Asst. Commissioner of Income tax Central Cir. 1, Belgaum V. Smt. T. Vani.,

ITA 303/PAN/2013

• Counselvise Citation: 30324114 RSA 2013
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B BARTHAKUR
• Keywords: Bogus purchase; Unexplained investment; Cost of acquisition
• Section: 37(1); 132; 28; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BABNSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO S . 303 & 304 /PNJ/2013 (ASST. YEAR S : 200 7 - 0 8 & 2008 - 09 ) ACIT, CENTRAL CIRCLE - 1, BELGAUM. VS. SMT. T. VANI, PROP. M/S. GALAXY IMPEX, SHOP NO. 10, DATTA COMPLEX, NEAR T.V. RELAY STATION, HOSPET. PAN NO. AEOPT 6706 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANDIP BHANDARE - CA DEPARTMENT BY : SHRI B. BARTHAKUR - D.R. DATE OF HEARING : 16 / 12 /2014 . DATE OF PRONOUNCEMENT : 1 9 / 12 /201 4 . O R D E R PER D.T. GARASIA , J .M TH ESE APPEAL S BY THE DEP ARTMENT AGAINST THE COMMON ORDER OF LD. CIT (A) - VI, B A NGALORE DATED 30 /0 7 /201 3 FOR THE A.Y S . 2007 - 08 & 200 8 - 0 9 . THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON, SO THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2 2. THE FOLLOWING GROUNDS ARE RAISED BY THE DEPARTMENT IN ITA NO. 303/PNJ/2013 : 1. WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELET I NG AN AMOUNT OF RS. 1,24,80,000/ - ADDED BY THE ASSESSING OFFICER FOR THE A.Y. 2007 - 08 TOWARDS UNEXPLAINED INVESTMENT IN RESPECT OF UNACCOUNTED PURCHASES MADE BY THE ASSESSEE? 2. WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELETING AN AMOUNT OF RS. 6,55,200/ - ADDED BY THE ASSESSING OFFICER FOR THE A.Y. 207 - 08 TOWARDS PROFIT ELEMENT ON UNACCOUNTED PURCHASES? IN ITA NO. 304/PNJ/2013, THE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1 . WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELETING AN AMOUNT OF RS. 16,52,47,498/ - ADDED BY THE ASSESSING OFFICER FOR THE A.Y. 200 8 - 0 9 TOWARDS UNEXPLAINED INVESTMENT IN RESPECT OF UNACCOUNTED PURCHASES MADE BY THE ASSESSEE? 2 . WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELET ING AN AMOUNT OF RS. 9,32,47,498/ - ADDED BY THE ASSESSING OFFICER FOR THE A.Y. 200 8 - 0 9 TOWARDS UNEXPLAINED INVESTMENT IN RESPECT OF UNACCOUNTED PURCHASES MADE BY THE ASSESSEE? 3 . WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELETING AN AMOUNT OF RS. 1, 35 , 6 8, 683 / - ADDED BY THE ASSESSING OFFICER FOR THE A.Y. 200 8 - 0 9 TOWARDS PROFIT ELEMENT ON UNACCOUNTED PURCHASES? 3. SHORT FACTS OF THE CASE ARE THAT A SEARCH U/S. 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT', FOR SHORT) WAS CARRIED OUT ON 25/0 3 /200 8 I N THE GROUP CASES OF SRI B.P. ANAND KUMAR AND SRI MANOJ KUMAR JAIN OF HOSPET. ON THE BASIS OF CERTAIN PAPERS AND DOCUMENTS BELONGING TO THE ASSESSEE, SEIZED FROM THE PREMISES OF SRI MANOJ KUMAR JAIN, THE CASES OF THE ASSESSEE WERE TAKEN UP FOR PROCEEDINGS U/S. 153C OF THE ACT. THE ASSESSING OFFICER WAS OF THE 3 BELIEF THAT THE TRANSACTIONS SHOWN WITH REGARD TO PURCHASE AND SALE OF IRON ORE PRIM ARILY RESULTING IN SALES TO M/S. GRMTC, A PROPRIETARY CONCERN OF SRI MANOJ KUMAR JAIN WERE NOT GENUINE TRANSACTIONS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , SALE BILLS OF M/S. GALAXY IMPEX WORTH RS. 1,24,80,000/ - FOR THE PERIOD FROM 01/04/2006 TO 31/03/2007 WERE FOUND AND SEIZED AS PER DOCUMENT MARKED AS A/MJ/NO.4 DATED 01/04/2008. IT WAS OBSERVED THAT AGAINST THESE PURCHASES A CASH OF RS. 26,00,000/ - WAS PAID TILL 10/03/2007 AND BALANCE AMOUNT OF RS. 98,80,000/ - WAS S HOWN AS OUTSTANDING. THE CASH PAYMENT OF RS. 26,00,000/ - WAS PAID IN STAGGERED MANNER WHICH IS IN THE RANGE OF RS. 20,000/ - ONLY. THEREFORE, THESE SMALL PAYMENTS FOUND TO BE PRIMA - FACIE SUSPICIOUS. DURING THE COURSE OF SEARCH, IN THE CASE OF SRI MANOJ KUMAR JAIN A DOCUMENT WAS FOUND AND SEIZED FROM HIS OFFICE. THIS DOCUMENTS WAS ANALY ZED WHICH SHOWS THAT ON A NUMBER OF OCCASIONS, ASSESSEE HAS ISSUED LETTER TO ING VYSYA BANK HOSPET INTIMATING THAT THEY HAD ISSUED CERTAIN CHEQUES TO CERTAIN PARTIES FOR BUSINESS PURPOSE. THE DETAILS OF SUCH PARTIES WERE INCLUDED IN THE SAID LETTERS ALONG WITH CHEQUES NUMBERS AND AMOUNT, PHOTOCOPIES OF THE SAID CHEQUES ETC. IN THE SAID DOCUMENT, LETTER ISSUED BY M/S. GALAXY IMPEX WERE ALS O FOUND AND SEIZED. ON VERIFICATION, IT REVEALED THAT ALL THE RELEVANT CHEQUES WERE BEARER POST SEARCH ENQUIRIES A SUMMONS WAS ISSUED AND SERVED ON THE SAID PARTY ATTENDED AND FURNISHED THE LEDGER 4 ACCOUNT EXTRACT OF M/S. GRMTC FOR THE PERIOD RELEVANT TO A .Y. 2007 - 08 AND 2008 - 09 WAS GIVEN. THE ASSESSEE WAS REQUESTED TO PRODUCE THE BOOKS OF ACCOUNTS FOR VERIFICATION. HE DID NOT PRODUCE THE DOCUMENTS AND NO INFORMATION WAS FURNISHED. THE ASSESSING OFFICER ENQUIRED FROM ANDHRA BANK HOSPET AND ING VYSYA BANK , HOSPET WHERE THE ASSESSEE WAS HAVING BANK ACCOUNT AND FROM THE BANK, IT WAS FOUND THAT CASH DEPOSIT SLIPS AND CHEQUE DEPOSIT SLIPS THAT MOST OF THE CASH/CHEQUES HAVE BEEN DEPOSITED BY ONE MR. ASHOK AND MR. K. VEERUPAKSH, WHO WERE EMPLOYEES OF M/S. GRMTC . CASH WITHDRAWN FROM THE BANK WAS ALSO RECEIVED BY THE EMPLOYEE OF M/S. GRMTC. THE INFORMATION COLLECTED FROM ING VYSYA BANK ALSO SHOWS THAT SHRI AMIR ZAKIR HUSSAIN PROP. OF PRIMEZAK MINES AND MINERALS HAD GIVEN INTRODUCTION FOR OPENING THE BANK ACCOUNT. MOST OF THE CASH/CHEQUES HAVE BEEN DEPOSITED BY ONE MR. K. VIRUPAKSHA , WHO IS E MPLOYEE OF M/S. GRMTC. D URING THE COURSE OF ASSESSMENT, THE ASSESSEE COULD NOT SUBSTANTIATE THE SALES MADE TO M/S. GRMTC. IN INVESTMENTS IN PURCHASES WAS NOT EXPLAINED AND ALSO PROFIT THEREON. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE WAS REGISTERED IN COMMERCIAL TAXES DEPARTMENT, THE INVESTMENT IN PURCHASES AND PROFIT THEREON WERE MADE BY HIM AND WHERE BROUGHT TO TAX SUBSTANTIVELY IN THE HANDS OF THE ASSESSEE AND A PROTECTIVE ADDITION WAS MADE IN THE HANDS OF SRI MANOJ KUMAR JAIN WHO IS ULTIMATE BEN EFICIARY , AS THE SALE OF IRON ORE IS ULTIMATELY MADE 5 TO M/S. GRMTC A PROPRIETARY CONCERN OF SRI MANOJ KUMAR JAIN. THUS, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT ORDER U/S. 144 R.W.S. 143 OF THE ACT AND TOTAL INCOME WAS COMPUTED AS UNDER: - A.Y. UNDISCLOSED INCOME PROFIT ON SALES UNEXPLAINED INVESTMENT TOTAL I NCOME 2007 - 08 1,24,80,000 6,55,200 - 1,31,35,200 2008 - 09 16,52,47,498 1,35,68,683 9,32,03,618 27,20,19,799 4 . THE MATTER WAS CARRIED TO THE CIT(A) AND CIT(A) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: - 6. THE APPE LL ANT HAS IN HER ARGUMENTS RELIED UPON THE APPELLATE ORDER IN THE CASE OF SRI MANOJ KUMAR JAM IN TA NOS.429/429A/428/427/ 426/425/DCIT,CC1, BELGAUM/CIT(A) - VL/BLOREF2009 - 2010 DATED 13TH MAY 2013 FOR A.YS 2003 - 04, 2004 - 05, 2005 - 06, 2006 - 07, 2007 - 08 & 2008 - 09, SUCH PURCHASES MADE BY MIS GRMTC FROM THE APPELLANT AND OTHER SUCH CONCERNS EITHER DIRECTLY OR ROUTED EITHER THROUGH THE APPELLANT OR SUC H OTHER CONCERNS ARE HELD TO BE MAKE BELIEVE OR BOGUS TRANSACTIONS. FOR THE SAID REASON, THESE TRANSACTIONS SHOWN IN HANDS OF TH E AP P E LL ANT ARE ALSO NOT GENUINE. THIS IS FURTHER SUBSTANTIATED BY THE APPELLANT HERS EL F IN HER SUBMISSI ONS BEFORE TAX RECOVERY OFFICER IN STATEMENT RECORDED ON 06022013 IN ANSW ER TO QUESTION NO.9, EXTRACTED BELOW AND COPY ENCLOSED AS ANNEXURE. Q. NO.9, THE DEMANDS WERE RAISED IN ORDERS DT 29,12.2009. SINCE THEN YOU HAVE NOT MADE ANY TAX PAYMENTS, REASONS FOR THE SAME. ANS : I WA S ONLY A NAME LENDER TO TRANSACTIONS DONE BY SRI MANOF KUMAR FAIN FOR A PERIOD JUNE 2007 TO JULY 2008 (MAJOR TRANSACTIONS. AS I DO NOT HAVE THE REQUISITE FUNDS TO PAY THE TAXES, I HAVE NOT PAID ANY AMOUNT TILL DATE, MERE FILING OF SELF DECLARATION FORMS BEFORE THE COMMERCIAL TAX DEPARTMENT WILL NOT MAKE THE TRANSACTION GENUINE. 6 AS SUCH I HO LD THAT THE ADDITION WITH REGARD TO BOGUS PURCHASES HAVING BEEN ALREADY UPHELD IN HANDS OF SRI MANOJ KUMAR JAM, FOR THE YEARS IN QUESTION, ADDITION IS NOT CALLED FOR IN HANDS OF THE APPELLANT. HOWEVER, CONSIDERING THAT A SUM OF RS 8,75,152/ - HAS ALREADY BEEN SHOWN AS INCOME OF THE APPELLANT FOR AX. 2008 - 09 IN LETTER FILED BEFORE THE ASSESSING OFFICER, THE SAME IS ACCEPTED AND TAXABLE AS PER ADMIS S I ON OF THE APPELLANT HERSELF. THIS COMPUTATION FILED BY THE APPELLANT IS EXTRACTED AS BELOW SMT T VANI GALAXY IMP EX, SHOP NO.2, DUTTA COMPLEX, HOSPET 583 201 COMPUTATION OF INCOME AND TAX THEREON NET PROFIT 931,682 LESS : INSURANCE 56,530 TOTAL INCOME 875,152 TAX LIABILITY 181,546 ADD: SURCHARGE - ADD: EDUCATION CESS 3,641 TOTAL TAX AND ED. CESS 185,176 SELF ASSESSMENT TAX PAID 100,000 BALANCE 85,176 THEREFORE, ADDITION MADE FOR A.Y. 2008 - 09 IS RESTRICTED TO RS 8,75152/ - TO BE TAXED AS INCOME FROM OTHER SOURCES AND NOT INCOME FROM BUSINESS AS APPELLANT HAS HERSELF ADMITTED THAT SHE DID NOT CARRY OUT THE IRON ORE BUSINESS. 7. WITH THESE FINDINGS, THE APPEALS ARE DISPOSED OF AND TREATED AS PARTLY ALLOWED. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LEARNED DR SUBMITTED BEFORE US THAT THE ISSUE IN CONTROV ERSY IS COVERED BY THE COMMON ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. SHRI G. CHANDRASHEKHAR AND OTHERS IN ITA NOS. 345, 293 TO 302, 307 & 311/PNJ/2013, WHEREIN THIS TRIBUNAL HAS ALLOWED THE DEPARTMENTAL APPEAL AND DIRECTED TO CALCULATE THE PROFIT @ 4% ON THE PURCHASES. 7 6. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE CASE OF SRI G. CHANDRASHEKHAR (SUPRA), WHEREIN THIS TRI BUNAL HAS TAKEN A DECISION THAT ALL THE ORDERS INCLUDING SRI G. CHANDRASHEKHAR (SUPRA) ARE TO BE TAXED @ 4% ON THE PURCHASES. WE HAVE ALREADY DEALT WITH THIS ISSUE IN DETAIL WHICH READS AS UNDER: - 19. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY DECISION OF HONBLE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH, IN THE CASE OF SRI MANOJ KUMA R JAIN, ITA NO. 179 TO 184/PNJ/2013. WE ARE OF THE VIEW THAT TRIBUNAL IN HIS ORDER HAS DISPOSED THE APPEALS OF THE MANOJ KUMAR JAIN BY OBSERVING AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. THE QUESTION ARISES FOR OUR CONSIDERATION OUT OF THE FACTS RELATING TO GROUND NO. 9 IN THE A. Y. 2007 - 08 AND ROUND NO. 8 IN A. Y 2008 - 09 IS WHETHER THE PURCHASES MADE BY THE ASSESSEE C AN BE DISALLOWED WHEN THE SALES MADE BY THE ASSESSEE HAS DULY BEEN ACCEPTED IT IS NOT DENIED FROM THE ORDER OF THE AUTHORITIES BELOW ON THE BASIS OF THE DOCUMENTS FOUND DURING THE COURSE OF THE SEARCH THAT THE ASSESSEE WAS ENGAGED IN THE TRADING OF THE IRO N ORE. DURING THE COURSE OF CARRYING OUT THE TRADING IN IRON ORE THE ASSESSEE HAS ACCOMMODATED SHRI ANIL IL LAD AND MIS. VSL AND SONS FOR SELLING IRON ORE PROCURED BY THEM THROUGH ILLEGAL MINING CARRIED OUT IN THEIR MINING THUS, THE PURCHASES MADE BY THE A SSESSEE FROM THESE FIRMS WHICH WERE WITHOUT BILLS WERE SHOWN BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS AS IF THE ASSESSEE HAS MADE PURCHASES FROM VARIOUS PARTIES SO THAT IT MAY APPEAR THAT THE ASSESSEE HAS MADE THE PURCHASES FOR THESE PARTIES. IT IS ALSO UN CONTROVERTED FACT THAT THE ASSESSEE DID NOT OWN ANY MINE AND WAS ENGAGED ONLY IN TRADING OF IRON ORE THROUGH ITS PROPRIETORSHIP CONCERN. THE SALES MADE BY THE ASSESSEE WERE DULY ACCEPTED BY THE REVENUE. WE HAVE GONE THROUGH THE DECISION OF THE HONBLE SUPR EME COURT IN CIVIL APPEALS NOS. 4540 - 4548 OF 2000 IN THE CASE OF THREESIAMMA JACOB 8 & ORS V/S GEOLOGISTS, D E PTT. C/MINING & GEOLOGY & ORS IN WHICH HONBLE SUPREME COURT VIDE ORDER DATED 8 JULY, 2013 HONBLE SUPREME COURT HELD UNDER PARA 57 OF ITS ORDER THA T OWNERSHIP OF SUB - SOIL/MINERAL WEALTH SHOULD NORMALLY FOLLOW THE OWNERSHIP OF THE LAND, UNLESS THE OWNER OF THE LAND IS DEPRIVED OF THE SAME BY SONIC VA/ID PROCESS. EVEN IN THIS CASE THE HONBLE SUPREME COURT WAS OF THE OPINION THAT THERE IS NOTHING IN LA W WHICH DECLARES THAT ALL MINERAL WEALTH SUBSOIL RIGHTS VEST IN THE STATE. ON THE BASIS OF THE DICTUM OF LAW PRONOUNCED BY THE HONBLE SUPREME COURT THE IRON ORE ILLEGALLY EXTRACTED FROM THE MINES OF SHRI ANIL H LAD AND THE FARM OWNED BY HIM BELONG TO SHRI ANIL II LAD NOT TO THE ASSESSEE. THERE ARE ALSO EVIDENCES FOUND DURING THE COURSE OF SEARCH THAT THE ASSESSEE MADE CASH PAYMENTS TO SHRI ANIL H. LAD AND THE IRON ORE SO EXTRACTED ROUTED TO THE PROPRIETORSHIP CONCERN OF THE ASSESSEE. IT CANNOT BE SAID THAT WHATEVER IRON ORE ILLEGALLY EXTRACTED FROM THE MINING BELONGING TO M/S. VSL AND SONS, A FIRM OF SHRI ANIL H LAD, WAS GIVEN BY SHRI ANIL H. LAD TO THE ASSESSEE WITHOUT CHARGING ANY COST. THE ASSESSEE HAS SUBMITTED QUANTITATIVE RECONCILIATION SHOWING THE QU ANTITY OF THE MATERIAL PURCHASED AS WELL AS MATERIAL SOLD. THE ASSESSEE HAS BOTH ACCOUNTED AS WELL AS UNACCOUNTED SALES. SO FAR AS THE UNACCOUNTED SALES ARE CONCERNED, THE SAME HAS BEEN DEALT WITH SEPARATELY IN THE PRECEDING PARAGRAPHS. HERE, WE ARE CONCER NED WITH THE ACCOUNTED SALES AND ACCOUNTED PURCHASE BILLS. ON THE BASIS OF THE SEIZED MATERIAL THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS PROCURED THE BILLS FOR THE IRON ORE AND ACCOUNTED FOR THESE BILLS IN HIS BOOKS OF ACCOUNTS. SOME OF THE CONCE RNS ARE OWNED BY SOME OF THE EMPLOYEES OF THE ASSESSEE WHILE OTHER CONCERNS ARE OWNED BY THIRD PARTIES. ALL THESE CONCERNS, EXCEPT 2 - 3, WERE DULY REGISTERED WITH THE SALES TAX AUTHORITIES. ALL WERE HAVING FAN AS WELL AS TIN. ALL THESE CONCERNS WERE HAVING BANK ACCOUNTS ALTHOUGH IN 3 CASES THE BANK ACCOUNTS WERE INTRODUCED BY THE ASSESSEE. IT IS NOT DENIED BY THE ASSESSEE ALSO THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THESE CONCERNS AND THE PAYMENTS WERE ALSO I MADE TO THESE CONCERNS. THE AO DISALLOWED THES E PURCHASES TREATING THEM TO BE BOGUS PURCHASES WHICH WAS CONFIRMED BY THE CIT(A). WE MAY MENTION HERE THAT THE ASSESSEE WHO IS ENGAGED IN TRADING BUSINESS CANNOT SELL THE GOODS WITHOUT BUYING IT. THE ASSESSEE MIGHT HAVE BOUGHT IT FROM ONE PARTY WITHOUT BI LLS BUT MIGHT HAVE PROCURED THE BILLS FROM OTHER PARTIES. THE ASSESSEE IN 9 HIS STATEMENT WHICH WAS RECORDED BY THE REVENUE POST - SEARCH HAS CATEGORICALLY ACCEPTED THAT HE HAS PAID COMMISSION CHARGES FOR PROCURING THE BILLS @4% THIS MAY MAKE THE BILLS TO BE B OGUS BUT WE: CANNOT CONCLUDE THAT THE ASSESSEE HAS NOT MADE THE PURCHASES. IT IS NOT A CASE WHERE THE ASSESSEE HAS INFLATED THE PURCHASES I.E., THE QUANTITY OF THE PURCHASES ARE MUCH MORE THAN THE QUANTITY OF THE IRON ORE SOLD. THE AO IN HIS REMAND REPORT HAS CATEGORICALLY ACCEPTED THE FACT THAT THE ASSESSEE WAS WORKING ON BEHALF OF SHRI ANIL H LAD WHO WANT OWNED THE MINES AND HAS EXTRACTED IRON ORE ILLEGALLY MUCH MORE THAN PERMISSIBLE. TO COVER UP THE QUANTITIES OF PURCHASE MADE FROM SHRI ANIL H LAD CONCER N MIS. VSL & SONS, THE ASSESSEE HAD TO PROCURE THE PURCHASE BILLS. IT IS NOT THE CASE OF THE REVENUE THAT THE IRON ORE PURCHASES AND SALES MADE BY THE ASSESSEE ARE NOT RECONCILABLE. THE ASSESSEE HAS SUBMITTED THE QUANTITATIVE RECONCILIATION STATEMENT WHICH I HAS BEEN REFERRED TO BY THE AO IN HIS REMAND REPORT. THE SALES ACCOUNTED FOR AND MADE BY THE ASSESSEE HAVE NOT BEEN DISPUTED BY THE REVENUE. AT THE MOST, IN OUR OPINION, WHERE THE ASSESSEE HAD SAVED ANY TAX IN PROCURING THE BOGUS BILLS, THE ASSESSEE COU LD HAVE MADE MORE PROFIT BUT THE PURCHASES MADE BY THE ASSESSEE CANNOT BE DISALLOWED THERE ARE EVIDENCES THAT THESE FIRMS WERE DULY REGISTERED WITH THE INCOME TAX AS WELL AS SALE TAR AUTHORITIES. THE VAT HAS DULY BEEN PAID ON THE PURCHASES MADE BY THE ASSE SSEE. THESE CONCERNS FILED THEIR INCOME TAX RETURN PRIOR TO THE NOTICE ISSUED U/S.153C EVEN VAT RETURN WAS DULY FILED. THESE CONCERN MADE THE SALES TO THE PROPRIETORSHIP CONCERN OF THE ASSESSEE TO THE EXTENT OF RS.50,33,07,161/ - IN BOTH THE YEARS AS PER TH E DETAILS GIVEN AT PAGE 146 OF THE PAPER BOOK. THESE CONCERNS HAVE INTER SALES ALSO TO THE EXTENT OF RS. 33,75,75,865/ - IN BOTH THE YEARS. WE NOTED THAT DURING THE YEAR ENDED 31.3.2007 THE PURCHASES WERE DISALLOWED BY THE A. 0 TO THE EXTENT OF RS. 17,72,99 ,484 / - AND DURING THE YEAR ENDED 31.3.2008, THE PURCHASES DISALLOWED WERE RS. 23,26,29,989/ - . THE GROSS PROFITS AS PER THE BOO/CC OF ASSESSEE WERE 16,35% AND 6.06% FOR THE ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 RESPECTIVELY. WE DO AGREE WITH THE LEARNED A.R T HAT ONCE THE PURCHASES ARE DISALLOWED THE GROSS PROFIT WILL INCREASE TO 50.9% AND 90.7% FOR THE ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 RESPECTIVELY. NO MATERIAL OR EVIDENCE WHATSOEVER SHOWING THE COMPARATIVE INSTANCE WAS PRODUCED BEFORE US TO JUSTIFY SUCH A H IGH GROSS PROFIT. UNDER THESE FACTS IN OUR OPINION NO ADDITION ON 10 ACCOUNT OF BOGUS IRON ORE PURCHASES CAN BE MADE AS WITHOUT PROCURING THE IRON ORE BY INCURRING THE COST IN OUR OPINION THE ASSESSEE CANNOT SELL THE IRON ORE. AT THE MOST THE REVENUE COULD HA VE ADDED THE PROFIT ON SUCH PURCHASES @ 4% AS HAS BEEN HELD BY US IN THE PRECEDING PARAGRAPH AS THE ASSESSEE CATEGORICALLY STATED THAT HE WAS CARRYING OUT THE SALES ON BEHALF OF SHRI ANIL H. LAD ON COMMISSION BASIS AND THE EVIDENCES FOUND DURING THE COURSE OF SEARCH AND SURVEY ALSO PROVE THAT THE ASSESSEE IS BEING USED AS CONDUIT TO SIPHON OFF IRON ORE WHICH WAS ILLEGALLY MINED BY M/S. VSL & SONS FIRM OF SHRI ANTI LAD. WE NOTED THAT CIT(A) HAS DELETED THE ADDITION MADE BY THE A. 0 ON ACCOUNT OF PROFIT ESTIM ATED ON SUCH SALES THE REVENUE HAS NOT COME IN APPEAL BEFORE US IN THIS REGARD IN THE ABSENCE OF THE GROUND OF APPEAL BEFORE US WE CANNOT DIRECT THE A.O TO ESTIMATE PROFIT @ 4% ON SUCH PURCHASES. WE ALSO NOTED THAT THE ASSESSEE HAS MADE SURRENDER BY WAY OF UNDISCLOSED STOCK BEING THE INVESTMENT OF THE INCOME EARNED BY THE ASSESSEE. THE SURRENDER SO MADE IN ANY CASE SINCE MORE THAN 4% ON SUCH PROFIT WHICH THE ASSESSEE WOULD HAVE EARNED OTHERWISE TAKES CARE OF ADDITION OF SUCH ESTIMATED PROFITS. BEFORE CONCLU DING OUR FINDING ON THIS ISSUE WE MAY MENTION THAT THE ASSESSING OFFICER HAD DISALLOWED THE EXPENSES INCURRED BY THE ASSESSEE FOR THE PURCHASES U/S 37(1) OF THE INCOME TAX ACT. WE, THEREFORE, IN VIEW OF OUR AFORESAID DISCUSSION DELETED THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES. THE PURCHASE COST IN THE CASE OF A TRADER IN OUR OPINION IS ALLOWED AS DEDUCTION U/S. 28 ITSELF AS U/S. 28 IS ONLY THE PROFIT AND GAINS OF ANY BUSINESS OR PROFESSION WHICH ARE CHARGEABLE TO INC. THE CONSIDERATION RECEIVED BY TH E ASSESSEE ON THE SALES CANNOT BE REGARDED TO BE THE PROFIT AND GAINS OF THE PROFESSION. SECTION 28(1) DOES NOT MAKE TOTAL REVENUE RECEIPT TO BE CHARGEABLE TO INCOME TAX ACT. ON THIS BASIS ALSO THE ORDER OF THE CIT (A) CANNOT BE SUSTAINED IN OUR OPINION ON THIS ISSUE. IN VIEW OF OUR AFORESAID DISCUSSION WE DELETE THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES MADE BY A0 AND SUSTAINED BY THE CIT(A). IN BOTH THE ASSESSMENT YEARS THUS THE GROUND NO. 9 IN ASSESSMENT YEAR 2007 - 08 AND GROUND NO. 8 IN ASSESSMENT YEAR 2008 - 09 ARE ALLOWED. ON GOING THROUGH THE DECISION OF TRIBUNAL, WE FIND THAT WE HAVE ALREADY HELD THAT MR. MANOJ KUMAR JAIN PURCHASED MATERIAL FOR WHICH THEY HAVE CONFIRMED THE SALES BY SRI MANOJ KUMAR JAIN. WE FIND THAT IN THIS ORDER WE HAVE ALREA DY HELD THAT THERE IS NO MATERIAL OR EVIDENCE WHATSOEVER 11 SHOWING THE COMPARATIVE INSTANCE WAS PRODUCED BEFORE US TO JUSTIFY SUCH A HIGHER GROSS PROFIT. WE HAVE ALREADY HELD THAT REVENUE CAN ADD A PROFIT ON SUCH PURCHASES @ 4% AS HAS BEEN HELD BY US IN THE TRIBUNAL ORDERS. 19.1. WE HAVE ALREADY HELD THAT ASSESSEE HAS MADE SURRENDER BY WAY OF UNDISCLOSED STOCK BEING INVESTMENT OF INCOME EARNED BY THE ASSESSEE. THE SURRENDER SO MADE IN ANY CASE SINCE MORE THAN 4% ON SUCH PROFIT WHICH THE ASSESSEE WOULD HAVE EA RNED OTHERWISE TAKES CARE OF ADDITION OF SUCH ESTIMATED PROFIT. THE PURCHASE COSTS IN CASE OF TRADER IS ALLOWED AS DEDUCTION UNDER SECTION 28 ITSELF. THE CONSIDERATION RECEIVED BY THE ASSESSEE ON THE SALES CANNOT BE REGARDED TO BE THE PROFIT AND GAINS OF THE PROFESSION. WE ARE OF THE VIEW THAT CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF INVESTMENT. THE CIT(A) HAS HELD THAT THE INVESTMENT IS MADE BY MANOJ KUMAR JAIN, THEREFORE, HE HAS CONFIRMED THE ADDITION IN THE CASE OF MANOJ KUMAR J AIN AND DELETED THE ADDITION IN HANDS OF EACH ASSESSEE. WE HAVE ALREADY HELD IN MANOJ KUMAR JAIN CASE THAT SOME OF THE CONCERNS ARE OWNED BY SOME OF THE EMPLOYEES OF THE ASSESSEE WHILE OTHER CONCERNS ARE OWNED BY THIRD PARTIES. ALL THESE CONCERNS, EXCEPT 2 - 3 WERE DULY REGISTERED WITH THE SALES TAX AUTHORITIES. ALL WERE HAVING PAN AS WELL AS TIN. ALL THESE CONCERNS WERE HAVING BANK ACCOUNTS ALTHOUGH IN 3 CASES THE BANK ACCOUNTS WERE INTRODUCED BY THE MANOJ KUMAR JAIN. THE ASSESSING OFFICER HAS TREATED THIS I NVESTMENT IN PURCHASE AS INVESTMENT IS MADE BY HIMSELF BUT WE HAVE ALREADY HELD THAT MR. MANOJ KUMR JAIN HAS CATEGORICALLY ACCEPTED THAT HE HAS PAID COMMISSION CHARGES FOR PROCURING THE BILLS @4%. THIS MAY MAKE THE BILLS TO BE BOGUS BUT WE CANNOT CONCLUDE THAT THE ASSESSEE HAS NOT MADE ANY PURCHASE. 19.2 AS WE HAVE HELD THAT NO ADDITION ON ACCOUNT BOGUS IRON ORE PURCHASE CAN BE MADE WITHOUT PROCURING THE IRON ORE BY INCURRING THE COST IN OUR OPINION THE ASSESSEE CANNOT SELL THE IRON ORE. AT THE MOST TH E REVENUE ADDED THE PROFIT ON SUCH PURCHASE @ 4% AS HAS BEEN HELD BY US IN THAT ASSESSEE WAS CARRYING OUT THE SALES ON BEHALF OF SHRI ANIL H. LAD. THE CIT(A) HAS DELETED THE ADDITION ON ACCOUNT OF PROFIT ESTIMATED ON SUCH SALES. THE REVENUE HAS NOT COME IN APPEAL BEFORE US IN THIS REGARDS. THE ASSESSEE HAS MADE SURRENDER BY WAY OF UNDISCLOSED STOCK BEING THE INVESTMENT OF THE INCOME EARNED BY THE ASSESSEE. THE SURRENDER SO MADE IN ANY CASE SINCE MORE THAN 4% ON SUCH PROFIT WHICH WOULD HAVE EARNED OTHERWISE TAKES CARE OF ADDITION OF SUCH ESTIMATED PROFITS. THE PURCHASE COST IN THE CASE OF A TRADER IN OUR OPINION IS ALLOWED AS DEDUCTION U/S. 28 ITSELF AS U/S. 28 IT IS ONLY THE PROFIT AND GAINS OF ANY BUSINESS AND 12 PROFESSION WHICH ARE CHARGEABLE TO TAX. THE C ONSIDERATION RECEIVED BY THE ASSESSEE ON THE SALES CANNOT BE REGARDED AS PROFIT AND GAINS OF THE PROFESSION AND IT IS NOT CHARGEABLE TO TAX. THEREFORE, IN OUR OPINION, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF INVESTMENT BUT WE ARE OF THE VIEW THAT CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF PROFIT ON SALES. THEREFORE, WE MODIFY THE ORDER OF CIT(A) AND WE DIRECT THE AO TO TAKE 4% OF THE SALES TO BE BROUGHT TO TAX AS HELD IN THE CASE OF SRI MANOJ KUMAR JAIN. WE THEREF ORE, ALLOW THE APPEALS OF THE DEPARTMENT. WE HOLD THAT CIT(A) IS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF INVESTMENT. WE THEREFORE, DIRECTED THE AO TO CALCULATE THE PROFIT @ 4% AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE AS DISCUSSED IN THE CASE OF SRI MANOJ KUMAR JAIN IN ITA NO. 179 TO 184/PNJ/2013. SO, RESPECTFULLY FOLLOWING THE AFORESAID ORDER , WE MODIFY THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO CALCULATE PROFIT @ 4% ON PURCHASES AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE AS DISCUSSED IN THE CASE OF SRI MANOJ KUMAR JAIN IN I.T.A.NO. 184/PNJ/2013 . 7 . IN THE RESULT, APPEAL S OF THE DEPARTMENT ARE ALLOWED PARTLY. ( ORDER PRONOUNCED IN OPEN COURT ON 1 9 T H DECEMBER , 201 4 ) S D / - S D / - (P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 9 T H DECEMBER , 201 4 . VR/ - 13 COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE LD. CIT 4 . THE CIT(A) 5 . THE D.R 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI