Asst. Commissioner of Income tax Cent. Cir. 1, Belgaum V. Shri. H. Raghavendra Rao, Belgaum

ITA 308/PAN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84827 (ITAT-PANAJI)
• 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; 11

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 . 30 8 & 30 9 /PNJ/2013 (ASST. YEAR S : 200 7 - 0 8 & 2008 - 09 ) ACIT, CENTRAL CIRCLE - 1, BELGAUM. VS. SHRI H. RAGHAVENDRA RAO, PROP. M/S. RAGHAVENDRA AGENCIES, Y.D. COMPOUND, OPP. ROTARY HALL, COLLEGE ROAD, HOSPET . PAN NO. AEEPR 7489 C (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 18 /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. 30 8 /PNJ/2013 : 1. WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELET I NG AN AMOUNT OF RS. 1, 55 , 00 ,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. 8,13,750/ - ADDED BY THE ASSESSING OFFICER FOR THE A.Y. 20 0 7 - 08 TOWARDS PROFIT ELEMENT ON UNACCOUNTED PURCHASES . IN ITA NO. 30 9 /PNJ/2013, THE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1 . WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELETING AN AMOUNT OF RS. 3.21.10,000/ - 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 DELETING AN AMOUNT OF RS. 16 , 85 ,7 75 / - ADDED BY THE ASSESSING OFFICER FOR THE A.Y. 200 8 - 0 9 TOWARDS PROFIT ELEMENT ON UNACCOUNTED PURCHASES OF RS. 3,21,10,000/ - ? 3 . WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELETING AN AMOUNT OF RS. 7,20,19,760/ - 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 ? 4. WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN DELETING AN AMOUNT OF RS. 37,81,037/ - ADDED BY THE ASSESSING OFFICER FOR THE A.Y. 2008 - 09 TOWARDS PROFIT ELEMENT ON UNACCOUNTED PURCHASES OF RS. 7,20,19,760/ - ? 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 3 SRI MANOJ KUMAR JAIN, THE CASES OF THE ASSESSEE WERE TAKEN UP FOR PROCEEDINGS U/S. 153C OF THE ACT. THE ASSESSING OFFICER HAS ISSUED NOTICE FOR THE A.Y S . 2007 - 08 & 2008 - 09 U/S. 153C OF THE ACT. THE ASSESSING OFFICER W AS OF THE BELIEF THAT THE TRANSACTIONS SHOWN WITH REGARD TO PURCHASE AND SALE OF IRON ORE PRIMARILY RESULTING IN SALES TO M/S. GRMTC, A PROPRIETARY CONCERN OF SRI MANOJ KUMAR JAIN WERE NOT GENUINE TRANSACTIONS. THE ASSESSING OFFICER FOUND THAT AS PER THE SEIZED MATERIAL, THERE ARE IRON ORE PURCHASES OF RS. 1,55,00,000/ - FOR A.Y. 2007 - 08 AND RS. 3,21,10,000/ - FOR A.Y. 2008 - 09 FROM M/S. RAGHAVENDRA AGENCIES BY M/S. GRMTC . AS PER DOCUMENT MARKED AS A/MJ/45DATED 01/04/2008, SEIZED FROM M/S. GRMTC, A NUBER OF CONCERNS INCLUDING M/S. RAGHAVENDRA AGENCIES WERE OPERATED FROM THE OFFICE OF MR. MANOJ KUMAR JAIN HAD ISSUED LETTERS TO ING VYSYA BANK, HOSPET INTIMATING THAT THE CHEQUES ISSUED TO CERTAIN PARTIES ARE MEANT FOR BUSINESS PURPOSES. CAREFUL READING OF THE SAME INDICATES THAT THE LETTER ISSUED TO BANK APPEARED TO BE ABNORMAL BECAUSE NO ACCOUNT HOLDER IN NORMAL COURSE OF BUSINESS EXPLAINS TO BANK AU THORITIES, THE PURPOSE OF WITHDRAWAL OF CASH FROM BANK ACCOUNT . THE BANK RECORDS INDICATE THAT BANK HAD ALREADY COLLECTED BCTT TAX ON THE WITHDRAWALS AND FURTHER TELLING THE BANK THAT IT IS FOR BUSINESS PURPOSE HAS NO MEANING. FURTHER, IT IS SEEN THAT CH EQUES ARE BEARER CHEQUES AND THE HANDWRITING ON THE CHEQUES AS WELL AS ON THE LETTERS APPEAR TO BE 4 MADE BY ONE OR TWO PERSONS ONLY . SHRI MANOJ KUMAR JAIN APPEARS TO HAVE DIRECTED TO ISSUE SUCH TYPE OF LETTERS TO BANK TO MAKE BELIEVE THAT THE CONCERNS WHO ISSUED LETTERS ARE GENUINE CONCERNS. RECORDS SHOW THAT M/S. GRMTC HAD SHOWN PURCHASES OF IRON ORE OF RS. 1,55,00,000/ - FOR A.Y S . 2007 - 08 AND 2008 - 09 . THE PARTY COULD NOT FOUND, T HEREFORE, THE ASSESSING OFFICER HAS DIRECTED SHRI MANOJ KUMAR JAIN TO PROVE GENUINENESS OF THE PURCHASE OF ABOVE PARTY . THE ASSESSEE FAILED TO DO SO, THEREFORE, ASSESSING OFFICER WAS OF THE VIEW THAT THE DIFFERENCE IN PURCHASES NOTICED IN THE CAS E OF M/S. RAGHAVENDRA AGENCIES BELONGED TO M/S. GRMTC ITSELF. THEREFORE, THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER U/S. 144 OF THE ACT AS UNDER: - 4 . THE MATTER WAS CARRIED TO THE CIT(A) AND CIT(A) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: - DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANTS COUNSEL HAS NOT BEEN ABLE TO GIVE ANY DETA ILS REGARDING ANY PURCHASES MADE BY HIM WHICH COULD SUBSTANTIATE THE SALES OF 1,55 , 00 , 000/ - FOR A.Y. 2007 - 08 AND RS. 3,21,10,000/ - FOR AY. 2008 - 09 SHOWN TO MIS GRMTC AS CLAIMED BY SRI MANOJ KUMAR JAM, PROP, MIS GBMTC. THE ONLY ARGUMENT RAISED BY THE APPELLANT IS PLACING RELIANCE ON THE FINDINGS GIVEN BY THE CIT(A) IN ORDER A.Y. UNDISCLOSED INCOME PROTECTIVE BASIS TOTAL INCOME 2007 - 08 1,55,00,000 8,13,750 1,63,13,750 2008 - 09 3,21,10,000 16,85,775 10,95,96,572 5 IN TA NOS.429/429A1428/427/426/425/DCIT,CC 1, BELGAUM/CJT(A) - VL/ B LORE/2009 - 2010 DATED 13TH MAY 2013, IN THE CASE OF SRI MANOJ KUMAR JAM WHEREIN THE TRANSACTIONS OF PURCHASES SHOWN IN THE HANDS OF SRI MANOJ KUMARJAIN FROM THE APPELLANTS CONCERN AND OTHER SIMILAR CONCERNS HAVE BEEN HELD TO BE BOGUS AND MAKE - BELIEVE TR ANSACTIONS AND THE PURCHASES SHOWN BY SRI MANOJ KUMAR JAM IN NAME OF THE APPELLANT HAVE BEEN ADDED AS INCOME OF SRI MANOJ KUMAR JA IN HIMSELF. ON THIS BASIS, THE APPELLANT HAS SOUGHT RELIEF IN HIS CASE. IT IS ON RECORD THAT NO EVIDENCE WHAT SO EVER HAS BEE N PRODUCED BEFORE ME OR BEFORE THE ASSESSING OFFICER TO SHOW THAT THE APPELLANT CONCERN ACTUALLY CARRIED OUT IRON ORE TRADING OR THAT THE APPELLANT WAS A PERSON OF MEANS. THE APPELLANT HIMSELF HAS NOT BEEN ABLE TO CONTRADICT THE FINDINGS OF THE ASSESSING O FFICER. ON THE BASIS OF EVIDENCE ON RECORD AND AS ALSO EXAMINED IN THE CASE OF SRI MANOJ KUMAR JAM IN ITA NOS.429/429A / 428 / 427 / 426/425/OCIT,CC 1, BELGAUM/CIT(A) - VIIBLORE/2009 - 2010 DATED 13TB MAY 2013, I HOLD THAT THE TRANSACTION OF SALES SHOWN IN THE HAN DS OF THE APPELLANT SRI RAGHAVENDRA RAO TO SRI MANOJ KUMAR JAIN , PROP. MIS GRMTC IS NOT A GENUINE TRANSACTION. MERE REGISTRATION WITH THE COMMERCIAL TAX DEPARTMENT AND FILING SELF DECLARATORY FORMS WILL NOT MAKE THE TRANSACTIONS OF PURCHASE AND SALES TO BE GENUINE TRANSACTIONS IN A BSENCE OF BASIC EVIDENCES TO SUPPORT THE SAME WHICH ARE ABSENT IN THE CASE OF THE APPELLANT. ON THIS ASPECT, I AGREE WITH THE FINDINGS OF THE ASSESSING OFFICER. HOWEVER, IN MY VIEW, SINCE THE PURCHASE AND SALES, IF ANY, SHOWN BY T HE APPELLANT ARE BOGUS, MAKE BELIEVE AND ON PAPER ONLY, NO ADDITION ON ACCOUNT OF INVESTMENT IN PURCHASES, DIFFERENCE IN SALES FIGURES OR PROFIT THEREOF NEEDS TO BE MADE IN THE HANDS OF THE APPELLANT WHO IS APPARENTLY A PERSON WITHOUT MEANS. IT HAS ALSO BE EN HELD BY ME THAT THESE TRANSACTIONS SHOWN IN THE NAMES OF THE APPELLANT SRI RAGHAVENDRA RAO AND OTHER SIMILAR PERSONS WERE SHOWN ONLY TO GIVE A SOURCE TO THE IRON - ORE S OLD BY SRI MANOJ KUMAR JAM REFERRED TO IN TA NOS.429/ 429A / 428/427/426/4251 DCIT,CC 1, B EL GAUM/CIT(A) - V I /BIORE / 2009 - 2010 DATED 13TH MAY 2013 IN THE CAGE OF SRI MA NOJ KUMAR JAM. THEREFORE, THE ADDITION MADE IN THE HANDS OF THE APPELLANT ON PROTECTIVE BASIS IS HEREBY DELETED FOR BOTH THE A.YS WITH THE ABOVE FINDINGS. THIS TAKES CARE OF ALL THE GROUNDS RAISED AS RELEVANT IN THE FACTS OF THE CASE. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LEARNED DR SUBMITTED BEFORE US THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE 6 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. 6. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES. L OOKING 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 TRIBUNAL 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 KUMAR 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 CAN 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 IRON 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 MAD E BY THE ASSESSEE 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 7 VARIOUS PARTIES SO THAT IT MAY APPEAR THAT THE ASSESSEE HAS MADE THE PURCHASES FOR THESE PARTIES. IT IS ALSO UNCONTROVERTED 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 HO NBLE SUPREME COURT IN CIVIL APPEALS NOS. 4540 - 4548 OF 2000 IN THE CASE OF THREESIAMMA JACOB & 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 THAT 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 NOT HING IN LAW 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 BELO NG 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 SHOW ING THE QUANTITY 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 CONCERNED 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 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 FAN AS WELL AS TIN. ALL THESE CONCERNS WE RE 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 8 ALSO I MADE TO THESE CONCERNS. THE AO DISAL LOWED THESE 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 BILLS BUT MIGHT HAVE PROCURED THE BILLS FROM OTHER PARTIES. THE ASSESSEE IN 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 BIL LS TO BE BOGUS 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 REMA ND 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 CONCERN 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 STATE MENT 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 AS SESSEE COULD 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 B Y THE ASSESSEE. 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 THE 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 LEA RNED A.R THAT ONCE 9 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 JUSTIF Y SUCH A HIGH GROSS PROFIT. UNDER THESE FACTS IN OUR OPINION NO ADDITION ON 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 REVENU E COULD HAVE 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 PR OFIT ESTIMATED 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. BEF ORE CONCLUDING 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 ADDITI ON 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 RECE IVED BY THE 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 A SSESSMENT YEAR 2008 - 09 ARE ALLOWED. 10 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 ALREADY HELD THAT THERE IS NO MATERIAL OR EVIDENCE WHATSOEVER 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 WOU LD HAVE EARNED 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 MAN OJ KUMAR JAIN 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 TREA TED THIS INVESTMENT 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 CANNO T 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 THE REVENUE ADDED THE PROFIT ON SUCH PURCHASE @ 4% AS H AS 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 11 IN ANY CASE SINCE MORE THAN 4% ON SUCH PROFIT WHICH WOULD HAVE EARNED OTHERWISE TAKES CARE OF ADDITION OF SUCH ESTIMATED PROFITS. T HE 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 PROFESSION WHICH ARE CHARGEABLE TO TAX. THE CONSIDERATION RECEIVED BY THE ASSESSEE ON THE SALES CA NNOT 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 TH E 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 THEREFORE, ALLOW THE APPEALS OF THE DEPARTMENT. WE HOLD THA T 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 1 84/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/ - 12 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