RELIANCE CABLES AND CONDUCTORS P. LTD, MUMBAI V. ITO WD 4(3)(2), MUMBAI

ITA 3311/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2654 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 17-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained investment; Income from undisclosed sources; Opportunity of cross examination; Corroborative evidences; Revised return
• Section: 40A(3); 143(3); 133A; 133(6); 131

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.3311 /MUM/2012 ( / ASSESSMENT YEAR : 2007-08) RELIANCE CABLES AND CONDUCTORS PVT. LTD., 12, SHANTI VILLA CHS, 3 RD FLOOR, 45 TELLE PARK ROAD, ANDHERI (EAST), MUMBAI 400 069. / V. INCOME TAX OFFICER, 4(3)(2), AAYAKAR BHAVAN, MUMBAI 400020. ./ PAN : AAACR 2900D ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI HARIDAS BHAT DEPARTMENT BY : SHRI MUKESH JAIN (D.R.) / DATE OF HEARING : 09-05-2016 / DATE OF PRONOUNCEMENT : 25-07-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE COMPANY, BEING ITA NO. 3311/MUM/2012, IS DIRECTED AGAINST THE CORRIGENDUM ORDER DATED 29 TH MARCH, 2012 PASSED BY LEARNED COMMISSIONER OF INCOM E TAX (APPEALS)- 8 MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE A SSESSMENT YEAR 2007-08, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDER DATED 30 TH DECEMBER, 2009 PASSED BY THE ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INC OME TAX ACT,1961 (HEREINAFTER CALLED THE ACT).ON BEING ASKED BY TH E BENCH ON EARLIER OCCASIONS, THE LD DR DURING THE COURSE OF HEARING ON 17-06-2015 HAD STATED THAT THERE IS NO ORIGINAL ORDER PASSED BY THE LEARN ED CIT(A) FOR THE IMPUGNED ITA 3311 /MUM/2012 2 ASSESSMENT YEAR AND THIS CORRIGENDUM ORDER DATED 29 -03-2012 IS THE ONLY APPELLATE ORDER PASSED BY LEARNED CIT(A) , WHICH WA S CONFIRMED BY LD DR VIDE LETTER OF THE ITO 4(3)(2), MUMBAI DATED 15.06.2015 FILED WITH THE BENCH DURING THE COURSE OF HEARING ON 17-06-2015 WHICH IS PLACED IN THE FILE AND ALSO RECORDING TO THAT EFFECT IS MADE IN ORDER SHEE T ENTRY DATED 17-06-2015. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE COM PANY IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL , MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- I. 1) THE LEARNED COMMISSIONER OF INCOME TAX (' THE CIT (A) ') ERRED IN MAKING ORDER DISMISSING THE APPELLANT'S AP PEAL WITHOUT HEARING THE APPELLANT AND NOT GIVING ADEQUATE OPPORTU NITY OF BEING HEARD. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT THE APPELLANT WAS SEEKING ADJOURNMENT FOR VALID REASONS BEYOND THEI R CONTROL, PARTICULARLY THE FACTS THAT IN RESPECT OF THE SIMILAR IS SUE, THE FOR THE SISTER CONCERN, THE MATTER WAS BEING HEARD BY THE OTHER CIT(A)AND ALL THE DETAILS ARE SUBMITTED TO HIM AND HIS ORDER IS EXPEC TED SOON AND ACCORDINGLY, ADJOURNMENT SHOULD HAVE BEEN GIVEN. 3. HE FURTHER ERRED IN NOT GIVING FINAL NOTICE TO THE APPELLANT STATING THAT 'IF NOT ATTENDED TO IT, THE ORDER WILL BE MADE EX PA RTE'. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) B E SET ASIDE AND SENT BACK TO HIM FOR GIVING AN OPPORTUNITY TO THE APPE LLANT AND DECIDE THE MATTER BASED ON THE FACTS AND SUBMISSIONS. WITHOUT PREJUDICE TO THE ABOVE: II. 1) THE LEARNED CIT (A) ERRED IN CONFIRMING THE D ISALLOWANCE OF RS. 13,22,526/- U/ S 40A (3) OF THE ACT. 2. HE FURTHER ERRED IN CONFIRMING THE DISALLOWANCE ME RELY BY SAYING THAT THE ADDITION MADE BY THE AO HAS BEEN MADE AFTER TA KING INTO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WITHOUT APPREC IATING THE LEGAL POSITION MENTIONED BY THE APPELLANT IN THE GROUNDS OF A PPEAL. 3. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THA T: A) THE APPELLANT HAD PURCHASED GOODS FROM THE SAID PARTY AND THE MATERIAL WAS DELIVERED DIRECTLY BY THEM TO APPELLANTS' CUSTOMERS WHICH ITA 3311 /MUM/2012 3 HAS BEEN CONFIRMED BY THEM VIDE THEIR LETTER WHICH BEI NG ON THE RECORDS OF THE ITO AND BEING CONCLUSIVE EVIDENCE, SHOULD HAV E BEEN TAKEN INTO ACCOUNT AND SHOULD HAVE ACCEPTED PURCHASES AS GENUI NE. B) THE PURCHASERS OF GOODS HAVE ALSO CONFIRMED IN THE STATEMENT RECORDED U/ S 131 OF THE ACT THAT THEY HAVE PURCHASED GOODS FROM THE APPELLANT WHICH HAS BEEN DELIVERED TO THEM THROUGH TE MPO, LORRY & HAND CART. C) THE APPELLANT WAS NOT GIVEN ADEQUATE OPPORTUNITY OF CROSS EXAMINATION OF THE SAID MR. PRAVIN T. AGARWAL AND WI THOUT DOING THAT HIS STATEMENT WAS USED AGAINST THE APPELLANT TREATING THE ENTIRE PURCHASES AS CASH PURCHASES. D. THE APPELLANT HAD SUBMITTED COPIES OF ACCOUNT FOR THE YEAR UNDER ASSESSMENT AS WELL AS OF THE SUBSEQUENT YEAR SHOWING T HE PAYMENTS MADE TO THE CONCERNED PARTY BY ACCOUNT PAYEE CROSSED CHEQUES FOR WHICH NECESSARY BANK STATEMENTS ARE ALSO SUBMITTED. E) ADDITION/ DISALLOWANCE CANNOT BE MADE ON THE BASI S OF ONE GENERAL STATEMENT OF ANY INDIVIDUAL WITHOUT TAKING INTO CONSIDE RATION, THE FACTS OF THE INDIVIDUAL CASE, THE SUBSEQUENT LETTER CONFIRMIN G AND RETRACTING THE ORIGINAL EVIDENCES OF ENTERING INTO TRANSACTION, I N OUR CASE THAT GOODS WERE SOLD & MATERIAL WAS DELIVERED BY THEM DIR ECTLY AND THE VAT COLLECTED BY THEM IS ALSO PAID. 4. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS 13,2 2,526/- U/S 40A (3) BE DELETED. 5. WITHOUT PREJUDICE, THE APPELLANT PRAYS THAT THE D ISALLOWANCE BE APPROPRIATELY REDUCED. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CABLE AND CONDUCTORS O F FERROUS AND NON- FERROUS METALS & TRADING OF FERROUS AND NON-FERROUS METALS CABLES & CONDUCTORS. THERE WAS A SURVEY ACTION CONDUCTED BY THE INVESTIGATION WING OF THE REVENUE U/S 133A OF THE ACT ON 12 TH DECEMBER, 2007 AT THE PREMISES OF THE ASSESSEE COMPANY. DURING THE COURSE OF SURVEY, STATEMENT OF THE DIRECTOR SHRI PRAKASH JAYANTILAL SHAH WAS RECORDED. AS PER ANSWER TO Q. NO. 5, IT WAS STATED THAT THE ASSESSEE COMPANY HAD PURCHASED ALUM INIUM ITEMS FROM M/S ITA 3311 /MUM/2012 4 SHRADHA SABURI MERCHANTS LTD. OF RS. 66,12,630/-. THE QUESTION AND ANSWER TO QUESTION NO. 6 & 7 ARE REPRODUCED HEREUNDER:- Q.6 PLEASE PRODUCE THE DOCUMENTARY EVIDENCE OF DEL IVERY OF GOODS FROM M/S. SHRADHA SABURI MERCHANTS LIMITED AN D SAI KRIPA METALIC TRADECOM LTD. ANS. IN RESPECT OF OUR TRADING ACTIVITIES WITH M/S. SHRADHA SABURI MERCHANTS LIMITED AND SAI KRIPA METALIC TRADECOM. L TD. WE ARE MAINLY ACTING AS AN INDENTING AGENTS, WHERE THE MAT ERIAL IS DIRECTLY DISPATCHED FROM THE PARTIES FROM WHOM THE MATERIAL IS PURCHASED TO THE CUSTOMER. Q.7. I AM. SHOWING YOU THE SELF DECLARED STATEMENT DATED 02-11- 2007 OF SHRI PRAVIN T. AGARWAL PROPRIETOR/PARTNER O F SAI KRIPA METALIC TRADECOM LTD. AND SHRADHA SABURI MERCHANTS LIMITED, THE EXTRACT OF WHICH IS AS UNDER: I WITHDRAW THE MONEY FROM THE A/C. M/S CHIRAG CONS TRUCTION & PERK IMPEX HOWEVER, I ISSUE BILL FROM M/S SAI KRIPA METALIC TRADECON LTD. AND SHRADHA SABURI MERCHANTS LIMITED. I AGAIN WANT TO STATE THAT I AM NOT DONE REAL BUSIN ESS FROM TILE PARTIES; HOWEVER I AM PROVIDING FABRICATED CHALLAN & OTHER SUPPORTING VOUCHERS FOR PURCHASE BILL & SALE BILLS' PLEASE COMMENT. ANS. THE ABOVE STATEMENT OF MR. PRAVIN T. AGARWAL I S NOT TRUE. PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES TO M/ S SAI KRIPA METALIC TRADECON LTD. AND SHRADHA SABURI MERC HANTS LIMITED FOR THE PURCHASED GOODS. SUBSEQUENTLY, THE SAID GOODS WERE SOLD TO OTHER PARTIES, FOR WHICH THE PAYMENTS WERE ALSO RECEIVED BY ACCOUNT PAYEE CHEQUES. M/S PRAKASH META LS AND M/S RELIANCE CABLE AND CONDUCTORS PVT. LTD. ACTED AS AN INDENTING AGENT IN THESE TRANSACTIONS. THE ASSESSEE COMPANY SUBMITTED THAT DURING THE COUR SE OF SCRUTINY ASSESSMENT PROCEEDINGS, SUMMARY OF TRADING SALES AN D PURCHASE FOR THE YEAR 2006-07 WERE SUBMITTED. AS PER THE SUMMARY, THE AL LEGED GOODS PURCHASED OF RS.66,12,630/- FROM M/S SHRADHA SABURI MERCHANTS LIMITED ARE SOLD TO ITA 3311 /MUM/2012 5 M/S D.C. METALS OF RS. 49,61,129/- AND TO M/S RAJAS THAN METAL HOUSE OF RS. 16,72,089/-. TO CONFIRM THE FACT OF THE TRANSACTION AS TO WHETHER THE GOODS PURCHASED BY THEM WERE RECEIVED THROUGH M/S SHRADHA SABURI MERCHANTS LIMITED, THE STATEMENTS U/S 131 OF THE ACT OF SHRI VASANT MISHRIMAL BANSALI, PARTNER OF M/S DC METALS AND SHRI DILIPKUMAR UMEDMA L BANSALI PARTNER OF M/S RAJASTHAN METAL HOUSE WERE RECORDED WHEREBY BOT H THE PARTNERS DENIED OF KNOWING M/S SHRADHA SABURI MERCHANTS LIMITED AND CONFIRMED THAT THE GOODS RECEIVED WERE THROUGH M/S RELIANCE CABLE AND CONDUCTORS PVT. LTD. AND NOT THROUGH M/S SHRADHA SABURI MERCHANTS LIMITE D . THUS, IT WAS OBSERVED BY THE A.O. THAT THE GOODS PURCHASED BY TH EM ARE RECEIVED BY THESE PARTIES TO WHOM GOODS WERE SOLD I.E. M/S D C METALS AND M/S RAJASTHAN METAL HOUSE ONLY FROM M/S RELIANCE CABLE AND CONDU CTORS PVT. LTD. AND NOT THROUGH M/S SHRADHA SABURI MERCHANTS LIMITED, HENCE , IT WAS CONCLUDED THAT M/S SHRADHA SABURI MERCHANTS LTD. IS A BOGUS O UTFIT AND NOT HAVING ANY EXISTENCE NOR HAVING ANY LEGITIMATE BUSINESS ACTIVI TIES. NOTICE U/S 133(6) OF THE ACT WAS ISSUED TO M/S SHRADHA SABURI MERCHANTS LTD. CALLING FOR THE INFORMATION/DOCUMENTS REGARDING THE SAID TRANSACTIO N BUT THE PARTY WAS NOT AVAILABLE ON THE ADDRESS AND HENCE NOTICE WAS SERVE D THROUGH AFFIXTURE. THEREAFTER, SUMMONS U/S 131 OF THE ACT WERE ISSUED TO SHRI PRAVIN T. AGARWAL, THE PROPRIETOR/PARTNER OF THE SAID FIRM M/ S SHRADHA SABURI MERCHANTS LTD. WHICH WAS AGAIN SERVED THROUGH AFFIX TURE , BUT NEITHER INFORMATION WAS RECEIVED NOR SHRI PRAVIN T. AGARWAL APPEARED BEFORE THE REVENUE AUTHORITIES. THE C.A. OF THE ASSESSEE COMPA NY WAS CONFRONTED TO GIVE HIS SUBMISSIONS ON THE STATEMENT OF SH. PRAVIN T . AGARWAL OF SHRADHA SABURI MERCHANTS LIMITED WHEREIN HE HAS STATED THAT HE IS NOT DOING ANY REAL BUSINESS FROM THE PARTIES HOWEVER, HE IS PROVIDING VOUCHERS FOR THE PURCHASE BILLS AND SALE BILLS , AGAINST WHICH QUERY RAISED B Y THE AO NO COMPLIANCE WAS MADE BY THE ASSESSEE COMPANY TO PROVE THE GENUINENE SS OF THE PURCHASE FROM M/S SHRADHA SABURI MERCHANTS LIMITED AND SINCE THE ASSESSMENT WAS GETTING BARRED BY LIMITATION ON 31-12-2009, THE A.O . PASSED THE ORDER BASED ITA 3311 /MUM/2012 6 ON THE FACTS AVAILABLE ON RECORD. THE A.O. OBSERVE D THAT AS PER THE STATEMENT OF SHRI VASANT AND SHRI DILIPKUMAR BANSAL IT WAS PR OVED THAT THE GOODS PURCHASED BY THEM FROM M/S RELIANCE CABLE AND CONDU CTORS P. LTD. WERE NOT RECEIVED THROUGH M/S SHRADHA SABURI MERCHANTS LTD. IT WAS ALSO OBSERVED THAT THE ASSESSEE COMPANY HAS NOT MADE SINGLE PAYME NT TO M/S SHRADHA SABURI MERCHANTS LTD. BUT ONLY AT THE END OF THE YE AR THE LIABILITY IS REDUCED BY AN AMOUNT OF RS. 60 LACS BY CREDITING M/S D.C. M ETALS. THUS, IT WAS CONCLUDED BY THE A.O. THAT THE ASSESSEE COMPANY HAS NOT PURCHASED ANY GOODS FROM M/S SHRADHA SABURI MERCHANTS LTD. BUT ON LY COLLECTED BILLS/VOUCHERS FOR THE ALLEGED PURCHASE OF RS. 66,1 2,630/- WHICH MAY BE GOODS PURCHASED FROM OTHER PARTIES ON PAYMENT OF CA SH WITHOUT ANY BILLS AND TO ESCAPE FROM DISALLOWANCE OF EXPENSES U/S 40A(3) OF THE ACT WHEREBY THE ASSESSEE COMPANY HAS OBTAINED FABRICATED ACCOMMODAT ION BILLS FROM M/S SHRADHA SABURI MERCHANTS LTD.. HOWEVER, IT WAS ALS O OBSERVED BY THE A.O. THAT THE SAID EXPENSES POSTED WAS A BOGUS ONE BUT Q UANTITATIVE DETAILS HAVE BEEN PROVIDED BY THE ASSESSEE COMPANY WHEREBY SALES ARE TALLYING WITH PURCHASES AND, HENCE, ADDITION WAS MADE U/S 40A(3) OF THE ACT FOR CASH PURCHASE WHEREBY DISALLOWANCE OF 20% OF THE SAID PU RCHASES OF RS. 66,12,630/- I.E. RS. 13,22,526/- WAS MADE AND ADDED TO THE INCOME OF THE ASSESSEE COMPANY BY THE AO VIDE ASSESSMENT ORDERS D ATE 30-12-2009 PASSED U/S 143(3) OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 30-12- 2009 PASSED BY THE A.O. U/S 143(3) OF THE ACT, THE ASSESSEE COMPANY FILED F IRST APPEAL BEFORE THE LD. CIT(A). 5. BEFORE THE LD. CIT(A) NO SUBMISSION WAS MADE BY THE ASSESSEE COMPANY ON THE GROUND THAT THE CHARTERED ACCOUNTANT OF THE ASSESSEE COMPANY WAS NOT KEEPING WELL WHEREBY SEVERAL ADJOURNMENTS WERE TAKEN, AND HENCE, THE ITA 3311 /MUM/2012 7 ADDITION MADE BY THE A.O. WAS CONFIRMED BY THE LD. CIT(A) VIDE APPELLATE ORDER DATED 29-03-2012. 6. AGGRIEVED BY THE APPELLATE ORDER OF THE LEARNED CIT(A), THE ASSESSEE COMPANY IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 7. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE COMPANY SUBMITTED HE IS NOT PRESSING GROUND NO. I. (1 TO 4), HENCE, T HESE GROUNDS MAY BE DISMISSED AS NOT BEING PRESSED. THE LD. D.R. HAS A LSO NOT RAISED ANY OBJECTION. ACCORDINGLY, WE DISMISS GROUND NO. I (1 TO 4) AS NOT BEING PRESSED. 8. WITH RESPECT TO THE OTHER GROUNDS, THE LD. COUNS EL FOR THE ASSESSEE COMPANY SUBMITTED THAT ON IDENTICAL FACTS IN THE CA SE OF SISTER CONCERN OF THE ASSESSEE COMPANY NAMELY M/S PRAKASH METALS WHICH WA S ALSO COVERED BY THE SAME SURVEY ACTION U/S 133A OF THE ACT CONDUCTED BY THE REVENUE ON 12 TH DECEMBER, 2007 AND THE TRIBUNAL ON SIMILAR FACTS AN D CIRCUMSTANCES DECIDED THE ISSUE IN ITA NO. 6457/MUM/2012 AND ITA NO. 6611 /MUM/2012 FOR THE ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 17 TH FEBRUARY, 2016 HAD HELD THAT END OF JUSTICE WILL BE MET IF COMMISSION @ 5% FOR C LANDESTINELY FACILITATING THE BOGUS TRANSACTION OF THE PARTIES TO THE PURCHASES AND SALES WILL BE BROUGHT TO TAX AS COMMISSION INCOME, WHICH THE LEARNED COUNSEL SUBMITTED IS ACCEPTED BY THE SAID M/S PRAKASH METALS TO END LITIGATION AN D IT WAS SUBMITTED THAT THE SAID SISTER CONCERN HAS ALSO GOT MATERIAL FROM M/S SHRADHA SABURI MERCHANTS LTD. AND THE SAID MATERIAL WAS SOLD TO TH E SAME D.C. METALS AND TO ONE OTHER CONCERN M/S. RAJASTHAN ALUMINIUM AND PRAY ED THAT SIMILAR DIRECTION MAY BE GIVEN IN THIS CASE ALSO WHICH IS C ONCEDED BY THE LEARNED COUNSEL FOR THE ASSESSEE COMPANY TO BE ACCEPTABLE A ND WILL ALSO MEET THE END OF THE JUSTICE AND SHALL BE CONSISTENT WITH THE STA ND OF THE TRIBUNAL IN ITS AFORE-STATED ORDERS IN THE CASE OF SISTER CONCERN O F THE ASSESSEE COMPANY ITA 3311 /MUM/2012 8 NAMELY PRAKASH METALS WHICH IS CONCEDEDLY ACCEPTED BY THE SAID PARTY M/S PRAKASH METALS TO END LITIGATION WITH THE REVENUE. 9. THE LD DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE MATERIAL PLACED ON RECORD INCLUDING THE TRIBUNAL ORDERS IN I TA NO. 6457/MUM/2012 & ITA 6611/MUM/2012 DATED 17 TH FEBRUARY, 2016 IN THE CASE OF SISTER CONCERN OF THE ASSESSEE NAMELY M/S PRAKASH METALS WHICH WAS ALSO COVERED BY SURVEY ACTION ON 12-12-2007. THE TRIBUNAL IN ITA NO. 6457/ MUM/2012 & ITA 6611/MUM/2012 DATED 17 TH FEBRUARY, 2016 IN ASSESSEE COMPANYS SISTER CONCERN NAMELY PRAKASH METALS DECIDED THE CASE WHER EBY THE FINDINGS ARE AS UNDER:- THESE ARE CROSS APPEALS BY THE ASSESSEE AND REVENUE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-31, MUMBAI DA TED 17/08/2012 FOR ASSESSMENT YEAR 2007-08. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE FIRM, ENGAGED IN THE BUSINESS AS M ANUFACTURES, TRADERS OF CONDUCTORS AND FERROUS AND NON-FERROUS M ETALS, FILED ITS RETURN FOR ASSESSMENT YEAR 2007-08 ON 29/10/2007 DECLARING NIL INCOME. A REVISED RETURN WAS FILED ON 1/9/2008 DEC LARING TOTAL INCOME OF RS.5,91,912/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. ITA 3311 /MUM/2012 9 2.2 A SURVEY UNDER SECTION 133A OF THE ACT WAS COND UCTED IN THIS CASE BY THE ADIT (INV), UNIT IV(I), MUMBAI ON 12/12 /2007 ON THE BASIS OF INFORMATION/VERIFICATION OF BANK DATA UND ER THE BANKING CASH TRANSACTION ACT THAT M/S. SHRADDHA SABURI MERC HANTS LTD. AND M/S. SAI KRIPA METALLIC TRADECOM LTD.AND OTHER CON CERN PROMOTED BY SHRI PRAVIN AGARWAL HAD INDULGED IN SUSPICIOUS T RANSACTIONS BUT ADMITTED THAT NO ACTUAL BUSINESS OF SALE AND PURCHA SE WAS CARRIED OUT BY THEM AND THAT THESE TRANSACTIONS WERE ALL AC COMMODATION ENTRIES IN RESPECT OF WHICH THE ASSESSEE AND OTHERS WERE BENEFICIARIES. IN THIS SURVEY IT WAS FOUND THAT IN THE PERIOD RELEVANT TO ASSESSMENT YEAR 2007-08, THE ASSESSEE HAD PURCHA SED MATERIALS WORTH RS.2,27,60,254/- FROM M/S. SHRADDHA SABURI ME RCHANTS LTD. AND RS.1,55,09,505/- FROM M/S. SAI KRIPA METALLIC T RADECOM LTD., FOR WHICH PAYMENTS MADE BY THE ASSESSEE WERE CREDIT ED IN THE AFORESAID TWO PARTIES BANK ACCOUNTS AND THE SAME WA S WITHDRAWN IN CASH ON THE VERY NEXT DATES AFTER ITS DEPOSITS; THE ASSESSEE BEING THE MAIN BENEFICIARY OF THESE ACTIVITIES. THE SURVEY A CTION REVEALED THAT THE ASSESSEE HAD TAKEN ACCOMMODATION BILLS SHOWING BOGUS PURCHASE DURING THE PERIOD RELEVANT TO ASSESSMENT Y EAR 2006-07 AND 2007-08 FROM M/S. SHRADDHA SABURI MERCHANTS LTD., A ND M/S. SAI KRIPA METALLIC TRADECOM LTD. THE ABOVE MODUS OPERAN DI AND THE FACT THAT THE ASSESSEE WAS A BENEFICIARY OF SUCH AC TIVITIES WAS CONFIRMED BY SHRI PRAVIN T. AGARWAL IN A STATEMENT FILED BEFORE ADIT (INV), UNIT IV(I), MUMBAI ON 2/11/2007. THE ADIT (INV) ALSO REPORTEDLY INFORMED THE ASSESSING OFFICER THAT THE PARTNER OF THE ITA 3311 /MUM/2012 10 ASSESSEE FIRM SHRI PRAKASH J. SHAH WAS AFFORDED AN OPPORTUNITY TO CROSS-EXAMINE SHRI PRAVIN T. AGARWAL, WHICH HE DID NOT AVAIL. 2.3 IN THE LIGHT OF THE ABOVE MATERIAL ON RECORD, T HE ASSESSING OFFICER AFFORDED THE ASSESSEE AN OPPORTUNITY OF BEI NG HEARD IN THE MATTER TO EXPLAIN THE PURCHASE TRANSACTIONS CARRIE D OUT WITH THESE PARTIES IN THE RELEVANT PERIOD (SUPRA). IN THIS RE GARD, THE STATEMENT OF SHRI PRAKASH J. SHAH, PARTNER OF THE ASSESSEE FI RM WAS RECORDED ON 12/12/2007 WHEREIN, INTER-ALIA, HE HAS STATED TH AT HE IS ONLY ACTING AS AN INDENTING AGENT WHEREIN THE MATERIALS PURCHASED BY IT IS DIRECTLY DISPATCHED THROUGH THE PARTIES FROM WHOM T HE MATERIAL WAS PURCHASED TO THE CUSTOMERS TO WHOM IT IS SOLD I.E. M/S. RAJASTHAN ALUMINIUM & M/S. D.C.METALS, PAYMENTS/RECEIPTS IN T HIS REGARD BEING BOTH BY WAY OF ACCOUNT PAYEE CHEQUE. ALTERNA TIVELY, IT WAS SUBMITTED BY THE ASSESSEE THAT IN CASE THE SAID PUR CHASES FROM THE AFORESAID TWO PARTIES ARE TREATED AS BOGUS, THEN TH E CORRESPONDING SALES SHOWN BY THE ASSESSEE SHOULD ALSO BE CONSIDER ED BOGUS AND THE DIFFERENCE BETWEEN PURCHASES AND SALES BEING THE G. P, ONLY THIS AMOUNT SHOULD BE CONSIDERED AS ITS INCOME. THE ASS ESSING OFFICER DID NOT ACCEPT THE EXPLANATIONS PUT FORTH BY THE AS SESSEE OBSERVING THAT EXCEPT FOR MAKING THE AFORESAID CLAIMS, THE AS SESSEE COULD NOT FURNISH MATERIAL TO PROVE THE MODE OF DELIVERY OF G OODS PURCHASED/SOLD, NAMES AND ADDRESSES AND OTHER RELAT ED PARTICULARS AND DETAILS OF THE PARTIES TO WHOM GOODS WERE ALLEG EDLY SOLD, OR TO EXPLAIN WITH DOCUMENTARY EVIDENCE THE TRANSACTIONS ENTERED INTO FOR PURCHASE FROM THE AFORESAID TWO PARTIES. ITA 3311 /MUM/2012 11 2.4 THE AFORESAID SUBMISSIONS OF THE ASSESSEE DID N OT FIND FAVOUR WITH THE ASSESSING OFFICER WHO OBSERVED THAT THESE AVERMENTS OF THE ASSESSEE WERE ALREADY DEALT WITH IN THE COURSE OF S URVEY, POST SURVEY INVESTIGATIONS. THE ASSESSING OFFICER WAS OF THE V IEW THAT AS PER THE FACTS ON RECORD THE TRANSACTIONS ENTERED INTO BY TH E ASSESEE WITH M/S. SHRADDHA SABURI MERCHANTS LTD., M/S. SAI KRIPA ME TALLIC TRADECOM LTD. (PURCHASE PARTIES), M/S. RAJASTHAN AL LUMINIUM AND M/S. D.C. METALS (SALE PARTIES) WERE ONLY ACCOMMOD ATION ENTRIES RENDERED BY SHRI PRAVIN T. AGARWAL AND ACCEPTED BY SHRI PRAKASH J. SHAH OF THE ASSESSEE FIRM AND NOT REAL SALE/PURCHAS E TRANSACTIONS AS PRESENTLY CLAIMED BY THE ASSESSEE. IN THIS VIEW OF THE MATTER, THE ASSESSING OFFICER AT PARA 10 TO 12 OF THE ORDER OF ASSESSMENT HELD THAT SINCE THE ASSESSEE COULD NOT SUBSTANTIATE THE PURCHASES MADE FROM THE AFORESAID TWO CONCERNS, THE ENTIRE ALLEGED PURCHASES OF RS.3,82,69,759/- SHOWN BY THE ASSESSEE FROM M/S. SH RADDHA SABURI MERCHANTS LTD. AND M/S. SAI KRIPA METALLIC TRADECOM LTD. AS BOGUS AND BROUGHT THE ENTIRE AMOUNT TO TAX IN THE ASSESS EES HANDS. THE ASSESSMENT WAS ACCORDINGLY COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 31/12/2009 WHEREIN, THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.3,87,89,670/-. 3.1 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESS MENT YEAR 2007-08 DATED 31/12/2009, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS)-31, MUMBAI. THE CIT(APPEALS) DIS POSED OFF THE ASSESSEES APPEAL VIDE THE IMPUGNED ORDER DATED 17/ 8/2012 ALLOWING THE ASSESSEE PARTIAL RELIEF. IN THE COURSE OF APPE LLATE PROCEEDINGS, ITA 3311 /MUM/2012 12 THE CIT(APPEALS) REMANDED TO THE FILE OF THE ASSESS ING OFFICER FOR ENQUIRIES TO BE MADE FOR THE PURPOSE OF CORROBORA TING THE ASSESSING OFFICERS FINDING THAT THE ENTIRE INVESTM ENT IN PURCHASES BY THE ASSESSEE FROM M/S. SHRADDHA SABURI MERCHANTS L TD. AND M/S. SAI KRIPA METALLIC TRADECOM LTD. AMOUNTING TO RS.3, 82,69,759/- CONSTITUTED UNACCOUNTED INCOME OF THE ASSESSEE. IN THIS CONTEXT THE ASSESSING OFFICER WAS ALSO REQUIRED TO MAKE AVAIL ABLE TO THE ASSESSEE COPIES OF STATEMENTS OF SHRI PRAVIN T. AGA RWAL DATED 12/12/2007, PRIMARILY RELIED ON BY THE ASSESSING O FFICER TO MAKE THE ADDITION OF UNDISCLOSED INCOME OF RS.3,82,69,759/- AND TO AFFORD THE ASSESSEE OPPORTUNITY OF CROSS EXAMINATION OF SHRI PRAVIN T. AGARWAL. THE MATTER WAS REMANDED TO THE ASSESSING OFFICER ON MORE THAN ONE OCCASION TO ADDRESS THE REBUTTALS PUT FORTH BY THE ASSESSEE. REPORT IN THE MATTER WAS ALSO CALLED FO R FROM THE DDIT (INV) UNIT IV(I), MUMBAI. 3.2 AFTER TAKING INTO ACCOUNT ALL THE FACTS BEFORE HIM, THE CIT(APPEALS) OBSERVED THAT THE ASSESSEE HAD ONLY FA CILITATED THE CONCERNED PURCHASE AND SALE PARTIES, AS AN INDENTIN G AGENT FOR COMMISSION, IN THEIR TRANSACTIONS OF BOGUS SALE AND PURCHASES. THE CIT(APPEALS) OBSERVED THAT NO EVIDENCE WAS BROUGHT ON RECORD BY THE ASSESSING OFFICER /DDIT TO ESTABLISH THAT THE A SSESSEE PURCHASED THE GOODS FROM THIRD PARTIES IN CASH, AS ALL THE T RANSACTIONS OF THE ASSESSEE WITH BOTH THE CONCERNED SALE AND PURCHASE PARTIES WAS ADMITTEDLY THROUGH BANKING CHANNELS. IN THIS VIEW OF THE MATTER, THE CIT(APPEALS) HELD THAT THE ASSESSING OFFICER WAS N OT JUSTIFIED IN HOLDING THAT THE ENTIRE PURCHASES BY THE ASSESSEE A RE ITS UNDISCLOSED ITA 3311 /MUM/2012 13 INCOME AND THAT THE CORRESPONDING SALES ONLY ARE GE NUINE; PARTICULARLY WHEN THE QUANTITY PURCHASED AND SOLD A RE IDENTICAL. THE CIT(APPEALS) WAS OF THE VIEW THAT THE ASSESSEE FACILITATED THESE BOGUS TRANSACTIONS FOR THE PECUNIARY BENEFIT OF CO MMISSION. THE CIT(APPEALS) WAS OF THE VIEW THAT SINCE THE ENTIRE TRANSACTION WAS CLANDESTINE, THE ASSESSEE WOULD HAVE EARNED MORE T HAN THE 0.17% COMMISSION DECLARED BY IT; (WHICH WAS THE DIFFERENC E BETWEEN THE CONCERNED SALES AND PURCHASE TRANSACTIONS) OR WHICH IS NORMALLY DECLARED IN THIS BUSINESS AT 1 TO 2% ACCORDING TO T HE ASSESSEE. FOLLOWING THE RATIO OF THE DECISION OF THE ITAT, AH MEDABAD BENCH, IN THE CASE OF VIJAY PROTEINS LTD. (15 ITD 428), TH E CIT(APPEALS) ESTIMATED THE COMMISSION EARNED BY THE ASSESSEE AT 5% OF THE SAID PURCHASE OF RS.3,82,69,759/- IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE ON HAND. 4. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) -31, MUMBAI DATED 17/8/2012 FOR ASSESSMENT YEAR 2007-08, BOTH REVENUE AND THE ASSESSEE HAVE PREFERRED APPEALS BEFORE THE TRIBUNAL IN RESPECT OF THE ISSUES HELD AGAINST THEM. 4.1.1 THE GROUNDS RAISED IN THE ASSESSEES APPEAL A RE AS UNDER:- I 1.THE COMMISSIONER OF INCOME TAX ('CIT(A)') ERR ED IN MAKING CONFIRMING ADDITION OF RS. 18,48,429/-, BEING ESTIM ATING THE ADDITIONAL COMMISSION INCOME ON THE ACCOMMODATION BILLS OF BOG US PURCHASES MADE FROM M/S. SAI KRIPA METTALIC TRADECOM PVT. LTD., AND M/S SHARDHHA SABURI MERCHANTS LTD @ 5% OF THE TOTAL PURCHASE AMOUNT FRO M THE ABOVE TWO PARTIES, AFTER DEDUCTING THE NET COMMISSION INCOME OF RS. 65 ,0591- SHOWN IN THE BOOKS OF ACCOUNT. 2. THE LEARNED CIT(A) WAS ALREADY SATISFIED AND HAS VERIFIED ALL THE PURCHASES AND SALES BILLS WITH THE NET INCOME OUT OF THESE TR ANSACTIONS WHICH WERE FULLY SUPPORTED BY THE ACCOUNT PAYEE CHEQUES AND WAS ACCE PTED THAT NO CASH TRANSACTIONS WERE INVOLVED. ITA 3311 /MUM/2012 14 3. THE TRANSACTIONS PROVED THE MODUS OPERENDI OF DI RECT PURCHASES AND SALES BY THE PARTIES WHERE YOUR APPELLANT WAS ONLY DELCREDER AGENT SUPPORTED BY VARIOUS DOCUMENTARY CONFIRMATIONS UNDER THE CIRCUMSTANCES. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT HAD ACTED AS AN INDENTING AGENT AND ACCORDINGLY, EARNED THE COMMISS ION INCOME AS SHOWN IN THE FORM OF PROFIT WHICH IS IN THE NATURE OF COMM ISSION AND SHOWN IN THE PROFIT & LOSS ACCOUNT. HENCE NO ADDITION IS CALLED FOR. 3. THE APPELLANT PRAYS THAT THE ADDITION OF RS.18,4 8,429/- BE DELETED AS UNWARRANTED AND UNJUSTIFIED. 4. WITHOUT PREJUDICE TO THE ABOVE THE APPELLANT PRA YS THAT THE ADDITION BE REDUCED TO REASONABLE APPROPRIATE RATE DEPENDING U PON THE CIRCUMSTANCES OF THE APPELLANTS CASE. II. 1. THE APPELLANT CRAVES LEAVE TO ADD TO , AMEND AND/OR ALTER THE ABOVE GROUNDS OF APPEAL. 4.1.2 AT THE OUTSET, THE LD. REPRESENTATIVE FOR THE ASSESSEE FOR THE ASSESSEE SUBMITTED THAT IN ITS APPEAL, THE ASSESSEE WILL BE PRESSING ONLY GROUND NO.I (SUPRA) AND THAT ALL OTHER GROUNDS I (2 TO 4) AND ( 2 TO 4) AS WELL AS II(1) ARE NOT BEING PRESSED. SINCE THE GROUNDS AT S.NOS. I (2 TO 4) AND (2 TO4) AND II(1) ARE NOT PRESSED IN THIS APPEAL, THE SAME ARE RENDERED INFRUCTUOUS AND ACCORDINGLY DISMISSED. 4.2 THE GROUNDS RAISED IN REVENUES APPEAL ARE AS U NDER:- 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND CIRCUMSTA NCES OF THE CASE AND IN LAW IN DIRECTING AO TO DELETE RS. 3,64,21,330/- HEL D AS BOGUS PURCHASES BY THE ASSESSING OFFICER. 2. THE LEARNED CIT(A) HAS ERRED ON THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW IN ASSUMING THE ASSESSEE AS MERELY AN AGENT REC EIVING PREFIXED COMMISSION IN RESPECT OF THE TRANSACTION OF ALLEGED BOGUS PURC HASES. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APP EALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NEW GROUND WHICH MAY BE NECESSARY. 5.1 IN GROUND NO.1 OF ASSESSEES APPEAL , IT IS CONTENDED THAT THE CIT(APPEALS) ERRED IN ESTIMATING THE COMMISSION INC OME EARNED BY THE ITA 3311 /MUM/2012 15 ASSESSEE ON ACCOMMODATION BILLS OF BOGUS PURCHASES MADE FROM M/S. SHRADDHA SABURI MERCHANTS LTD. AND M/S. SAI KRIPA M ETALLIC TRADECOM LTD. @5% OF THE TOTAL PURCHASES OF RS.3,82,69,759/- FROM THESE TWO PARTIES. 5.2 IN GROUNDS NO.1 TO 4 OF REVENUES APPEAL, IT IS CONTENDED THAT CIT(APPEALS) ERRED IN DIRECTING THE ASSESSING OFFIC ER TO DELETE THE ADDITION OF RS.3,82,89,579/- HELD BY THE ASSESSING OFFICER AS INCOME OF THE ASSESSEE ARISING OUT OF BOGUS PURCHASES FROM THE AF ORESAID TWO PARTIES AND IN ASSUMING THAT THE ASSESSEE HAS MERELY EARNED COM MISSION IN RESPECT OF THE AFORESAID PURCHASES. 5.3 THE ASSESSEES GROUNDS I(1) AND REVENUES GROUN DS (1 TO 4)(SUPRA) BEING BOTH IN RESPECT OF THE CONTRARY FINDINGS OF THE ASSESSING OFFICER AND THE CIT(APPEALS) ON THE SAME ISSUE OF DETERMINATIO N OF THE INCOME EARNED BY THE ASSESSEE FROM OUT OF THE TRANSACTIONS OF BOGUS PURCHASES AMOUNTING TO RS.3,82,69,759/- MADE BY THE ASSESSEE FROM THE TWO PARTIES M/S. SHRADDHA SABURI MERCHANTS LTD. AND M/S. SAI KR IPA METALLIC TRADECOM LTD., THESE ISSUES BEING INTER CONNECTED A ND ARISING FROM THE GROUNDS RAISED BY BOTH SIDES IN RESPECT OF THE SAME SET OF TRANSACTIONS, THEY ARE BEING CONSIDERED AND DISPOSED OFF TOGETHER HERE UNDER. 5.4.1 THE LD. REPRESENTATIVE FOR THE ASSESSEE , ON THE ISSUE RAISED IN REVENUES APPEAL, VEHEMENTLY SUPPORTED THE IMPUGNED ORDER OF THE CIT(APPEALS) IN RESPECT OF ITS FINDING HOLDING T HAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE ENTIRE PURCHA SES OF RS.3,82,69,759/- MADE BY THE ASSESSEE FROM THE TWO PURCHASE PARTIE S I.E. M/S. SHRADDHA SABURI MERCHANTS LTD. AND M/S. SAI KRIPA METALLIC T RADECOM LTD. WAS THE ASSESSEES UNDISCLOSED INCOME; PARTICULARLY WHEN T HERE WERE IMMEDIATE ITA 3311 /MUM/2012 16 AND IDENTICAL QUANTITIES SOLD TO M/S.D.C.METALS AND M/S. RAJASTHAN ALUMINIUM THROUGH BANKING CHANNELS. IT IS SUBMITTE D THAT THE CIT(APPEALS) HAD, AFTER DUE CONSIDERATION OF THE FA CTUAL MATERIAL ON RECORD, FOUND THAT THE ASSESSEE HAD ONLY FACILITATE D THE CONCERNED PURCHASE AND SALE PARTIES AS AN INDENTING AGENT FOR REMUNERA TION IN COMMISSION IN THEIR TRANSACTION OF BOGUS SALES AND PURCHASES. 5.4.2 IN RESPECT OF GROUND NO.I(1) IN THE ASSESSES APPEAL, THE LD. REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT THE CIT(APPEALS), AFTER OBSERVING THAT THE ASSESSEE WAS ONLY AN INDENTING A GENT OR FACILITATOR FOR THE AFORESAID SELLERS AND PURCHASERS IN THEIR TRANS ACTIONS OF BOGUS SALES AND PURCHASES IN RETURN FOR REMUNERATION OF COMMISS ION, ERRED IN NOT ACCEPTING THE COMMISSION OF 0.17% AS ADMITTED BY TH E ASSESSEE. IT IS CONTENDED THAT THE ESTIMATION OF COMMISSION INCOME EARNED BY THE ASSESSEE ON THE AFORESAID TRANSACTIONS AS A FACILIT ATOR @5% THEREON WAS TOO HIGH AND THE SAME COULD NOT BE MORE THAN 1 TO 2 % THEREOF IN SUCH BUSINESS. 5.5.1 IN RESPECT OF THE GROUNDS RAISED AT S.NO. 1 T O 4 OF REVENUES APPEAL, THE LD. DEPARTMENTAL REPRESENTATIVE PLACING STRONG RELIANCE ON THE FINDINGS OF THE ASSESSING OFFICER IN THE ORDER OF A SSESSMENT, CONTENDED THAT THE CIT(APPEALS) HAD ERRED IN HOLDING THAT THE ASS ESSEE WAS MERELY AN INDENTING AGENT RECEIVING COMMISSION IN RESPECT OF TRANSACTIONS OF BOGUS PURCHASES AND IN CONSEQUENTLY DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES FROM THE AFO RESAID TWO PARTIES; I.E. M/S. SHRADDHA SABURI MERCHANTS LTD. AND M/S. SAI KR IPA METALLIC TRADECOM LTD.. IT WAS PRAYED THAT THE FINDING IN T HE ASSESSING OFFICERS ORDER BE RESTORED. ITA 3311 /MUM/2012 17 5.5.2 IN RESPECT OF THE AVERMENTS OF THE LD. REPRES ENTATIVE FOR THE ASSESSEE ON THE ASSESSEES GROUNDS CLAIMING THAT THE ASSESSE ES INCOME FROM COMMISSION @ 0.17% OF PURCHASES SHOULD BE ACCEPTED AS SUCH AND NOT AT 5% DETERMINED BY THE CIT(APPEALS), THE LD. DEPARTME NTAL REPRESENTATIVE SUBMITTED THAT, WITHOUT PREJUDICE TO REVENUES STAN D THAT THE ENTIRE BOGUS PURCHASES AMOUNTING TO RS.3,82,69,759/- MADE BY THE ASSESSEE FROM THE AFORESAID TWO PARTIES OUGHT TO BE BROUGHT TO TAX IN THE ASSESSEES HANDS AS HELD BY THE ASSESSING OFFICER, THE CLAIM OF THE LD. REPRESENTATIVE FOR THE ASSESSEE IS CONTRADICTORY AS BEFORE THE CIT(APPEALS ) THE CLAIM WAS THAT COMMISSION IN SUCH TYPE OF BUSINESS WOULD BE 1 TO 2 % THEREOF. IN THESE CIRCUMSTANCES, SINCE THE AVERMENTS OF THE ASSESSEE ARE BEREFT OF ANY CORROBORATIVE MATERIAL EVIDENCE, THE ASSESSEES APP EAL OUGHT TO BE DISMISSED. 5.6.1 WE HAVE HEARD THE RIVAL CONTENTIONS, IN RESPE CT OF BOTH THE ASSESSEES AS WELL AS REVENUES CROSS APPEALS, AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE FACTS OF TH E MATTER, FROM THE ASSESSMENT TO THE FIRST APPELLATE PROCEEDINGS, LEAD ING TO THE PRESENT APPEAL HAVE BEEN BRIEFLY NARRATED AT PARA 2.1 TO 3.2 OF TH IS ORDER (SUPRA). ON A PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT THE CIT (APPEALS) HAS MADE A DETAILED CONSIDERATION OF THE ORDER OF ASSESSMENT, THE AVERMENTS OF THE LD. REPRESENTATIVE FOR THE ASSESSEE FOR THE ASSESSEE, T HE VARIOUS REMAND REPORTS SUBMITTED BY THE ASSESSING OFFICER , THE A SSESSEES REBUTTALS, DETAILS FILED IN THE REPORT OF DDIT(INV) UNIT IV, M UMBAI. WE ALSO FIND THAT, AFTER CONSIDERATION OF ALL THESE MATERIAL ON RECORD, THE CIT(APPEALS) OBSERVED THAT NO MATERIAL EVIDENCE WAS BROUGHT ON R ECORD BY THE ASSESSING OFFICER /DDIT (INV) TO ESTABLISH THAT THE ASSESSEE PURCHASED THE GOODS ITA 3311 /MUM/2012 18 FROM THIRD PARTIES IN CASH, AS ALL THE TRANSACTIONS OF THE ASSESSEE WITH BOTH THE SALE AND PURCHASE PARTIES WERE THROUGH BANKING CHANNELS. THE CIT(APPEALS) NOTICED FROM THE MATERIAL BEFORE HIM, THAT THE ASSESSEE HAD ONLY FACILITATED THE CONCERNED PURCHASE AND SALE PA RTIES IN THEIR TRANSACTIONS OF BOGUS SALES AND PURCHASES AS AN IND ENTING AGENT FOR COMMISSION. IT WAS IN THIS FACTUAL MATRIX THAT THE CIT(APPEALS) HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE ENTIRE PURCHASES BY THE ASSESSEE FROM M/S. SHRADDHA SABURI MERCHANTS LTD. AND M/S. SAI KRIPA METALLIC TRADECOM LTD. ARE THE ASSESSEES UND ISCLOSED INCOME AND THAT ONLY THE CORRESPONDING SALES TO M/S. RAJASTHAN ALUMINIUM AND M/S. D.C METALS ARE GENUINE, PARTICULARLY WHEN THE ITEMS /QUANTITY PURCHASED AND SOLD ARE IDENTICAL. 5.6.2 IT IS SEEN THAT THE CIT(APPEALS) FROM THE MAT ERIAL ON RECORD, WAS OF THE VIEW THAT THE ASSESSEE FACILITATED THESE BOGUS TRANSACTIONS OF SALE AND PURCHASE FOR THE AFORESAID SALE AND PURCHASE PARTIE S AS AN INDENTING AGENT AND RECEIVED COMMISSION THEREON. WE FIND THAT CIT( APPEALS) WAS OF THE OPINION THAT SINCE THE AFORESAID BOGUS TRANSACTIONS OF SALES AND PURCHASES WERE CLANDESTINELY CARRIED OUT, THE ASSESSEE WOULD HAVE CERTAINLY EARNED MORE THAN THE 0.17% DECLARED BY THE ASSESSEE OR 1 T O 2% EARNED IN SUCH TYPE OF BUSINESS AS ADMITTED BY THE LD. REPRESENTAT IVE FOR THE ASSESSEE. THE CIT(APPEALS) FOLLOWING THE RATIO OF THE DECISION O F THE ITAT AHMEDABAD BENCH IN VIJAY PROTEIN LTD. (SUPRA) PROCEEDED TO E STIMATE THE COMMISSION EARNED BY THE ASSESSEE @5% ON THE SAID PURCHASE TRA NSACTIONS AMOUNTING TO RS.3,82,69,759/- IN THE PECULIAR FACTS AND CIRCU MSTANCES OF THE CASE. 5.6.3 THE FINDINGS OF THE LD. CIT(A) AT PARAS 2.4 T O 2.4.3 OF THE IMPUGNED ORDER, IN RESPECT OF THE ISSUES BEFORE US IS EXTRAC TED HEREUNDER :- ITA 3311 /MUM/2012 19 2.4 I HAVE CAREFULLY CONSIDERED :HE ASSESSMENT OR DER AND THE SUBMISSIONS OF THE AR. I HAVE ALSO GONE THROUGH THE VARIOUS REMAND REPORTS AND ITS REBUTTALS INCLUDING THE VARIOUS DETAILS FILED BY THE AR AND T HE REPORT OF DDIT(INV)UNIT-V, MUMBAI AS DISCUSSED ABOVE. I HAVE ALSO GONE THROUGH THE VARIOUS STATEMENTS RECORDED BY THE AO DURING THE REMAND PROCEEDINGS I. E. STATEMENTS OF SHRI PRAKASH J. SHAH DATED 21.07.2011 AND STATEMENTS OF SHRI RAJU BHANSALI & SHRI CHANDUPRAKASH BHANSALI DATED 19.07.2011 AND THE AFF IDAVIT OF SHRI PRAKASH J. SHAH DATED 06.01.2012 AS WELL AS THE AFFIDAVITS OF SHRI RAJU BHANSALI & SHRI CHANDUPRAKASH BHANSALI DATED 14.05.2010 AND THE AFF IDAVIT OF SHRI PRAVIN T. AGARWAL DATED 19.05.2010 AS DISCUSSED ABOVE. BESIDE S, I HAVE ALSO GONE THROUGH THE STATEMENT OF SHRI PRAKASH J. SHAH PARTNER OF TH E APPELLANT FIRM RECORDED DURING THE COURSE OF SURVEY U/S 133A OF THE ACT AS WELL AS THE STATEMENT OF SHRI PRAVIN T. AGARWAL RECORDED U/S 131 OF THE ACT DATED 24.03.2008 AND HIS WRITTEN CONFESSION SUBMITTED VIDE LETTER DATED 02.11.2007 B EFORE THE ADIT (INV). ON PERUSAL THEREOF I FIND THE APPELLANT HAS SHOWN PURC HASES OF ALLUMINIUM AND COPPER RODS OF RS.3,82,69,759/- FROM M/S SHRADDHA S ABURI MERCHANTS LTD AND M/S SAI KRIPA METALLIC TRADECOM LIMITED AND ITS COR RESPONDING SALES TO M/S D.C. METALS AND M/S RAJASTHAN ALUMINUM DURING THE R ELEVANT ACCOUNTING YEAR. HOWEVER, BASED ON THE VARIOUS ENQUIRIES MADE AND EV IDENCES GATHERED IN THE CASE OF THE APPELLANT BY THE ADIT (INV.), UNIT - IV (1), MUMBAI IT WAS FOUND THAT NO SUCH GOODS WERE PURCHASED FROM M/S SHRADDHA SABU RI MERCHANTS LTD AND M/S SAI KRIPA METALLIC TRADECOM LTD INASMUCH AS THE SE SALES BILLS ISSUED BY M/S SHRADDHA SABURI MERCHANTS LTD. AND M/S. SAI KRIPA M ETALLIC TRADECOM LTD. WERE BOGUS ACCOMMODATION BILLS ISSUED WITHOUT SUPPL Y OF ACTUAL MATERIAL AS DISCLOSED THEREIN. OR IN OTHER WORDS, THE APPELLAN T HAS NOT MADE ANY SUCH PURCHASES FROM M/S. SHRADDHA SABURI MERCHANTS LTD. AND M/S. SAI KRIPA METALLIC TRADECOM LTD. AND THEREFORE, THE ENTIRE PU RCHASES SHOWN WAS CONSIDERED AS BOGUS OR UNEXPLAINED PURCHASES AND AC CORDINGLY THE SAME WAS ADDED TO ITS TOTAL INCOME. HOWEVER, THE APPELLANT HAS SUBMITTED THAT IT IS ONLY ENGAGED IN THE INDENTING AGENCY BUSINESS; WHEREBY, THE GODS PURCHASED WERE DIRECTLY DISPATCHED BY M/S. SHRADDHA SABURI MERCHAN TS LTD AND M/S. SAI KRIPA METALLIC TRADECOM LTD. TO THE GODOWNS OF M/S. D.C.M ETAL AND M/S. RAJASTHAN ALLUMINIUM WITHOUT ANY INVOLVEMENT OF THE APPELLANT . IT WAS FURTHER SUBMITTED THAT THE APPELLANT FOR ITS INDENTING AGENCY SERVICE S WAS DULY COMPENSATED BY WAY OF COMMISSION WHICH IS THE DIFFERENCE BETWEEN THE SALE PRICE AND THE PURCHASE PRICE AS SHOWN IN ITS BOOKS OF ACCOUNT. AT THE SAME TIME THE AR HAS VEHEMENTLY ARGUED THAT NEITHER A COPY OF THE STATEMENT RECORDE D OF SHRI PRAVIN T. AGARWAL AS DISCUSSED IN THE ASSESSMENT ORDER WAS PROVIDED N OR THE APPELLANT WAS ALLOWED TO CROSS EXAMINE SHRI PRAVIN T. AGARWAL EITHER BY T HE AO OR BY THE ADIT. IT WAS VEHEMENTLY ARGUED THAT THE DENIAL OF THE CROSS EXAM INATION BY THE APPELLANT OF SHRI PRAVIN T. AGARWAL AS DISCUSSED IN THE ASSESSME NT ORDER IS FALSE AND INCORRECT. ACCORDINGLY, THE APPELLANT HAS FILED AN AFFIDAVIT DATED 19.05.2010 OF SHRI PRAVIN T. AGARWAL; WHEREIN, HE HAS ADMITTED HA VING MADE SALE OF MATERIAL ITA 3311 /MUM/2012 20 AS PER THE SALE BILLS ISSUED TO THE APPELLANT. THE AR HAS ALSO FILED CORRESPONDING AFFIDAVITS DATED 14.05.2010 OF SHRI RAJU BHANSALI P ARTNER OF M/S RAJASTHAN ALLUMINIUM AND SHRI CHANDRA PRAKASH BHANSALI PARTNE R OF M/S D.C. METALS CONFIRMING THE CONTENTION OF THE APPELLANT, AS DISC USSED ABOVE. THEREFORE, ON ACCOUNT OF THESE FACTS PLACED ON RECORD THE MATTER WAS REMANDED TO THE AO ON VARIOUS OCCASIONS AS DISCUSSED ABOVE. THE MATTER WA S ALSO REFERRED TO THE CONCERNED DDIT(INV) FOR MAKING FURTHER ENQUIRIES AN D INVESTIGATIONS AS DISCUSSED ABOVE. HOWEVER, IN SPITE THEREOF NO FRUIT FUL OR LOGICAL DETAILS AND EVIDENCES ARE BROUGHT ON RECORD SO AS TO HOLD THAT THE ENTIRE PURCHASES SHOWN BY THE APPELLANT FROM M/S SHRADDHA SABURI MERCHANTS LT D AND M/S SAI KRIPA METALLIC TRADECOM LTD ARE TO BE CONSIDERED AS ITS U NACCOUNTED OR UNEXPLAINED INCOME. THE AO HERSELF VIDE PARA-4 OF HER REMAND REPORT DATED 19.09.2011 HAS CONFIRMED THE SUBMISSIONS OF THE APPELLANT THAT THE SOURCE OF PAYMENTS MADE TO M/S SHRADDHA SABURI MERCHANTS LTD AND M/S SAI KRIPA METALLIC TRADECOM LTD THROUGH BANKING CHANNELS ARE ORIGINATING OUT OF THE PAYMENTS RECEIVED FROM M/S D.C. METAL AND M/S RAJASTHAN ALUMINUM BY THE APPELL ANT. FROM THE SAME AS WELL AS FROM THE DETAILS AND EVIDENCES BROUGHT ON R ECORD IT IS SEEN THAT THE APPELLANT HAS BEEN ACTING ONLY AS AN CONDUIT ORAN A GENT TO FACILITATE THE BOGUS TRANSACTIONS OF PURCHASES AND SALE OF ALUMINUM SHEE TS AND COPPER WIRES & RODS TAKEN PLACE BETWEEN M/S SHRADDHA SABURI MERCHANTS L TD AND MLS SAI KRIPA METALLIC TRADECOM LTD (SALE PARTIES) AND M/S D.C. M ETAL AND M/S. RAJASTHAN ALUMINUM ( PURCHASE PARTIES) MERELY AS AN MIDDLEMEN OR AN INDENTING AGENT; WHEREBY, THE APPELLANT HAS IN TURN ISSUED BOGUS OR ACCOMMODATION SALE BILLS IN FAVOUR OF M/S D.C. METAL AND M/S. RAJASTHAN ALUMINU M AGAINST THE RECEIPT OF SIMILAR BOGUS OR ACCOMMODATION SALE BILLS ISSUED BY M/S.SHRADDHA SABURI MERCHANTS LTD AND M/S.SAI KRIPA METALLIC TRADECOM L TD. OR IN OTHER WORDS, IT HAS ACTED MERELY AS AN INDENTING AGENT OR AS AN FAC ILITATOR TO LEGALISE SUCH BOGUS TRANSACTIONS; WHEREAS, THE REAL BENEFICIARIES OF TH ESE BOGUS TRANSACTIONS ARE M/S. D.C. METAL AND M/S RAJASTHAN ALUMINUM, AS NO EVIDE NCES EXCEPT FOR THE MOVEMENT OF FUNDS NO OTHER CORRESPONDING OR CORROB ORATIVE EVIDENCES TO ESTABLISH THE ACTUAL PURCHASE AND SALE OF GOODS M ENTIONED IN THESE SALE /PURCHASE BILLS ARE PRODUCED NEITHER BY M/S SHRADDH A SABURI MERCHANTS AND M/S SAI KRIPA METALLIC TRADECOM LTD, NOR BY THE APP ELLANT OR BY M/S D.C. METAL AND M/S. RAJASTHAN ALUMINIUM. NOTHING IS BROUGHT ON RECORD TO PROVE THE MOVEMENT, TRANSPORTATION AS WELL AS THE NAMES AND PARTICULARS OF THE PARTIES FROM WHOM THESE GOODS WERE EITHER PURCHASED M/S S HRADDHA SABURI MERCHANTS LTD AND M/S SAI KRIPA METALLIC TRADECOM LTD OR BY T HE APPELLANT OR BY THE M/S D.C. METAL AND M/S RAJASTHAN ALUMINUM; EXCEPT FOR T HE ISSUE OF BOGUS SALES BILLS BY M/S. SHRADDHA SABURI MERCHANTS LTD AND M/S . SAI KRIPA METALLIC TRADECOM LTD AND BY THE APPELLANT WHICH AS DISCUS SED ABOVE ARE ALREADY CONFIRMED TO BE BOGUS BILLS WITHOUT SALE OF ACTUAL MATERIAL BY M/S. SHRADDHA SABURI MERCHANTS LTD. AND M/S. KRIPA METALLIC TRADE COM LTD. (STATEMENT OF SHRI PRAVIN T. AGARWAL DATED 24.03.2008) AND BY THE APPE LLANT (AFFIDAVIT OF SHRI PRAKASH J. SHAH DATED 06.01.2012). NO OTHER EVIDENC ES ARE BROUGHT ON RECORD BY THE AO OR BY THE DDIT SO AS TO PROVE THAT THE APPEL LANT HAS PURCHASED THESE ITA 3311 /MUM/2012 21 GOODS FROM THIRD PARTIES IN CASH. NOTHING IS PRODUC ED TO PROVE THAT SUCH MATERIAL PURCHASED IS SOLD TO M/S. D.C. METAL AND M/S RAJAST HAN ALUMINUM BY THE APPELLANT AS NO SUCH EVIDENCES TO PROVE THE MOVEMEN T OF GOODS IS EITHER PRODUCED BY THE AO OR BY THE DDIT OR BY THE CONCERN ED PURCHASE PARTIES. THE AO HAS NOT BROUGHT ANY SUCH DETAILS AND EVIDENCES ( IN REMAND) EVEN THOUGH STATEMENTS OF SRI PRAKASH J. SHAH AND SHRI RAJU BHA NSALI & SHRI CHANDUPRAKASH BHANSALI WERE RECORDED DURING REMAND PROCEEDINGS. IT IS NOT PROVED THAT THE CASH WITHDRAWN FROM THE BANK ACCOUN TS OF M/S.SHRADDHA SABURI MERCHANTS LTD AND M/S SAI KRIPA METALLIC TRADECOM L TD WERE GIVEN TO THE APPELLANT. THEREFORE, IT IS SEEN THAT NO SUCH MATER IAL IS SOLD BY THE APPELLANT TO M/S. D.C. METALS AND M/S RAJASTHAN ALUMINUM EXCEPT FOR THE ISSUE OF BOGUS BILLS IN CONSONANCE WITH THE MOVEMENT OF FUNDS AS DISCUSS ED ABOVE. NO MATERIAL OR EVIDENCE IS PRODUCED BY THE AO OR BY THE DDIT THAT THESE GOODS WERE PROCURED BY THE APPELLANT FROM GREY MARKET IN CASH AND THERE AFTER SOLD TO M/S D.C. METALS AND M/S RAJASTHAN ALUMINUM. ON THE OTHER HAND FROM THE AFFIDAVITS OF THE SHRI CHANDRA PRAKASH BHANSALI AND RAJU BHANSALI DATED 14 .05.2010, THE MATERIAL PURCHASED IS DIRECTLY DELIVERED BY THE CONCERNED MA NUFACTURERS OR SUPPLIERS TO THEIR GODOWNS WITHOUT ANY INVOLVEMENT OF THE APPELL ANT. IT WAS ALSO STATED THAT THESE SUPPLIERS I MANUFACTURERS ARE HAVING THEIR GO DOWNS SITUATED OUTSIDE MUMBAI, CHECK NAKA, WHERE M/S D C METALS AND RAJAST HAN ALLUMINIUM ARE ALSO HAVING THEIR GODOWNS I WAREHOUSES. ON ACCOUNT OF THESE FACTS AND EVIDENCES PLACED ON RECORD, I FIND SUFFICIENT MERIT S IN THE SUBMISSIONS OF THE AR THAT THE APPELLANT HAS ONLY FACILITATED THE CONCERN ED PURCHASE AND SALE PARTIES, BEING A CONDUIT IN THE PROCESS OF LEGALIZATION OF T HE TRANSACTION OF BOGUS PURCHASES AND SALES AGAINST PAYMENT OF PRE-FIXED CO MMISSION. THESE SUBMISSIONS OF THE APPELLANT ARE DULY CORROBORATED BY THE AFFIDAVITS OF SHRI PRAVIN T AGARWAL, PROMOTER OF M/S. SHRADDHA SABURI MERCHANTS LTD AND M/S. SAI KRIPA METALLIC TRADECOM LTD AND SHRI CHANDRA PR AKASH BANSALI AND SHRI RAJU BHANSALI, PARTNERS OF M/S. D C METALS AND M/S. RAJASTHAN ALLUMINIUM RESPECTIVELY. THE AO HAS CONFIRMED THAT THE FUNDS O RIGINATING FROM M/S. D.E. METALS AND M/S. RAJASTHAN ALUMINUM ARE IMMEDIATELY TRANSFERRED TO THE BANK ACCOUNTS OF M/S SHRADDHA SABURI MERCHANTS LTD AND M /S. SAI KRIPA METALLIC TRADECOM LTD THROUGH THE BANK ACCOUNTS OF THE APPEL LANT. THEREAFTER, THE SAME ARE WITHDRAWN IN CASH FROM THE BANK ACCOUNTS OF M/S . SHRADDHA SABURI MERCHANTS LTD AND M/S. SAI KRIPA METALLIC TRADECOM LTD BUT ULTIMATELY TO WHOM THE SAME IS PAID IS NOT INVESTIGATED EITHER BY THE AO OR BY THE ADIT/DDIT EITHER DURING THE COURSE OF THE ASSESSMENT ORDER OR DURING THE REMAND PROCEEDINGS. BOTH THESE AUTHORITIES AS DISCUSSED AB OVE HAVE FAILED TO EXAMINE SHRI PRAVIN T. AGARWAL ON THIS ISSUE NOR THEY COU LD SUCCEED IN RECORDING THE STATEMENT OF SHRI PRAVIN #T. AGARWAL AND FURTHER TO BE CROSS EXAMINED BY THE APPELLANT AS DISCUSSED ABOVE. THE AO AS WELL AS THE DDIT HAVE EXPRESSED THEIR IN THIS REGARD. SIMILARLY, NO CROSS EXAMINATION OF SHRI CHANDRA PRAKASH BHANSALI AND SHRI RAJU BHANSALI IS GRANTED TO THE A PPELLANT IN SPITE OF THE CONTENTS OF THEIR AFFIDAVITS DATED 14.05.2010 AS DI SCUSSED ABOVE VIS-A-VIS THEIR INDEPENDENT STATEMENTS RECORDED BY THE AO DURING T HE REMAND PROCEEDINGS ON ITA 3311 /MUM/2012 22 19.07.2011. ON ACCOUNT OF THESE FACTS BROUGHT ON R ECORD, I FIND SUFFICIENT MERITS IN THE SUBMISSIONS OF THE AR THAT THE STATEMENTS RE CORDED BY THE AO AT THE BACK OF THE APPELLANT CANNOT BE CONSIDERED AS VALID PIEC E OF EVIDENCE. 2.4.1. BESIDES, IT MAY BE NOTICED THAT IN SPITE OF GRANTING SUFFICIENT OPPORTUNITY BY WAY OF REMANDING THE PROCEEDINGS TO THE AO AS WE LL AS REFERRING THE MATTER TO THE DDIT (INV), AS DISCUSSED ABOVE, THEY HAVE FAILE D TO SUBSTANTIATE OR CORROBORATE THE FINDINGS OF THE AO AS DISCUSSED IN THE ASSESSMENT ORDER BY BRINGING ANY COGENT MATERIAL SO AS TO ESTABLISH THA T THE ENTIRE PURCHASES SHOWN BY THE APPELLANT ARE ITS UNEXPLAINED INCOME. BOTH T HE AO AND THE DDIT(INV) HAVE FAILED TO RECORD THE STATEMENT OF SHRI PRAVIN T AGARWAL AND ALLOWING HIM TO BE CROSS-EXAMINED BY THE APPELLANT, SO AS TO ASCERT AIN THE CORRECT FACTS OF THE CASE IN HAND. IN THE ABSENCE OF SUCH A STATEMENT AN D FURTHER CORROBORATIVE DOCUMENTARY EVIDENCES BROUGHT ON RECORD, TO MY CONS IDERED OPINION, IT IS UNJUSTIFIED ON THE PART OF THE AO TO HOLD THAT THE ENTIRE PURCHASES SHOWN BY THE APPELLANT ARE TO BE CONSIDERED AS ITS UNEXPLAINED I NCOME. IT IS PATENTLY INCORRECT CONCLUSION ON THE PART OF THE AO THAT THE PURCHASES ARE NOT GENUINE BUT AT THE SAME TIME THE CORRESPONDING SALES SHOWN ARE GENUINE SALES. IF THE PURCHASES ARE BOGUS WITHOUT PROVING THAT THE APPELLANT HAS PURCHA SED THE SAME ITEMS IN GREY MARKET IN CASH IT CANNOT BE HELD THAT THE CORRESPON DING SALES ARE GENUINE. HOWEVER, NOTHING IS BROUGHT ON RECORD EITHER BY THE AO OR BY THE DDIT EVEN THOUGH THE MATTER WAS SPECIFICALLY REMANDED FOR THI S PURPOSE. THEREFORE, I FIND SUFFICIENT MERITS IN THE SUBMISSIONS OF THE AR THAT IF THE PURCHASES ARE FOUND BOGUS, THE CORRESPONDING SALES OF THE SAME ITEM AS SHOWN BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS CANNOT BE CONSIDERED AS GENUINE S ALES. NEVERTHELESS, NO DETAILS OF WHATSOEVER NATURE ABOUT THE PARTIES FROM WHOM, THE MATERIAL IS PURCHASED, ITS MOVEMENT OR TRANSPORTATION TO THE GO DOWN OF M/S. D C METALS AND M/S. RAJASTHAN ALLUMINIUM IS BROUGHT ON RECORD BY THE AO OR BY THE DDIT(INV), IN SPITE OF CONDUCTING SURVEY U/S 133A O F THE ACT. FURTHER, THERE IS NO EVIDENCE TO PROVE THAT THE CASH WITHDRAWN BY SHRI P RAVIN T AGARWAL IS RETURNED TO THE APPELLANT AND NOT TO M/S. D C METALS OR M/S. RAJASTHAN ALLUMINIUM, PARTICULARLY CONSIDERING TO THE CONTENTS OF THE AFF IDAVIT OF SHRI PRAKASH J SHAH, PARTNER OF THE APPELLANT FIRM DATED 06.01.2012. THE REFORE, IT IS SEEN THAT IN SPITE OF REMANDING THE MATTER ON SEVERAL OCCASIONS, NO NE W FACTS AND EVIDENCES ARE BROUGHT ON RECORD BY THE AO OR BY THE DDIT(INV), SO AS TO JUSTIFY THE BOGUS PURCHASES MADE BY THE APPELLANT OUT OF ITS UNACCOUN TED INCOME. ON THE OTHER HAND, AS DISCUSSED ABOVE, THE AO HERSELF HAS ADMITT ED ON VERIFICATION OF THE RELEVANT BANK ACCOUNTS THAT THE SOURCE OF THE ENTIR E PAYMENTS MADE TO M/S SHRADDHA SABURI MERCHANTS LTD AND M/S. SAI KRIPA ME TALLIC TRADECOM LTD BY THE APPELLANT THROUGH BANKING CHANNELS IS OUT OF TH E PAYMENTS RECEIVED FROM M/S. D C METALS AND M/S. RAJASTHAN ALLUMINIUM. THIS PROVES THAT NO UNACCOUNTED INVESTMENT IS MADE BY THE APPELLANT FOR THIS PURPOSE DURING THE RELEVANT ACCOUNTING YEAR. ITA 3311 /MUM/2012 23 2.4.2 BESIDES, SHRI PRAKASH J SHAH IN HIS STATEMENT DATED 06.01.2012 HAS SATED THE DETAILED MODUS-OPERANDI OF THE ENTIRE TRA NSACTIONS ARRANGED BY THE APPELLANT, WHICH PROVES THAT THE APPELLANT HAS MERE LY RENDERED OR FACILITATED THESE TWO PARTIES I.E. M/S. SHRADDHA SABURI MERCHAN TS LTD. AND M/S. SAI KRIPA METALLIC TRADECOM LTD.(PURCAHSE PARTIES) AND M/S. D C METALS AND M/S. RAJASTHAN ALUMINIUM (SALES PARTIES) BY WAY OF ISSUE OF BOGUS SALES BILLS AGAINST PRE-FIXED COMMISSION RECEIVED. THE CONTENTS OF THE AFFIDAVIT FILED ARE FURTHER CORROBORATED BY WAY OF THE EVIDENCES FURNISHED I.E. FROM THE COPIES OF BANK ACCOUNT OPENING FORMS FILED, IT IS SEEN THAT THE AP PELLANT HAS OPENED A NEW ACCOUNT PARTICULARLY FOR THIS PURPOSE IN THE SAME BANK AND BRANCH (RATNAKAR BANK) IN WHICH, THE BANK ACCOUNTS OF M/S. D C METAL S AND M/S. RAJASTHAN ALLUMINIUM WERE MAINTAINED AND THE NEW ACCOUNT OPEN ING FORM OF THE APPELLANT IS INTRODUCED BY THE DIRECTOR/PARTNER OF M/S.D C ME TALS AND M/S RAJASTHAN ALLUMINIUM. SECONDLY, IT IS ALSO NOTICED A THE APP ELLANT HAS NEVER DEALT IN THE BUSINESS OF ALLUMINIUM SHEETS AND RODS, WHICH ARE FOUND MENTIONED IN THESE ACCOMMODATION BILLS ISSUED. FURTHER, THE APPELLANT HAS NO FACILITY OR WAREHOUSING TO STORE THE MATERIAL PURCHASED, WHICH IS ADMITTED BY THE PARTNERS OF M/S.RAJASTHAN ALLUMINIUM AND M/S. D.C. METALS IN THEIR AFFIDAVITS DATED 14- 05-2012, CONTENDING THAT THE MATERIAL PURCHASED WAS DIRECTLY DELIVERED BY MANUFACTURERS / SUPPLIERS IN THEIR OWN DELIVERY VAN S / HANDCARTS FROM THEIR GODOWNS SITUATED OUTSIDE MUMBAI CHECK NAKA, WHERE M /S. D.C. METALS/ M/S. RAJASTHAN ALLUMINIUM WERE ALSO HAVING THEIR GODOWNS /WAREHOUSING FACILITIES. FURTHER, IT IS ALSO NOTICED THAT THE ENTIRE AMOUNT OF MAHARASHTRA-VAT ON THESE TRANSACTIONS IS PAID BY M/S DC METALS / M/S. RAJAST HAN ALLUMINIUM. 2.4.3. THEREFORE, ON ACCOUNT OF THESE FACTS AVAILAB LE IN THE CASE OF THE APPELLANT, AS DISCUSSED ABOVE AND FURTHER IN THE ABSENCE OF AN Y NEW FACTS AND EVIDENCES BROUGHT ON RECORD BY THE AO AS WELL AS IN THE ABSEN CE OF ANY CORROBORATIVE EVIDENCES PLACED ON RECORD IN SPITE OF REMANDING TH E MATTER ON VARIOUS OCCASIONS, I FIND IT CANNOT BE HELD THAT THE ENTIRE PURCHASES MADE BY THE APPELLANT ARE OUT OF ITS UNACCOUNTED SOURCES OR THE SAME IS TO BE CONSIDERED AS ITS UNEXPLAINED INCOME. EVEN OTHERWISE, EVEN IF THE PURCHASES ARE HELD AS BOGUS, TO MY CONSIDERED OPINION, IT CANNOT BE HELD THAT TH E CORRESPONDING SALES ARE GENUINE; PARTICULARLY WHEN THE QUANTITY PURCHASED A ND SOLD ARE SAME. OBVIOUSLY, IN SUCH A CIRCUMSTANCE IF THE PURCHASES ARE CONSIDERED THE CORRESPONDING SALES ALSO HAS TO BE BOGUS. THEREFORE , ON ACCOUNT OF THE SAME, IT IS EVIDENT THAT UNDER THE GIVEN FACTS AND CIRCUMSTA NCES THE APPELLANT HAS MERELY ISSUED ACCOMMODATION SALES BILLS AGAINST THE PAYMEN T OF PRE-FIXED COMMISSION AS DISCUSSED ABOVE. HOWEVER, SINCE THE ENTIRE TRANS ACTION IS CARRIED OUT IN A CLANDESTINE MANNER, IT CANNOT BE HELD THAT THE RATE OF COMMISSION IS AS PER THE NORMAL PRACTICE FOLLOWED IN THIS LINE OF BUSINESS. NATURALLY, IT HAS TO BE MORE THAN THE NORMAL RATE OF COMMISSION PAID IN THIS LIN E OF BUSINESS. IN THE CASE OF VIJAY PROTEINS LTD VS. ACIT REPORTED IN 15 ITD 428, THE HON'BLE ITAT AHMEDABAD 'C' BENCH UNDER SIMILAR CIRCUMSTANCES, WH ERE THE AO DISALLOWED THE ENTIRE EXPENDITURE ON ACCOUNT OF PURCHASES MAD E FROM CERTAIN PARTIES ITA 3311 /MUM/2012 24 TRATING THE SAME AS BOGUS, HAS HELD THAT 'IT IS AN ELEMENTARY RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAWS THAT PROFIT FROM BUSINE SS CANNOT ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM SALES/ OTHERWISE IT COULD AMOUNT TO LEVY OF INCOME TAX ON GROSS RECEIPTS OR ON SALES. SUCH RECO URSE IS NOT PERMISSIBLE UNLESS IT IS SPECIFICALLY AUTHORIZED TO DO SO UNDER ANY P ARTICULAR PROVISIONS CONTAINED IN THE ACT. IT HAS BEEN HELD BY THE HON'BLE TRIBU NAL THAT IN SUCH CIRCUMSTANCES, A CERTAIN PERCENTAGE OF EXPENDITURE HAS TO BE DISAL LOWED ON ACCOUNT OF INFLATION OF PURCHASE PRICE. THE ITAT HAS HELD THAT IF PURCHA SES ARE MADE FROM THE OPEN MARKET WITHOUT INSISTING FOR THE GENUINE BILLS, THE SUPPLIERS MAY BE WILLING TO SELL THOSE PRODUCTS AT A MUCH LOWER RATE COMPARED TO TH E RATE AT WHICH THEY MAY CHARGE IN CASE THE DEALER HAS TO GIVE A GENUINE SAL E INVOICE IN RESPECT OF THAT SALE AND SUPPLY OF GOODS. THERE MAY BE VARIOUS FAC TORS DUE TO WHICH THERE IS BOUND TO BE A SUBSTANTIAL DIFFERENCE BETWEEN THE P ARTY PURCHASE PRICE OF UNACCOUNTED MATERIAL AND RATE OF PURCHASE OF UNACCO UNTED FOR GOODS. THERE MAY BE A SAVING ON ACCOUNT OF SALES-TAX AND OTHER T AXES AND DUTIES WHICH MAY BE LEVIABLE IN RESPECT OF MANUFACTURE OF SALE OF GOODS IN QUESTION. THE SUPPLIERS OR MANUFACTURERS MAKE A SUBSTANTIAL SAVING IN THE INCO ME TAX IN RESPECT OF INCOME FROM SALE OF UNACCOUNTED GOODS PRODUCED AND SOLD B Y THEM. THIS MAY ALSO BE ONE OF THE FACTORS DUE TO WHICH THE SELLER MAY BE WILLING TO CHARGE LOWER RATES FOR UNACCOUNTED GOODS AS COMPARED TO ACCOUNTED FOR GOODS. THE AR HAS NOT FILED THE DETAILS OF COMMISSION EARNED ON THIS BOGU S TRANSACTION SEPARATELY. HOWEVER, FROM THE P&L ACCOUNT IT IS SEEN THAT IT HA S SHOWN TOTAL COMMISSION OF RS.85,948.70 ON TOTAL PURCHASES OF RS.5,0L,02,850/- WHICH IS INCLUSIVE OF THE BOGUS SALES MADE TO M/S. RAJASTHAN ALLUMINIUM AND M /S. D.C. METALS. THE SAME WORKS OUT TO 0.17% OF THE TOTAL PURCHASES. THE BOGU S PURCHASES MADE FROM M/S. SHRADDHA SABURI MERCHANTS LTD. AND M/S. SAI KRIPA METALLIC TRADECOM LTD IS OF RS.3,82,69,759/- FOR THE RELEVANT ACCOUNTING YEA R. THE AR HAS CONSISTENTLY ARGUED THAT THE RATE OF COMMISSION ALLOWED IN THIS LINE OF BUSINESS NORMALLY DOES NOT EXCEED MORE THAN 1% TO 2% OF THE SALE VALUE. HO WEVER, TO MY CONSIDERED OPINION THE SAME CANNOT BE TAKEN ON ITS FACE VALUE, PARTICULARLY IN VIEW OF THE LACK OF EVIDENCES AND THE CLANDESTINE NATURE OF BUS INESS CARRIED OUT BY THE APPELLANT. AND ALSO CONSIDERING TO THE FACT THAT TH E APPELLANT ITSELF HAS SHOWN SUCH COMMISSION OF 0.17%( AS DISCUSSED ABOVE) WHICH IS MUCH LESSER THAN THE RATE OF COMMISSION ADMITTED BY THE AR IN THE SIMILA R LINE OF BUSINESS OR PRACTICE. THEREFORE, ON ACCOUNT OF THE SAME, I FIND IT WOULD MEET THE END OF JUSTICE, IN CASE, THE RATE OF COMMISSION CHARGED BY THE APPELLANT IS TAKEN @ 5% OF THE TOTAL PURCHASE VALUE OF THE APPELLANT DURING THE RELEVANT ACCOUNTING YEAR. THE SAME ON TOTAL SUCH PURCHASES OF RS.3,82,69,759/- WORKS O UT TO RS.19,13,488/-FOR THE RELEVANT ASSESSMENT YEAR. SINCE, THE APPELLANT HAS SHOWN NET DIFFERENCE BETWEEN THE SALE AND PURCHASE OF RS.85,948.70 IN ITS TRADIN G ACCOUNT PERTAINING TO THE BOGUS PURCHASES AS WELL AS GENUINE . TRADING CARRIE D OUT, THEREFORE, THE PROPORTIONATE PROFIT OR COMMISSION PERTAINING TO BO GUS TRANSACTION IS WORKED OUT AT RS.65,059/-(I.E. 0.17% OF RS.3,82,69,759/-) WHICH IS ALREADY ASSESSED TO TAX, THEREFORE, CONSIDERING TO THE SAME, THE BALANC E AMOUNT OF RS.18,48,429/- (I.E. RS.19,13,488/- (-) RS.65,059/-) OF ADDITION M ADE ON THIS ACCOUNT IS SUSTAINED ITA 3311 /MUM/2012 25 AND THE REMAINING ADDITION MADE IS DIRECTED TO BE D ELETED. THIS GROUND RAISED BY THE APPELLANT IS THEREFORE PARTLY ALLOWED. 5.6.4 BEFORE US, BOTH REVENUE AND THE ASSESSEE HAVE MERELY REITERATED THEIR RESPECTIVE CLAIMS (I) OF REVENUE THAT THE ENT IRE PURCHASE TO M/S. SHRADDHA SABURI MERCHANTS LTD. AND M/S. SAI KRIPA M ETALLIC TRADECOM LTD. AMOUNTING TO RS.3,82,69,759/- BE BROUGHT TO TA X AS THE ASSESSEES INCOME AND; (II) OF THE ASSESSEE THAT THE COMMISSIO N INCOME BE ASSESSED AT 0.17% AS PURCHASES AS DECLARED BY IT. WE FIND THAT APART FROM PUTTING FORTH THESE AVERMENTS, BOTH PARTIES HAVE FAILED TO BRING ON RECORD ANY MATERIAL EVIDENCE TO CONTROVERT THE FINDINGS RENDER ED BY THE LD. CIT(A) IN THE IMPUGNED ORDER ON THESE TWO ISSUES IN CROSS APP EALS. IN THIS VIEW OF THE MATTER, AND AFTER CAREFUL CONSIDERATION OF THE MATERIAL ON RECORD, WE FIND NO REASON FOR INTERFERENCE IN THE ORDER OF THE LD. CIT(A) ON BOTH THESE ISSUES BEFORE US RAISED RESPECTIVELY BY REVENUE AND THE ASSESSEE. WE, THEREFORE, CONFIRM THE ORDER OF THE LD. CIT(A) IN H OLDING THAT (I) THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE EN TIRE BOGUS PURCHASES BY THE ASSESSEE FROM THE AFORESAID TWO PA RTIES AMOUNTING TO RS.3,82,69,759/- IN THE ASSESSEES UNDISCLOSED I NCOME AND (II) THAT THE ASSESSEE HAD EARNED COMMISSION @ 5% FOR CLANDESTINELY FACILITATING THE BOGUS TRANSACTIONS O F THE PARTIES TO PURCHASES AND SALES. CONSEQUENTLY, REVENUES GROUN DS AT SR. NOS. 1 TO 4 AND THE ASSESSEES GROUND AT SR. NO. I(1) ARE DISMISSED. 6. IN THE RESULT, BOTH THE ASSESSEES APPEAL FOR A SST. YEAR 2007-08 AND REVENUES CROSS APPEAL ARE DISMISSED. WE HAVE OBSERVED THAT THE FACTS AND CIRCUMSTANCES O F THE INSTANT CASE BEFORE US ARE SIMILAR TO THE FACTS IN THE CASE OF SISTER C ONCERN OF THE ASSESSEE ITA 3311 /MUM/2012 26 COMPANY NAMELY PRAKASH METALS VIDE AFORE-STATED ORD ERS IN ITA NO.6457/MUM/2012 AND ITA NO. 6611/MUM/2012 VIDE ORD ERS DATED 17-02- 2016, RESPECTFULLY FOLLOWING THE ORDERS OF THE CO-O RDINATE BENCH OF THIS TRIBUNAL IN ITA NO.6457/MUM/2012 AND ITA NO. 6611/M UM/2012 VIDE ORDERS DATED 17-02-2016 IN THE CASE OF ASSESSEE COMPANYS SISTER CONCERN M/S PRAKASH METALS, WE PARTLY ALLOW THE APPEAL FILED BY THE ASSESSEE COMPANY BY HOLDING THAT THE ASSESSEE COMPANYS INCOME FROM THE SE TRANSACTIONS BE COMPUTED AS 5% OF COMMISSION FOR CLANDESTINELY FACI LITATING THE BOGUS TRANSACTION OF THE PARTIES TO THE PURCHASE AND SALE AS HELD BY THE TRIBUNAL IN ITS ORDERS IN THE CASE OF THE SISTER CONCERN OF THE ASSESSEE COMPANY NAMELY M/S PRAKASH METALS IN ITA NO.6457/MUM/2012 AND ITA NO. 6611/MUM/2012 VIDE ORDERS DATED 17-02-2016, WHICH W ILL MEET THE END OF THE JUSTICE WHICH IS ALSO CONCEDED BY THE ASSESSEE COMPANYS COUNSEL TO BE ACCEPTABLE TO THE ASSESSEE COMPANY TO END LITIGATIO N WITH THE REVENUE , KEEPING ALSO IN VIEW OF THE AFORE-STATED DECISION O F THE TRIBUNAL IN THE CASE OF THE ASSESSEES SISTER CONCERN M/S PRAKASH METALS ON SIMILAR FACTS WHICH WAS STATED BY THE LEARNED COUNSEL FOR THE ASSESSEE COMP ANY WAS ALSO ACCEPTED BY THE SAID CONCERN M/S PRAKASH METALS TO END LITIGATI ON WITH REVENUE. WE ORDER ACCORDINGLY. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE COMPANY IN ITA N0. 3311/MUM/2012 FOR THE ASSESSMENT YEAR 2007-08 IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY , 2016. # $% &' 25-07-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 25-07-2016 [ ITA 3311 /MUM/2012 27 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI D BENCH 6. (BC / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI