APL Metals Limited , Kolkata V. ACIT, Central Circle - 3(3), Kolkata

ITA 297/KOL/2023

AI Insights

APL Metals Ltd., engaged in manufacturing and trading of chemical products, appealed against the order of the Commissioner of Income-tax (Appeals), which confirmed the addition of Rs.57,49,01,910 as unexplained expenditure. This amount was initially added by the Income Tax Officer, National Faceless Assessment Centre, Delhi, during the assessment for the year 2018-19, suspecting the genuineness of purchases from seven parties. The Tribunal examined the detailed findings of the CIT(A) and the submissions made by both parties, including the lack of digital footprints of the vendors and the improbability of the transactions under the circumstances described by the appellant. The Tribunal also considered various judicial precedents and the principles of burden of proof in tax evasion cases, ultimately agreeing with the lower authorities that the purchases were not genuine and were likely made to evade taxes.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124745 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 20-06-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 30-03-2023
• Other Referred Cases: CIT vs. Odeon Builders (P) Ltd., PCIT vs Mohd Hazi Adam & co., PCIT Vs. Vaman International (P) Ltd., PCIT Vs. Subarna Rice Mill, Simit P. Sheth, Vijay Trading Co., Bhola Shanker Cold Storage vs Joint Commissioner of Income Tax, CIT vs Nivedan Vanijya Niyojan Ltd, CIT Vs. NR Portfolio Pvt. Ltd., Maru Ram Makhan Lal Vs. CIT, Ruby Traders & Exporters Vs. CIT, CIT Vs. MAF Academy Pvt. Ltd., CIT Vs. N Tarika Properties Investment Pvt. Ltd., CIT vs. Active Traders Pvt. Ltd., Sankar Industries, CIT vs. Durga Prasad More, CIT vs. P. Mohankala, CIT vs. N Tarika Properties Investment (2014) 51 taxmann.com 387 (SC), CIT vs. N Tarika Properties Investment Pvt. Ltd. (Delhi), CIT vs. N Tarika Properties Investment Pvt. Ltd. (Delhi)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained expenditure; Gift; Business income; Depreciation; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Accommodation entries; Onus to prove; Revised return; Unabsorbed depreciation; Set aside; Capital Gains
• Section: 131; 68; 69C; 143(3); 142(1); 143(2); 208; 264; 139(1); 64; 13; 153; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA Before Dr. Manish Borad, AM & Shri Sonjoy Sarma, JM I.T.A. No.297/KOL/2023 Assessment Years: 2018-19 APL Metals Ltd. C/o, Subash Agarwal & Associates, Advocates, Siddha Gibson, 1, Gibson Lane, Suite 213, 2 nd Floor, Kolkata- 700069. (PAN: AACCA4246P) Vs. Income Tax Officer, National Faceless Assessment Centre, Delhi. (Appellant) (Respondent) Appearances by: Shri Subhash Agarwal, Advocate appeared for Appellant. Shri Subhendu Datta, CIT, DR appeared for Respondent. Date of concluding the hearing : 21.06.2023 Date of pronouncing the order : 15.09.2023 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2018-19 is directed against the order passed u/s 250 of the Income Tax Act, 1961 in short the “Act”) by ld. Commissioner of Income-tax (Appeals), Kolkata-21 [in short ld. “CIT(A)”] dated 24.02.2023 arising out of the assessment order passed u/s 143(3) r.w.s. 144B of the Act by Ld. ITO, National Faceless Assessment Centre, Delhi. 2. Assessee has raised following grounds of appeal: “1. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs.57,49,01,910/- made by the A.O. on account of purchase of raw material including the GST element by wrongly treating the same as unexplained expenditure. I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 2 of 38 2. For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have considered that as per the information, total purchases made from the seven parties in question was Rs.45,65,01,722/- whereas the A.O. disallowed purchases to the tune of Rs. 57,49,01,910/-. 3. For that the Ld. CIT(A) ought to have held that the provisions of section 69C r.w. section 115BBE were not applicable in the facts and circumstances of the case. 4. For that the Ld. CIT(A) failed to appreciate that the impugned addition on account of alleged unsubstantiated purchases was chargeable to tax under the head "Business Income" instead of "Income from other sources". 5. For that the A.O. was not justified in not granting the benefit of brought forward unabsorbed depreciation and business loss against the returned business income and the impugned addition made. 6. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing.” 3. Brief facts of the case as culled out from the records are that the assessee is a Limited Company engaged in the business of manufacturing of chemical products, recycling of metal waste and scraps etc., trading of these goods. Loss of Rs.45,54,83,272/- declared in the e-return for AY 2018-19 furnished on 09.10.2018. This return was revised on 07.03.2019 without altering the income declared in the original return of income. Return was selected for scrutiny under CASS for complete scrutiny followed by serving a valid notice u/s. 143(2) and 142(1) of the Act. 4. Various details were called for by the Ld. AO including the details of purchases. Ld. AO noticed that some of vendors who supplied goods to assessee have not filed their return of income for AY 2018-19. The details of these parties are as follows: I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 3 of 38 Sl. No. PAN of the party with Name Purchase reported (in GSTR Rs.) Purchase during the year (in Rs.) Amount (in Rs.) paid during the year for purchase of raw material Name under which business(s) carried on by the I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 4 of 38 5. Ld. AO asked the assessee to prove the genuineness of purchases made from these parties and also to submit necessary documentary evidence such as ledger account, purchase bills, delivery challans, entries in stock register, e-mail address, relevant portion of bank statement, income tax return, if any, filed. With regard to these alleged purchases of Rs.57,49,01,910/-, assessee filed details of monthly summary, date wise and month wise registry, summary of sales, computation of sales out of the above purchases and profit element etc. Ld. AO examined these details and noticed that none of these parties have digital foot print i.e. E-Mail ID. Ld. AO came to conclusion that genuineness of the alleged purchases is in serious doubt and interpreted that the assessee company could have made purchases from grey market in cash payment and obtained accommodation bills of higher amount from these parties. Thus, in absence of any confirmation from the alleged vendors the impugned purchases remained unexplained. The Ld. AO accordingly invoked the provision of section 69C read with section 115BBE of the Act and added the alleged purchase of raw material of Rs.57,49,01,910/- and assessed the income accordingly. 6. Aggrieved, assessee preferred appeal before the Ld. CIT(A) and filed detailed written submission in support of its contention that purchases were genuine and also enclosed the copy of GST returns, party wise details and quantity of material purchased, proof of payment through account payee cheque, evidence of payment to transporters after due deduction of tax. Ld. CIT(A) noticed that various new details have been filed for the first time. He thus called for a remand report from the Ld. AO. Detailed remand proceedings were carried out and when the notice was sent to the alleged seven parties either no such person was available at those addresses or the I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 5 of 38 addresses could not be located and in one case, the purchaser refused to accept the notice. Ld. CIT(A) also noticed that search action was carried out on 07.12.2021 at the business premises of APL group. Further enquiry also revealed that some of the alleged purchasers were actually not involved in carrying out the business activity and were engaged in some other routine job work. One of the person, who is proprietor of Pasupati Enterprises stated to be a crane operator whereas total sales to the assessee company by this concern are at Rs.5,99,64,324/-. Similar type of other observations were made by the Ld. CIT(A) which indicated that the alleged vendors were newly incorporated during the year and they did not file the income tax return and the owners of these proprietorship concern are actually not involved in the business of sale of goods to the assessee which indicates that the purchases were bogus and have been booked in the books of account to reduce the profits and evade taxes. Ld. CIT(A) gave detailed finding and confirmed the addition made u/s. 69C of the Act. 7. Aggrieved, assessee is in appeal before this Tribunal. 7. Ld. Counsel for the assessee referring to detailed paper books, one dated 10.05.2023 running into 247 pages, another paper book volume II running into 288 pages contended that assessee’s books of account are regularly audited, complete quantitative details are maintained, purchases having made from the parties registered under the GST Act, sales of the assessee are not in dispute and, therefore, for achieving the sales purchases are needed. It is also submitted that complete details of the alleged parties have been filed before the lower authorities. Details of transporters along with vehicle numbers have also been filed. Gross profits declared in the return are consistent I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 6 of 38 with the preceding year’s gross profit rates. Further reliance was placed on the following decisions: 1. CIT vs. Odeon Builders (P) Ltd. 110 Taxmann.com 64 (SC) 2. PCIT vs Mohd Hazi Adam & co. ITA No. 1004 of 2016 dated 11.02.2019 (Bom) 3. PCIT Vs. Vaman International (P) Ltd. ITA No. 1940 of 2017 dated 29.0.2020 (Bom) 4. PCIT Vs. Subarna Rice Mill (2018) 96 Taxmann.com 286 (Cal) 5. Simit P. Sheth (2013) 38 Taxmann.com 385 (Guj.) 6. Vijay Trading Co. (2016) 76 Taxmann.com 366 (Guj) 8. During the course of hearing when the assessee was asked about the yield achieved on manufacturing of finished goods from the raw material no satisfactory reply was given and in the closing argument, it was reiterated that complete details have been filed to prove the genuineness of the transaction of alleged purchases and when the sales of the assessee company are not disputed then the alleged purchases cannot be held to be bogus. 9. On the other hand, the Ld. DR heavily relied on the details filed before the Ld. CIT(A) and also referring to the remand proceedings wherein the proprietors of some of the alleged parties have refused to carry out the business activity and were engaged in job work like crane operator etc. Ld. DR stated that the assessee was under the regime of Excise Act till the close of the FY 2016-17 and from FY 2017-18 under the GST regime. Assessee made the purchases from the parties which except providing the documentary evidence could not prove the genuineness of the transaction and in the statement I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 7 of 38 recorded by the revenue authorities these parties accepted to be not engaged in the regular business activities of selling goods to assessee company. Following written submission has also been filed and placing reliance on various decisions as under: I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 8 of 38 10. We have heard rival contentions and perused the records placed before us. Ground nos. 1 to 3 have been raised challenging the addition for unexplained purchase at Rs.57,49,01,910/- which the assessee had made from following seven parties: I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 9 of 38 11. All the above referred seven parties are sole proprietorship concerns. Ld. AO doubted the genuineness of purchases from these seven parties. In the course of remand proceedings u/s. 131 of the Act (were sent through ITBM Module and Speed Post) except Asish Mishra, proprietor of Adarsh Trading Co. remaining six parties could not be served with the notice. In the remand proceedings itself the AO could lay its hand on the appraisal report along with the seized and impounded document and other relevant documents which were seized by the Income Tax Department in the course of search carried out on 07.12.2021 at the residential and office premises of APL Group. It was observed that one of the concerns M/s. N. B. Trading Co. of which Mr. Swapan Sashmul is the proprietor whose statement was recorded on oath u/s. 132(4) of the Act wherein he stated that he is a plumber earning his livelihood from this profession and no goods have been supplied to any person. Similarly, another person namely, Harish Kumar Chakram who is sole proprietor of Shri Pasupati Enterprise was also incorporated during the year under appeal and he stated to be a crane operator employed with L&T Ltd. and is not engaged in any business. Further, we observe that the Departmental Inspector visited at the address of M/s. Mahadev Trading Co., proprietor Mr. Sanjay Maity and Inspector found the address at a multi-storeyed residential cum commercial building and there was no signboard in the name of Mahadev Trading co. nor anybody could give any information about the existence of Mr. Sanjay Maity at this address. 12. During the course of hearing before the Ld. CIT(A), the submissions made by the assessee can be summed up in the following points: I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 10 of 38 “1) That the Ld. AO added Rs.57,49,01,910/- u/s. 69C of the Act for purchase which included GST of Rs.8,74,49,454/- The GST was not debited to the Profit & Loss Account and hence addition with GST is not justified. 2) G.P. ratio in the Asst. Year 2018-19 was 4.98% compared to 4.32% in the Asst. Year 2017-18. 3) That the Ld AO. didn't take any cognizance of quantitative details submitted before him. There cannot be a sale without a purchase. 4) Interest u/s. 234A has been charged on the basis of revised return filed. No interest u/s. 234A is chargeable as original return was filed within the due date. 5) The Ld AO. did not provide any opportunity to cross examine the witness through specifically asked for which is a serious flaw as per the Hon'ble Supreme Court of India. 6) Addition u/s 69C of the Act has been made contrary to the law enumerated therein. Addition u/s 69C is not applicable on the facts and circumstances of the case. 7) The Ld AO. was not justified in taking cognizance of the statement of persons who are evaders of tax. No presumption of bogus purchase can be taken for those sellers who didn't respond to notice or where notices could not be served. Moreover, as per CBDT's own Circular no F No. 286/212003 -IT (lnvs) dt.10/03/2003, confession statement does not have any evidentiary value. The Board has categorically relied on gathering evidences rather than recording statement only. The whole Remand Report is based on statement issued by two suppliers without any evidence on record. 8) That every possible evidence for purchase has been enclosed herewith. 9) The entire addition as per the Order passed u/s 143(3) dt 23/09/2021 is based on that we have not been able to prove the identity of the parties whereas the Ld AO himself admitted that the parties have filed their GST returns. The Remand Report also mentions that we are not able to prove the creditworthiness of the suppliers. A purchaser is not supposed to prove the creditworthiness of its supplier. 10) Notwithstanding the above, as per various judgements filed, entire purchase cannot be added, only profit embedded which can be added to total income. Excess purchase is Rs.31179557/- only as per the details enclosed, which is also due to wrong returns filed by the suppliers. Under the circumstances, your honour is requested to allow the appeal and oblige.” 13. However, Ld. CIT(A) was not convinced with these arguments and observed that the alleged purchases lacked the genuineness and creditworthiness of the persons who are sole proprietor of this concern, came to a conclusion that all these purchases are bogus they I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 11 of 38 have been brought into the books of account for the purpose of evading tax. Finding of the Ld. CIT(A) reads as follows: “Grounds 1 to 4 These grounds agitate the single issue of the addition of Rs. 57,49,01,910/- made on account of bogus purchases claimed to have been made by the AO. They are therefore being disposed as one. Facts, briefly are that the appellant is in the business of manufacturing chemical products recycling metal waste and scrap etc. He also trades in these goods and providing services in this connection. During the impugned period, the appellant claimed to have purchased raw material from seven parties which are enumerated as below: I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 12 of 38 During the scrutiny assessment proceedings, the AO noted that some of the parties from whom purchases had been claimed to be made by the appellant during the impugned period, had not filed their returns of income for the corresponding period. A further suspicious circumstance that was noted by the AO during assessment was that even though these vending parties were claimed to have shown huge sales to the appellant - mostly amounting to sales of over 5 to 6 crore and often crossing 15 crore, going up to as much as over 20 crore - these parties showed no digital footprints anywhere. In this day and age, when most statutory compliances under any statute, are to be done online, the absence of any form of digital presence, not even an email id, is very strange and may be considered to be a suspicious circumstance in itself, as indicating the lack of these statutory compliances. A show cause notice was accordingly issued by the AO, on 20.05.2021, for verification of the identity of parties from whom raw material was purchased by the appellant company, their creditworthiness and genuineness of the transactions. The above list is of the parties from whom raw material was purchased by the appellant company who had not filed their returns of income for F.Y. 2017-18 i.e. A.Y. 2018-19. In addition to the fact that the said parties were found not to have filed their income tax returns, the AO also found that the GSTR of the said parties showed purchases amounting to a value of Rs 45,65,01,722/-, while the purchases as per the appellant himself, from these 7 parties around amounted to Rs 57,49,01,910/-. Therefore, the AO found the purchases related to these parties to be suspicious and unreliable. During assessment despite opportunities being provided in the appellant he was not able to submit any form of confirmation from any of the above stated parties. He could only produce books and evidences that were based upon his own books of account or documents that had been under his control These circumstances have led to the impugned addition and hence the present appeal. During appeal, the appellant has contended that on account of the COVID situation as well as due to the assessment being completed under the faceless scheme, he was denied adequate opportunity to present proper evidence. This I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 13 of 38 grievance of the appellant was addressed through the means of remand proceedings during this appeal. The appellant was provided with complete opportunity to present whatever evidence or submissions that he thought he could not submit during assessment. During remand, notices u/s 131 of the Act, were sent through the ITBA system as well as through speed post to the seven parties in whose case purchases had been found by the AO during assessment, to be bogus. The remand report, inter alia, has enumerated these parties. These are: Sl. No. Name of the Assessee PAN 1 Budhadev Malik COAPM2096A 2 Ashok Kumar Gupta BTMPG4413M 3 Swapan Sashmol FBMPS6099K 4 Harish Kr. Chakram BGRPC7718R 5 Soumya Chakraborty BDXPC8614B 6 Sanjay Maity COLPM5353M 7 Ashish Mishra ALXPM4891M But out of seven parties, the above notice could be served by the Postal Department only to one party - Ashish Mishra (Prop. of M/s. Adarsh Trading Co.). Remaining six parties to whom notice could not be served even by the Postal Department are as follows: Sl. No. Name of the Assessee Postal Remarks 1 Budhadev Malik Not know return 2 Ashok Kumar Gupta No such person in this address 3 Swapan Sashmol No such person in this address 4 Harish Kr. Chakram Address cannot be located 5 Soumya Chakraborty Refused return 6 Sanjay Maity No such person in this address The AO, therefore, has held that this proves that the identity of the above persons, their creditworthiness and the genuineness of the transactions claimed to have been made by them with the appellant could not be ascertained during remand proceedings. Moreover, though the notice was served to Shri Ashish Mishra by the Postal Department, but Shri Ashish Mishra did not appear for personal hearing fixed as per the said notice u/s 131 of the Act. Due to this the creditworthiness and genuineness of the transaction made by Shri Ashish Mishra with the appellant company could not be established. I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 14 of 38 It is noteworthy that a search and seizure was conducted on the various residential and office premises of the APL Group (appellant's group), including the appellant on 07.12.2021 and subsequent dates. Search Warrant was also executed in the name of the appellant company. During the course of search & seizure operation, books of accounts and incriminating documents were seized. In this case, the Appraisal Report, has clearly indicated that six out of the above mentioned seven individuals in question have made transactions with the appellant company by way of issuing bogus bills and their creditworthiness was doubtful as they had not filed their ITRs for the relevant assessment years. Analysis of seized/impounded documents has brought forth the following: 1. During the search proceedings in the case of the group. a team was sent to registered address of M/s. Sashmol & Nath Engineering Private Limited which was found non-existent. Thereafter, one search team was sent to the residential address of Shri Swapan Sashmol, who is the director of M/s. Sashmol & Nath Engineering Pvt. Ltd. During the course of search proceedings, statement of Shri Swapan Sashmol was recorded on oath u/s 132(4) of the Income Tax Act wherein he has stated that he is a plumber earning his livelihood from his profession, his company has not supplied an goods to any person. 2. It may be mentioned here that Shri Swapan Sashmol is one of the directors of M/s. Sashmol and Nath Engineering Private Limited. Here in this case, he is the proprietor of M/s N.B. Trading Co, one of the claimed suppliers for the appellant - one of the seven purchasers who were found to be bogus 3 Letters/notices of superintendent (HO Anti Evasion), CGST & Central Excise, Howrah Commissionerate were seized from the residential premises of Swapan Sashmol at 39 Bazar Lane, Uttarpara Bazar, Hooghly-712258. There was no explanation offered in this regard either by Shri Sashmol or the appellant who was the involved party in the transactions with Shri Sashmol. The relevant portion of statement of Shri Swapan Sashmol is reproduced hereunder: Q8. As per MCA data, it is seen that you are Addl. Director in M/s Dag Creative Media Private Limited. Also, as per the information available with the income tax department two proprietorship concerns namely M/ NB Trading Co: (GST No. 19FBMPS6099KIZF) and M/s SS Trading Co. (GST No. 19FBMPS6099K2ZE) exist in your name. Please state where the books of account of your proprietorship concerns are kept. Please offer your comments on the issue. Ans: Sir, I do not know anything about this. 1even do not know the meaning of Books of Account. Q9. Please state your source of income. Ans: Sir, I am a plumber by profession and I earn Rs. 500/- per day on an average I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 15 of 38 Ans: Sir, l agree with the above. Q. 20 From the above discussions and your previous replies it is now amply clear that your proprietorship concerns and M/s Sashmol and Nath Engineering Private Limited are shell entities and had no real business whatsoever. These have been formed for the sole purposes of providing accommodation entries, raising fake GST invoices, passing on bogus ITCs. Please offer your comments. Ans: Sir, l agree with the above. The remand report has stated that from the statement of Shri Swapan Sashmol as well as the fact that documents related to the bogus transaction were found upon the premises of Shi Sashmol it is ample clear that M/s N.B. Trading is a shell entity providing bogus bill only. It is also clear that Shri Swapan Sashmol is nothing but a front created by the appellant to create a bogus trail of non-existent purchases. During the post search proceedings, it has been brought on record, that Shri Harish Kumar Chakram, who was claimed to be the proprietor of M/s. Sri Pashupati Enterprises was, another party out of the seven who were found to be bogus suppliers, was summoned u/s 131 of the Income Tax Act, 1961 requesting his personal appearance. In response to the Summons so issued, Sri Harish Kumar Chakram appeared and his statement was recorded on oath u/s 131 of the Income Tax Act. In his statement, Shri Harish Chakram has stated that he is not engaged in any business, he is merely a crane operator currently employed at L&T Limited. He was more explicit in his statements; he stated that a firm namely M/s. Sn Pashupati Enterprises was incorporated by using his identities fraudulently and that this has been used by some unknown person for his own illegal purposes. Sri Harish Kumar Chakram has admitted in his statement that the entire sales booked by M/s. Sri Pashupati Enterprises in the name of M/s. APL Metals Limited is completely bogus and no goods have been supplied with such bogus bills. The relevant portion of his statement is as under: Q.7. From the records available with the department that you are proprietor of Ms Shri Pashupati Enterpises having office address at GROUND FLOOR, 4, SURYA SEN PALLYSHASHTRIJI ROAD, West Bengal 700126 and GST No. 19BGRPC7718RIZE. Please furnish details of business performed by the firm since its establishment. Ans. Madam. I do not have any knowledge about how this firm has been created in my name. I have not done any business in my life lam merely a crane operator. However, in the year 2017 when t was unemployed two of my native friends namely Shri. Baban Kumar Singh and Shri Satish Pandey assured getting me a job and took my details such as copy of Aadhar and PAN with them. This Firm might have been created by them only by forging my signatures Sri Harish Chakram also confirmed in his answer to Q.No. 12 of his statement that all the sales booked by M/s. Shi Pashupati Enterprises are completely bogus without supply of any corresponding goods or services. The relevant portion of his statement has been placed hereunder. I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 16 of 38 Q. 12. From the records available to the department, it has been observed that your firm M/s Pashupati Enterprises has booked sales of Rs, 5,99,64,324/- in the name of M/s APL Metals Limited during the financial year 2017-18. Please state what was the commodity supplied to the company. Also, submit copies of invoices, Weighing slip, transporter Bitty and delivery challan in respect of all the supplies made. Ans. Madam all the above mentioned sales booked from Mr Pashupati Enterprises are completely bogus. I have not supplied anything to M/s APL Metals Limited. Neither I have operated any firm named M/s Pashupati Enterprises. I am a crane operator and receive salary from M/s Larson Turbo Limited. In his answer to Q.No.13 of his statement, Sri Harish Chakram informed that he has also filed an FIR with Jharkhand Police against his friends who purportedly misused his identity cards for illegal purposes. The relevant portion of his statement has been placed hereunder: Q.13. Have you made any police complaint regarding misuse of your identity documents? Ans. Yes Madam. I have lodged Fir through online mode before Jharkhand Police with complaint No. 362037 against those two persons namely Baban Kumar Singh and Satish Pandey. From the statement of Shri Harish Kumar Chakram it is quite undisputedly established that M/s Shripashupati Enterprises is a shell entity providing bogus bills only. In the remand report it has been noted that the departmental inspector visited the address of Sanjay Maity - another one of the suppliers from the list of seven suppliers of bogus goods to the appellant, listed above, for the purpose of making discreet enquiries, at C/o Mahadeh Trading Co., 130, Ramdulal Sarkar Street, Kolkata departmental inspector is as below: I visited the said premise on 28.01.2022 at 02:00 PM. It's a multi-storey residential cum commercial building. I did not found any letter box or signboard in the name of the proprietorship concern "Mahadeb Trading. On enquiry in the vicinity about Mr. Sanjay Maity, nobody could say anything about the person. Hence no such person resides at the premise" It may be mentioned that Shri Maity through this Mahadeb Trading is supposed to have supplied goods amounting to about Rs 6.15 crores to the appellant according to the appellant's version. To Sum up, the appellant during appeal had contended that he had been denied natural justice and had not been given ample opportunity to establish the genuineness of the impugned purchases. At his request therefore, the matter had been remanded to the AO for complete examination. Not only did the appellant not produce any of the parties who, according to his claim, had sold goods worth several crores to him, but even the efforts of the AO in this regard were brought to nought since none of the seven parties I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 17 of 38 responded to the summons issued to them in almost all of them, the notices also could not be served upon them. The summary of the findings of the remand report is that the identity of two entities, namely Shri Swapan Sashmol and Shri Harish Kumar Chakram had been established at the time of the search and post search enquiries respectively; and in the case of one entity, namely Shri Ashish Mishra, at the stage of remand enquiry, the summons were undoubtedly served – but there was no personal appearance on the part of Shri Ashish Mishra, which was a requirement of the summons u/s 131. In these three cases the genuineness of the impugned transactions and the creditworthiness of any of these parties from whom purchases were claimed to have been made, was not established. In the case of the other purchasers, the notices themselves could not be served and there was no trace of these parties. In fact, in the case of one supplier- Sanjay Maity - even the Departmental Inspector deputed for the task of tracing Shri Maity, could not find any trace of the latter or any of his business concerns. Therefore the proving of their identity, their creditworthiness as well the genuineness of the transactions could not be established. It must be kept in mind that this issue of bogus purchases has been in the reckoning ever since the search and assessment stages. At the instance of the appellant, one more opportunity was provided to him to establish the genuineness of the impugned purchase transactions through remand proceedings. At no point of time has the appellant been able to establish this. The law, as per the Income Tax Act as well as the law of evidence, as it exists and is explained by various judicial authorities, is clear on one issue, which is summarized in one phrase, semper necessitas probandi incumbit ei qui agit. This translates to "the necessity of proof always lies with the person who lays charges." In the context of the present case, this translates to the necessity of proof lies with the person who is asserting any particular fact or making any claim. This claim being made is always presumed to be in the context of someone analysing the merits of this claim - which, in the present context, is the assessing authority (or as the case may be, the appellate authority). The presence of the assessing/appellate authority has the effect which is embedded within the principle of burden of proof, that is, onus probandi, which translates as the obligation to shift the assumed conclusion away from an oppositional opinion to one's own position. When applied in the present context of purchases being claimed by the appellant in his return, the above principles stipulate that the burden of proving that the claimed purchases were bona fide lies squarely upon the appellant. He has to discharge this onus through the production of cogent reasoning and concrete evidence. This has to be to the satisfaction of the assessing/appellate authority who is considered to be a prudent reasonable person. From the material on record, I find that the appellant has not been able to discharge his onus at all with regard to the impugned purchases. He has not been able to prove even the identity, in the context of the impugned transaction, of the claimed sellers of goods. Out of seven such sellers, in the case of 4, there is no trace of these entities/persons. Even the postal Department or the Departmental Inspector has not been able to trace them or serve notices upon these. The appellant of course, has unequivocally stated that it is not his duty to prove that such person(s) actually exist at all or not, According to him, he is not bound by law to prove to the assessing authority, I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 18 of 38 that such sellers do have a physical existence and that they are creditworthy to carry out transactions running into several crores. In the case of one of the sellers, where the notice u/s 131 was actually served through postal means, there was no compliance at all, either physically or in any other fashion. In the case of two persons, who had actually been traced, and who indeed did exist physically, the results of the inquiry, including through the examination of these persons under oath, have been discussed earlier in this order. Going by the process to be taken by law in such a case as this, it has already been mentioned that the primary onus for establishing the bona fides of the impugned purchases lies, by law, upon the appellant since it was he who was asserting that these purchases were bona fide and genuine. I find that except for providing a whole lot of paper-work in terms of the purchase order, ledgers, some bank accounts, monthly summaries of raw-material register, monthly summary of finished goods, summary of sales as per P & L Account, etc, details which had also been provided by the appellant during assessment, the appellant has done nothing to prove the genuineness and bona fides of the impugned purchases. He has been asked specific questions in relation to very specific purchases. The appellants reply has been based upon generalized figures of sales and purchases. When asked about the genuineness of the purchases, it was primarily his duty to produce the said sellers of the goods and to show that the said purchases were bona fide in the sense that the identity of the purchasers was proved; that they were creditworthy enough to execute the purchase orders placed by the appellant, that ran into several crores of rupees. That the purchases themselves were genuine in that the surrounding circumstances within which the purchases had been executed were genuine. I find that the appellant has not been attempting to discharge this to any level of satisfaction. Hits entire bent has been that if the sellers of the goods did not fulfil their statutory obligations with respect to the filing of their ITRs, if they did not fulfil the requirements of GST; if they did not respond to departmental notices u/s 131 or 133(6): if they were not traceable and that he was completely unaware of their whereabouts, or if traced, they unequivocally stated that their identities had been fraudulently used for creating fictitious, shell entities and that they had even filed FIRs against persons who had done so; even then it was not his onus to counter any of these factual findings and that he had no control over such persons. The appellant has taken the stand that he is not responsible for explaining of the above issues and that the entire transaction of such purchases should be taken to be genuine since he had all the paperwork ready. His entire approach in this regard, in my opinion, is based upon an erroneous reading of the legal framework within which these issues are to be examined. Judicial authorities, time and again have repeated that any assessment cannot be a stand-alone procedure and that an assessing authority is not supposed to apply blinkers and, without taking into account the rational workings of a prudent business mind, he is not supposed to complete assessments of income. In this case, it is undisputed that it is claimed that the said parties have entered into transactions running onto several crores of rupees. It is difficult to accept, without some form of plausible reason, why these seven parties, not only disappeared without a trace, but that they never had any digital or physical footprints. The normal facts and circumstances within which any business or commercial activity takes place does not allow for the complete absence or disappearance of a businessman who has been I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 19 of 38 participating in business transactions that are of the kind of volume shown in the impugned transactions for a reasonably prolonged period of time. Undoubtedly, such a thing can indeed happen, as sometimes even improbable things do happen, but the likelihood of seven such occurrences is even lower. The fact that all seven disappeared in the case of one single person – the appellant- makes this almost impossible to believe for a reasonable prudent person. This goes even further, in that when some of these purchasers are traced, they categorically deny being involved in the impugned transaction and unequivocally state their ordinary vocations and meagre earnings to underline the fact that they were not even creditworthy to envisage such a business transaction much less to undertake it. In the backdrop of the aforementioned stacking of preponderance of improbabilities, the appellant has no explanation to offer save that he has no control over the sellers of these goods. To accept the contentions of the appellant would be tantamount to applying blinkers in the true sense of the phrase, and of completing the assessment without any application of mind to the overall facts and circumstances within which such transactions are taking place Not only has the appellant not been able to discharge the onus cast upon him by law, but he has not even been able to controvert what the AO has put forth before him. This Is despite getting enough opportunities for doing so. Except for providing elaborate paperwork the appellant has not done much else. In this connection it is instructive to study what is the opinion of legal authorities across the country. Some of these citations discussed below, are with reference to issues other than purchases, however, they have been selected on account of the legal principles, especially the onus of proof, that they underline. In Bhola Shanker Cold Storage vs Joint Commissioner of Income Tax 270 ITR 487 (CAL) June 24, 2004, the Hon’ble High Court held that the assessee has to establish first identity, second creditworthiness and third genuineness. When all three are established, the onus shifts. Mere payment by cheques not sacrosanct to make a non-genuine transaction into a genuine transaction. Nor indeed is the mere providing of extensive documentation. in the case of CIT Vs Nivedan Vanijya Niyojan Ltd reported in [130] Taxman 153 (Calcutta) it was held that the main ingredient that has to be satisfied by the taxpayer is to establish the identity of the share subscribers the creditworthiness and the genuineness of the transactions. Mere bank entries and PAN would not be sufficient to discharge the onus, when the surrounding circumstances and probabilities point against the appellant. in the instant appeal the surrounding circumstances and probabilities unequivocally and undeniably point against the genuineness of the transactions. Similarly, the Hon'ble SC held in the case of CIT vs. N. Tarika Properties Investment (2014) 51 taxmann.com 387 (SC) that "PAN cannot be treated as sufficient discloser of identity of the person. PANS are allowed on the basis of application without actual de-facto clarification of identity or ascertainment of activities, nature of business activity and are just so as to facilitate the I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 20 of 38 revenue to keep track of transactions and thus PAN cannot be blindly and without consideration of surrounding circumstances treated as sufficient disclosing the identity of individual." This underlines the need for the appellant, on who lies the burden of proof, to go beyond the mere supply of some documents and establish the transactions bonafides. CIT vs Active Traders Pvt. Ltd. (Cal) 214 ITR 583 The jurisdictional HC has held that where for any sum credited on account of share capital or share premium, there must be existence, identity, genuineness and creditworthiness of the share applicants. This needs to be established by the Assessee by going beyond the submission of some documents. Sankar Industries 114 ITR 689 (Cal) It has been held that the Assessee must prove identity of creditor, capacity of creditor to advance money and genuineness of transaction mere proof of identity not enough nor is the mere submission of documents enough. CIT Vs. NR Portfolio Pvt. Ltd. (Delhi) In this case, it is held that creditworthiness cannot be proved by mere issue of cheques furnishing a copy of statement of bank account. The core matter of bonafides of the transaction needs to be established. Maru Ram Makhan Lal Vs. CIT (P&H) 300 ITR 12 In this case, it is held that it is not enough that creditworthiness of the transaction is shown but it should also be shown that creditor had funds on the date of advancing the loan even if the amounts received by cheque and return of income has been filed. 208 ITR 465 (Cal) Precision Finance Which has held that mere furnishing of particulars is not enough, Sumati Dayal Vs. CIT (SC) 214 ITR 801 In this case, it is held that even though the share applicants could not be accessed through notices, assessee should prove the genuineness of the transaction as they were accessible to it. CIT Vs MAF Academy Pvt. Ltd. (Delhi) In this case, it is held that mere production of incorporation details, PAN Nos or the fact that third persons or companies had filed income tax return are not sufficient for the assessee to discharge its onus to prove the genuineness, creditworthiness and identity of person from whom the assessee had received share application money. CIT Vs. N Tarika Properties Investment Pvt. Ltd. (Delhi) In this case, it is held that mere furnishing of PAN and completions of paper work does not prove the genuineness of the person. I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 21 of 38 M/s. Pramila Investment & Finance Ltd. V. ITO In this case, it is held that the assessee has to establish the source and capacity of the share subscribing company. Mere submission of IT return and payment made by cheque are not sufficient to prove the genuineness of the transaction. There is need to understand, evaluate and establish the bona fides and genuineness of the transaction itself. Ruby Traders & Exporters Vs. CIT (CAL) 263 ITR 300 In this case, it is held that the assessee must prove the genuineness and creditworthiness of the share subscribing company. Mere submission of IT return and payment made by cheque are not sufficient to prove the genuineness of the transaction. There is need to understand evaluate and establish the bona fides and genuineness of the transaction itself. In the case of CIT Vs NR Portfolio (Pvt) Ltd, reported in [2014] 42 taxmann.com 339 (Delhi), it is held that when the persons working behind the companies do not appear before the AO and are evasive in approach, the matter of due discharge of onus by the assessee-company is not fulfilled. In another recent judgment of the Hon'ble High Court of Delhi, the case of Riddhi Promoters (Pvt) Ltd Vs CIT-7, Delhi, reported in [2015] taxmann.com 367, the Hon'ble High Court has held that merely establishing the identity of the share applicant would not suffice, the assessee is bound to bring on record and satisfy Revenue about the genuineness of the transaction, as well as the creditworthiness of the share applicant. Section 68 of the Income-tax Act, 1961 -Cash credit (Share application money) - Assessment year 2002-03 - Whether establishing identity of share applicant or creditor is not sufficient for assessee to discharge onus under section 68; assessee has to further satisfy revenue as to genuineness of transaction and creditworthiness of share applicant or individual who is advancing amounts - Held, yes- Whether creditworthiness of share applicants has to be seen in context of assertion made by them or materials presented before Assessing Officer at relevant time - Held, yes [Para 6] [In favour of revenue] Relevant portion of the judgement is reproduced below: 1. I also find that all the submissions made by the appellant during the course of the appeal point towards the elaborate documentation, meaning thereby that the appellant has produced papers relating to application for the shares, the allotment of the shares the share certificates, payments by cheque and the necessary papers filed before the Registrar of companies, where the name of the assessee has been reflected as a Shareholder The appellant has also filed proof of amalgamation of the companies Wherein the shareholding has changed hands, t is also the contention of the appellant that it has provided copies of the bank statement bank contract notes and delivery instructions to the broker by way of proof that all these transactions were genuine. However, in my considered view of the matter, it is precisely this elaborate paperwork that strengthens the mater relating to the bogus benefit of the LTCG, which clearly has been schemed, pre-planned and executed with malafide intelligence and precision. Therefore all these papers are mere documents and I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 22 of 38 not any evidence. The whole gamut of transactions are unnatural and highly suspicious, and therefore the rules of SUSPICIOUS TRANSACTIONS Ought to apply in the instant case. There are grave doubts in the story propounded by the assessee before the authorities below. None of the material produced before the Ld. AO by the assessee-appellant are enough to justify the humongous gains accruing to the assessee by way of Capital Gains. In my considered view the banking documents are mere self serving recitals. The law in the matter of self-serving recitals has been long established by the Hon’ble apex Court. In the case of CIT vs P. Mohankala 291 ITR 278, the Hon'ble Supreme Court held that "the money came by way of bank cheque and was paid through the process of banking transactions was not by itself of any consequences." The burden of proof is on the assessee in the matter of justification of receipts which are of suspicious and dubious nature. In the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC), their Lordships laying down the significance of human probabilities held as under: "in a case where a party relied on self serving recitals in documents, it was for that party to establish the truth of those recitals: the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals." Similarly in the case of Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC), their Lordships held as under: "In view of section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income tax as the income of the assesses of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the evidence against the assessee viz. the receipt of money, and if he fails -to rebut, the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature." In the case of Sajan Das & Sons vs. CIT (2003) 264 ITR 435 (Delhi), their Lordships of the High Court of Delhi, while considering a case in which gifts were received by the assessee through banking channels laid importance on the capacity of the donor for making the gift and his identity as well as importance of relationship between the donor and donee in determination of genuineness of gift held as under: "That a mere identification of the donor and showing the movement of the gift amount through banking channels was not sufficient to prove the genuineness of the gift. Since the claim of the gift was made by the assessee, the onus lay on him not only to establish the identity of the person making the gift but also his capacity to make a gift and that it had actually been received as a gift from the donor. "In my considered view wherever documents are relied upon they should pass the test of normal behaviour of the assessee in the course of business viz., human conduct, preponderance of probability and surrounding circumstances. In my considered view even if documentary evidence is produced, the same must pass the test of human probabilities and surrounding circumstances if they do not, then addition justified. Reliance on such matters is placed on the case of Smt. Phoolwati Devi 314 ITR (AT) 1 (Del.) The Delhi High Court in the case of CIT Vs. Nipun Builders & Developers (P) Ltd. (2013) 350 ITR 407 (Del), where summons were returned un-served with the remarks "no such company" had asked the assessee to produce the Principal Officer of the companies who had subscribed to the shares along with the relevant details – assessee developed cold feet and directed the AO to go to website of ROC and search for addresses of share-subscribers and then communicate with them for proof of genuineness of share subscription. Naturally, the High Court had decided against the assessee holding that the share amounts were not genuine. I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 23 of 38 The Hon'ble Calcutta High Court in the case of CiT vs. Kundan Investment Ltd. (2003) 263 ITR 626 (Cal) has held that once there is non response from shareholders to the enquiry letters of the A0, it is the responsibility of the Assessee Company to prove creditworthiness of the subscribers or genuineness of the transaction. The Ahmedabad Tribunal In ITA No.1716/Ahd/2012 in the case of ACIT, Cir- 5, Ahmedabad Vs. Nakoda Fashion Pvt. Ltd held that "From going through all the above judgments and decision, we find that along with evidences, surrounding circumstances, human probability and intentional acts are also to be taken note off while accepting the identity, creditworthiness and genuineness of the cash creditors which in this case is the share applicants. In the case before us we observe that assessee is trying to assert again and again upon the PAN, IT returns, bank statement and confirmations of the impugned 5 parties but has nowhere tried to clarify or disclose the fact which has embedded in the financial statement of these 5 parties which speaks in itself that they are paper companies. ... It is well settled that in order to discharge the onus the assessee must prove the following :- i. The identity ii. The Capacity iii. Genuineness of the transaction. If the assessee has adduced evidences to establish the prima facie, the aforesaid onus shifts to the Department. However, mere furnishing of particulars or the mere fact of payment by account payee cheque or the mere submission of confirmation letter (by the share applicant) is by itself not enough to shift the onus to the Department although these facts may, along with other facts be relevant in establishing the genuineness of the transaction. As held by Hon. Supreme Court in the case of CIT VS. N Tarika Properties Investment (2014) 51 taxmann.com 387 (SC) that "PAN cannot be treated as sufficient disclosure of identity of the person. PANs are allowed on the basis of application without actual de facto clarification of identity or ascertainment of activities, nature of business activity and are just as to facilitate the Revenue to keep track of transactions and thus PAN cannot be blindly and without consideration of surrounding circumstances treated as sufficient disclosing the identity of individual". 21. We further observe that Hon. Delhi High Court in the case of CIT V Empire Builtech P Ltd 361 ITR 258 (Del), has held that when Asst. Year 2009-10 assessee does not produce evidence or tries to avoid the appearance before the Assessing authority it necessarily creates difficulties and prevents ascertainment of the truth and correct facts as the Assessing Officer is denied the advantage of the attendance or factual assertion by the assessee before him. If an assessee deliberately and intentionally fails to produce evidence before the Assessing Officer with the desire to prevent Nakoda Fashion Pvt. Ltd.,, ... vs Department Of Income Tax on 18 August, 2016 Indian Kanoon- http://indiankanoon.org/doc/128477607/13 enquiry or investigation an adverse opinion should be drawn. The assessee had not discharged the initial onus to establish the identity, creditworthiness of the share applicants and the genuineness of the transactions. The additions made by the Assessing Officer were justified and sustainable. 22. We are, therefore, of the view that in the I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 24 of 38 given facts and circumstances of the case and respectfully following the judgments of Hon. Supreme Court, High Court and the decision of C-ordinate Bench as discussed above, we are of the confirmed view that assessee has been able to just prove the identity of the company but unable to prove the genuineness & & creditworthiness of the impugned 5 parties. In the result, the sum of Rs.3.5 crores has rightly been treated as unexplained money u/s 68 of the Act by the ld. Assessing Officer. We set aside the order of ld. CIT(A) and restore that of the Assessing Officer. In the result ground no.(i) of Revenue is allowed." In the cases of M/S Subhalakshmi Vanijya Pvt Ltd and several others, the Hon'ble Kolkata Tribunal in its order ITA No 1104/KoV2014 and others dated 30.07.2015, the Hon'ble Kolkata Tribunal has discussed the entire gamut of issues surrounding the various aspects of extant judicial pronouncements in the connection of procedure to be followed in proving the genuineness and bona fides of any transaction, before arriving at the final conclusions. Of particular significance is the view of the Ahmedabad Tribunal in ITA No.1716/Ahd/2012 in the case of ACIT, Cir-5, Ahmedabad Vs. Nakoda Fashion Pvt. Ltd, discussed supra, which has elaborately dealt with several case laws in this regard and summed up the various issues involved including the onus for proving a transaction, the essentials of what this proof should involve and so on. In the judgement of Hon'ble Supreme Court in the case of Sri Meenakshi Mills Ltd 63 ITR 609 where it was held that the I.T. Authorities are entitled to pierce the veil of Corporate Entity and to look into the reality of the transaction. In the case of McDowell & Co. 154 ITR 148 (SC), it was stated that implications of tax avoidance are manifold, First, there is substantial loss of much needed public revenue. Next, there is a serious disturbance caused to the economy of the country due to the piling of mountains of black money, causing inflation. Thus, there is the large hidden loss" to the community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of members in the country being involved in the perpetual war waged between the tax payer and his expert team of advisors, and accountants on the one side and the tax gatherer and his perhaps not so successful advisors on the other side. The Hon'ble Court further held that it was for the Court to take stock to determine the nature of new and sophisticated legal devices to avoid tax and consider whether the, situation created by the devices would be related to the existing legislation with the aid of emerging techniques of interpretation as was done in Ramsay, Burmah Oil and Dawson to expose the devices for what they really are and to refuse to give judicial benediction. The central thrust of the above cited ratios is that it is the duty of the assessing authority to go beyond what has been created by the assessee for the purpose of tax evasion/avoidance, and to unearth the true nature of the transactions against which income is to be assessed. These citations are squarely applicable in this case, where it is clear, as per the afore discussed uncontroverted facts of this case, that the appellant has taken recourse to the creation of a false, but complete documentary trail in order to book bogus purchases so as to suppress his GP ratio. The GP ratio declared by the appellant in other years has no material effect on the GP ratio of this year. I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 25 of 38 This is because in the other years, where some GP rate has been accepted by the Department, the facts, as unearthed by the Department in this case are not as incriminating. It is the special investigations that have been brought on record, at the search/post-search as well assessment and remand stages, that have brought to the fore the extent to which the appellant has been falsifying his books through the booking of bogus sales. These investigations have admittedly not been conducted in the other assessment years and therefore the book results of these other years cannot be reasonably applied to the instant year under appeal. It is a settled proposition of law, as held by the Hon'ble Supreme Court in the case of CIT V. Durga Prasad More AIR 1971 SC 2439, 1971 82 ITR 540 SC, that though an apparent statement must be considered real until it was shown that there were reasons to believe that apparent was not real, as held by the Apex court in CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349, in a case where some party relied on self serving recitals in documents, it was for the party to establish the proof of those recitals; the taxing authorities were entitled to look into the surrounding circumstances to find out reality of such recitals. The Hon'ble Court has held: 11. Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real In a case of the present kind a party who relies on a recital in e deed has to establish the truth of those recitals otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. "[Emphasis supplied] The above cited decisions and propositions of law must be read in harmony with the also settled legal proposition that if no evidence is given by the party on whom the burden is cast, the issue must be found against him. Therefore, onus is always on the person who asserts a proposition or fact, which is not self evident. I find that the burden for proving the fact that the purchases declared by the appellant were real and not bogus lay squarely upon the appellant himself. This burden became more onerous in the backdrop of the findings, as discussed above, of the Department at various stages that the entire impugned purchases were bogus. A distinction must, at its stage be made between finding the parties who were claimed to have made the sales to the appellant, being found to be bogus, and the purchases themselves being bogus. The entire purchases were found to be artificially manufactured by creating false paper trails both through the books of entities, that had been created by the appellant himself, and at his instance, and through false paper trails within I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 26 of 38 his own books. The entire purchase transaction, meanwhile took place out of the books. In this context, since the onus was very onerous in this case, it was the legal duty of the appellant to provide concrete evidence accompanied by cogent reasoning, refuting not only the findings of the investigative process that had accumulated against him, but also of proving his own books results. I find that neither during assessment, aforementioned tasks to any degree of satisfaction in the mind of a prudent person. In the face of a denial by alleged purchasers, of having any connection with the impugned transactions, in the face of the assertion of such alleged purchasers that they had never conducted any business, and that they were nominally employed low-wage earning persons, the appellant has merely stated that it was not his responsibility to refute the statements made by persons who were not in his control, He would have us believe that persons who had allegedly made sales running into several crores of rupees, had now suddenly disappeared, after closing shop for good and had started working as crane operators or at an even lower economic level. He has completely ignored the fact that it is his responsibility to prove the identity of the supplier in the context of and with respect to the transaction involved. It is he who had to establish the creditworthiness of the suppliers, again, with respect to the impugned transactions, and how was it possible that persons of negligible worth, who themselves were denying the said transaction, were being claimed, by him, to have supplied goods worth several crores of rupees through a reasonably long period of time. As per the submissions and assertions of the appellant himself, he is a veteran of his particular line of business - he has been in this business for over half a century. It is Common Knowledge that the presence of someone in any particular line of business or trade acquaints him with the workings and business environment and major players of is particular line or business, it is not his case that he was a very minor player of his business or that he worked at the fringes of his business and/or that he was unaware of the players involved. Armed with this knowledge, commonly available to any player in his business, it would be expected - prudently and reasonably - that the appellant would be aware of the main or at least the suppliers of raw material and other goods who were capable of servicing his orders. His plants work on the principle of optimal capacity utilisation. This implies that once his plants are operating, he would require uninterrupted supplies of raw material so as to achieve optimal capacity utilisation and to avoid cost over runs on account of the production slowing down or stopping altogether. With this in mind, how can it be believed that the appellant placed large orders - of such critical value to his existence - running into several crores of rupees (about 10% of his total purchases), with fly-by-night operators of little or no credibility or worth and persons who were prone to close shop and completely disappear without a trace just to avoid the payment of taxes. This behaviour of a prudent businessman appears very improbable. The foregoing discussions only shows that neither has the appellant tried to discharge his onus to any reasonable degree of plausibility nor has been able to refute the investigative results of the Department; nor indeed has the appellant as discussed offered plausible causes for his clearly irrational and imprudent behavior above. In the aforementioned circumstances, 1 cannot get myself to agree with the contentions as made by the appellant. I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 27 of 38 The appellant has in fact taken the alternate plea that even if the sellers were found to be bogus, the purchases themselves were not bogus. His main argument in this case has been that his purchases were duly entered in the books and the AO has accepted, without demur, the sales of the appellant, and since there cannot be any sales without purchases, therefore the appellant must definitely have purchased the said raw material from somewhere, even if not from the said sellers. While considering this alternate plea, what also needs to be taken into consideration is the test of human probabilities. How probable is the behaviour of the appellant when he asserts that, he, an established business player in his line of business, with his entire business depending upon the smooth running of his manufacturing plants, staked his entire existence upon operators who were entirely unknown to him, and who had no business presence or means or creditworthiness; who were entities that had no presence in the business scope of the appellant's line of business and who, after making the impugned supplies, promptly disappeared only to avoid taxes. Application of virtually any test of human probabilities would not answer the above question in the affirmative. The appellant has not offered any alternate sources from which he could have made these purchases since the parties from whom these purchases had initially been claimed to have been made were found to be bogus. Even alternate arguments and pleas have to be supported by some form of evidence or plausible argument. These have been singularly absent in the appellant's submissions The appellant in any case, has not been able to make any form of Correlation or correspondence between the purchase of the impugned raw material with its Consumption or It could be only through such an exercise that with the production or final sales figures. It could be only through such an exercise that corroborative evidence for the sake of consumption of these purchases could be ascertained. What the appellant is trying to do through his alternate plea is that he is suggesting that only the GP from the sale corresponding to these bogus purchases can be added in this case While this argument has an element of substance in it, there are certain aspects that accompany the employment of this argument while estimating the amount of unaccounted money that had been invested by the Assessee during the coOurse of booking bogus purchases. It is necessary to estimate the unaccounted seed money that would have been injected by the appellant in order to carry out these bogus transactions. This estimate of the unaccounted seed money is based upon the cycle of procurement, manufacture, and sale as shown by the appellant. No such estimation is available in the case of the appellant. Since the payments have been made by cheque, whose ultimate fate is not known, it cannot be presumed that any part of the bogus payments made by the appellant to such bogus parties was received back for utilization by the appellant for making subsequent purchases. The concept of peak investment though applicable, needs to be worked out and presented by the appellant himself. Nowhere has he provided any form of a cash flow with respect to the out-of-the books purchases that necessarily would have been made by the appellant. He has nowhere brought on record the source for making such out-of-the-books purchases. There is no way to estimate or arrive at a figure for any form of seed money that could have been cyclically used by the appellant in order to make these purchases. The transactions have bogus parties. Corresponding payments were duly made through banking channels to these fictitious parties. Whether or how any of the amounts so credited to these bogus bank accounts, were re-utilised I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 28 of 38 by the appellant after being withdrawn in cash or through any other means has not been made evident by the appellant. Therefore it is not possible in his case to apply the concept of peak investment for these transactions. An ad hoc estimation of this seed money (peak investment) would not be as per any legal reasoning. Therefore the only conclusion that can be reached is that the appellant has made the entire amount of investment from out of his unaccounted income. Therefore, in view of the above discussions, the action of the AO stands confirmed. These grounds are dismissed. Ground 5 This being consequential is disposed as fullness, I agree with the appellant that once the return us 139(1) has been filed in time no interest u/s 234A can be levied. This ground therefore is disposed with directions to the AO to recalculate the said interest as per law at the time of giving effect to this order after verifying the date on which the return was filed by him. This ground is allowed for statistical purposes.” 14. After perusing the above detailed and exhaustive finding of the Ld. CIT(A) and also considering the ratio of the decision referred and relied upon by both the sides, we will first examine the facts of the case. We note that this is the year in which assessee came into the GST regime. All the alleged parties are sole proprietorship concerns which have been registered during the year. All the alleged parties have not filed their income tax returns and except two no other parties could be located by the revenue authorities. The two parties who have been located of which one of the proprietors Mr. Sapan Sashmol has stated to be a plumber and not engaged in any other business activities. The second party namely Sri Harish Kumar Chakram has also stated to be a crane operator employed with L&T Ltd. Both the parties are proprietor of business concerns and have sold goods worth crores to the assessee company. It is beyond imagination that how can a person stated to be a plumber has sold goods worth Rs. 21.62 Cr. and one Mr. Harish Chakram has sold worth Rs.7.08 Cr. without having any proper business place. All the remaining parties have remained unlocated even when several notices were sent. Even the assessee who have dealt with these parties for crores of rupees transaction could not bring forth such persons to prove the I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 29 of 38 genuineness of this transaction. Merely placing documentary evidence to show that the parties are registered to GST Department, bills have been raised, purchases have been made through banking channel cannot prove the genuineness of the parties. It is an admitted fact that news of GST evasion and fraud keeps floating on the news portals and all such alleged parties have proper Paper trail. 15. One of the strong arguments given by the Ld. Counsel for the assessee is that sales of the assessee have not been denied and quantitative details have been maintained by the assessee. We on examination of records noticed that assessee purchased scrap namely Lead Ingot. From the alleged parties assessee has purchased scrap of lead and it has stated that this scrap has been converted into finished goods. The actual yield of scrap of finished goods is not placed before us. Even if the sales are not in doubt but if for the sake of arguments, we take a situation that for making a sales of Rs. 100/- assessee actually utilised the raw material valued at Rs. 80/- but in order to reduce profits has added up Rs. 10/- more to the total cost by arranging the bogus purchase but the yield remains the same. In this way, the sales are not in doubt but purchase has been escalated because it is a case of manufacturing of goods i.e. converting the scrap of lead into finished products of lead. Had it been the case of trading of goods and no element of manufacturing was involved then to some extent assessee’s contention could have found merit that the sales have not been disputed then for such sales of trading goods purchase is must and in that situation if the assessee could not have been able to place documentary evidence to explain the purchase then a profit percentage may have been applied to cover up the situation. 16. But in this case, its manufacturing concern and converting scrap into finished goods and in absence of any information given by I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 30 of 38 the assessee about the yield of finished goods vis-à-vis the market yield normally achieved in such kind of business, the surrounding circumstances which are loud enough to state that purchases are bogus and a clear inference can be drawn that the alleged purchases are not genuine and are bogus which have been booked by the assessee for the purpose of escalating purchases and to evade tax. 17. Even though plethora of judgments have been referred to by the Ld. CIT(A) which have been referred to above in preceding para squarely applicable on the facts of this instant case, we will further like to refer to the decision of Co-ordinate Bench, Mumbai in the case of ITO Vs. Solid Machinery Co. Pvt. Ltd. in ITA No. 5328/Mum/2012 dated 19.10.2022 wherein also the issue was regarding genuineness of purchase transaction and in this case also the vendors were traders of limited means and operating from table space and no longer available for any verification. Tribunal vacated the relief granted by the Ld. CIT(A) and decided in favour of the revenue observing as follows: “6. We may at the outset mention that though the learned CIT(A) has observed that “The appellant company has filed confirmation letter from all such parties, which suggests that goods were returned back and a result thereof the balance of such creditors as on 31/03/2010 remains NIL”, no such document was shown to us. In response to our specific question about the existence of such a document, the learned counsel for the assessee could not throw any light on the same. We could also not find any reference to such documents in the paper book filed before us, which is said to contain all the submissions made before the CIT(A). In any case, these documents, even if they exist, pertain to the subsequent financial year, which is not the subject matter of our consideration at this stage. There is thus no basis for this observation by the learned CIT(A) that goods were returned by the purchaser directly to the vendor, and not even the smallest evidence on that aspect has been filed before us. The product that the assessee has purchased is fabric, and it does not take complicated analysis to find out whether the fabric is defective or not; the acceptability of quality of fabric can be examined even at the time of delivery, and, by the way, delivery of the fabric, going by the version of the assessee, is taken directly by the buyer. If the buyer did not find it defective at the point of taking delivery, or let us say within a reasonable time of taking delivery, it does not sound a very convincing story that every part of the fabric, bought from each of the dozens of vendors, as found to be defective. That is too much of a coincidence. If the story of the assessee is to be believed, the assessee bought goods worth almost 20 crores from vendors who do not have I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 31 of 38 fixed addresses, whom the assessee cannot even locate today, each one of whom gave 100% credit to the assessee, 100% of the goods supplied by them was defective, and the 100% of the goods purchased from them is said to have been returned in the subsequent year- even though there is not an iota of evidence about the goods being returned to them. On the one hand, the assessee submits that the vendors are so small that they operate from the table spaces on wafer-thin margins, and, on the other hand, they are so financially strong that notwithstanding the fact that neither any payment is made to them by the assessee nor there is any evidence of the goods having actually been returned to them, they have not raised even a whisper about such an inordinate delay in payment of dues to them. There is no material whatsoever to corroborate the statements made by the assessee with respect to the quality of the goods and the fact of the good having been returned to the assessee. While these vendors are so accommodating to the business concerns of the assessee, the assessee does not even have their current whereabouts. It is also an interesting coincidence, coincidence if it is, that all the supplies by all the vendors turned out to be defective, and not a single payment is made for any of the supplies by these vendors. Be that as it may, as we look at the balance sheet of the assessee at the year-end for the relevant previous year before us, it is interesting to note that on the assets side, all that the assessee has is a cash and bank balance of Rs 41,711, sundry debtors of Rs 5,46,331 apart from the loans and advances of Rs 36,00,00,000, and yet the current liabilities and provisions, including the creditors for supplies in question aggregating to Rs 19,22,05,496, stand at Rs 36,04,86,476. There is not a single payment for these supplies to the vendors as the goods are defective, but then neither is there any evidence of the actual return of the goods by the end buyer to the assessee, nor by the assessee to the vendor. That is, to say the least, pretty unusual. If the supplies are defective, it is only natural that the end buyers would not make the payments for the goods but then the entire debtors of the assessee are only Rs 5,46,331, and yet the assessee is so financially strong that with a capital base of just Rs 1 lakhs, and simply on the strength of sundry creditors of Rs 36.04 crores- including for these unpaid creditors for purchase of goods, the assessee has shown loans and advances of Rs 36 crores. These figures do not inspire any confidence in the explanation given by the assessee. It is inconceivable that the people who have to take monies from the assessee, and huge monies aggregating to Rs 19.22 crores, are not even traceable, and most of the notices served on them have come back unserved. The explanations given by the assessee do not appeal to us at all. We have no hesitation in rejecting the explanation given by the assessee in this regard. 7. It is also important that when we examine the genuineness of the transactions entered into by the assessee, we must also bear in mind Hon'ble Supreme Court's observation, in the case of CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)], to the effect that "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities". Similarly, in a later decision in the case of Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)], Hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent and not real, and observed that, "This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities.... Similarly the observation.... that if it is alleged that these I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 32 of 38 tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably". We will be superficial in our approach in case we examine the claim of the assessee solely on the basis of documents filed by the assessee and overlook clear the unusual pattern in the documents filed by the assessee and pretend to be oblivious of the ground realities. As Hon'ble Supreme Court has observed, in the case of Durga Prasad More (supra),........."it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents". As a final fact finding authority, this Tribunal cannot be superficial in its assessment of the genuineness of a transaction, and this call is to be taken not only in the light of the face value of the documents sighted before the Tribunal but also in the light of all the surrounding circumstances, the preponderance of human probabilities and ground realities. There may be a difference in subjective perception on such issues, on the same set of facts, but that cannot be a reason enough for the fact-finding authorities to avoid taking subjective calls on these aspects, and remain confined to the findings on the basis of irrefutable evidence. Hon'ble Supreme Court has, in the case of Durga Prasad More (supra), observed that "human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law". This faith in the Tribunal by Hon'ble Courts above makes the job of the Tribunal even more onerous and demanding and, in our considered view, it does require the Tribunal to take a holistic view of the matter, in the light of surrounding circumstances, the preponderance of probabilities and ground realities, rather than being swayed by the not so convincing, but apparently in order, documents and examining them, in a pedantic manner, with the blinkers on. 8. Viewed thus, the impugned credit entries reflecting creditors for purchases of goods, in our considered view, are not satisfactorily explained. As regards the claim that since sales are not being doubted, the purchases cannot be doubted either, as what is sold must have been purchased as well, this theory is relevant only when purchases are being sought to be disallowed as bogus, and profit on the sale is being thus computed without providing for the cost of purchases; that is not the case here. What is held to be unexplained is the bunch of entries showing credits in the names of certain vendors and the existence and means of these vendors is not proved and the genuineness of the transactions is not established. None of the three necessary ingredients of I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 33 of 38 a credit, i.e. existence of the creditor, means of the creditor and genuineness of the transaction involved, are established on the facts of this case. In the case of CIT Vs Precision Finance Pvt Ltd [(1994) 208 ITR 465 (Cal)], Hon’ble Calcutta High Court has summed up this principle by observing that “It is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. In our view, on the facts of this case, the Tribunal did not take into account all these ingredients which have to be satisfied by the assessee. Mere furnishing of the particulars is not enough. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established, consequently, the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, accordingly, it is to be presumed that the transactions were genuine. It was not for the ITO to find out by making an investigation from the bank accounts unless the assessee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct, nor can it make a non-genuine transaction genuine”. The onus on the assessee to prove the existence of the alleged vendors and the genuineness of the transaction is far from proven. There is not even a whisper of evidence before us to prove, or even prima facie indicate, that these alleged vendors did exist. Every statement of the assessee is on the basis of sweeping generalizations. So far as the genuineness of the transaction is concerned, there is nothing before us even to indicate, leave aside from establishing, the genuineness of the transaction. We reject the explanations of the assessee as wholly unacceptable. In CIT v. Nathulal Agarwala & Sons [(1985) 153 ITR 2921 (Pat)] full bench of Hon’ble Patna High Court had inter alia observed, though in a slightly different context, that "As to the nature of the explanation to be rendered by the assessee, it seems plain on the principle that it is not the law that the moment any fantastic or unacceptable explanation is given, the burden placed upon him would be discharged and the presumption rebutted. It is not the law and perhaps hardly can be that any and every explanation by the assessee must be accepted.... He may not prove what he asserts to the hilt positively but as a matter of fact materials must be brought on the record to show that what he says is reasonably valid." The above views were approved by the Hon’ble Supreme Court in the case of CIT v. Mussadilal Ram Bharose [(1987) 165 ITR 142 (SC)]. Referring to the judgment of Hon’ble Patna High Court, Their Lordships observed that "The Patna High Court emphasised that as to the nature of the explanation to be rendered by the assessee, it was plain on principle that it was not the law that the moment any fantastic or unacceptable explanation was given, the burden placed upon him would be discharged and the presumption rebutted. We agree. We further agree that it is not the law that any and every explanation by the assessee must be accepted. It must be an acceptable explanation, acceptable to a fact-finding body." These observations are equally relevant in the context of explanations for the purpose of application of section 68. Viewed in this light, we reject the explanation of the assessee as an explanation unacceptable to this final fact finding body. 9. As regards the learned CIT(A)’s stand that the amount shown as outstanding for the credit purchases can never be covered by the scope of I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 34 of 38 Section 68, in our considered view, that is a very superficial way of looking at the provisions of Section 68. Section 68 categorically provides that “where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year”. The law is simple and unambiguous. When a sum is found credited in the books of accounts of the assessee, he has to explain the same, and in the event of the assessee’s failure to do so, that amount is treated as unexplained credit under section 68. When an assessee purchases something from a vendor, obviously, the account of such a vendor is credited and the purchases are debited and, therefore, when the assessee does not have a reasonable explanation about the credit appearing in the account of the vendor- as in this case, the Assessing Officer is perfectly justified in making the addition under section 68. The assessee explains that these people keep changing their office and are not easily traceable, but could it be an acceptable explanation that someone owes huge amounts to the vendors and these vendors are untraceable? The answer, in our humble understanding, is emphatically in negative. Another explanation of the assessee is that the goods were found defective and, therefore, no payments were made but there is no evidence whatsoever of the goods having been returned; this explanation does not merit acceptance either. Yet another facet of the explanation is that “entire” supplies were found to be defective, and this explanation is also highly unlikely. There is no explanation for why did it take so long to discover that the goods were defective, and there is not even a whisper of evidence that there were any issues in this aspect. A lot of emphasis is then placed on the fact that section 68 is titled ‘cash credit’ and, therefore, purchases on credits cannot be covered by this section. This plea is also ex-facie incorrect as wordings of Section 68, as we have noted above, are categorical, and these words cover any unexplained credit in the books of accounts. This matter has been under hearing before this Tribunal for almost a decade, and a lot of papers are placed on record, but there is not one confirmation from the purported vendors evidencing the transaction, evidencing the goods return or evidencing the payment. When we specifically asked the learned counsel to point out one confirmation filed by the assessee, he could not do so. We have carefully perused the submissions filed by the assessee before the CIT(A)- copies of which are placed before us at pages 31 to 33 and there is not one averment on this aspect. Learned counsel for the assessee expressed inability to file any confirmation from the persons from whom such purchases were purportedly made. It was once again explained that these persons being small traders of limited means and operating from table space etc are no longer available for any verification, but then these persons were not available even at the stage of the assessment proceedings. There is a mention about some confirmations having been filed by these persons in the next year but even those confirmations could not be produced before us. There is nothing to establish identity of these persons; no payments have been made to them, and there is no evidence before us about the current status of amounts payable to them. All that is being reiterated are the self- serving statements, based on sweeping generalizations, unverified statements, and without any supporting evidence. The onus is on the assessee to prove the identity of these persons, the means of these persons to have allowed these credits to the assessee, and the genuineness of the transactions leading to these credits. On each of these counts, the assessee I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 35 of 38 has miserably failed in discharging his onus. The factual foundation of the case of the assessee is devoid of any substance or merits. The credits appearing in the books of the assessee, with respect to the purported purchase of goods on credit, in our considered view, are, therefore, not at all reasonably explained, and the Assessing Officer was, therefore, fully justified in making the impugned addition of Rs 19,22,05,496 under section 68. We must, therefore, restore the addition made by the Assessing Officer. 10. In view of these discussions, and bearing in mind the entirety of the case, we vacate the relief granted by the learned CIT(A) and restore the impugned addition of Rs 19,22,05,496, made by the Assessing Officer. The appellant Assessing Officer thus succeeds in his appeal. Ordered, accordingly.” 18. Similar is the view taken by the Hon’ble High court of Delhi in the case of Mahalaxmi Dye India (P) Ltd. Vs. ACIT (2023) 146 taxmann.com 97 (Delhi) wherein Hon’ble court held that during the investigation by the revenue authorities it was found that M/s. Seema Enterprises is not involved in any real business, therefore, the contention of the Ld. Counsel for the petitioner that it made payments in the course of business was not accepted. Hon’ble court further held that merely filing of VAT returns cannot be held to establish genuineness of transaction especially when it was not shown that the VAT Department had made any physical or spot enquiry. Hon’ble court thus held that the alleged purchases were bogus and prima facie income has escaped assessment. Similar view has also taken by Hon’ble High court of Delhi in the case of PCIT Vs. NRA Iron & Steel (P) Ltd. (2019) 103 taxmann.com 387 (Del.). 19. We thus respectfully following the above decisions and also considering the facts discussed hereinabove, and on finding that assessee miserably failed to make any form of co-relation or between the purchase of the lead scrap (raw material) with its consumption or with the production of finished goods or of final sale figures and also considering the facts unearthed out of various enquiries, search conducted at the assessee’s premises and alleged vendors were either not traceable or admitted to be not engaged in business of selling I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 36 of 38 goods to assessee and merely job workers which goes beyond doubt to prove that the alleged purchases are bogus and are in the nature of accommodation entries taken for evading the tax. We thus, fail to find any infirmity in confirming the disallowance made by the Ld. AO u/s. 69C read with respect to sec. 115BBE of the Act. As far as the difference in the amount of alleged purchase mentioned by the assessee in ground no. 2 is concerned, wherein assessee stated that the purchases in question from the seven parties is Rs.45,65,01,722/- as against the disallowance made by the AO at Rs.57,49,01,910/-. We note that the alleged purchases of Rs. 57,49,01,910/- includes GST charged at Rs.8,74,49,454/- which the assessee is claiming to have not been routed through Profit & Loss Account. The said GST has been taken as Input GST and the fate of allowability of such Input tax on bogus purchases is to be examined by GST authorities/GST Intelligence Department who can carry out necessary enquiry in accordance with law. However, for income tax purpose, the purchases debited to P&L Account is only Rs.48,74,52,456/-. Therefore, the impugned addition u/s. 69C r.w.s. 115BBE of the Act is restricted to Rs.48,74,52,456/-. Therefore, ground nos. 1 and 2 by the assessee are partly allowed and ground no. 3 is dismissed. 20. As regards ground no. 4 is concerned, the contention of the assessee is that the alleged unsubstantiated purchases are chargeable to tax under the head business income instead of income from other sources. We fail to find any merit in this ground because the assessee has miserably failed to explain the nature and source of such expenditure and the explanation offered by him have not been found to be satisfactory by the lower authorities and even by us. It is not the matter of difference in the value of purchases as booked by the assessee vis-à-vis the documentary evidence in the forms of bills and I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 37 of 38 vouchers kept by the assessee nor it is a matter of any reconciliation between two parties. It is a clear case where unaccounted income has been utilised for the purpose of arranging bogus purchases and such unaccounted income for which source is not provided and the same has been applied for the purpose of incurring an expenditure is bound to be held as income from other sources. Therefore, ground no. 4 of the assessee is dismissed. 19. Ground no. 5 has been raised stating that Ld. AO was not justified in not granting the benefit of brought forward and unabsorbed depreciation as business loss against the business income and the impugned addition. In our view, this ground also does not have any merit considering our finding that the addition u/s. 69C towards unexplained expenditure is to be assessed as income from other sources and have held that Ld. AO has rightly invoked sec. 115BBE of the Act. As per sub-section 2 of section 115BBE no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under the provisions of this Act in computing the income referred to in clause (a) of section 115BBE(1) of the Act which includes the Income referred to in section 69C of the Act. Therefore, ground no. 5 of the assessee’s appeal is also dismissed. 20. Ground no. 6 is general in nature. 21. In the result, appeal of the assessee is partly allowed in terms of the direction stated hereinabove. Order is pronounced in the open court on 15.09.2023. /- Sd/- [Sonjoy Sarma] Sd/- [Manish Borad] Judicial Member Accountant Member J.D. Sr. PS. Dated: 15.09.2023 I.T.A. No. 297/Kol/2023 A Y: 2018-19, APL Metals Ltd. Page 38 of 38 Copy of the order forwarded to: 1. Appellant – 2. Respondent 3. CIT(A), Kolkata-21. 4. CIT- 5. Departmental Representative 6. Guard File. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata