ACIT, New Delhi V. M/s. Sanvik Engineers India Pvt. Ltd., New Delhi

ITA 3201/DEL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4704 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 19-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHALINI VERMA
• Keywords: Bogus purchase; Rejection of books of accounts; Accommodation entries; Assessment record; Reassessment proceedings; Set aside
• Section: 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. R.K PANDA, ACCOUNTANT MEMBER AND SH. KULDIP SINGH, JUDICIAL MEMBER ITA NO.3201/DEL/2015 ASSESSMENT YEAR: 2010-11 ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 22 (1) NEW DELHI VS M/S. SANVIK ENGINEERS INDIA PVT. LTD. B-1/1265, VASANT KUNJ, NEW DELHI-110070 PAN NO.AAACS2960A (APPELLANT) (RESPONDENT) APPELLANT BY SMT. SHALINI VERMA, SR. DR. RESPONDENT BY SH. M. P. RASTOGI, ADVOCATE DATE OF HEARING: 22/04/2019 DATE OF PRONOUNCEMENT: 30/05/2019 ORDER PER R.K. PANDA, AM: 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGA INST THE ORDER DATED 13.03.2015 OF THE PCIT (OSD) (APPEALS)-8, DEL HI RELATING TO A. Y. 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF S UPPLY AND PAGE | 2 INSTALLATION OF CENTRAL AIR CONDITIONING PLANT TO T HEIR CUSTOMERS ON CONTRACT BASIS. IT FILED ITS RETURN OF INCOME ON 15.10.2010 DECLARING TOTAL INCOME OF RS.1,8807,790/-. THE ASS ESSING OFFICER COMPLETED THE ASSESSMENT U/S. 143 (3) DETERMINING T HE TOTAL INCOME AT RS.1,93,47,891/-. SUBSEQUENTLY THE ASSESS ING OFFICER REOPENED THE ASSESSMENT U/S 147 OF THE IT ACT AND N OTICE U/S. 148 DATED 04.03.2008 WAS ISSUED AFTER RECORDING FOL LOWING REASONS :- INFORMATION IN RESPECT OF CASES OF NON-GENUINE BIL LS EMANATING OUT OF VAT DEPARTMENT, MUMBAI WAS RECEIVE D THROUGH THE DIT (INV)-I, DELHIS LETTER F. NO. DIT [INV.]- I/MVAT/DEL/2012-13/71 DATED 26.02.2013. THE DGIT (INV) MUMBAI COMMUNICATED THE DETAILS OF NON-GENUIN E / BOGUS BILLS AVAILED BY THE ABOVE ASSESSEE AS PER TH E INFORMATION OBTAINED FROM THE MAHARASHTRA VAT DEPARTMENT AS A RESULT OF ENQUIRIES CONDUCTED BY TH EM. THE INFORMATION REGARDING M/S. SANVIK ENGINEERS (IN DIA) BENEFICIARY TIN HAWALA TIN HAWALA NAME HAWALA PAN FY AMOUNT 27650394720V 27090707756V MAHAVIR SALES CORPORATION AMMPM3778R 2009-10 1212598 27650394720V 27440688212V TULSIANI RADING PRIVATE LIMITED AADCT0405G 2009-10 4076273 27650394720V 27560694451V SAMARTH ENTERPRISES APBPS3000G 2009-10 1628294 27650394720V 27600648257V NIDDHISH IMPEX PVT AACCN6984H 2009-10 4630071 PAGE | 3 LTD. 27650394720V 27750595164V DEEP ENTERPRISES AMTPS9884P 2009-10 4630071 TOTAL 15847973 IT IS ALLEGED THAT M/S. SANVIK ENGINEERS INDIA PVT . LTD. HAS AVAILED BOGUS BILLS FROM THE AFORESAID FIV E PARTIES MENTIONED UNDER THE COLUMN OF HAWALA NAME AMOUNTIN G TO RS.1,58,47,973/- IN THE FINANCIAL YEAR 2009-10. I HAVE PERUSED THE ASSESSMENT RECORD OF THE ASSESSEE FOR T HE A. Y.2010-11. THE DETAILS OF PURCHASES FURNISHED BY T HE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS CONTAIN NAMES OF THE ABOVE HAWALA DEALERS WHO HAVE GIVEN BO GUS BILLS. THUS THE ASSESSEE HAS REDUCED ITS TAXABLE P ROFITS BY INTRODUCING BOGUS PURCHASE BILLS TO THE EXTENT OF RS.1,58,47,973/-. IN VIEW OF THE ABOVE I HAVE REAS ONS TO BELIEVE THAT A SUM OF RS.1,58,47,973/- REPRESENTS I NCOME OF THE ASSESSEE FOR THE A. Y.2010-11 WHICH HAS ESCA PED ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECT ION 147 OF THE IT ACT 1961, THEREFORE A NOTICE U/S 148 OF THE INCOME TAX THE IT ACT 1961 IS REQUIRED TO BE ISSUED AND SERVED UPON THE ASSESSEE COMPANY TO ASSESS THE INCO ME ESCAPED AS STATED, HEREINABOVE. 3. THE ASSESSEE, IN RESPONSE TO THE SAID NOTICE, FILED A LETTER DATED 22.03.2013 STATING THAT THE RETURN ORIGINALLY FILED U/S 139 MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE 148. THE ASSESSEE SOUGHT COPY OF THE REASONS RECORDED WHICH WERE PROV IDED TO THE ASSESSEE ON THE SAME DATE. THE ASSESSEE FILED OBJE CTIONS TO THE PAGE | 4 NOTICE U/S.148 ON 28.03.2013 WHICH WERE ALSO DISPOS ED OFF BY PASSING A SEPARATE ORDER DATED 10.04.2013 BY REJECT ING VARIOUS OBJECTIONS. 4. SUBSEQUENTLY THE ASSESSING OFFICER ISSUED STATUT ORY NOTICE U/S. 142 (1) AND 143 (2) FOR COMPLIANCE AND ASKED T HE ASSESSEE TO EXPLAIN AS TO WHY THE PURCHASES AMOUNTING TO RS.1,5 8,47,973/- REPRESENTING BOGUS BILLS PURCHASE THROUGH HAWALA DE ALERS BE NOT DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSE SSEE. THE ASSESSEE FILED REPLY STATING THAT IT HAD PURCHASED MATERIAL FROM THE SAID PARTIES AND ALL THESE TRANSACTIONS ARE GEN UINE AND MATERIAL HAS BEEN CONSUMED IN THE PROJECTS EXECUTED FOR THE PROJECT OF MAGUS HOTELS AND ASCENT HOTELS AT MUMBAI AND THAT ALL THE PAYMENTS WERE MADE TO THE SUPPLIERS THROUGH BAN KING CHANNEL BY ACCOUNT PAYEE CHEQUES ONLY. IT WAS ARGU ED THAT NO PROJECT OF SIMILAR NATURE CAN BE COMPLETED WITHOUT MATERIAL. THE ASSESSEE ALSO FILED THE COPIES OF PURCHASE BILLS IS SUED BY THE ABOVE SUPPLIERS ALONGWITH DELIVERY CHALLAN, MATERIA L RECEIPT NOTE AND COPY OF PURCHASE ORDER ETC. THE COPIES OF THE BANK STATEMENT HIGHLIGHTING THE PAYMENTS WERE ALSO FILED. 5. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ABOVE SUBMISSIONS AND ASKED THE ASSESSEE TO PROVE T HE GENUINESS OF THE TRANSACTIONS WITH THE IMPUGNED PAR TIES AND TO PRODUCE EVIDENCE OF SUPPLY OF MATERIAL I.E. TRANSPO RT BILLS/ BILTY ETC AND ALSO TO PRODUCE THE PARTIES IN PERSON TO VE RIFY THE AUTHENTICITY OF THE OF THE TRANSACTIONS. IT WAS SU BMITTED THAT IT IS NOT POSSIBLE FOR THE ASSESEE TO PRODUCE THE SUPPLIE RS SINCE THEY PAGE | 5 ARE NOT THE REGULAR SUPPLIERS OF THE ASSESSEE COMPA NY AND FURTHERMORE PROJECT AT MUMBAI HAS ALREADY BEEN COMP LETED IN THE YEAR 2011. IT WAS REQUESTED TO CALL ALL THE SUPPLIE RS FOR THEIR CROSS EXAMINATION, SINCE THE ASSESSEE IS NOT ABLE TO PROD UCE THE SAME. THE ASSESSEE ALSO REQUESTED THE ASSESSING OFFICER T O PROVIDE THE RELEVANT MATERIAL AND OPPORTUNITY TO CROSS EXAMINE THE SAID PARTIES. IT WAS SUBMITTED THAT INFORMATION RECEIVE D FROM VAT DEPARTMENT AND THE BASIS OF THEIR CONCLUSION OF THE IMPUGNED SUPPLIERS TO BE BOGUS ETC IS UNFOUNDED AND SUSPICIO US IN NATURE. SINCE ALL THESE PARTIES WERE REGISTERED AS FAR AS 2 007AND THUS THE SILENCE OF THE VAT DEPARTMENT ON THEIR CONDUCT PRIO R TO THESE DATES PRIOR TO THE YEAR IN QUESTION CONVEY UNAMBIGU OUSLY ABOUT THE EXISTENCE AND GENUINESS OF THESE PARTIES. 6. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED AND AGAIN ASKED THE ASSESSEE TO FURNISH EVIDENCE OF SUPPLY AN D USE OF THE MATERIAL PURCHASED AND ALSO TO PRODUCE THE PARTIES IN PERSON. IN ABSENCE OF COMPLIANCE OF THE SAME AND OBSERVING THA T THE ASSESSEE ARRANGED BOGUS PURCHASE BILLS WITH A MOTIV E TO REDUCE ITS TAXABLE PROFITS AND OBSERVING THAT THE PARTIES HAVE ADMITTED IN THE INVESTIGATION BY THE VAT DEPARTMENT OF MAHARASH TRA THAT THEY WERE NOT DOING GENUINE BUSINESS BUT WERE SIMPLY PRO VIDING ACCOMMODATION ENTRIES IN THE SHAPES OF BOGUS BILLS, THE ASSESSING OFFICER MADE ADDITION OF RS.1,58,47,973/- TO THE TO TAL INCOME OF THE ASSESSEE AS BOGUS PURCHASES FROM THE AFOREMENTI ONED PARTIES. PAGE | 6 7. BEFORE CIT(A) THE ASSESSEE APART FROM CHALLENGIN G THE ADDITION ON MERIT, CHALLENGED THE VALIDITY OF THE R EASSESSMENT PROCEEDINGS. THE LD. CIT(A) HELD THAT THE REASSESSM ENT PROCEEDINGS ARE VOID SINCE THE REASONS RECORDED BY THE ASSESSING OFFICER U/S 147 OF THE IT ACT IS NOT PROPER AND VAL ID AND IS BASED ON SUSPECT AND WITHOUT ANY EVIDENCE. HE HAS ACTED ONLY ON THE BASIS OF 3 RD PARTY INFORMATION WITHOUT APPLYING HIS OWN MIND. FURTHER THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS HAD MADE ENQUIRIES ABOUT MOR E THAN 20 PARTIES AND DEEP SCRUTINY WAS DONE AND HAD CONSIDER ED THESE PARTIES AS GENUINE. SINCE THERE WAS NO FAILURE ON T HE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS REQUIRED FOR ASSESSMENT AND THE ASSESSING OFFICER WAS HAVING A V ERY SCANTY AND VAGUE INFORMATION THAT THOSE FIVE PARTIES ARE H AWALA GIVERS, THEREFORE, THE ACTION TAKEN U/S 147 IS A MERE CHANG E OF OPINION. FOR THE ABOVE PROPOSITION THE LD. CIT(A) RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF USHA INTERN ATIONAL LIMITED VS. CIT REPORTED IN 348 ITR 485. 8. SO FAR AS THE MERIT OF THE CASE IS CONCERNED, HE NOTED THAT THIRD PARTY INFORMATION CANNOT BE ACCEPTED AS AN EV IDENCE WITHOUT GIVING OPPORTUNITY OF CROSS-EXAMINATION TO THE ASSESSEE. HE NOTED THAT THE ASSESSEE HAS PURCHASED CERTAIN IT EMS WHICH WAS USED FOR MANUFACTURING THE CENTRAL AIR CONDITIO NING PLANT IN THE HOTEL. IF THE ALLEGATIONS OF THE ASSESSING OFFI CER THAT ASSESSEE HAS NOT PURCHASED THE MATERIAL IS CORRECT, THAN IT IS NOT POSSIBLE ON THE PART OF THE ASSESSEE TO COMPLETE THE CENTRAL AIR PAGE | 7 CONDITIONING SYSTEM IN THE HOTEL. FURTHER THE ASSES SING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESS EE. RELYING ON VARIOUS DECISIONS THE LD. CIT(A) DELETED THE ADDITI ON MADE BY THE ASSESSING ON MERIT ALSO. 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REV ENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWIN G GROUNDS OF APPEAL :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING THE REOPENING OF THE ASSESSMENT PROCEEDINGS U/S. 14 7 OF THE INCOME TAX ACT 1961 AS AB INITIO VOID. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,58,47,973/- MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES BASED ON INFORMATION RECEIVED FROM MAHARASHTRA VAT DEPARTMENT, AN EXTERNAL EVIDENCE. 3. THE APPELLANT CRAVES TO AMEND, MODIFY, ALTER, A DD OR FOREGO ANY GROUNDS (S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 10. THE LD. DR STRONGLY CHALLENGED THE ORDER OF THE CIT(A) IN HOLDING THE REASSESSMENT PROCEEDINGS AS VOID. SHE SUBMITTED THAT WHEN THE INFORMATION WAS RECEIVED FROM A GOVER NMENT DEPARTMENT THAT THE PARTIES FROM WHOM THE ASSESSSEE HAD PURCHASED THE MATERIAL ARE ONLY ENTRY PROVIDERS WIT HOUT DOING ANY GENUINE BUSINESS AND THE ASSESSEE WAS UNABLE TO PRODUCE THE PARTIES, THEN THE ACTION OF THE CIT(A) IN ANNUL LING THE REASSESSMENT PROCEEDINGS IS NOT PROPER. SHE SUBMIT TED THAT WHEN THE PURCHASES ARE BOGUS MERELY BECAUSE IT WILL SHOW HIGHER G.P WILL NOT BE GROUND FOR DELETING THE ADDITION. S HE ACCORDINGLY PAGE | 8 SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET ASIDE ON BOTH THE ISSUES AND THE ORDER OF THE ASSESSING OFFICER BE RE STORED. 11. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). HE SUBMITTED THA T APART FROM THE COMMUNICATION FROM THE MVAT DEPARTMENT, THE ASS ESSING OFFICER DOES NOT HAVE ANY OTHER EVIDENCE TO DISBELI EVE THE PURCHASES MADE BY THE ASSESSEE FROM THE ALLEGED FIV E PARTIES. THEREFORE, THE REOPENING MADE ON THE BASIS OF BORRO WED SATISFACTION CANNOT BE UPHELD. IT IS NOT KNOWN ON WHAT BASIS THE VAT DEPARTMENT CAME TO THE CONCLUSION THAT THESE AR E ALL HAWALA PARTIES. DESPITE BEING ASKED TO SUPPLY THE FULL DET AILS THE ASSESSING OFFICER DID NOT REPLY ON THE SAID ISSUE. HE SUBMITTED THAT WHEN THE ASSESSEE HAS GIVEN THE DATES OF PURCH ASE OF MATERIAL AND THE PAYMENTS WERE MADE BY ACCOUNT PAYE E CHEQUE THROUGH BANKING CHANNELS AND THE SALES ARE NOT DISP UTED THEN IT IS NOT PROPER ON THE PART OF THE ASSESSING OFFICER TO DISALLOW THE ENTIRE PURCHASES. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE UPHELD AND THE GROUNDS RAISED BY THE REVE NUE BE DISMISSED. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THE ASSESSING OFFICER IN THE INSTANT CASE RECEIVED INFO RMATION FROM THE DGIT (INVESTIGATION), MUMBAI THAT VAT DEPARTMEN T, MUMBAI HAS SUPPLIED INFORMATION ON THE BASIS OF ENQUIRIES CONDUCTED BY THEM THAT THE ASSESSEE M/S. SANVIK ENGINEERS INDIA PVT LTD. HAS PAGE | 9 AVAILED BOGUS BILLS FROM THE ALLEGED FIVE PARTIES ( AS MENTIONED EARLIER AT PARA NO.2 OF THIS ORDER) AMOUNTING TO RS . 1,58,47,973/-. THE ASSESSING OFFICER, AFTER PERUSAL OF THE ASSESSM ENT RECORD AND ON THE BASIS OF DETAILS FURNISHED BY THE ASSESSEE, REOPENED THE ASSESSMENT U/S 147/148 OF THE IT ACT. SINCE THE AS SESSEE COULD NOT PRODUCE THE DETAILS AS ASKED BY THE ASSESSING O FFICER TO SUBSTANTIATE THE GENUINESS OF THE PURCHASES AND ALS O FAILED TO PRODUCE THE FIVE PARTIES FROM WHOM IT HAD MADE THE ALLEGED BOGUS PURCHASES, THE ASSESSING OFFICER MADE ADDITION OF RS.1,58,47,973/- TO THE TOTAL INCOME OF THE ASSESSE E TREATING THE PURCHASES AS BOGUS. WE FIND THE LD. CIT(A) QUASHED THE REASSESSMENT PROCEEDINGS AND ALSO DELETED THE ADDIT ION ON MERIT. 13. SO FAR AS THE ORDER OF THE CIT(A) IN QUASHING T HE REASSESSMENT PROCEEDINGS ARE CONCERNED, WE FIND THE SAME IS NOT PROPER UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E. THE ASSESSING OFFICER HAS ACTED ON THE BASIS OF INFORMA TION SUPPLIED BY THE INVESTIGATION WING OF THE DEPARTMENT WHO IN TURN HAVE RECEIVED INFORMATION FROM MVAT DEPARTMENT THAT THE ASSESSEE M/S. SANVIK ENGINEERS PVT. LTD. HAS AVAILED BOGUS B ILLS FROM AFORESAID FIVE PARTIES WHO ARE HAWALA DEALERS. THE ASSESSING OFFICER AFTER OBTAINING THE INFORMATION HAS PERUSED THE ASSESSMENT RECORD AND ALSO HAS ALSO GONE THROUGH TH E VARIOUS DETAILS FILED BY THE ASSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. WHEN THE INVESTIGATION WING HAS RECEIVED SPECIFIC INFORMATION FROM ANOTHER GOVERNME NT DEPARTMENT THAT ASSESSEE HAS INDULGED IN HAWALA TRA NSACTION BY PAGE | 10 AVAILING BOGUS PURCHASES BILLS TO INFLATE ITS PURCH ASES, THEREFORE, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAD NO INFORMATION OR THAT THERE WAS NO FRESH MATERIAL BEFORE THE ASSESSI NG OFFICER FOR REOPENING OF THE ASSESSMENT. SO FAR AS THE OBSERVAT ION OF THE CIT(A) THAT THE ASSESSING OFFICER IN THE ORIGINAL A SSESSMENT HAS CONSIDERED THESE PARTIES AS GENUINE IS CONCERNED, T HE SAME IS INCORRECT, IN VIEW OF THE EXTENSIVE ENQUIRIES CONDU CTED BY THE MVAT AND PASSING OF THE INFORMATION TO DGIT (INVEST IGATION) WHO IN TURN HAS PASSED THE INFORMATION TO THE ASSESSING OFFICER. THEREFORE, THESE THINGS CAME TO LIGHT ONLY AFTER SU CH ENQUIRIES WERE CONDUCTED AFTER THE COMPLETION OF THE ORIGINAL ASSESSMENT. THEREFORE, THE REASSESSMENT PROCEEDING IN THE INSTA NT CASE IN OUR OPINION IS VALID. THEREFORE, THE ORDER OF THE CIT(A ) TREATING THE REOPENING OF THE ASSESSMENT U/S 147 OF THE IT ACT A S AB-NITIO VOID IS NOT CORRECT. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND ALLOW THE GROUND NO.1 FILED BY THE R EVENUE. 14. SO FAR AS THE ORDER OF THE CIT(A) IN DELETING T HE ADDITION OF RS.1,58,47,973/- ON MERIT IS CONCERNED, WE FIND DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER HAD SPECIFICALLY ASKED THE ASSESSEE TO PRODUCE THE ABOV E PARTIES FOR HIS EXAMINATION. HOWEVER, THE ASSESSEE STATED THAT IT IS NOT POSSIBLE FOR IT TO PRODUCE THE SUPPLIERS SINCE THEY ARE NOT THE REGULAR SUPPLIERS OF THE ASSESSEE COMPANY AND FURTH ER THE PROJECT AT MUMBAI HAD ALREADY BEEN COMPLETED. FURTHER THE ASSESSEE COULD NOT FURNISH EVIDENCE OF SUPPLY OF THESE MATER IALS I.E. PAGE | 11 TRANSPORTATION BILTY OR ANY EVIDENCE TO PROVE THE M OVEMENT OF GOODS. THEREFORE DELETION OF THE ENTIRE AMOUNT OF T HE BOGUS PURCHASES SO MADE BY THE ASSESSING OFFICER IS NOT P ROPER. THEREFORE, THE ORDER OF THE CIT(A) ON THIS ISSUE AL SO CANNOT BE HELD TO BE PROPER. 15. HOWEVER, IT HAS BEEN HELD IN VARIOUS DECISIONS THAT EVEN IF THE PURCHASES ARE HELD AS BOGUS, THE ENTIRE PURCHAS E AMOUNT CANNOT BE ADDED WHEN THE DEPARTMENT HAS NOT DISPUTE D THE ASSESSEES SALES AND THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNTS AND HAS NOT GRANTED OPPORTUNITIES OF CROSS EXAMINATION. IN SUCH CASE ONLY GROSS PROFIT ELEMEN T EMBEDDED IN SUCH BOGUS PURCHASES CAN BE ADDED. FOR THE ABOVE PR OPOSITION, WE FIND SUPPORT FROM DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF PCIT VS. MOHD. HAZI ADAM VIDE ITA NO. 1 004/M/2016 AND OTHER CONNECTED APPEALS VIDE CONSOLIDATED ORDER DATED 21.02.2019 WHERE THE HONBLE HIGH COURT HAS OBSERVE D AS UNDER :- 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESSEE WAS A TRADER OF FABRICS. THE A. O FOUND THREE ENTITIES WH O WERE INDULGING IN BOGUS BILLING ACTIVITIES. A. O. FOUND TH AT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCE EDED ON SUCH BASIS. DESPITE THIS, THE QUESTION ARISE WHETHER TH E REVENUE IS CORRECT IN CONTENDING THAT THE ENTIRE PURCHASE AMOU NT SHOULD BE ADDED BY WAY OF ASSESSEES ADDITIONAL INCOME OR TH E ASSESSEE IS CORRECT IN CONTENDING THAT SUCH LOGIC C ANNOT BE PAGE | 12 APPLIED. THE FINDING OF THE CIT(A) AND THE TRIBUNAL W OULD SUGGEST THAT THE DEPARTMENT HAD NOT DISPUTED THE ASSES SEES SALES. THERE WAS NO DISCREPANCY BETWEEN THE PURCHAS ES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BE ING THE POSITION, THE TRIBUNAL WAS CORRECT IN COMING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTUR BING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE , CORRECTLY RESTRICTED THE ADDITIONS LIMITED TO THE EXTENT OF B RINGING THE G. P. RATE ON PURCHASES AT THE SAME RATE OF OTHER GENU INE PURCHASES. THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF N. K. INDUSTRIES LTD. (SURPA) CANNOT BE APPLIED WITHOUT RE FERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGM ENT THE COURT HELD AND OBSERVED AS UNDER SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3,70,78,125/- AS GROSS PROFIT ON SALES OF RS.37. 08 CRORES MADE BY THE ASSESSING OFFICER DESPITE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RECORDED IN THE REGULAR BOO KS DURING FINANCIAL YEAR 1997-98 IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHED SINCE SALE PRIC E IS ACCEPTED BY THE REVENUE. THEREFORE, IF 6% GROSS PRO FIT IS TAKEN INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUI RED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. W E HAVE TO REDUCE THE SELLING PRICE ACCORDINGLY AS A RESULT OF WHICH PROFIT COMES TO 5.66%. THEREFORE, CONSIDERING 5.66% OF 3,70,78,125/- WHICH COMES TO RS.20,98,621,88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20,98,621.88 AS GROSS PROFIT AND MAKE NECESSA RY DEDUCTIONS ACCORDINGLY. ACCORDINGLY, THE SAID QUESTIO N IS PAGE | 13 ANSWERED PARTIALLY IN FAVOUR OF THE ASSESSEE AND PART IALLY IN FAVOUR OF THE REVENUE. 16. SINCE IN THE INSTANT CASE THE ASSESSING OFFIC ER HAS NOT DISTURBED THE SALES AND HAS NOT REJECTED THE BOOKS OF ACCOUNTS, THEREFORE, THE ENTIRE AMOUNT OF BOGUS PURCHASES AS ALLEGED CANNOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE AND THE ADDITION HAS TO BE RESTRICTED TO THE EXTENT OF THE G. P. RATE ON PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHAS ES. THE ASSESSEE IN THE PAPER BOOK PAGE 54 HAS GIVEN THE CA LCULATIONS OF SUCH GP RATE AT 9.96%. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO THE EXTENT THE G. P. RATE ON PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHASES. THE ASSESSING OFFICER IS ACCORDI NGLY DIRECTED TO RESTRICT THE ADDITION TO 9.96% OF ALLEGED BOGUS PURCHASES AS AGAINST RS. 1,58,47,973 ADDED BY HIM SUBJECT TO VER IFICATION OF THE GP SO COMPUTED BY THE ASSESSEE IN THE PAPER BOO K. THE APPEAL FILED BY THE REVENUE IS ACCORDINGLY PARTLY A LLOWED. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ACCORDINGLY PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.05.2019. SD/- SD/- (KULDIP SINGH) (R.K PAND A) JUDICIAL MEMBER ACCOUNTANT MEM BER *NEHA* DATE:- 30.05.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT PAGE | 14 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 30.05.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER