The ITO, Ward-5(3), Baroda V. Shri Gumanmal Misrimal Sanghvi, Baroda

ITA 2536/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2353 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-01-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 08-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP SINGH
• Assessee Lawyers: M J SHAH
• Keywords: Bogus purchase; Cost of acquisition
• Section: 40A(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI MUKUL SHRAWAT,JM & SHRI A N PAHUJA,AM ITA NOS.2536 & 2537/AHD/2008 (ASSESSMENT YEARS:-2003-04 & 2004-05) INCOME-TAX OFFICER, WARD- 5(3), RACE COURSE CIRCLE, BARODA V/S SHRI GUMANMAL MISRIMAL SANGHVI, PROP. OF HIMANSHU TRADING CORPORATION, LAKKADPITHA ROAD, BARODA PAN: AFRPS 0623 R [APPELLANT] [RESPONDENT] ITA NOS.2575 & 2576/AHD/2008 (ASSESSMENT YEARS:-2003-04 & 2004-05) SHRI GUMANMAL MISRIMAL SANGHVI, PROP. OF HIMANSHU TRADING CORPORATION, LAKKADPITHA ROAD, BARODA V/S INCOME-TAX OFFICER, WARD- 5(3), RACE COURSE CIRCLE, BARODA [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI PRADEEP SINGH, DR ASSESSEE BY:- SHRI M J SHAH, AR O R D E R A N PAHUJA: THESE CROSS APPEALS FILED AGAINST TWO SEPARATE O RDERS DATED 28-04-2008 OF THE LD. CIT(APPEALS)-V, BARODA, RAISE THE FOLLOWING COMMON GROUNDS :- ITA NO.2536& 2537/AHD/2008[REVENUE] 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.5,5 7,722/- THE AY 2003-04 & RS.21,08,558/- IN THE AY 2004-05 ON ACCOU NT OF BOGUS PURCHASES WITH THE OBSERVATION THAT 30% OF THE PURC HASE COST WILL BE A REASONABLE AMOUNT WHICH CAN BE ADDED IN THIS C ASE TO COVER THE GAINS OF THE APPELLANT. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE DEPARTMENT HAD MADE INQUIRIES AND HAS ESTABLISHED THAT NO SUCH SUPPLIERS IN THE NAMES OF M/S GIRNAR SALES CORPN., AND SHLV META L CORPORATION ITA NOS.2536 & 2537 AND 2575 & 257 6/A/08 2 ARE IN EXISTENCE AT THE ADDRESS GIVEN BY THE ASSESS EE FROM WHOM THE ASSESSEE CLAIMED TO HAVE PURCHASED THE MATERIAL . 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS DELIBERATELY CLAIMED PURCHASE EXPENSES IN THE NAME OF THE TWO ABOVE SAID PARTIES AND THEREBY REDUCED ITS PROFIT T O DEFRAUD THE REVENUE OF ITS DUE TAXES. 4 THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, OR A LTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. ITA NO.2575& 2576/AHD/2008[ASSESSEE] 1 THE CIT(A) ERRED IN UPHOLDING THE REOPENING OF ASSE SSMENT UNDER SEC. 147 OF THE I.T. ACT. 1961 WHICH IS BAD IN LAW AS WELL AS ON FACT OF THE CASE. 2 THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 2,39,024/-FOR THE AY 2003-04 & RS.9,03,667FOR THE AY 2004-05 BEING 30 % OF THE TOTAL PURCHASES MADE FROM M/S. GIRNAR SALES CORPORA TION AND M/S. SHIV METAL CORPORATION. 3 THE C.I.T.(APPEALS) OUGHT TO HAVE DELETED THE ENT IRE ADDITION OF RS.7,96,746/- IN THE AY 2003-04 & RS. 30,12,226/- IN THE AY 2004- 05 INSTEAD OF UPHOLDING A PART OF THE ADDITION TO T HE EXTENT OF RS.2,39,024/- & RS.9,03,667/-- RESP.. 4 THE C.I.T.(APPEALS) ERRED IN HOLDING THAT THE ASS ESSING OFFICER HAD REJECTED THE BOOK RESULTS. THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, ALT ER OR MODIFY ANY OF THE GROUNDS STATED HEREINABOVE EITHER BEFORE OR AT THE TIME OF HEARING . 2. AT THE OUTSET, THE LEARNED AR ON BEHALF OF THE ASSESSEE DID NOT PRESS GROUND NO.1 RELATING TO REOPENING OF ASSESSME NT IN THEIR APPEALS FOR THE AFORESAID TWO ASSESSMENT YEARS. CO NSEQUENTLY, THESE GROUNDS ARE DISMISSED AS SUCH. 3. ADVERTING NOW TO COMMON GROUND NOS.1 TO 3 IN THE APPEALS OF THE REVENUE AND GROUND NOS.2 TO 4 IN THE APPEALS OF THE ASSESSEE, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT TH E RETURN DECLARING ITA NOS.2536 & 2537 AND 2575 & 257 6/A/08 3 INCOME OF RS.1,18,787/-FILED ON 27-11-2003 BY THE ASSESSEE FOR THE AY 2003-04 AND INCOME OF RS.1,39,554/- FILED ON 30 .10.2004 FOR THE AY 2004-05,WERE PROCESSED U/S 143(1) OF THE INCOME -TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT]. SUBSEQUENTL Y, ENQUIRIES CONDUCTED BY THE THEN ITO, WARD-5(3), BARODA REVEAL ED THAT SHRI JABBARSINGH CHAUHAN, PROP. M/S GIRNAR SALES CORPORA TION, BARODA ISSUED BOGUS BILLS OF RS.6,21,040/- TO THE ASSESSE E FIRM IN THE AY 2003-04 & RS. 18,69,658/- IN THE AY 2004-05 AND PAYMENT MADE THROUGH CHEQUE AGAINST SUCH BOGUS BILLS HAD BEEN DEPOSITED IN THE CURRENT ACCOUNT NO.2152/- OF M/S. GIRNAR SALES CORPORATION WITH SHRI MAHALAXMI CO-OP. BANK, SULTANPURA, BARODA. THE AMOU NT SO DEPOSITED WAS WITHDRAWN IN 'CASH' BY SELF/BEARER CH EQUES IMMEDIATELY AFTER DEPOSITING THE CHEQUE. SIMILARLY SHRI NAVIN RAVAL, PROP. M/S SHIV METAL CORPORATION/HINDUSTAN METAL CO RPORATION , BARODA ALSO ISSUED BILLS OF RS. 1,75,706 IN THE AY 2003-04 & FOR 11,42,308/- IN THE AY 2004-05 TO THE ASSESSEE, WITH OUT SUPPLYING ANY MATERIAL. SHRI JABBARSINH CHOUHAN, PROP, OF M/S . GIRNAR SALES CORPORATION AND SHRI NAVIN RAVAL, PROP, OF M/S SHIV METAL CORPORATION ADMITTED IN A COMMON AFFIDAVIT DULY NOT ARIZED WITH PUBLIC NOTARY THAT THE ACCOMMODATION BILLS WERE ISS UED TO CERTAIN PARTIES WITHOUT SUPPLYING ANY MATERIAL. SINCE THE ASSESSEE INFLATED ITS PURCHASES BY RS.6,21,040/- DURING THE PERIOD RE LEVANT TO THE AY 2003-04 AND BY RS. 30,12,226/- IN THE AY 2004-05, THE ASSESSMENT FOR THESE TWO ASSESSMENT YEARS WAS OPENED U/S.147 OF THE ACT WITH THE SERVICE OF A NOTICE U/S.148 OF THE ACT ON 15-0 3-2006. IN RESPONSE, THE ASSESSEE FILED A LETTER ON 27-03-200 6, SEEKING TO TREAT THE RETURNS FILED ALREADY FOR THE AFORESAID TWO ASSESSMENT YEARS AS THE RETURNS IN PURSUANCE TO NOTICE ISSUE D U/S 148 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TO A QUERY BY THE AO, SEEKING CONFIRMATION FROM M/S. GIRNAR SALES CORPORATION AND M/S HINDUSTAN METAL CORPORATION BESIDES DOCUMEN TARY EVIDENCE IN SUPPORT OF PHYSICAL DELIVERY OF GOODS, MODE OF TRANSPORTATION OF THE GOODS WITH VEHICLE NUMBER AS ALSO NAME AND ADDR ESS OF THE ITA NOS.2536 & 2537 AND 2575 & 257 6/A/08 4 TRANSPORTER LOADING AND UNLOADING THE GOODS, DETAI LS OF LABOUR PAYMENTS IN CONNECTION WITH SAID PURCHASES AND ITS SUBSEQUENT SALE APART FROM PRODUCTION OF BOOKS OF ACCOUNTS, BILLS/V OUCHERS, BANK STATEMENTS AND STOCK REGISTER, THE ASSESSEE FURNISH ED BILLS/DELIVERY CHALLANS CLAIMED TO HAVE BEEN ISSUED BY THE SAID PA RTIES I.E. M/S. GIRNAR SALES CORPORATION AND M/S HINDUSTAN METAL CO RPORATION BESIDES CERTAIN LORRY AND OCTROI RECEIPTS. HOWEVER , THE ASSESSEE DID NOT FURNISH ANY OTHER DETAILS OR DOCUMENTARY EVIDEN CE IN SUPPORT OF PHYSICAL DELIVERY OF GOODS, MODE OF TRANSPORTATION, PLACE OF LOADING AND UNLOADING AND IN TURN SALE OF GOODS ETC. SINCE THE ASSESSEE FAILED TO ESTABLISH GENUINENESS OF THE PURCHASES FR OM THE AFORESAID TWO PARTIES AND INSTEAD ADMITTED THAT BOTH THE AF ORESAID PERSONS WERE NOT AVAILABLE AT THE GIVEN ADDRESSES NOR THEIR WHEREABOUTS WERE KNOWN, THE AO INFERRED THAT THE SO-CALLED PURC HASES FROM M/S. GIRNAR SALES CORPORATION AND M/S HINDUSTAN METAL CORPORATI ON/SHIV METAL CORPORATION WERE BOGUS. ACCORDINGLY, THE AO REJECTED THE BOOK RESULTS U/S 145(3) OF THE ACT AND OBSERVED THAT THE CREDITORS AMOUNTING TO RS.7, 96,746/- HAD BEEN PAID OUT OF UNDISCLOSED INCOME OF THE ASSESSEE , RESULTING IN A DDITION OF RS. 7,96,746/- IN THE AY 2003-04. LIKEWISE AN AMOUNT OF RS. 30,12,226/- WAS ADDED IN THE AY 2004- 05. 4. ON APPEAL, THE LD. CIT(A) WHILE REFERRING TO THE DECISIONS OF THE ITAT IN VIJAY PROTEINS LTD., 58 ITD 428 (AHD) , DATED 20.10.2006 IN THE CASE OF OMKAR PHARMA CHEM LTD. IN ITA NO.2988/AHD/ 2002, DATED 23.10.2003 IN THE CASE OF SHREE RAJ INDUSTRIES IN ITA NO.2341 & 2601/AHD/1996, DATED 17- 08-2004 IN THE CASE OF AMIT PROCESS PVT. LTD. IN I TA NO.1796/AHD/1997 AND DATED 02-02-2007IN THE CASE OF PREM KUMAR RATHI IN ITA NO.425/AHD/2004, , REDUCED THE ADDITION TO 30% OF THE TOTAL PURCHASES FROM THE AFORESAID PARTIES IN THE FOLLOWING TERMS IN THE AY 2003-04: 5.1 I HAVE CONSIDERED, THE FACTS OF THE CASE THE A RGUMENTS MADE BY THE AR AND THE CASE LAWS RELIED UPON BY HIM. IT IS A FA CT THAT, APPELLANT HAS NOT BEEN ABLE TO PROVE THE PURCHASES AS THE PARTIES COU LD NOT BE PRODUCED. THERE IS ADVERSE EVIDENCE ON RECORD, SHOWING THAT T HE SUPPLIER ISSUED BILLS WHICH WERE DOUBTFUL. THE BURDEN WAS ON THE APPELLAN T TO PROVE THAT THE ITA NOS.2536 & 2537 AND 2575 & 257 6/A/08 5 PURCHASES ARE GENUINE. HOWEVER, THE APPELLANT HAS G IVEN QUANTITATIVE TALLY OF MATERIALS PURCHASED AND MATERIALS SOLD. THE PAYM ENTS HAVE BEEN MADE BY CHEQUE FROM EXPLAINED FUNDS OF THE BUSINESS. THA T LEAVES ONLY ONE ALTERNATIVE. THE MATERIALS HAVE BEEN PURCHASED FROM THE OPEN MARKET INCURRING CASH PAYMENT AND BILLS HAVE BEEN TAKEN FR OM PAPER CONCERNS LIKE GIRNAR SALES CORPORATION. IN THE PROCESS THE A PPELLANT HAS VIOLATED SEC. 40A(3) WHICH PROHIBITS CASH PURCHASES. THERE C OULD BE ACCOMPANYING GAIN AS THE PURCHASES ARE MADE FROM UN REGISTERED PARTIES WHO DO NOT PAY SALES TAX AND OTHER STATUTORY DUTIES . 5.2 HOWEVER AS PER THE RATIO OF THE VIJAY PROTEINS LTD., ENTIRE COST OF PURCHASES CANNOT BE ADDED EVEN IN SUCH CASES. THIS VIEW IS ALSO SUPPORTED BY THE JUDGMENTS OF ITAT IN THE CASES OF OMKAR PHARMA, SHREE RAJ INDUSTRIES, AMIT PROCESSORS, PREM KUMAR RATHI E TC. CITED SUPRA. THE APPELLANT HAS SUBMITTED QUANTITATIVE TALLY OF MATER IAL WHICH MEANS THAT THERE WAS PURCHASE OF MATERIAL WHICH WERE SOLD TO V ARIOUS PARTIES. TAKING INTO ACCOUNT ALL THE RELEVANT FACTS OF THE CASE, I FIND THAT 30% OF THE PURCHASE COST WILL BE A REASONABLE AMOUNT WHICH CAN BE ADDED IN THIS CASE TO COVER THE GAIN OF THE APPELLANT. THEREFORE, OUT OF TOTAL ADDITION OF RS.7,96,746/- MADE BY THE AO ON ACCOUNT OF PURCHASE S, RS.5,57,722/- IS DELETED AND RS.2,39,024/- IS CONFIRMED BEING 30% OF TOTAL PURCHASES FROM M/S GIRNAR SALES CORPORATION AND M/S SHIV METAL COR PORATION. 5.3 THIS DISPOSES OFF ALL THE GROUNDS FROM GROUNDS NO.2 TO 13. IN GROUND NO.12, THE APPELLANT HAS STATED THAT THE AO COULD NOT HAVE VARIED THE DECLARED PROFITS OF THE APPELLANT WITHOUT REJEC TING BOOKS OF ACCOUNT. I FIND THAT SUCH AN ARGUMENT DOES NOT HAVE ANY MERIT. FOR MAKING ANY SPECIFIC ADDITION, IT DOES NOT NECESSARILY MEAN THA T SECTION 145(3) HAS TO BE COMPULSORILY INVOKED. IN ESSENCE THE AO HAS REJE CTED THE BOOK RESULTS AND HAS MADE SPECIFIC ADDITION RELATING TO THE NON GENUINE PURCHASES. THE ACTION OF THE AO IS AS PER LAW . 5. SIMILAR FINDINGS WERE RECORDED IN THE AY 2004 -05. 6. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE FINDINGS OF THE LD. CIT(A) IN REDUCING THE ADDITION IN THE AFORESAID TWO ASSESSMENT YEARS WHILE THE ASSESSEE IS IN APPEAL FO R UPHOLDING THE ADDITION TO THE EXTENT OF 30% OF THE PURCHASES FROM THE AFORESAID TWO PARTIES. THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE MERELY SOUGHT REDUCT ION OF ESTIMATE OF 30% IN THE LIGHT OF DECISION DATED 23-10-2003 OF THE ITAT IN M/S SHREE RAJ INDUSTRIES, AHMEDABAD VS. ACIT IN ITA NO.2341/AHD/1996. ITA NOS.2536 & 2537 AND 2575 & 257 6/A/08 6 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISION OF THE ITA T. AS IS APPARENT FROM THE FACTS OF THE CASE, THOUGH THE ASSESSEE CLA IMED TO HAVE MADE PURCHASES FROM THE AFORESAID TWO PARTIES VIZ. M/S GIRNAR SALES CORPORATION AND SHIV METAL CORPORATION, THE LATTER ADMITTED THAT THEY ISSUED ONLY ACCOMMODATION BILLS. THE ASSESSEE DID NOT PRODUCE THE AFORESAID TWO PARTIES BEFORE THE AO OR THE LD. CIT(A) IN ORDER TO ESTABLISH THE GENUINENESS OF THE PURCHASES WHILE TH E SALES HAVE NOT BEEN DOUBTED BY THE AO. THE AO WHILE REJECTING B OOK RESULTS, HAVING RECOURSE TO PROVISIONS OF SEC. 145(3) OF TH E ACT, ADDED THE ENTIRE AMOUNT OF BOGUS PURCHASES FROM THE AFORESAI D TWO PARTIES. THE LD. CIT(A) WHILE UPHOLDING THE FINDINGS OF THE AO, REJECTING THE BOOK RESULTS, OBSERVED THAT THE AO HAD DISALLOWED SPECIFIC AMOUNT OF BOGUS PURCHASE FROM THE AFORESAID TWO PARTIES. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE SALES HAVE NOT BEEN DOUBTED BY THE AO NOR GENUINENESS OF ANY EXPENSES HAVE BEEN DO UBTED, THE LD. CIT(A) FOLLOWED THE BASIS ADOPTED IN THE CASE OF VI JAY PROTEINS VS. ITO 58 ITD 428 (AHD). THE RELEVANT PORTION OF THE TRIBU NALS DECISION IN PARA 19.3 OF THE SAID DECISION READS AS UNDER:- 19.3 IT IS WELL KNOWN THAT IF PURCHASES ARE MADE FR OM OPEN MARKET WITHOUT INSISTING FOR THE GENUINE BILLS, THE SUPPLI ER MAY BE WILLING TO SELL THOSE PRODUCTS AT A MUCH LOWER RATE AS COMPARE D TO THE RATE WHICH THEY MAY CHARGE IN CASE THE DEALER HAS TO GIV E A GENUINE SALE INVOICE IN RESPECT OF THAT SALE AND SUPPLY THE GOODS. THERE MAY BE VARIOUS FACTORS DUE TO WHICH THERE IS BOUND TO B E A SUBSTANTIAL DIFFERENCE BETWEEN THE PURCHASE PRICE OF UNACCOUNTE D MATERIAL AND RATE OF PURCHASE OF ACCOUNTED FOR GOODS. THERE MAY BE A SAVING ON ACCOUNT OF SALES-TAX AND OTHER TAXES AND DUTIES WHI CH MAY BE LEVIABLE IN RESPECT OF MANUFACTURE OR SALE OF GOODS IN QUESTION. THE SUPPLIERS OR THE MANUFACTURERS MAKE A SUBSTANTIAL S AVING IN THE INCOME-TAX IN RESPECT OF INCOME FROM SALE OF UNACCO UNTED GOODS PRODUCED AND SOLD BY THEM. THIS MAY ALSO BE ONE OF THE FACTORS DUE TO WHICH THE SELLER MAY BE WILLING TO CHARGE LOWER RATES FOR UNACCOUNTED GOODS AS COMPARED TO ACCOUNTED FOR GOOD S. KEEPING ALL THESE FACTORS IN MIND AND ALSO KEEPING IN VIEW THE DECISION OF THE ITAT IN THE CASE OF SANJAY OIL CAKE INDUSTRIES (SUP RA) WE HOLD THAT 25% OF THE PURCHASE PRICE ACCOUNTED FOR IN THE BOOK S OF ACCOUNTS THROUGH SUCH FICTITIOUS INVOICES IN THE NAME OF 33 BOGUS PARTIES ITA NOS.2536 & 2537 AND 2575 & 257 6/A/08 7 SHOULD BE DISALLOWED OUT OF THE AMOUNT OF PURCHASES SHOWN TO HAVE BEEN MADE FROM THOSE 33 BOGUS SUPPLIERS. THE TOTAL PURCHASES SHOWN AS MADE FROM THESE 33 PARTIES WHICH HAVE BEEN DISALLOWED BY THE AO ARE AS UNDER:- (I) BOGUS PURCHASES AS DISCUSSED IN PARA 38 READ WITH PARA 22 OF THE ASSESSMENT ORDER RS.7007826 (II) BOGUS PURCHASES AS DISCUSSED IN PARA 40 OF THE ASSTT. ORDER. RS.1799768 ----------------- RS.88,03,614 WE DIRECT THE AO TO DISALLOW 25% OF THE AFORESAID A MOUNT ON ACCOUNT OF INFLATION OF PURCHASE PRICE. THE AMOUNT OF DISALLOWANCE WOULD ACCORDINGLY COME TO RS.22,00,903/- WHICH MAY BE ROUNDED TO RS.22 LAKHS. THE AMOUNT OF EXPENDITURE SHOWN BY WAY OF FREIGHT ON THE AFORESAID PURCHASES HAS BEEN SEPARATELY DISALLO WED BY THE AO TO THE TUNE OF RS.5,02,752/-. SINCE THE ASSESSEE HA S FAILED TO PROVE THAT SUCH OIL CAKES WERE RECEIVED FROM OUTSIDE THE STATE, AS SHOWN AS PER THE FICTITIOUS INVOICES, WE AGREE WITH THE V IEW TAKEN BY THE DEPARTMENTAL AUTHORITIES IN RESPECT OF DISALLOWANCE OF THE ENTIRE AMOUNT OF FREIGHT IN RELATION TO THE AFORESAID PURC HASES. THE DISALLOWANCE OF RS.5,02,752/- IS ALSO THEREFORE, CO NFIRMED. THUS, THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE TO AN AGGREGATE SUM OF RS.27,02,752/- (RS.22 LAKHS PLUS RS.5,02,752) AS AGAINST THE AGGREGATE DISALLOWANCE OF RS.93,06,366/- MADE BY TH E AO COMPRISING OF RS.70,03,826/-, RS.17,99,788 AND RS.5 ,02,752/-. 7.1 THE LD. AR SUBMITTED THAT 30% OF THE DISALLOWA NCE MADE BY THE LD. CIT(A), FOLLOWING THE VIEW TAKEN IN THE AFORESAID SAID DECISION OF THE TRIBUNAL, IS EXCESSIVE LOOKING TO THE NATURE AND BUSINESS ACTIVI TIES OF THE ASSESSEE AND IN THIS CONNECTION, THE LD. AR REFERRED TO THE DECISIO N IN THE CASE OF SHREE RAJ INDUSTRIES(SUPRA) , WHERE IN DISALLOWANCE WAS REST RICTED TO 15% OF THE AMOUNT OF TOTAL PURCHASES DISALLOWED BY THE AO . WE FIND TH AT IN THE SAID CASE THE ASSESSEE WAS DEALING IN IRON AND STEEL AND DECISI ON RELATES TO AY 1991-92 WHEN THE COST OF INPUTS AND OTHER EXPENSES AS ALSO TAXES AND DUTIES AND CONSEQUENTLY SELLING PRICES MAY BE DIFFERENT VIS --VIS IN THE CASE BEFORE US. IN ANY CASE, COMPARATIVE COST OF INPUTS ,EXPENSES OR E VEN SELLING PRICES HAVE NOT BEEN PLACED BEFORE US. THEREFORE, FINDINGS OF THE I TAT IN THE SAID DECISION CAN NOT BE FOLLOWED STRAIGHTWAY. IN THE INSTANT CASE, INDISPUTABLY, THE ASSESSEE FAILED TO ESTABLISH GENUINENESS OF PURCHASES FROM THE AFOR ESAID PARTIES REFERRED BY THE ITA NOS.2536 & 2537 AND 2575 & 257 6/A/08 8 AO VIZ. M/S GIRNAR SALES CORPORATION AND M/S SHIV M ETAL CORPORATION/M/S HINDUSTAN METAL CORPORATION AND BOTH THE PARTIES AD MITTED THAT THEY DID NOT SELL ANY MATERIAL TO THE ASSESSEE AND INSTEAD ISSUED ACC OMMODATION BILLS. IN THE FACE OF THIS ADMISSION, THE ASSESSEE MISERABLY FAIL ED TO ESTABLISH THE GENUINENESS OF PURCHASES. THE LD. CIT(A) FOUND TH AT THE ASSESSEE HAD FURNISHED QUANTITATIVE TALLY OF MATERIALS PURCHASED AND MATERIALS SOLD WHILE THE PAYMENTS HAD BEEN MADE BY CHEQUE FROM EXPLAINED FUN DS OF THE BUSINESS. THESE FINDINGS HAVE NOT BEEN DISPUTED BEFORE US BY THE REVENUE. THE LD. CIT(A) FURTHER OBSERVED THAT THE MATERIALS WERE PU RCHASED FROM THE OPEN MARKET INCURRING CASH PAYMENT AND BILLS HAVE BEEN TAKEN FR OM THE AFORESAID TWO PARTIES. IN THE PROCESS, THE ASSESSEE VIOLATED THE PROVISIO NS OF SEC. 40A(3) WHICH PROHIBITS CASH PURCHASES AND THERE COULD BE ACCOMPA NYING GAIN AS THE PURCHASES WERE MADE FROM UNREGISTERED PARTIES WHO DO NOT PAY SALES TAX AND OTHER STATUTORY DUTIES . ACCORDINGLY, THE LD. CIT(A ) WHILE REFERRING TO A NUMBER OF DECISIONS OF THE ITAT RELIED UPON ON BEHALF OF THE ASSESSEE CONCLUDED THAT 30% OF THE PURCHASE COST WILL BE A REASONABLE AMOUNT IN THIS CASE TO COVER THE GAIN OF THE ASSESSEE . NOT AN IOTA OF EVIDENCE HAS BEEN PLACED BEFORE US EITHER BY THE REVENUE OR THE ASSESSEE IN ORDER TO ENABLE US TO T AKE A DIFFERENT VIEW IN THE MATTER. WE ARE OF THE OPINION THAT THE PERCENTAGE ESTIMATED IN A NUMBER OF DECISIONS BY THE ITAT IS NEITHER STATIC NOR A MAT HEMATICAL FORMULA CAN BE APPLIED IN ALL CASES. TRIBUNAL IN VARIOUS CASES, H AS OBSERVED THAT ESTIMATION OF POSSIBLE BENEFITS DERIVED BY THE ASSESSEE IS TO BE TAKEN IN THE FACTS OF EACH CASE. THE UNDERLINED PROPOSITION LAID DOWN IS TO OBJECTIV ELY ESTIMATE THE POSSIBLE BENEFITS, LOOKING AT ALL THE ASPECTS OF MATTER AND ATTENDING CIRCUMSTANCES. THIS TRIBUNAL IN VIJAY PROTEINS VS. ACIT (SUPRA) HELD TH AT IT WAS INCUMBENT UPON THE ASSESSEE TO PROVE THAT THE SUPPLIERS WERE GENUINE S UPPLIER OF THE GOODS AND THEY REALLY SUPPLIED GOODS TO THE ASSESSEE AND THE ASSE SSEE REALLY MADE PAYMENTS BY CHEQUE TO THOSE PARTIES AND NONE-ELSE. SUCH A B URDEN HAD TO BE DISCHARGED BY THE ASSESSEE WITH VERY STRONG AND CONNECTED EVID ENCE IN VIEW OF THE BLATANT DENIAL BY THE AFORESAID PARTIES WHILE NO SERIOUS EFFORTS APPEAR TO HAVE BEEN MADE BY THE ASSESSEE TO DISCHARGE SUCH BURDEN OF PR OVING THE GENUINENESS OF THE TRANSACTIONS WITH THE SAID PARTIES. AS HELD IN THE CASE OF VIJAY PROTEINS(SUPRA), IT WOULD BE FIT CASE FOR REJECTION OF THE BOOKS. CONSIDERING THE FACTS OF THE PRESENT ITA NOS.2536 & 2537 AND 2575 & 257 6/A/08 9 CASE, NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT THE APPLICATION OF RATE BY THE LD. CIT(A) IS EXCESSIVE . AS REGARDS ESTIMATION OF PROFITS, NO DOUBT THE AO/CIT(A) SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT AND SHOUL D NOT ACT TOTALLY ARBITRARILY, BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGMENT ASSESSMENT, AND IT IS THE ASSESSEE HIMSELF WHO IS T O BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS AND DETAILS.[ KACHWALA GEMS VS JCIT , 288 ITR 10 (2007)(SC) ]. SINCE THE ASSESSEE MISERABLY FAILED TO ESTABLISH G ENUINENESS OF THE PURCHASES FROM THE AFORESAID TWO PARTIES WITH ANY COGENT EVI DENCE BEFORE THE AO OR THE LD. CIT(A) NOR EVEN ANY SUCH MATERIAL HAS BEEN PLACED BEFORE US, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LEARNED CIT( A) WHILE UPHOLDING REJECTION OF BOOK RESULTS AND SUSTAINING THE ADDITION ON THE BAS IS OF VIEW TAKEN BY THE ITAT IN A NUMBER OF DECISIONS REFERRED TO ABOVE . IN VIEW OF THE FOREGOING , WE DO NOT FIND ANY MERIT IN THE COMMON GROUND NOS.1 TO 3 IN T HE APPEALS OF THE REVENUE AND GROUND NOS.2 TO 4 IN THE APPEALS OF THE ASSESSEE. THEREFORE, THESE GROUNDS ARE DISMISSED. 8. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND IN THE APPEALS OF THE ASSESSEE OR IN TERMS OF GROUND NO.4 IN THE APPEAL OF THE REVENUE, THESE GRO UNDS ARE ALSO DISMISSED. 9. IN THE RESULT, CROSS APPEALS IN THESE TWO A SSESSMENT YEARS ARE DISMISSED . ORDER PRONOUNCED IN THE COURT TODAY ON 13 -01-2011 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 13 -01-2011 COPY OF THE ORDER FORWARDED TO: ITA NOS.2536 & 2537 AND 2575 & 257 6/A/08 10 1. SHRI GUMANMAL MISRIMAL SANGHVI, PROP. OF HIMANSH U TRADING CORPORATION, LAKKADPITHA ROAD, BARODA 2. INCOME-TAX OFFICER, WARD-5(3), RACE COURSE CIRCL E, BARODA 3. CIT CONCERNED 4. CIT(A)-V, BARODA 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR