MAHENDRA BROTHERS, MUMBAI V. DCCC 8(2),

ITA 3054/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9350 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-04-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 27-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CULLA E MUMBAI VS DCCC MUMBAI
• Keywords: Bogus purchase; Rejection of books of accounts; Unexplained expenditure; Search and seizure; Validity of assessment; Reason to believe; Documents seized
• Section: 143(3); 153A; 132

Judgement Text

1 ITAS 3054-3056/UM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NOS.3054-3056/MUM/2016 (ASSESSMENT YEARS : 2006-07, 2007-08 & 2010-11) M/S MAHENDRA BROTHERS 1201-A, SHATRUNJAYA DARSHAN CO-OP HSG SOCIETY, SHETH MOTISHA CROSS LANE, BYCULLA (E), MUMBAI VS DCCC, 8(2), MUMBAI APPELLANT RESPONDENT APPELLANT BY NONE RESPONDENT BY SHRI H.M. SINGH DATE OF HEARING 21-09-2017 DATE OF PRONOUNCEMENT 27-09-2017 O R D E R PER G MANJUNATHA, AM : THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIRE CTED AGAINST SEPARATE BUT IDENTICAL ORDERS OF THE CIT(A)-48, MUMBAI DATED 22-02-2016 FOR THE ASSESSMENT YEARS 2006-07, 2007-08 AND 2010-11. SIN CE THE FACTS ARE IDENTICAL, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEA RD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE ASSESSEE HAS RAISED COMMON GROUNDS OF APPEAL FO R ALL THE THREE YEARS. FOR THE SAKE OF CONVENIENCE, GROUNDS OF APP EAL IN ITA 2 ITAS 3054-3056/UM/2016 NO.3054/MUM/2016 FOR AY 2006-07 ARE REPRODUCED HERE UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE HON'BLE CIT(A) ERRED IN UPHOLDING THE VALIDITY OF N OTICE ISSUED U/S. 153A AND THE CONSEQUENT ASSESSMENT U/S. 143(3) R.W. S. 153A OF THE ACT WITHOUT APPRECIATING THAT THERE WAS NO SEAR CH ACTION U/S. 132 ON THE APPELLANT AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISION OF INCOME TAX ACT AND RULES MADE THERE UNDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HON'BLE CIT(A) ERRED IN UPHOLDING THE AC TION OF LD AO OF REJECTING BOOKS OF ACCOUNTS U/S. 145(3) BY TREAT ING GENUINE SALES ET PURCHASES AS BOGUS AND FURTHER ACTION OF ESTIMATION OF INCOME AT RS. 1,73,480/- BEING 2% OF SALES AS COMMISSION AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISIO N OF INCOME TAX ACT AND RULES MADE THERE UNDER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HON'BTE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 5,34,446/- MADE BY DISALLOWING EXPENSES PROPORTIONATE TO ALLEGED BO GUS SALES AS UNEXPLAINED EXPENDITURE AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISION OF INCOME TAX A CT AND RULES MADE THERE UNDER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNE RSHIP FIRM CARRYING ON BUSINESS OF SUPPLY OF IRON AND STEEL ITEMS IN TH E NAME OF M/S MAHENDRA BROTHERS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 31-10-2006 DECLARING TOTAL INCOME OF RS.41,28,520. THE ASSESSMENT WAS S ELECTED FOR SCRUTINY AND CONSEQUENTLY ASSESSMENT WAS COMPLETED U/S 143(3) R. W.S. 153A ON 01-06-2009 DETERMINING THE TOTAL INCOME AT RS.47,24,084, INTER ALIA MAKING ADDITIONS TOWARDS DISALLOWANCE OF PERSONAL EXPENSES OF RS.25,989 AND PARTIAL DISALLOWANCE OF INTEREST ON LOAN AMOUNTING TO RS.5,69,572. A SEARCH ACTION U/S 132 OF THE I.T. ACT, 1961 WAS CARRIED OUT ON 10-02-2012. CONSEQUENT TO SEARCH, T HE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 153A ON 23-06-2014 WHEREIN ADDITI ON OF RS.1,73,480 AND RS.5,34,446 WERE MADE ON ACCOUNT OF COMMISSION ON B OGUS TURNOVER AND DISALLOWANCE OF PROPORTIONATE EXPENSES INCURRED IN RELATION TO BOGUS TURNOVER. 3 ITAS 3054-3056/UM/2016 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PRE FERRED APPEAL BEFORE THE CIT(A). THE ASSESSEE HAS TAKE AN ADDITION GROUND O F APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS CHALLENGING THE VALIDITY OF S EARCH ACTION OR REQUISITION OF BOOKS OF ACCOUNT AS SPECIFIED U/S 132 AND 132A OF THE ACT . DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE CONTENDED THAT NO SEARCH AND SEIZURE ACTION U/S 132(1) OF THE ACT, WAS CONDUCTED IN THE OFFICE PREMISES OF TH E ASSESSEE ON 10-02-2012. THEREFORE, THE AO WAS ERRED IN LAW AND FACTS IN ASS ESSING INCOME U/S 153A OF THE ACT, WHEN THE ASSESSEE WAS NEVER SUBJECTED TO SEARC H ACTION OR REQUISITION OF BOOKS OF ACCOUNT AS SPECIFIED U/S 132 & 132A OF THE ACT. THE ASSESSEE CHALLENGED THE INITIATION OF ASSESSMENT PROCEEDINGS U/S 153A ON TH E GROUND THAT IN FACT, THERE WAS NO SEARCH ACTION U/S 132, THEREFORE, THE AO WAS NOT HAVING ANY JURISDICTION TO RE- ASSESS THE INCOME OF THE ASSESSEE U/S 153A OF THE A CT. IN THIS CONNECTION, THE ASSESSEE RELIED UPON THE FOLLOWING CASE LAWS:- 1. CIT VS RAMESH D PATEL (GUJARAT) TA NO.347 OF 20 13 2. S.C. SIBAL VS CIT, PUNJAB & ORS. (1977) 106 ITR 102 3. MANMOHAN KRISHAN MAHAJAN VS CIT, PATIALA & ORS. (1977) 107 ITR 420 4. SIKSHA ANUSANDHAN VS COMMISSIONER OF INCOME-TA X (ORISSA) TA NO.71 TO 77 OF 2009 5. AJIT JAIN VS UOI & ORS (2000) 242 ITR 302 6. CIT VS M.S. ROHINI S WALIA (2007) 289 ITR 328 7. JYOTI AGARWAL V/S ACIT (ITAT- INDORE) 8. CIT VS JM TRADING CORPORATION (ITA 276, 696, 852 OF 2009) 5. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE CIT (A) FORWARDED ADDITIONAL GROUND OF APPEAL ALONG WITH WRITTEN SUBMISSIONS TO THE AO FOR HIS VERIFICATION AND COMMENTS. IN REPLY, THE AO REPORTED THAT WARRANT N O.8591 WAS ISSUED U/S 132 OF THE 4 ITAS 3054-3056/UM/2016 ACT ON M/S MAHENDRA BROTHERS WAS EXECUTED ON 10-02- 2012. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT A SEARCH ACTION CON DUCTED IN ITS NAME ON THE PREMISES NOT OWNED BY IT, THE AO FILED COPIES OF DO CUMENTS IMPOUNDED FROM ASSESSEES PREMISES WHICH IS THE SAME AS MENTIONED IN THE WARRANT OF AUTHORIZATION ISSUED U/S 132. THE ASSESSEE , IN A REJOINDER TO R EMAND REPORT SUBMITTED COPIES OF TWO PAGES OF FORM 45 ISSUED BY THE AUTHORISED OFFIC ER AND STATED THAT IT NEITHER MENTIONS THE NAME AND DESIGNATION OF THE ISSUING AU THORITY NOR IT IS SIGNED AND SEALED BY THE AUTHORIZED OFFICER AND, THEREFORE, IT DOES NOT HAVE ANY LEGAL SANCTITY AND IT CANNOT BE CALLED A VALID WARRANT OF SEARCH. IT IS FURTHER SUBMITTED THAT IN FACT SURVEY WAS CONDUCTED AT THE OFFICE PREMISES AT NO.4 5A & 45, LATIF HOUSE, 250 ST ROAD, CARNAK BUNDER, MUMBAI AND THE ADDRESS MENTION ED IN THE WARRANT OF AUTHORIZATION IS DIFFERENT FROM THAT OF THE ASSESSE ES ADDRESS WHERE A SURVEY WAS CONDUCTED. THE ASSESSEE ALSO CHALLENGED ADDITIONS MADE BY THE AO TOWARDS ESTIMATION OF COMMISSION OF 2% ON SALES BILLS BY ST ATING THAT THE PURCHASES FROM M/S DEV STEELS AND CORRESPONDING SALES ARE DECLARED IN THE BOOKS OF ACCOUNT AND THE AO MERELY ON THE BASIS OF STATEMENTS MADE BY ITS EMPLO YEES AND PARTNERS CAME TO THE CONCLUSION THAT THE PURCHASES MADE FROM M/S DEV STE ELS IS BOGUS IN NATURE AND CORRESPONDING SALES ALSO IS BOGUS TO COME TO THE CO NCLUSION THAT THE ASSESSEE HAS INDULGED IN ISSUING BOGUS SALE BILLS TO THE EXTENT OF RS.86,74,047. AS REGARDS DISALLOWANCE OF PROPORTIONATE INDIRECT EXPENSES ATT RIBUTABLE TO BOGUS SALES, THE ASSESSEE SUBMITTED THAT MERELY BECAUSE CERTAIN SALE S WERE IDENTIFIED AS BOGUS EXPENDITURE INCURRED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CANNOT BE PROPORTIONATELY DISALLOWED WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE EXPENDITURE CLAIMED BY THE ASSESSEE. 6. THE CIT(A), AFTER CONSIDERING THE RELEVANT SUBMISSI ONS OF THE ASSESSEE 5 ITAS 3054-3056/UM/2016 DISMISSED ADDITIONAL GROUND RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF ASSESSMENT U/S 153A OF THE ACT. THE CIT(A) FURTHER OBSERVED THAT COPIES OF SEARCH WARRANT ISSUED BY THE DEPARTMENT U/S 132(1) CONTAIN S NAME AND ADDRESS OF THE ASSESSEE WHERE IT CARRIED OUT ITS BUSINESS AND ALSO THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH FROM THE PREMISES ALSO INDICATES T HE ADDRESS MENTIONED IN THE SEARCH WARRANT IS CORRECT. THEREFORE, THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEE THAT NO SEARCH ACTION WAS CONDUCTED IN IT S CASE. INSOFAR AS ADDITIONS MADE BY THE AO TOWARDS ESTIMATION OF 2% COMMISSION ON BOGUS BILLS, THE CIT(A) OBSERVED THAT THE AO HAS BROUGHT OUT CLEAR-CUT FIND ING THAT THE ASSESSEE HAS RESORTED TO BOGUS PURCHASE AND SALES AND IN TURN EA RNED COMMISSION THEREON. THE AO HAS BROUGHT OUT FACTS OF BOGUS SALES MADE TO M/S DEV STEELS AND ACCORDINGLY WORKED OUT TOTAL BOGUS SALES OF RS.86,74,047 AND ES TIMATED 2% COMMISSION ON SUCH BOGUS SALES. THEREFORE, ON THE FACTS OF THE CASE A ND FOR THE REASONS GIVEN BY THE AO IN THE ASSESSMENT ORDER, HE FOUND NO REASON TO INTE RFERE WITH THE ORDER OF THE AO IN THE ABSENCE OF ANY SUBMISSIONS MADE BY THE ASSESSEE . INSOFAR AS ADDITION TOWARDS DISALLOWANCE OF PROPORTIONATE EXPENSES, THE ASSESSE E HAS FAILED TO ADDUCE ANY VALID REASONS TO JUSTIFY EXPENSES CLAIMED UNDER THE HEAD INDIRECT EXPENSES AND HENCE, THE AO WAS RIGHT IN DISALLOWING PROPORTIONATE EXPEN SES ON PRO-RATA BASIS TOWARDS ACTUAL SALES TURNOVER AND BOGUS SALES TURNOVER OF T HE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE U S. 7. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION IS VALIDITY OF NOTICE ISSUED U/S 153A AND CONSEQUENT ASSESSMENT PROCEEDINGS U/S1 43(3) R.W.S. 153A OF THE ACT. THE ASSESSEE HAS CHALLENGED THE VALIDITY OF RE-ASSE SSMENT ORDER PASSED BY THE AO U/S143(3) R.W.S. 153A ON THE GROUND THAT THERE WAS NO SEARCH ACTION U/S 132 IN THE PREMISES OF THE ASSESSEE. 6 ITAS 3054-3056/UM/2016 8. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD THE LD.DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE CIT(A) GAVE A C ATEGORICAL FINDING THAT THERE WAS A VALID SEARCH WARRANT NO.8591 ISSUED U/S 132(1) OF T HE ACT IN THE NAME OF M/S MAHENDRA BROTHERS, WHICH WAS EXECUTED ON10-02-2012. THE SEARCH WARRANT ISSUED IN THE NAME OF THE ASSESSEE CONTAINED NAME AND ADDR ESS OF THE ASSESSEE WHERE THE ASSESSEE HAS CARRIED OUT ITS BUSINESS ACTIVITIES. THOUGH THE ASSESSEE CLAIMS THAT THERE WAS NO SEARCH ACTION U/S 132(1) AND 132A, THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH ACTION IN THE OFFICE PREMISES OF T HE ASSESSEE AT NO.45A & 45, LATIF HOUSE, 250 ST ROAD, CARNAK BUNDER, MUMBAI AND THE A DDRESS MENTIONED IN THE WARRANT OF AUTHORIZATION ISSUED IN FORM NO.45 MATCH ES EACH OTHER. THEREFORE, THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THERE WAS NO VALID SEARCH WARRANT ISSUED IN ITS NAME. THE RELEVANT PORTION OF THE CI T(A)S ORDER IS REPRODUCED BELOW:- 2.5 I HAVE CONSIDERED THE REMAND REPORT OF THE A.O. AND SUBMISSION MADE FOR THE APPELLANT. THE APPELLANT'S ARGUMENT THAT THERE WAS NO SEARCH ACTION IN THE PREMISES OF THE A PPELLANT AND, THEREFORE, THERE IS NO SEARCH IN THE CASE OF THE APPELLANT IS NOT THE PROPER PROPOSITION OF LAW. THE WARRANT OF AUTHORIZA TION IS ALWAYS ISSUED TO SEARCH A PARTICULAR PLACE IN CONNECTION W ITH THE PERSONS NAMED IN THE WARRANT. IT IS NOT NECESSARY THAT THE PREMISES IN POSSESSION OF THE PERSON NAMED IN THE WARRANT OF AU THORIZATION ALONE CAN BE SEARCHED BUT THE CORRECT PROPOSITION O F LAW IS THAT IN CONNECTION WITH THE PERSON NAMED IN THE WARRANT ANY PLACE CAN BE SEARCHED WHETHER IN POSSESSION OF THAT PERSON OR NO T. IN FACT THE REASON TO BELIEVE AS REQUIRED U/S. 132(1) OF THE AC T IS ONLY AGAINST THE PERSON AND NOT AGAINST THE PLACE. IN CONNECTION WITH THE PERSON AUTHORIZED U/S. 132(1) OF THE ACT, THERE IS NO BAR IN RESPECT OF WHICH PLACE TO BE SEARCHED AS LONG AS THE AUTHOR IZED OFFICER HAS REASON TO SUSPECT THAT THE MONEY, BULLION, JEWELLER Y OR OTHER VALUABLE ARTICLE OR THING, BOOKS OF ACCOUNT AND OTHER DOCUME NTS OF THE PERSON NAMED IN THE WARRANT OF AUTHORIZATION IS SUS PECTED TO BE KEPT IN THAT PLACE. THEREFORE, IT IS NOT CORRECT TO SAY THAT SINCE THERE IS NO SEARCH IN THE BUSINESS PREMISES WITH THE WARR ANT OF AUTHORIZATION ISSUED IN THE NAME OF THE APPELLANT, NO VALID SEARCH 7 ITAS 3054-3056/UM/2016 HAS BEEN CONDUCTED INSPITE OF THE FACT THAT THE APP ELLANT'S NAME APPEARS IN THE WARRANT OF AUTHORIZATION AND SEARCH HAS TAKEN PLACE IN THE PREMISES OF THE APPELLANT AS MENTIONED IN THE WARRANT OF AUTHORIZATION. IT WAS CONTENDED THAT NO PANCHNAMA W AS DRAWN IN THE CASE OF THE APPELLANT. IN THIS CONNECTION, ATTENTIO N IS DRAWN TO THE DECISION OF MDLR RESORTS PVT. LTD. VS CIT IN WRIT P ETITION (CIVIL) NO. 823/2013 DATED 20/12/2013 BY THE HON'BLE DELHI HIGH COURT. THE FACTS AND DECISION IN THE CASE ARE REPRODUCED H EREIN UNDER: 'A SEARCH U/S 132 WAS CONDUCTED ON THE PREMISES OF THE ASSESSEE AND ITS GROUP CONCERNS. THOUGH A PANCHNAMA WAS PREPARED, THE ASSESSEE'S NAME DID NOT APPEAR THEREI N. AN ASSESSMENT ORDER LI/S 153A WAS PASSED TO ASSESS THE ALLEGED UNDISCLOSED INCOME. THE ASSESSEE CLAIMED THAT AS SE CTION 153B IMPOSED A LIMITATION FOR PASSING OF A SECTION 153A ORDER BY REFERENCE TO THE LAST PANCHNAMA MEANT THAT THE SECT ION 153A ASSESSMENT ORDER COULD NOT BE PASSED. A WRIT PETITI ON WAS FILED TO CHALLENGE THE ASSESSMENT. THE HON'BLE HIGH COURT DISMISSING THE PETITION HELD THAT SECTION 153A(1) DOES NOT MAKE ANY REFERENCE TO PANC HNAMA. A PANCHNAMA IS NOT A PRE-CONDITION FOR INVOKING SECTI ON 153A. AS REGARDS THE ARGUMENT THAT THE TIME LIMIT U/S 153B I S CALCULATED WITH REFERENCE TO THE DATE OF THE LAST P ANCHNAMA, A PANCHNAMA WAS DRAWN UP ON THE OCCASION OF THE SEA RCH AND IT REFERRED TO DOCUMENTS BELONGING TO THE ASSES SEE THOUGH IT DID NOT REFER TO THE ASSESSEE BY NAME. THE PANCH NAMA ALSO DOES NOT REFER TO THE CONCLUSION OF THE SEARCH. THE NON- REFERENCE TO THE NAME OF THE ASSESSEE AND THE SUSPENSION/CONCLUSION OF THE SEARCH IS A LAPSE AND FAILURE TO COMPLY WITH THE REQUIREMENTS OF THE SEARCH AND SEIZ URE MANUAL. HOWEVER, THIS DOES NOT AFFECT THE VALIDITY OF THE SEARCH OR THE ASSESSMENT ORDER U/S 153A. THE DEPART MENT SHOULD TAKE REMEDIAL STEPS AND ENSURE THAT SUCH LAP SES DO NOT OCCUR IN FUTURE. ALSO, THE DEPARTMENT SHOULD GI VE A COPY OF THE SEARCH WARRANT TO THE PERSON SEARCHED SO AS TO CURTAIL ALLEGATIONS OF INTERPOLATION, ADDITION OF NAMES, ET C.' 2.6 IT MAY BE RELEVANT TO MENTION THAT APPELLANT IT SELF HAS MENTIONED THE IMPUGNED ADDRESS IN VARIOUS ACCOUNTS MAINTAINED OF PARTIES IN ITS 8 ITAS 3054-3056/UM/2016 BOOKS, AND FURTHER DOCUMENTS SHOWING THE SAME ADDRE SS OF THE APPELLANT AS MENTIONED IN SEARCH WARRANT WERE IMPOU NDED FROM ITS PREMISES. THEREFORE, IT CANNOT BE SAID THAT SEARCH ACTION WAS NOT CONDUCTED ON THE PREMISES OF THE ASSESSEE. FURTHER, THE CONTENTION OF THE APPELLANT THAT ONCE SEARCH WAS CONDUCTED IN 2007 AND ASSESSMENT MADE U/S.153A, NO FURTHER PROCEEDING COU LD BE INITIATED U/S.153A IS NOT TENABLE IN LAW. IN VIEW OF THE ABOV E, IT IS HEREBY HELD THAT THE ASSESSMENT MADE U/S 153A R.W.S. 143(3) OF THE ACT IN PURSUANCE OF SEARCH U/S 132 OF THE ACT IN THE CASE OF THE APPELLANT IS VALID AND AC CORDINGLY THE GROUND OF THE APPELLANT IS DISMISSED. THE ASSESSEE DID NOT APPEAR TO CONTROVERT THE FINDI NGS OF FACT RECORDED BY THE LD.CIT(A). ON THE OTHER HAND, THE LD.DR FURNISHED COPY OF WARRANT OF AUTHORISATION ISSUED U/S 132(1) OF THE ACT. ON PERUSAL OF THE CO PY OF WARRANT OF AUTHORIZATION, WE FIND THAT THE AUTHORIZED OFFICER HAD ISSUED A VALID WARRANT OF AUTHORIZATION IN THE NAME OF THE ASSESSEE WHICH CONTAINS NAME OF THE ASSESSEE AND ITS BUSINESS ADDRESS. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) WAS R IGHT IN DISMISSING ADDITIONAL GROUND RAISED BY THE ASSESSEE CHALLENGING THE VALID ITY OF RE-ASSESSMENT U/S 153A. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS D ISMISSED. 9. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION I S ESTIMATION OF COMMISSION ON BOGUS SALES TURNOVER. THE AO HAS ESTIMATED 2% C OMMISSION ON BOGUS TURNOVER OF RS.86,74,047 ON THE GROUND THAT THE ASSESSEE HAS INDULGED IN ISSUING BOGUS SALE BILLS TO EARN COMMISSION. THE CIT(A), AFTER CONSID ERING THE ASSESSEES SUBMISSION HAS GIVEN A CATEGORICAL FINDING THAT THE FACTS GATH ERED DURING THE COURSE OF SEARCH AND POST SEARCH INVESTIGATION REVEALED THAT THE ASS ESSEE IS INVOLVED IN ISSUING BOGUS SALES BILLS TO EARN COMMISSION. THE RELEVANT PORTI ON OF THE ORDER IS EXTRACTED BELOW:- 4. GROUND NO. 2 - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAD SHOWN SALES AMOUNTING TO RS.5,10,000/- TO M/S. DEV STEELS AGAIN ST WHICH THE ASSESSEE HAD CLAIMED PURCHASES AMOUNTING TO RS.4,93 ,2001- FROM 9 ITAS 3054-3056/UM/2016 AKHIL STEELS. IN THE CASE OF DEV STEEL IT WAS FOUND ON THE BASIS OF STATEMENTS MADE BY ITS EMPLOYEES, PARTNERS AND VERI FICATION OF DOCUMENTS THAT THE ENTIRE BUSINESS OF DEV STEELS WA S BOGUS. THE AO. ACCORDINGLY, NOTED THAT SINCE THE PURCHASES MADE BY THE ASSESSEE WERE FOUND TO BE NON- GENUINE, THE CORRESP ONDING SALES COULD NOT BE CONSIDERED GENUINE AND CONSEQUENTLY, T HE ASSESSEE COULD NOT SUPPLY THE SAME TO ITS CUSTOMERS. THE A.O . FURTHER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ASKING IT TO SH OW CAUSE AS TO WHY HIS BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED U/ S. 145(3) OF THE ACT AND ITS SALES AND PURCHASES SHOULD NOT BE CONSI DERED AS BOGUS. THE A.O. PERUSED A REPLY OF THE ASSESSEE IN THIS RE GARD BUT FOUND IT UNTENABLE. NOTHING WAS PROVED WITH SUPPORTING EVIDE NCE AND CONTRARY TO THE FACTS BROUGHT ON RECORD BY THE A.O. . THE A.O. THEREFORE, REJECTED THE BOOKS OF ACCOUNTS OF THE AS SESSEE AND HELD THAT THE ASSESSEE HAD RESORTED TO CIRCULAR TRADING WITHOUT PHYSICAL DELIVERY OF GOODS. HE ACCORDINGLY, ASSESSED THE COM MISSION EARNED FROM ISSUING OF SALES BILLS TO UNITY INFRAPROJECTS LTD AND OTHER PARTIES 2% OF THE SALE BILLS. ACCORDINGLY, HE MADE AN AD DITION OF RS.1,73,481/-. 4.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS MADE NO WRITTEN SUBMISSIONS TO CONTRO VERT THE FINDINGS OF THE A.O. 4.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE FOR THE APPELLANT. THE A.O. IN THE ASSESSMENT ORDER HAS GIVEN A CLEAR CUT FINDING THAT THE ASSESSEE HAD RESORTED TO BOGUS PURCHASE AND SALES AND IN TURN EARNED THE COMMISSION THEREON . THE AO HAS OBSERVED THAT THE SALES MADE TO M/S. DEV STEEL BY T HE ASSESSEE WERE NOT GENUINE AS NO PURCHASES WERE MADE BY IT FROM M/ S. AKHIL STEEL. THEREFORE, ON THE FACTS OF THE CASE AND FOR THE REA SONS GIVEN BY A.O. IN THE ASSESSMENT ORDER, I FIND NO REASON TO INTERF ERE WITH THE ORDER OF THE A.O. IN THE ABSENCE OF ANY SUBMISSION MADE BY A SSESSEE. THIS GROUND IS ACCORDINGLY, DISMISSED. FACTS REMAIN UNCHANGED. THE ASSESSEE DID NOT APPEA R TO CONTROVERT THE FINDINGS OF FACT RECORDED BY THE LD.CIT(A). THEREF ORE, WE ARE INCLINED TO UPHOLD THE ORDER OF CIT(A) AND REJECT GROUND RAISED BY THE ASSESSEE. 10 ITAS 3054-3056/UM/2016 10. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION I S DISALLOWANCE OF INDIRECT EXPENSES ON PRO-RATA BASIS. THE AO DISALL OWED INDIRECT EXPENSES INCURRED BY THE ASSESSEE ON PRO-RATA BASIS TOWARDS SALES TURNOVER DECLARED BY THE ASSESSEE TO BOGUS SALES TURNOVER DETERMINED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO HAS WORKED OUT DISA LLOWANCE OF RS.5,34,446 BY HOLDING THAT THE ASSESSEE HAS BEEN INDULGING IN ISSUING BOGUS SALES BILLS TO EARN COMMISSION INCOME FOR WHICH NO REQUIREMENT OF INCURRING ANY INDIRECT EXPENSES. THE AO FURTHER OBSERVED THAT INDIRECT EX PENSES INCURRED BY THE ASSESSEE ARE ABNORMAL COMPARED TO THE TURNOVER OF T HE ASSESSEE AND NATURE OF ITS BUSINESS. THE CIT(A), AFTER CONSIDERING RELEVA NT SUBMISSIONS OF THE ASSESSEE UPHELD DISALLOWANCES WORKED OUT BY THE AO. THE REL EVANT PORTION OF THE ORDER OF CIT(A) IS EXTRACTED BELOW:- 5. IN REGARD TO THE DISALLOWANCE OF INDIRECT EXPENS ES ON PRO RATA BASIS, A.O. OBSERVED THAT THE ASSESSEE HAD SHOWN A TOTAL TURNOVER OF RS27,82,16,064/- AGAINST WHICH, HE HAD CLAIMED I NDIRECT EXPENSES OF RS. 1,71,42,121/-. HE NOTED THAT THE SA LES OF RS.86,74,047/- WERE IDENTIFIED AS BOGUS SALES. THE A.O. ACCORDINGLY REDUCED THE TOTAL TURNOVER OF THE ASSES SEE TO RS.27,82,16,064/- FROM THE TURNOVER OF RS.26,95,42, 017/- SHOWN BY ASSESSEE. ACCORDING TO HIM INDIRECT EXPENSES CLAIME D BY THE ASSESSEE WOULD ALSO BE REDUCED PROPORTIONATE TO THE AMOUNT O F BOGUS PURCHASES. HE ACCORDINGLY WORKED OUT THE AMOUNT OF ALLOWABLE INDIRECT EXPENDITURE AT RS.1,66,07,675/- AS AGAINST RS.1,71,42,121/- CLAIMED BY ASSESSEE AND DIFFERENCE OF RS.5,34,446/- (RS.1,71,42,121/- LESS RS.1,66,07,675 /-) WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. 5.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E APPELLANT 11 ITAS 3054-3056/UM/2016 HAS NOT CONTROVERTED THE FINDINGS OF THE A.O. EXCEP T STATING THAT THE APPELLANT HAD NO TRANSACTIONS WITH M/S. PARAM C OMMERCIAL COMPANY. 5.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE FOR THE APPELLANT. DURING THE COURSE OF APPELL ATE PROCEEDINGS, THE APPELLANT HAS NOT CONTROVERTED THE FINDINGS OF THE AO. IN RESPECT OF THE ADDITION OF PROPORTIONATE EXP ENSES. THE APPELLANT, INSTEAD OF GIVING SUBMISSION ON MERIT, H AS MERELY HARPED ON THE ARGUMENT THAT THE SEARCH IN ITS CASE WAS BAD IN LAW IN THE ABSENCE OF WARRANT OF AUTHORIZATION AND THEREFORE, THERE WAS NO MANDATORY PRE-REQUISITE TO INITIATE ACTION U/S 153A OF THE ACT. CONSIDERING THE FACTS OF THE CASE, FINDINGS OF THE A.O. ON THE ADDITION MADE IN PARA 8.3 TO 8.7 OF THE ASSESSMENT ORDER AND THE ISSUE OF VALIDITY OF ASSESSMENT HAVING BEEN DECIDED AGAINST THE ASSESSEE, I REJECT THIS GROUND RAISED BY APPELLANT. FACTS REMAIN UNCHANGED. THE ASSESSEE DID NOT APPEA R TO CONTROVERT THE FINDINGS OF FACT RECORDED BY THE CIT(A). THEREFORE , WE ARE INCLINED TO UPHOLD THE ORDER OF CIT(A) AND REJECT GROUND RAISED BY THE ASSESSEE. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISM ISSED. 12. I.T.A NOS.3055 &3056/MUM/2016 : THE FACTS AND CIRCUMSTANCES IN THESE TWO APPEALS ARE ALSO COMMON TO ITA NO.354/MUM /2016 WHICH WE HAVE ALREADY DECIDED. THE GROUNDS RAISED IN THESE APPEA LS ARE ALSO IDENTICAL. THEREFORE, FOR THE REASONS GIVEN IN OUR ORDER ABOVE , APPEALS IN I.T.A NOS.3055 &3056/MUM/2016 ARE ALSO DISMISSED. 13. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE A SSESSEE ARE DISMISSED. 12 ITAS 3054-3056/UM/2016 ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER, 2017. SD/- SD/- (SAKTIJIT DEY) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 27 TH SEPTEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI