ANIL JAIN, MUMBAI V. ITO 25(2)(1), MUMBAI

ITA 2494/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9364 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 06-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Salary income; Question of law
• Section: 142(1); 234B; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH , JM / I .T.A. NO. 2494 / M/ 20 1 7 ( / ASSESSMENT YEAR: 20 0 9 - 10 ) ANIL JAIN PROP JAINSON MARBLE CENTRE, S.K. GUPTA , COMPOUND, OPP BLOSSOM SOCIET, MILITARY RD, MAROL, ANDHERI(E) PIN:400059 / VS. ITO 25(2)(1) R.NO. 701, C012 PRATTAKSHAR BHAVAN, BKC MUMBAI - ./ ./ PAN/GIR NO. : AAIPHJ 4066 H ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 04 .0 9 .2017 / DATE OF PRONOUNCEMENT : . 27 . 09 .2017 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 23.01.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 37 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2009 - 10 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. GENERAL ASSESSEE BY: MISS NONE DEPARTMENT BY: SHRI RAM TIWARI ANIL JAIN 2 ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE ORDER PASSED BY LD. CIT9A) IS BAD IN LAW AND ON FACTS, LEGALLY UNTENABLE AND VOID AB INITIO. 2. AD HOC ADDITION OF RS.40,39,122 (BEING 12.5% PROFIT ELEMENT INVOLVED IN ALLEGED PURCHASES) BY WRONGLY TREATING THE SAID PURCHASES ARE FROM NON - GENUINE PARTIES. 2.1 ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT(A) ERRED IN PARTLY CONFIRMING THE AO ACTION OF AD - HOC ADDITION OF RS.48,46,947/ - BY MAKING THE AD - HOC ADDITION OF RS.40,39,122/ - BEING 12.5 % PROFIT ELEMENT INVOLVED IN ALLEGED PURCHASES BY WRONGLY TREATING THE SAID PURCHASES ARE FROM BOGUS PARTIES 2.11 THE LD. CIT(A) ERRED IN MAKING THE AD - HOC ADDITION OF RS.40,39,122/ - (BEING 12.5% PROFIT ELEMENT INVOLVED IN ALLEGED PURCHASES. DESPITE THE FA CT THAT THE SAID PURCHASES ARE GENUINE. 3. INTEREST U/S 234B AND 234C THE LD. CIT(A) ERRED IN DIRECTING THE AO TO CHARGE THE INTEREST U/S 234B AND 234C. 4. HUMBLE REQUEST FOR RELIEF ON THE FACTS AND CIRCUMSTANCES AND IN LAW, AND IN VIEW OF GROUND OF APPEAL MENTIONED SUPRA, IT IS HUMBLE PRAYED THAT: (I) AD - HOC ADDITION OF RS.40,39,122/ - (BEING 12.5% PROFIT ELEMENT INVOLVED IN ALLEGED PURCHASES) BY WRONGLY TREATING THE SAID PURCHASES ARE FROMBOGUS PARTIES MAY KINDLY BE DELETED. (II) INTEREST CHARGES U/S 234B AND 234C MAY KINDLY BE DELETED. (III) SUCH OTHER RELIEF OR RELIEFS AS DEEMED JUST AND PROPER MAY ALSO KINDLY BE GRANTED. 5. EACH OF THE ABOVE, MENTIONED GROUND OF APPEAL IS WITHOUT PREJUDICED TO, AND INDEPENDENT OF, OTHER GROUNDS OF APPEAL. 6. THE APPELLANT CARVES LEAVE TO ADD, ALTER, AMEND OR MODIFY THE GROUNDS OF APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME TO THE TUNE OF RS.6,53,051/ - ON 29.09.2009 FOR THE A.Y. 200 8 - 09. THE RETUR N WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THE INFORMATION WAS RECEIVED FROM SALES TAX DEPARTMENT THROUGH DGIT(INV.), MUMBAI THAT THE ASSESSEE HAS CLAIMED BOGUS PURCHASES TO THE TUNE OF RS. 3,23,12,978/ - FROM VARIOUS ANIL JAIN 3 PARTIES WHICH WAS DECLARED AS HAW ALA DEALERS I N THE F.Y. 2008 - 09 RELEVANT TO THE A.Y. 2009 - 10. T HE CASE OF THE ASSESSEE WAS REOPENED U/S 147 OF THE I.T. ACT, 1961. NOTICE U/S 142(1) OF THE ACT DATED 26.03.2014 WAS ISSUED AND SERVED UPON THE ASSESSEE. NOTICE U/S 142(1) OF THE ACT DATED 25 .08.2015 WAS ALSO ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF MARBLES IN THE NAME AND STYLE OF M/S JAINSON MARBLE CENTRE. UNDER THE YEAR OF CONSIDERATION THE ASSESSEE HAS SHOWN THE INCOME FROM SALARY, BUSINES S INCOME AND INCOME OF OTHER SOURCES BEING BANK INTEREST. THE BOGUS PURCHASES FROM FIVE PARTIES WAS FOUND TO THE TUNE OF RS. 3,23,12,978/ - . THEREFORE, 15% OF THE SAID AMOUNT I.E., TO THE TUNE OF RS.48,46,947/ - WAS ADDED TO THE INCOME OF THE ASSESSEE AND THE TOTAL INCOME WAS ASSESSED TO THE TUNE OF RS.55,00,000/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO REDUCED THE BOGUS PURCHASES TO THE EXTENT OF 12.5% AND ACCORDINGLY INCOME TO THE TUNE OF RS. 40,39,122/ - WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE WAS NOT SATISFIED , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO. 1: - 4 . ISSUE NO. 1 IS GENERALLY IN NATURE WHICH NOWHERE REQUIRED ANY ADJUDICATION. ANIL JAIN 4 ISSUE NO. 2 : - 5. UNDER T HIS ISSUE THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 40,39,122/ - BEING 12.5% PROFIT ELEMENT INVOLVED IN THE ALLEGED BOGUS PURCHASES TO THE TUNE OF RS. 3,23,12,978/ - . IT IS NOT IN DISPUTE THAT THE CASE OF THE ASSESSEE WAS REOPENED ON THE BASIS OF THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THROUGH DGIT(INV.), MUMBAI IN WHICH IT CAME INTO NOTICE THAT THE ASSESSEE HAS RAISED THE CLAIM OF BOGUS PURCHASES TO THE TUNE OF RS.3,23,12,978 / - . THE ASSESSING OFFICER ON SEEING THE FACTS AND CIRCUMSTANCE S OF THE CASE ADDED THE PROFIT ELEMENT TO THE EXTENT OF 15% OF THE BOGUS PURCHASES I.E., AN AMOUNT OF RS.48,4 6947 / - AND ADDED TO THE INCOME OF THE ASSESSEE. THE CIT(A) REDUCED THE 15% TO 12.5% OF THE PROFIT ELEMENT OF BOG US PURCHASES. IT IS TO BE SEEN IN W HICH CIRCUMSTANCES THE CIT(A) HAS REDUCED THE PROFIT ELEMENT OF THE BOGUS PURCHASES . T HE FINDING OF THE CIT(A) IN THIS REGARD IS HEREBY REPRODUCED AS UNDER: - I HAVE CONSIDERED THE FACTS, ORAL CONTENTION AND WRITTEN SUBMISSIONS OF THE APPELLANT AS AGAINST THE OBSERVATION/FINDINGS OF THE AO IN ASSESSMENT ORDER. THE SUBMISSIONS AND CONTENTIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED AS UNDER: - IN THE INSTANT CASE GROUND NO. 1 TO 3 ARE RELATED TO ADDITION OF RS.48,46,947/ - . FOR THE SAKE OF CONVENIENCE , ALL THE THREE GROUNDS ARE DISPOSED TOGETHER. IN THIS CASE INFORMATION WAS RECEIVED FROM SALES TAX AUTHORITIES, MUMBAI THAT THE APPELLANT HAS OBTAINED BOGUS BILLS FROM AFORESAID PARTY WITHOUT ANY SUPPLY OF GOODS FROM THEM. THE AO ASKED THE ANIL JAIN 5 APPELLANT TO PRODUCE THE SUFFICIENT EVIDENCE AND ESTABLISH THE GENUINENESS OF TRANSACTIONS SAID PARTY BEFORE HIM. HOWEVER, THE APPELLANT FAILED TO DO SO. THE SALES SHOWN BY THE APPELLANT ARE NOT DOUBTED OR PROVED NON GENUINE BY THE AO. THE LOGICAL COROLLAR Y OF THIS IS THAT THE APPELLANT MUST HAVE MADE PURCHASES OR ELESE WHERE FROM HE COULD HAVE EFFECTED THE SALES. IN THIS REGARD IT IS SUBMITTED BY THE LD. A.R. THAT HE HAD SUBMITTED THE DETAILS OF PURCHASE, DETAILS OF SALES, PROOF OF PHYSICAL RECEIPT OF MATE RIAL, QUANTITY DETAILS AND INVOICE BILLS ALONG WITH THE DETAIL OF THE BANK TRANSACTION BEFORE THE ASSESSING OFFICER. FURTHER THE APPELLANT HAD ALSO EXPLAINED THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES. DURING THE APPELLATE PROCEEDINGS, THE A PPELLANT HAS VEHEMENTLY ARGUED THAT THE APPELLANT HAD SUBMITTED SUFFICIENT DOCUMENTS AND PAYMENT BY BANKING CHANNEL, WHEREIN THESE PAYMENTS MADE TO THESE PARTIES THROUGH NORMAL BANKING CHANNEL HAVE BEEN REFLECTED WERE SUBMITTED DURING THE ASESSMDENT PROCEE DINGS. IDENTICAL ISSUE CAME UP BEFORE THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT V. BHOLANATH POLY FAB. P. LTD. REPORTED IN 355 ITR 290 (GUJ) IN THIS CASE. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN FINISHED FABRICS. THE AO DISALLOW3E D PURCHASE AMOUNTING TO RS.40,69,546/ - AS BOGUS /UNEXPLAINED. THE CIT(A) CONFIRMED THE ACTION OF THE AO. THE ISSUE WAS CARRIED IN APPEAL BEFOE THE HONBLE TRIBUNAL WHICH CONCURRED WITH THE FINDING OF THE FREVENUE AUTHORITIES BELOW THE HONBLE TRIBUNAL WHI CH CONCURRED WITH THE FINDING OF THE REVENUE AUTHORITIES BELOW THAT SUCH PURCHASE WAS MADE FROM BOGUS PARTIES. AFTER ADVERTING TO THE FACTS AND DATA PLACED BEFORE IT, THE HONBLE TRIBUNAL NOTED THAT THE ENTIRE CLOTH OF 1,02,514/ - METRES WAS SOLD DURING PUR CHASED BY THE APPELLANT MAY NOT BE FROM THE PARTIES SHOWN IN THE ACCOUNTS BUT MARGIN EMBEDDED IN SUCH PURCHASES WOULD BE SUBJECTED TO TAX. THE HONBLE TRIBUNAL RELIED ON ITS EARLIER DECISION IN THE CASE OF M/S. SAKET STEEL TRADERS V. ITO ITA NO. 2801/AHD/2 008 DATED 20.05.2008 AND ALSO MADE REFERENCE TO THE DECISION I N THE CASE OF VIJAYA PROTEIN V. CIT58 ITD 428 ( A HD). ON APPEAL BY THE DEPARTMENT THE HONBLE HIGH COURT OF GUJARAT, DISMISSED HE APPEAL. THE HEAD NOTE IS AS UNDER: INCOME FROM UNDISCLOSED SOURCE S - ASSES S MENT - ASSESSEE TRADING IN FINISHED FABRIC - WHETHER PURCHASES THEMSELVES BOGUS WHETHER PARTIES FROM WHOM SUCH PURCHASES WERE MADE BOGUS ANIL JAIN 6 QUESTION OF FACT - TRIBUNAL FINDING ASSESSEE DID PURCHASE CLOTH AND SELL FINISHED FABRICS. NOT ENTIRE PURCHASE PRI CE BUT PROFIT ELEMENT EMBEDDED IN PURCHASES LIABLE TO TAX I.T. ACT. THE ASSESSEE FOR THE ASSESSMENT YEAR 2005 - 06 WAS ENGAGED IN HE BUSINESS OF TRADING IN FINISHED FABRICS. THE ASSESSING OFFICER HELD THAT PURCHASES WORTH RS. 40,69,5461 - WERE UNEXPLAINED END DISALLOWED THE EXPENDITURE CLAIMED BY ME ASSESSEE AND COMPUTED THE TOTAL INCOME OFRS.41,1 0 187/ - . IN SO FAR AS THE QUESTION OF BOGUS PURCHASES WAS CONCERNED THE TRIBUNAL CONCURRED WITH THE REVENUE VIEWS THAT SUCH PURCHASES WERE ALLEGEDLY WERE REVENUE A U NSERVED THE POSTAL AUTHORITIES THE REMARK THAT THE ADDRESSES WERE INCOMPLETE. THE INSPECTOR DEPUTED BUT THE INCOME TAX DEPARTMENT ALSO COULD NOT ONE FIND ANY OF THE PARTIES AVAILABLE AT THE GIVEN ADDRESSES. THE ASSESSEE WAS UNABLE TO PRODUCE ANY CONFIRMATI ON FROM ANY OF THE PARTIES. THOUGH THE ASSESSEE HAD CLAIMED TO HAVE MADE PAYMENT BY ACCOUNT PAYEE CHEQUES, UPON VERIFICATION IT WAS FOUND THAT TILE WERE ENCASHED BY SAME OTHER PARTIES AND NOT BY THE SUPPOSED SELLER. HOWEVER, THE TRIBUNAL WAS OF THE OPINION THAT THOUGH THE PURCHASES MIGHT HAVE BEEN MADE FROM BOGUS PARTIES THE PURCHASES THEMSELVES WERE NOT BOGUS ADVERTED TO THE FACTS AND CIRCUMSTANCES DATA ON RECORD AND CAME TO THE CONCLUSION THAT THE ENTIRE QUANTITY OF OPENING STOCK, PURCHASE MANUFACTURED DU RING THE YEAR 2005 - 06 WERE SOLD BY THE ASSESSEE. THEREFORE, THE PURCHASES OF THE ENTIRE 1,02,514 MTRES OF CLOTH WERE SAID DURING THE YEAR 2005 - 06. THE TRIBUNAL THEREFORE OCCULTED THE ASSESSES CONTENTION TILER THE SN/SHED GOODS WERE PURCHASED BY THE ASSESSE E THOUGH NOT FROM THE PARTIES SHOWN IN THE ACCOUNTS BUT TIMER USHER SOURCES. THE TRIBUNAL WAS OF THE OPINION THAT NOT THE ENTIRE AMOUNT BUT SHE PROFIT WOULD BE IN SUCH AMOUNT WOULD AN SUBJECT TO TAX. 5.6 IN THE EASE OR M/S. S ANJAY OILCAKE IND USTRIES V. COMMISSIONER OF INCOME TAX REPORTED IN 316 ITR 274 (CU)) THE HONBLE COURT HAD UPHELD THE ACTION OF THE CIT(A} AND ITAT IN DETERMINING ESTATE) ADDITION OF 25% OF THE PURCHASES IN CASES INVOLVING BOGUS PURCHASES. THE HEAD NOTE IS AS UNDER: - 'ASSE SSMENT INCOME FROM UNDISCLOSED SOURCE ADDITION ON ACCOUNT OF INFLATED PURCHASE PRICE - ESTIMATE - NOT A QUESTION OF LAW - NO MATERIAL PRODUCE BY ASSESSEE TO DISPROVE INFLATED PURCHASES - TRIBUNALS ORDER IN ACCORDANCE WITH LAW - I.T. ACT, 1961 WHETHER AN ESTIM ATE SHOULD BE AT A PARTICULAR SUM OR AT A DIFFERENT SUM CAN NEVER BE A QUESTION OF LAW. ANIL JAIN 7 FOR THE A.Y. 1084 - 85 AND 1985 - 86 THE ASSESSING OFFICER MADE ADDITIONS TO THE INCOME ASSESSEE ON ACCOUNT OF INFLATED PURCHASE PRICE OF OILCAKES. THE CIT(A) HELD THAT 25 PER CENT OF THE VALUE OF THE PURCHASE PRICE WAS NOT GENUINE AND THE ADDITION MADE BY THE AO WAS ACCORDINGLY RESTRICTED TO 25%. ON CROSS APPEALS BY THE ASSESSEE AND HE REVENUE THE TRIBUNAL CONFIRMED THE ORDER OF THE CIT(A). THE ASSESSEE SOUGHT MODIFICATION OF THE ORDER ON THE GROUND THAT THE TRIBUNAL HAD FAILED TO CONSIDER VARIOUS PIECES OF EVIDENCE ENUMERATED BY IT IN THE APPLICATION. THE TRIBUNAL REJECTED THE APPLICATION HOLDING THAT THERE WAS NO APPARENT ERROR OR TO THE HIGH COURT: HELD THAT THE FINDING O F THE AO HAD BEN AC CAPTIVE BY THE TO HIGH COURT AN THE TRIBUNAL THAT THE APPARENT SELLER S WHO HAD ISSUED SALE BILLS WERE NOT TRACEABLE. THE GOODS WERE ISSUED BILLS FOR SUCH GOODS. THOUGH THE PURCHASES WERE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENT THEREFO RE BY ACCOUNT PAYEE CHEQUES AND THE CHEQUES HAD BEEN DEPOSITED ION BANK ACCOUNTS OSTENSIBLY IN THE NAME OF THE APPARENT THE ASSESSEE HAD BY EVIDENCE AVAILABLE ON RECORD MADE IT POSSIBLE FOR THE RECIPIENTS NOT BEING TRACEABLE FOR THE PURPOSE OF INQUIRY AS T O WHETHER THE PAYMENTS MADE BY THE ASSESSEE HAD BEEN ACTUALLY RECEIVED BY THE APPARENT SELLER. HENCE . THE ESTIMATE MADE BY THE APPELLATE AUTHORITIES DID NOT WARRANT INTERFERENCE. 5.7 RECENTLY,IN THE CASE OF COMMISSIONER OR INCOME TAX V SIMIT P SHETH 356 )I TR 451 GUJ ) THE HONBLECOURT HAS GIVEN A FINDING THAT ESTIMATION OF RATE OF PROFIT RETURN MUST NECE S SARY VERY WITH THE NATURE , OF BUSINESS ANDNO UNIFORM YARDSTICK COULD BE ADOPTED AND FINALLY CONFIRMED THE ACTION OF THE ITAT IN DETERMINING 12.5% OF THE BOG US PURCHASE AS PROFIT EMBEDDED IN SUCH TRANSACTION. THE HEAD NOTE IS CIT FRAUD UNDISCLOSED SOURCES ASSESSEE TRADING IN STEEL FINDING THAT PURCHASE RECORDED BY IT WERE NOT BOGUS BUT FROM OTHER PARTIES NOT RECORDED IN BOOKS; ESTIMATION OF PROFIT ELEMENT EMBEDDED IN PURCHASES TRIBUNAL JUSTIFIED IN ESTIMATION ON THE BASIS OF FACTS INCOME TAX ACT, 1961. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN STEEL ON WHOLESALE BASIS. DURING THE COURSE OF THE REASSESSMENT PROCEDINGS FOR THE YEAR 2006 - 07, THE A O NOTICED THAT SOME OF THE SUPPLIES OF STEEL TO THE ASSESSEE HAD MADE THEIR STATEMENTS ON OATH TO THE EFFECT THAT THEY HAD NOT SUPPLIED THE STEEL TO THE ASSESSEE BUT HAD ONLY PROVIDED SALE BILLS. IN TURN THEY WERE RECEIVING A SMALL COMMISSION. THE AO CONCL UDED THAT THE TOTAL PURCHASE OF RS.41,04,903/ - CUMULATIVELY MADE FROM THE THREE PARTIES WERE BOGUS. HE THUS THE GROSS PROFIT OF THE ASSESSEE. HE ALSO REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE HAD MADE PURCHASES FROM OTHER PARTIES IN THE OPEN MARKET. THEREFORE, HE RETAINED 30 PERCENT RS.41,04,903/ - TO RS.12,31,471/ - AND DELETED THE BALANCE OF RS.28,73,432/ - WHILE DOING SO HE DELETED THE ADDITION OF RS.5 LAKHS AS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE OPINION THAT TWELVE AND HALF PERCENT O F THE DISPUTED PURCHASES SHOULD BE RETAINED IN THE HANDS OF THE ASSESSE AS BUSINESS PROFIT. ON APPEAL TO THE HIGH COURT. ANIL JAIN 8 HELD DISMISSING THE APPEAL THAT THE CIT(A) BELIEVED THAT THE PURCHASES WERE NOT BOGUS BUT WERE MADE FOM THE PARTIES OTHER THAN THOSE ME NTIONED IN THE BOOKS OF ACCOUNT. THAT BEING THE POSITION, NOT THE EN TIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMEBEDDEED IN SUCH PURCHASES COULD BE ADDED TO THEIN COME OF THE ASSESSEE. IN ESSENCE THE TRIBUNAL ONLY ESTIMATED THE POSSIBLE PROFIT OUT O F PURCHASES MADE THROUGH NON GENUINE. PARTIES. THE ESTIMATION OF RATE OF PROFIT RETURN MUST NECESSARILY VARY WITH THE NATURE BUSINESS END NO UNIFORM YARDSTICK,COULD DO ADOPTED, 5.8 ON CONSIDERATION OF THE FACESAVAILAB LE ON RECORD IT IS SEEN THAT INFORMATION UPLOADED BY THE STATE SALES TAX AUTHORITIES WHEREIN THE SAID DEPARTME NT PUT UP LISTS OF PARTIES ROUND TO BE ENGA G ED IN ISSUING FALSE B ILLS WITHOUT ACTUAL SALE OF GOODS, AS TIE POINT OF GENESIS FOR ENQUIRY REL ATED TO POSSIBLE BOGUS PURCHASES 11 A NUMBER OF CASES. IN CASE, OF A MANUFACTURER, IF THE PURCH A SES ARE BOGUS, IT MUST BE POSSIBLE TO PRODUCE THE GOODS AS SHOWN, EVEN WITHOUT USE OF MATERIALS, THE PURCHASE OF WHICHSUSPICIOUS. IF IT IS NOT POSSIBLE TO PRODUCE THE G000S AS SHOWN WITHOUT CONSUMPTION OF TH OSE MATERIALS, THESE SUS PICIOUS PURCHASES CANNOT BE HALF OUGHT UNLESS P R OD UCTION IS ALS O HELD BOGUS WHERE PURCHASE IS HEAD AS BOGUS THEN THE CORRESPONDING SALES FLUE: ALSO SO HE LD BOGUS AS WITHOUT THE MATERIAL BEING PURCHASED) PROD UCTION/SALES IS NOT POSSI BLE. THEREFORE, WITHOUT THE CO RR E SPO NDING PRODUCTION/SALES BEING HELD BASIS I T CANNOT BE A ONE OF BOGUS BASES. B ILL OTHER SO US IN A CASE WHERE THE PU RC HASE S IS SHOWN BEIN G BOGUS AND IT IS NOT POSSIBLE TO COMPLETE TIE CORRESPONDING SE' TRANSACTION WITHOUT A GENUINE PURCHASE OF SUCH M A TER I AL , THE SALE MUST ALSO BE BOGUS . HOWEVER, IT IS POSSIBLE TO COMPLETE THE SALES OR THE PRODUCTION AS SHOWN, EVEN WITHOUT T O TH E I INVOL VED THE SUSPICIOUS PURCHASE , IT HA W ALA TO BE PURCHASED ,RATHER THE SALE TRANSACTION WAS EFFECTED OR PR ODUCTION WAS DONE EVEN WITHOUT USE NO SUCH MATE RIAL : OR WHETHER SUCH MATERIAL WERE ALSO USED UNLESS IT IS SHOWN THAT SUCH MATERIALS WERE NOT USED IN CORRESPONDING SALES OR THE CROOKSTON AS SHOWN) PURCHASES ,1C ANNOLE HELD BOGUS AND IT WILL BE A CASE OF PURCHASE FR OM BOGUS PARTI ES. HOWEVER , THEN MATERIAL HAS BEEN USED IN THE SALES O AS SHE CASE MAY BE IN PRODUCTION, IT CANNOT BE A CASE OF BOGUS PURCHAS ES MATERIAL IT WILL BE CA N OR PURCHASE FRO M BO GU S PARTIES . STATEMENTS OF H AWALA PROVIDERS RECORDED BY SALES 'TAX AUTHORITIES ACTIVITIES BY SUCH SUPPLIERS BEFOR E SALES LAX AUTHORITIES, ABSENCE OF EVIDENCE IN SUPPORT OF TRANSPORTATION DELIVERY OF MATERIAL OUR HAV E BEEN HELD LESS RELEVANT AS MERE ANIL JAIN 9 INDICTORS AND NOT D ECISIVE AS FACTORS, [0 DRAW A CO NCLUSION REGARDING SENT GENUINENESS OF PURCHASES. 5.9 THE SUPP LIERS WERE FOUND TO BE ENGAGED I N PROVIDING BOGUS BILL WITHOUT BILL ACTUAL OF GOODS . THE APPELLANT MADE PAYMENTS FOR THESE PURCHASES BY ACCOUNT PAYEE CHEQUES DULY DEE D RECORD THROUGH N ORMA L I CAN KING CHANNEL ; AND ARE DULY BILL IN THE APPELLANTS BANK STATEMENT . BEFORE THE AD, TOE APPELLA NT PRODUCED DOCUMENTARY EVIDENCE LIKE COPIES OF NICE IDEA O OD LEDGER ACCOUNTS OF THE VENDORS IN TIE APPEAL UNIT BOOKS OF ACCOUNT ACCORDING THESE PURCHASES TO SUSTAIN THE GENUINENESS OF USED PU R CHASES. SINCE ROE SALES RECE 1PTS WAS NOT DOUBTED OR DISPUTE BY THE AD AND NE HAS ACCEPTED THE SALES SALES RECEIPTS O F THE APPELLANT - .T AS IT IS THERE. THE AD CANNOT DENY THETHAT END BOG W ORK NOT MADE BY THE APPELLANT AND THE MATERIAL WAS AND THAT PURCHASES WAS NOT USED FOR ITS CONTRACT WORK . WHAT IS UNDER DISPUTE IS THE. PURCHASEFROM THE PARTIES FROM WHOM BILLS H AVE BEEN TA KEN AN D CHEQUES HAVE B EEN ISSUED TO THEN'. PURCHASES ARE NOT IN DISPU TE BUT THE PARTIES FROM WHOM P URCHASE ARE SHOWNTO HAVE BEEN MADE ARE DISPUTED AND SUSPICIOUS. 5.10 THE AO HAD MADE THE ADDITION AS SOME OF THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT RHO 40 DID NOT MAKE TRY FURTHER INVESTIGATION. AND ME CRY CORRELATED ITS ASSESSMEN T ON SUSPICIOUS. ONCE THE ASSESSES HAS BROUGHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT. ON THE 40 TO HAVE VERIFIED THE PAYMENT DATA IS FROM THE BANK OF THE A ASSESSEE ONE A SO FROM THE BANK OF THE SUPPLIES TO VEHEMENTLY WHETHER THERE WAS NO DETAILED INVESTIGATION MADE BY THE AO HIMSELF. NO SUCH EXERCISE HAS BEEN GONE OR FINDINGS RECORDED. THERE WAS NO DETAILED INVESTIGATION MADE BY THE AO TRIBUNAL. IT IS ALSO FOUND THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENCE IN SHOW THAT THE ASSESSEE HAS RECEIVED CASH BOOK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID ROT HE SOME CONFIRMATION AND DOCUMENT, ONE CANNOT CONCLUDE THAT THE O N IN CASE WERE NOT MADE BY THE ASSESSES THIS VIEW IS SUPPORTED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TAXMAN 171 (BOM) TO T O THIS EXTENT TERN IN VIEW WITH THE APPELLANT, IF APPELLANT HAS FULFILLED IS ONUS FLAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRESUMED TO SU PPLIER WERE BOGUS 0:000LY ANIL JAIN 10 BECAUSE THE SELLERS WERE NOT FOUND AT THE EVEN ADD RESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN THE PE RIOD OF PURCHASE TRANSACTION AND PERIOD BE SCRUTINY P ROCEEDINGS . THE 40 HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THERE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT HE BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM SAL ES. ES TI MATION OF P ROFIT BELONGING FROM 12.5 NO 15% HAS BEEN UPHELD BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF C I T VS. SIMIT P. SHETH 356 ITR 451 (GUI.) DEPENDING UPON THE NATURE OF BUSINESS. 5.11 CONSIDERING THE TOTALITY OF THE FACTS BEFORE ME, AS WELL AS THE JUDICIAL OPINION AVAILABLE, I AM INCLINED TO AGREE WITH THE APPELLANTS STAND THAT THE ADDITION IS EXCESSIVE. THE AO HAS DISALLOWED THE AMOUNT OF RS.48,46,947/ - ON ACCOUNT OF BOGUS PURCHASES. THE TOTAL PURCHASES DEBITED TO THE TRADING ACCOUNT FROM THESE PARTIES ARE RS.3,23,12,978/ - . I AM OF THE VIEW THAT ESTIMATION OF PROFIT AT 12.5% WOULD MEET THE ENDS OF JUSTICE. THEREFORE, I DIRECT THE AO TO ESTIMATE PROFIT OF 12.5% ON THE TOTAL PURCHASES IN QUESTION WHICH WORK OUT TO RS. 40.39,133/ - (12.5% OF RS.3,23,12,978/ - THE APPELLANT THEREFORE GETS RELIEF OF RS.8,07,825/ - (RS.48,46,947/ - MINUS RS.40,39,122/ - . THE GROUNDS RAISED ARE PARTLY ALLOWED. 6. ON APPRAISAL OF THE ABOVE SAID FINDING , WE NOTICED THAT THE CIT(A) HAS GONE THROUGH THE VARIOUS FINDING GIVEN BY THE HONBLE HIGH COURT AND OTHER CASE . THE CIT(A) MAINLY RELIED UPON THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P S H ETH 356 ITR, 451 (GUJ) . THE FACTUAL POSITION IS NOT IN DISPUTE . T HE PROFIT ELEMENT WAS TAKEN INTO CONSIDE RATION TO THE EXTENT OF 12.5% OF THE BOGU S PURCHASES WHICH DOES NOT SEEM UNJUSTIFIABLE. SINCE, THE MATTER OF CONTROVERSY HAS BEEN DETECTED BY THE CIT(A) BY CONSIDERING THE DECISION OF THE HONBLE HIGH COURT OF GUJRAT IN THE CASE OF CIT VS. BHOLANATH POLY FAB. P. LTD. REPORTED IN 355 ITR 290 (GUJ) ANIL JAIN 11 AND M/S SANJAY OILCAKE INDUSTRIES VS. CIT REPORTED IN 316 ITR 274 (GUJ) AND CIT VS. SIMIT P S H ETH 356 ITR 451 (GUJ) . THERFORE WE ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) IS NOT LIABLE T O BE INTERFERED WITH SPECIFICALLY IN THE CIRCUMSTANCES WHEN NO CONTRARY LAW HAS BEEN PRODUCED BEFORE US. ON SEEING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VIEW T HAT THE CIT(A) HAS RIGHTLY TOOK INTO CONSIDERATION OF THE PROFIT ELEMENT TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASES TO THE TUNE OF RS. 3,23,12,978/ - . IN VIEW OF THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS PASSED THE ORDER JUDICIOUSLY AND CORRECTLY WHICH IS NOT REQUIRED TO BE INTERFERE WITH AT THIS APPELLAT E STAGE. WE UPHOLD THE FINDING OF THE CIT(A) ON THIS ISSUE AND DECIDE THIS ISSUE IN FAVOUR OF THE REVENUE AGAINST THE ASSESSEE. ISSUE NO. 3 : - 7. ISSUE NO. 3 IS CONSEQUENTIAL IN NATURE AND ACCORDINGLY THE INTEREST U/S 234(B) AND 234(C) ARE LIABLE TO BE CHARGED. 8 . IN THE RESULT , THE APPEAL OF THE ASSESSEE IS HEREBY ORDERED TO BE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 .09 . 2017 SD/ - SD / - ( SHAMIM YAHYA ) ( AMARJIT SINGH ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ANIL JAIN 12 MUMBAI; DATED : . 0 9 . 201 7 V.P.SINGH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI