) 121 CTR (CAL) 20 AND THE VIEW W AS SUPPORTED BY THE HONBLE ITAT, JAIPUR IN THE CASE OF M/S KACHWALA GE MS VS. JCIT ITA NO 134/ JP /2002 DT. 10.12.2003 AND AFFIRMED BY THE SU PREME COURT IN THE CASE OF M/S. KACHWALA GEMS VS. JCIT (2006) 206 CTR (SC) 585, 288 ITR 10 (SC). (D) THE GENUINENESS OF TRANSACTION IS NOT PROVED ON THE BASIS OF PRIMARY FACTS ON RECORD. IN THIS CASE THERE IS UNCONTROVERT ED EVIDENCE FROM AN IMPECCABLE SOURCE WHICH HAS THE PRIMARY DUTY OF TAX ING A PURCHASE-SALE TRANSACTION IN THE FORM OF ADMISSION OF THE SO-CALL ED SELLER ABOUT ISSUING BOGUS BILLS OF PURCHASE/SALE WHICH WAS HELD IN THE CASE OF CIT VS GOLCHA PROPERTIES PVT. LTD. (IN LIQUIDATION) (1996) 136 CT R 222 (RAJ.) IT IS HELD THAT THE DEPARTMENT IS NOT REQUIRED TO LEAD A CLINC HING EVIDENCE TO PROVE THAT PURCHASES ARE BOGUS. 6.9 THEREFORE, CONSIDERING THE MATERIAL ON RECO RD, CONCLUSION CAN BE DRAWN ON RELYING ON THE JUDGMENT OF DELHI HIGH COUR T IN THE CASE OF CIT VS LA MEDICA, 117 TAXMAN 628 (2001). IN THIS CASE, THE ASSESSEE WAS A MANUFACTURER OF ALLOPATHIC MEDICINES. THE ITO TREAT ED CERTAIN PURCHASES OF THE ASSESSEE AS BOGUS AS THE GENUINENESS OF THESE P ARTIES COULD NOT BE 6 ITA 2457/MUM/2017 PROVED BY THE ASSESSEE. THE COURT NOTED THAT THE AL LEGED SELLERS HAVE BEEN FOUND TO BE PERSONS WITHER MEANS EFIECT PURCHASES P R TO CARRY, ON BUSINESS. ONCE IT IS ACCEPTED THAT THE SUPPLIES WERE NOT MADE BY THE BOGUS PARTY TO WHOM PAYMENTS WERE ALLEGED TO HAVE BEEN MADE, THE Q UESTION WHETHER THE PURCHASES WERE MADE FROM SOME OTHER SOURCE OUGHT NO T TO HAVE WEIGHED WITH THE TRIBUNAL AS A FACTOR IN FAVOUR OF THE ASSE SSEE. THE COURT THUS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. 6. 10 RELIANCE IS ALSO PLACED ON THE JUDGEMENT OF H ONBLE HIGH COURT(KERALA) IN THE CASE OF SREE RAJVEL & CO. V. C OMMISSIONER OF INCOME TAX, 268 ITR 267 (KERALA)(2003). WHERE IN THE ASSES SEE HAD MADE GROSS PURCHASE OF COPRA AND SOLD COMPLETELY TO THE SISTER CONCERN ONLY, BUT, THERE IS A DIFFERENCE IN THE QUANTITY PURCHASED AND SOLD. THERE WAS NO POSSIBILITY OF ANY DRIAGE WHEN THE COPRA PURCHASED ON PARTICULA R DAY WAS TRANSFERRED TO THE SISTER CONCERN ON THE SAME DAY OR THE NEXT DAY, AND SO DIFFERENCE MUST HAVE BEEN ACCOUNTED BY THE ASSESSEE AS BOGUS PURCHA SES. THE DIFFERENCE IN THE QUANT.ITY IS CONSIDERED AS BOGUS PURCHASES FROM KARUKARAN & SONS AND OF OTHER SUNDRY PARTIES. HON'BLE HIGH COURT HAS HEL D THAT IT IS NOT DISPUTED THAT SHRI KARUNAKARAN & SONS WERE REGULAR SUPPLIERS OF COPRA TO THE ASSESSEE. WHEN THE ASSESSING OFFICER FINDS THAT THE RE WAS NO SUCH PURCHASE, THE ONUS WAS ON THE ASSESSEE TO REBUT THAT FINDING AND PROVE THAT IN SPITE OF THE DENIAL BY THE PERSONS CONCERNED, THERE WAS INFA CT SUCH PURCHASES EFFECTED FROM THEM. BUT, INSTEAD OF MAKING ANY ATTE MPT TO PROVE THAT THERE WERE GENUINE PURCHASES, THE ASSESSEE WAS NOT BOTHER ED AS TO WHETHER THEY HAD ACCOUNTED FOR THE SALES OR NOT. 6. 1 1 AFTER CAREFULLY GOING THROUGH THE LEGAL INST ANCES AVAILABLE ON THIS ISSUE THE ONUS LAY UPON THE ASSESSEE TO PROVE THE G ENUINENESS OF THE TRANSACTION WHEN IT CLAIMED THAT THE PURCHASES ARE GENUINE. FROM THE ABOVE CASE LAWS AND THE DISCUSSION ON INVESTIGATION, IT I S CRYSTAL CLEAR THAT: (A) THE PRIMARY ONUS IS ON THE ASSESSEE TO EST ABLISH THE GENUINENESS OF THE PURCHASES CLAIMED BY IT; (B) SINCE THE PRIMARY FACTS ARE IN THE KNOWLE DGE OF THE ASSESSEE IT IS HIS DUTY TO PRODUCE THE ALLEGED SUPPLIER WITH THE CONFI RMATION; (C) IF THE INVESTIGATION DONE BY THE DEPARTMEN T LEADS TO DOUBT REGARDING THE GENUINENESS OF THE PURCHASES IT IS INCUMBENT ON THE ASSESSEE TO PRODUCE THE PARTIES ALONG WITH NECESSARY DOCUMENTS TO ESTAB LISH THE GENUINENESS OF THE TRANSACTION. (D) PAYMENT BY ACCOUNT PAYEE CHEQUE ITSELF IS NOT SACROSANCT. 6.12 THUS, IN SUM, FROM ANALYSIS OF THE FACTS IN THE CASE OF ASSESSEE IT IS CRYSTAL CLEAR THAT THE PURCHASES MADE BY THE ASSESS EE FROM THE AFORESAID PARTIES WHICH WERE CLAIMED IN ITS PROFIT & LOSS ACC OUNT ARE NOT GENUINE. THEIR NAMES ALSO APPEAR IN THE LIST OF HAWALA DEALE RS PUT UP ON THE WEBSITE BY THE MAHARASHTRA SALES TAX DEPARTMENT. THE FACTS IND ICATE THAT THE SUSPECTED SALES TAX HAWALA PARTIES ARE NON GENUINE BUSINESS ORGANIZATIONS AND NEVER SUPPLIED ANY MATERIAL TO THE ASSESSEE OR ANY OTHER PERSONS AND THEREFORE THE PURCHASES MADE FROM THE SAID PARTIES ARE NOT GENUINE. 7 ITA 2457/MUM/2017 THEREFORE, FROM THE FACTS, MATERIAL AND EVIDENCE BR OUGHT ON RECORD, IT IS ABSOLUTELY CLEAR THAT THE ONUS ON THE ASSESSEE TO P ROVE THE GENUINENESS OF THE SAID PURCHASES IS NOT FULFILLED BY THE ASSESSEE . SINCE THE PURCHASES TO THAT EXTENT REMAIN UNVERIFIABLE, I AM NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. I, TH EREFORE, REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING THE PROVISI ONS OF SECTION 145(3) OF THE I.T. ACT. 6.13 IN VIEW OF THE ABOVE DISCUSSION AND RELYING ON THE ABOVE CASE LAWS, THE NON GENUINE PURCHASES OF RS. 71,19,439/- ARE TR EATED AS UNEXPLAINED EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEA R AND THIS AMOUNT IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271(L)(C) OF THE ACT ARE SEPARATELY INITIATED AGAIN ST THE ASSESSEE FOR FURNISHING INACCURATE PARTICULARS LEADING TO CONCEA LMENT OF INCOME. 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS ON THE ISSUE WHICH HAS BEEN REPRODUCED AT PARA 4 ON PAGES 4 TO 6 OF ORDER LD.CIT(A). THE SUM AND SUBSTANCE OF ARGUMENTS OF T HE ASSESSEE BEFORE THE LD.CIT(A) ARE THAT PURCHASES FROM THE PARTIES ARE S UPPORTED BY NECESSARY EVIDENCE INCLUDING PURCHASE BILLS AND PAYMENTS FOR SUCH PURCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. THE AO HAS M ADE ADDITION ONLY ON THE BASIS OF REPORT OF DGIT (INV) WHICH IS FURTHER SUPPORTED BY INFORMATION COLLECTED FROM SALES-TAX DEPARTMENT IGNORING ALL EV IDENCES FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S. ALTHOUGH, THE AO HAS ISSUED 133(6) NOTICES TO PARTIES, BUT SERVICE OF NO TICE AND ATTENDANCE TO SUCH NOTICES WAS NOT WITHIN THE KNOWLEDGE OF THE ASSESSE E BECAUSE NON AVAILABILITY OF THE PARTIES AFTER A LAPSE OF SIX YEARS CANNOT BE ATTRIBUTED TO THE ASSESSEE. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIO NS OF THE ASSESSEE AND ALSO 8 ITA 2457/MUM/2017 BY RELYING UPON VARIOUS JUDICIAL PRECEDENTS INCLUDI NG THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SH ETH (2013) 356 ITR 451 (GUJ) SCALED DOWN ADDITION MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES TO 12.5% OF SUCH PURCHASES. THE RELEVANT OBSERVATIONS OF THE LD.CIT(A) ARE AS UNDER:- 8.3 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS ON THE ISSUE ON HAND. ON PERUSAL OF THE MATERIAL ON RECORD IT IS NO TICED THAT, IN THE APPELLANT'S CASE, LD. AO, MADE INDEPENDENT VERIFICA TIONS BY ISSUING NOTICES U/S. 133(6) OF THE ACT, WHICH WERE RETURNED UNSERVED, AND THERE WAS AN OVERWHELMING EVIDENCE IN THE FORM OF STATEME NTS OF SOME OF THE SUPPLIERS GIVEN BEFORE THE SALES TAX AUTHORITIE S THAT IT WAS ENGAGED ONLY IN ISSUING HAWALA BILLS AND NO GOODS WERE EVER SUPPLIED BY THEM. , 8.4 AFTER WEIGHING THE EVIDENCE PROS AND CON, 1 FIN D THAT THE APPEL/ANT HAS NOT RECONCILED THE PURCHASES WITH THE ITEMS SOL D AND FAILED TO RECONCILE 1:1 OF THE 1 ITEMS PURCHASED AND SOLD. ONUS WAS ALWAYS ON THE APPELLANT TO PROVE AS TO HOW THE MATERIAL PURCH ASED WAS FIRSTLY OBTAINED. I RECORD A FINDING OF FACT HERE THAT NO P ROOF OF DELIVERY OF PURCHASES HAS BEEN FILED EITHER BEFORE THE LD. AO O R BEFORE ME. DURING THE PRESENT PROCEEDINGS ALSO, ONE MORE OPPORTUNITY WAS GIVEN TO THE AR, WHO WAS ASKED TO PRODUCE THE PARTIES FOR VERIFI CATION BEFORE THE AO AND IN RESPONSE, AR EXPRESSED HIS INABILITY TO DO S O. THUS, IT CAN BE SAFELY PRESUMED THAT EITHER THEY ARE NON-EXISTENT O R EVEN IF THEY DO EXIST, THEY WERE NOT BACKED BY SUFFICIENT EVIDENCE TO UNDERGO THE TEST OF SCRUTINY. 8.5 THE SUPPLIERS WERE IN FACT THE APPELLANT'S WITN ESS AND THE LD. AO WAS NOT REQUIRED TO FORCE THEIR ATTENDANCE. IT WAS FOR THE APPELLANT TO PRODUCE THEM AS PER CIVIL PROCEDURE CODE WHICH APPL IES ON ALL FOURS TO THE INCOME-TAX PROCEEDRNGS. IT IS TRITE THAT ONCE A TRANSACTION IS SHOWN TO BE OF THE NATURE OF INCOME, THE ONUS SHIFTS TO T HE ASSESSEE TO SHOW THAT THE SAME WAS NOT TAXABLE. IT CAN THUS BE SAFEL Y ASSUMED THAT THE APPELLANT HAS GROSSLY FAILED IN ITS DUTY TO MITIGAT E THE BURDEN CAST UPON IT IN SO FAR AS PROVING THE GENUINENESS OF THE TRAN SACTION FROM THE SAID PARTY IS CONCERNED. 8.6 IN THIS REGARD IT IS ALSO PERTINENT TO MENTION THAT WHILE DEALING WITH THE CONCEPT OF BURDEN OF PROOF, ONUS OF PROVING IS ALWAYS ON THE PERSON WHO MAKES THE CLAIM AND NOT ON THE REVENUE. WHILE DEALING WITH T HE ISSUE OF DECIDING THE BURDEN OF PROOF, HON'BLE SUPREME COURT IN THE CASES OF CIT VS . 9 ITA 2457/MUM/2017 DURGAPRASAD MORE 82 UR 540 AND SUMATI DAYAL VS. CIT 214 ITR 801 HAS HELD THAT THE APPARENT MUST BE CONSIDERED R EAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE AP PARENT IS NOT REAL AND THAT TAXING AUTHORITIES ARE ENTITLED TO LOOK IN TO SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTE R HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILIT IES. THE HON'BLE COURT ALSO HELD THAT, IT IS NO DOUBT, TRUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PR OVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE: BURDEN TO PROVE THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT, LIES UPON THE ASSESSEE. IN THE CASE OF DURGAPRASAD MOR E (SUPRA), THE HON'BLE COURT WENT ON TO ADD THAT A PARTY WHO RELIE S ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THIS RECITAL, OT HERWISE IT WILL BE VERY EASY TO MAKE SELF SERVING STATEMENTS IN DOCUMENTS E ITHER EXECUTED OR TAKEN BY A PARTY WHO RELIED ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX HAS TO HAVE SOME RE CITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUTED IN HI S FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. THE H ON'BLE COURT FURTHER HELD THAT THE TAXING AUTHORITIES WERE, NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BE FORE THEM. THEY WERE ENTITLED TO LOOK IN TO THE SURROUNDING CI RCUMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THOSE DOCUM ENTS. . 8.7 THE ONUS TO PROVE THAT APPARENT, IS NOT T HE REAL ONE, IS ON THE PARTY WHO CLAIMS IT TO BE SO, AS HELD BY THE HON'BL E SUPREME COURT IN THE CASE OF CIT V. DAULAT RAM RAWATMULL [1973] 8 7 ITR 349AND CIT V. DURGA PRASAD MORE (SUPRA).IT IS ALSO A > SET TLED LEGAL PROPOSITION THAT IF NO EVIDENCE IS GIVEN BY THE PAR TY ON WHOM THE BURDEN IS CAST, THE ISSUE MUST BE FOUND AGAINST HIM . THEREFORE, ONUS IS ALWAYS ON A PERSON WHO ASSERTS A PROPOSITION OR FACT, WHICH IS NOT SELF EVIDENT. THE ONUS, AS A DETERMINING FACTOR OF: THE WHOLE CASE CAN ONLY ARISE IF THE TRIBUNAL, WHICH IS VESTED WIT H THE AUTHORITY TO DETERMINE, FINALLY ALL QUESTIONS OF FACT, FINDS THE EVIDENCE PRO & CON, SO BALANCED THAT IT-CAN COME TO NO CONCLUSION; THEN , THEN THE ONUS WILL DETERMINE THE MATTER. THERE CANNOT BE ANY DOU BT THAT ONUS AS A DETERMINING FACTOR COMES INTO PLAY WHERE, EITHER TH ERE IS NO EVIDENCE ON EITHER SIDE, OR WHERE IT IS EQUALLY WORTHLESS OR WHERE IT IS EQUALLY BALANCED. IT IS IMPERATIVE TO MENTION HERE THAT WH ERE SUCH IS NOT THE CASE AND ALL AVAILABLE EVIDENCE IS CONSIDERED, WITH OUT REFERENCE TO THE ONUS AND WITHOUT RELYING ON THE CIRCUMSTANCES THAT ONUS LIES ON A PARTICULAR PARTY, THE ISSUE IS DETERMINED ON FACTS AND THE ONUS CANNOT BE SAID TO HAVE INFLUENCED THE DECISIONS. HOWEVER, IN THE INSTANT CASE, THE APPELLANT HAS MISERABLY FAILED TO LEAD EVIDENCE AND HENCE, ONUS IS A DETERMINING FACTOR. 10 ITA 2457/MUM/2017 8.8 WITH REGARD TO THE CLAIM OF THE APPELLANT THAT THE PARTIES ARE NOT OFFERED FOR CROSS-EXAMINATION BY THE APPELLANT, IT IS TO BE NOTED THAT THE RIGHT OF CROSS-EXAMINATION IS NOT AUTOMATIC, BUT IT WOULD BE INCUMBENT ONLY IN A SITUATION WHERE THE APPELLANT IS ABLE TO PRIMA FACIE DEMONSTRATE THAT THE ONUS CAST ON HIM TO ESTABLISH HIS VERSION OF AFFAIRS IS BASED ON PRIMARY EVIDENCE. IN THIS CASE, THE APP ELLANT HAD FAILED TO LEAD ANY PRIMARY EVIDENCE, VIZ. GRNS, OCTROI RECEIP TS, DELIVER/ CHALLANRS, ETC. WHICH WOULD SHOW THAT THE SUPPLIES WERE INDEED MADE. IN SUCH A SITUATION, THE AO IS JUSTIFIED IN DRAWING THE INFERENCE THAT THE PURCHASES AGGREGATING TO ? 71,19,439/'- ARE NOT GEN UINE. AS REGARDS THE ISSUE OF THE DENIAL OF THE CROSS EXAMINATION, I N THE CASE OF GTC INDUSTRIES LTD. VS. ASSISTANT COMMISSIONER OF INCOME-TAX [1998] 65 ITD 380 (BOM), IT WAS HELD AS UNDER: ' . '105. IN OUR OPINION RIGHT TO CROSS-EXAMINE THE WIT NESS WHO MADE ADVERSE REPORT, IS NOT AN INVARIABLE ATTRIBUTE OF T HE REQUIREMENT OF THE DICTUM, 'AUDLALTERAMPARTEM'. THE PRINCIPLES OF NATURAL JUSTICE DO NOT REQUIRE FORMAL CROSS-EXAMINATION. FORMAL CROSS-EXAMINATION IS A PART OF PROCEDURAL JUSTICE. IT IS GOVERNED BY THE RULES OF EVIDENCE, AND IS THE CREATION OF COURT. IT IS PART OF LEGAL AND STATUTOR Y JUSTICE, AND NOT A PART OF NATURAL JUSTICE, THEREFORE, IT CANNOT BE LAID DO WN AS A GENERAL PROPOSITION OF LAW THAT THE REVENUE CANNOT RELY ON ANY EVIDENCE WHICH HAS NOT BEEN SUBJECTED TO CROSS-EXAMINATION.' 8.9 COMING TO THE ISSUE OF BOGUS PURCHASES MADE FRO M THE THIRTEEN PARTIES, LD, AO STATED IN THE ASSESSMENT ORDER THAT PARTIES IN QUESTION ARE NON-EXISTENT AND THE TRANSACTIONS ENTERED WITH THEM ARE NON- GENUINE TRANSACTIONS. IN VIEW OF THE SAME, AO REJEC TED THE BOOKS OF ACCOUNTS OF THE APPELLANT AND THE TOTAL AMOUNT OF P URCHASES MADE FROM THOSE THIRTEEN PARTIES WAS ADDED TO THE TOTAL INCOM E. WHEN THE COMPLETENESS AND CORRECTNESS OF THE BOOKS OF ACCOUN TS IS QUESTIONED AND THE BOOKS OF ACCOUNT WE REJECTED, INSTEAD OF AD DING THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES THOUGH THE PURCHASES ARE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENT THEREOF B Y ACCOUNT PAYEE CHEQUES, THE CHEQUES HAVE BEEN DEPOSITED IN H ANK ACCOUNTS OSTENSIBLY IN THE NAME OF THE APPARENT SELLERS, THE REAFTER THE ENTIRE AMOUNTS HAVE BEEN WITHDRAWN BY BEARER CHEQUES AND T HERE IS NO TRACE OR IDENTITY OF THE PERSON WITHDRAWING THE AMOUNT FR OM THE BANK ACCOUNTS. IN THE LIGHT OF THE AFORESAID NATURE OF E VIDENCE IT IS NOT POSSIBLE TO RECORD A DIFFERENT CONCLUSION, DIFFEREN T FROM THE ONE RECORDED BY THE COMMISSIONER (APPEALS) AND THE TRIB UNAL CONCURRENTLY HOLDING THAT THE APPARENT SELLERS WERE NOT GENUINE, OR WERE ACTING AS CONDUIT BETWEEN THE ASSESSEE-FIRM AND THE ACTUAL SE LLERS OF THE RAW MATERIALS. BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE, THEREFORE, COME TO THE CONCLUSION THAT IN SUCH CIRC UMSTANCES, 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 REFLECTED IN THE BOOKS OF ACCOUN T MATCHES THE PURCHASE PRICE STATED TO HAVE BEEN PAID TO OTHER PE RSONS. THE ISSUE IS 11 ITA 2457/MUM/2017 WHETHER THE PURCHASE PRICE PAID BY THE ASSESSEE IS REFLECTED AS RECEIPTS BY THE RECIPIENTS. THE ASSESSEE HAS, BY SE T OF EVIDENCE AVAILABLE ON RECORD, MADE IT POSSIBLE FOR THE RECIP IENTS NOT BEING TRACEABLE FOR THE PURPOSE OF INQUIRY AS TO WHETHER THE PAYMENTS MADE BY THE ASSESSEE HAVE BEEN ACTUALLY RECEIVED BY THE APPARENT SELLERS. HENCE, THE ESTIMATE MADE BY THE TWO APPELLATE AUTHO RITIES DOES NOT WARRANT INTERFERENCE. EVEN OTHERWISE, WHETHER THE E STIMATE SHOULD BE AT A . PARTICULAR SUM OR AT A DIFFERENT SUM, CAN NEVER BE AN ISSUE OF LAW. 8.12 SIMILARLY, IN YET ANOTHER DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT SHETH (2013) 38 TAXMANN.C OM 385 (GUJ), HON'BLE COURT WAS SEIZED WITH A SIMILAR ISSUE WHERE THE AO HAD FOUND THAT SOME OF THE ALLEGED SUPPLIERS OF STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PROVIDED SALE BILLS AND HENCE, PURCHASES FROM THE SAID PARTIES WERE HEID TO BE BOG US. THE AO, IN THAT CASE ,ADDED THE ENTIRE AMOUNT OF PURCHASES TO GROSS PROFIT OF THE ASSESSEE. LD. CIT(A) HAVINQ FOUND THAT THE ASSESSEE HAD INDEED PURCHASED THOUGH NOT FROM NAMED PARTIES BUT OTHER P ARTIES FROM GREY MARKET, PARTIALLY SUSTAINED THE ADDITION AS PROBABL E PROFIT OF THE ASSESSEE. THE TRIBUNAL HOWEVER, SUSTAINED THE ADDIT ION TO THE EXTENT OF 12.5%. TAKING INTO ACCOUNT THE ABOVE FACTS, THE HON 'BLE GUJARAT HIGH COURT HELD THAT SINCE THE PURCHASES WERE NOT BOGUS, BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCOUNTS, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEE'S INCOME AND AS SUCH NO QUESTION OF LAW AR OSE IN SUCH ESTIMATION. WHILE ARRIVING AT THE ABOVE CONCLUSION, THE HON'BLE COURT ALSO RELIED ON THE DECISION IN THE CASE OF VIJAY M. MISTRY CONSTRUCTION LTD. 355 ITR 498 (GUJ) AND FURTHER APPROVED THE DEC ISION OF AHMEDABAD BENCH, ITAT IN THE CASE OF VIJAY, PROTEIN S 58 ITD 428. 8.13 THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA) AND ALSO CONSIDERING THE FACT THAT THE APPELLANT . HIMSELF MADE THE ALTERNATIVE PLEA IN THE SUBMISSIONS THAT PROFIT ELE MENT EMBEDDED ON SUCH PURCHASES SHOULD BE CONSIDERED FOR ADDITION IN STEAD OF ADDING THE TOTAL AMOUNT OF PURCHASES, I FEEL THAT IF PROFI T ELEMENT EMBEDDED ON SUCH PURCHASES IS ADDED TO THE TOTAL INCOME, THA T WILL MEET THE ENDS OF JUSTICE. 8.14. THE FACTS AND THE LINE OF BUSINESS OF THE PRE SENT CASE ARE VERY MUCH SIMILAR TO THE FACTS OF THE CASE DECIDED BY TH E HON'BLE GUJARAT HIGH COURT OF CIT VS. SIMIT P. SHETH (SUPRA). IN VIEW OF THE SAME, RESPECTFULLY FOLLOWING THE DECISION IN THAT CASE WI TH REGARD TO THE ESTIMATION OF PROFIT, AO IS DIRECTED TO RESTRICT TH E ADDITION TO 12.5% OF THE NON-GENUINE PURCHASES OF 71,19,439/-, MADE FR OM THE SAID THIRTEEN PARTIES. ACCORDINGLY, GROUND NO. 3 TO 5 RA ISED ON THE ISSUE OF BOGUS PURCHASES IS TREATED AS 'PARTLY ALLOWED'. 12 ITA 2457/MUM/2017 4. THE LD.DR SUBMITTED THAT THE LD.CIT(A) WAS ERRED IN SUSTAINING ONLY 12.5% PROFIT RATE ON TOTAL ALLEGED BOGUS PURCHASES OF RS.71,19,439 MADE FROM 13 PARTIES OF A GROUP CONCERN OF M/S BHANWARLAL JAI N GROUP OF COMPANIES, IGNORING THE FACT THAT THOSE COMPANIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES AS PER THE ADMISSION OF SHRI BHANWARLAL JAIN AND HIS ASSOCIATES DURING THE COURSE OF INVESTIGATION U/S 1 32(4) OF THE ACT. THE LD.DR FURTHER SUBMITTED THAT THE AO HAS BROUGHT OUT CLEAR FACTS IN LIGHT OF REPORT OF DGIT(INV) AND REPORT OF SALES-TAX DEPARTMENT, BUT T HE LD.CIT(A) BRUSHED ASIDE OBSERVATIONS OF THE AO WITHOUT ASSIGNING ANY REASON S AS TO HOW PURCHASES FROM THOSE PARTIES ARE GENUINE WHICH ARE SUPPORTED BY NECESSARY EVIDENCE. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. 6. WE HAVE HEARD THE LD.DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD ALONGWITH THE ORDERS OF THE LOWER AUTHORITIES. THE AO HAS MADE ADDITION TOWARDS ALLEGED BOGUS PURCHASES ON THE GROUND THAT THE ASSESSEE HAS FAILED TO FILE NECESSARY EVIDENCE TO JUSTIFY PURCHASES IN THE BACKDROP OF CLEAR FINDINGS FROM THE DGIT (INV), MUMBAI WHICH WAS FURTHER SUPPO RTED BY THE REPORT OF SALES-TAX DEPARTMENT. THE AO HAS ALSO TAKEN SUPPOR T FROM THE FACT THAT 133(6) NOTICES ISSUED TO THE PARTIES WERE RETURNED UNSERVE D. THEREFORE, HE CAME TO THE CONCLUSION THAT PURCHASES FROM THE PARTIES BELO NGING TO SHRI BHANWARLAL JAIN GROUP OF COMPANIES ARE BOGUS IN NATURE WHICH A RE NOT SUPPORTED BY 13 ITA 2457/MUM/2017 NECESSARY EVIDENCE. IT WAS THE CLAIM OF THE ASSESS EE BEFORE THE LOWER AUTHORITIES THAT PURCHASES FROM PARTIES BELONGING T O SHRI BHANWARLAL JAIN GROUP AND ASSOCIATES ARE SUPPORTED BY NECESSARY EVIDENCE AND PAYMENT AGAINST SUCH PURCHASES HAVE BEEN MADE THROUGH PROPER BANKING CHA NNEL. THE AO NEITHER POINTED OUT ANY DISCREPANCY IN BOOKS OF ACCOUNT OR STOCK REGISTER FILED FOR THE RELEVANT YEAR NOR MADE OUT A CASE OF SALES OUTSIDE THE BOOKS OF ACCOUNT. IN ABSENCE OF ANY INCORRECTNESS IN BOOKS OF ACCOUNT, N O ADVERSE INFERENCE COULD BE DRAWN SO AS TO TREAT PURCHASES FROM CERTAIN PART IES ONLY FOR THE REASON THAT THE NAMES OF SAID PARTIES WERE APPEARING IN THE LIS T OF HAWALA DEALERS PREPARED BY THE SALES-TAX DEPARTMENT. THE ASSESSEE ALSO CON TESTED THE OBSERVATION OF THE AO WITH REGARD TO NON SERVICE OF 133(6) NOTICES AND ARGUED THAT SERVICE OF NOTICES AND ATTENDANCE OF SUCH PARTIES WAS NOT WITH IN THE CONTROL OF THE ASSESSEE, THAT TOO, AFTER A LAPSE OF SIX YEARS. TH EREFORE, ONLY ON THAT BASIS, NO ADVERSE INFERENCE COULD BE DRAWN. 7. HAVING CONSIDERED RELEVANT MATERIALS ON RECORD, WE FIND THAT BOTH SIDES FAILED TO MAKE OUT A CASE IN THEIR FAVOUR WITH NECE SSARY EVIDENCE SO AS TO REACH TO A CONCLUSION THAT PURCHASES FROM ABOVE PARTIES A RE NON GENUINE. ALTHOUGH THE AO HAS CONDUCTED NECESSARY ENQUIRIES TO ASCERTA IN CORRECT NATURE OF PURCHASES BY ISSUING 133(6) NOTICES, BUT THE PARTIE S NEITHER ATTENDED NOR FILED ANY DETAILS. THEREFORE, MERELY FOR THE REASON OF N ON SERVICE OF NOTICE / NON 14 ITA 2457/MUM/2017 ATTENDANCE BY THE PARTIES, NO ADVERSE INFERENCE CAN BE DRAWN SO AS TO TREAT PURCHASES FROM THE ABOVE PARTIES WHEN THE ASSESSEE HAS FILED COMPLETE DETAILS INCLUDING PURCHASE BILLS AND STOCK DETAILS TO JUSTIFY ABOVE PURCHASES. IT IS NOT THE CASE OF THE AO THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE NOT SUSCEPTIBLE TO VERIFICATION. THERE IS NO O BSERVATION REGARDING INCORRECTNESS IN BOOKS OF ACCOUNT OR SALES OUTSIDE THE BOOKS. UNDER THESE FACTS, IT IS VERY DIFFICULT TO ACCEPT ARGUMENTS OF THE AO AS WELL AS THE ASSESSEE TO HOLD THAT PURCHASES FROM THE ABOVE PARTIES ARE F ULLY SUPPORTED BY NECESSARY EVIDENCE; HENCE, WE ARE OF THE CONSIDERED VIEW THAT IN ORDER TO SETTLE THE DISPUTE BETWEEN THE PARTIES, A REASONABLE PERCENTAG E OF PROFIT NEEDS TO BE ESTIMATED ON ALLEGED BOGUS PURCHASES. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH (SUPRA) HELD THAT WHER E THE PURCHASES CONSIDERED TO BE BOGUS, THEN PROFIT ELEMENT EMBEDDED IN THOSE PURCHASES NEEDS TO BE TAXED AND SUCH PROFIT PERCENTAGE DEPENDS UPON FACTS OF EACH CASE. THE CO- ORDINATE BENCHES OF MUMBAI TRIBUNAL, IN A NUMBER OF CASES, HAVE TAKEN A CONSISTENT VIEW AND DIRECTED THE AO TO ESTIMATE PRO FIT OF 12.5% TO 15% DEPENDING UPON FACTS OF EACH CASE. IN THIS CASE, T HE ASSESSEE IS IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS METALS. THE LD.CIT(A), CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE AND OTHER FACTS HAS SCALED DOWN ADDITION MADE BY THE AO TOWARDS BOGUS PURCHASES TO 12.5% OF SUCH PURCHASES. WE DO 15 ITA 2457/MUM/2017 NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A); H ENCE, WE ARE INCLINED TO UPHOLD FINDINGS OF LD.CIT(A) AND DISMISS APPEAL FIL ED BY THE REVENUE. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24-05-201 9. SD/- SD/- (SANDEEP GOSAIN) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 24 TH MAY, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI