ANMOL INTERNATIONAL, MUMBAI V. ITO 24(1)(3), MUMBAI

ITA 3434/MUM/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8983 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SINCE FACTS ARE IDENTICAL; THEY PERTAI NS TO AYS
• Keywords: Reopening of assessment; Bogus purchase; Opportunity of cross examination; Tangible material; Difference of opinion; Corroborative evidences; Third party statement; Accommodation entries; Change of opinion
• Section: 69C; 40A(3); 143(3); 142(1); 133(6); 147; 148

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER, AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NOS.3434 & 3435/MUM/2016 ASSESSMENT YEARS:-2009-10 & 2010-11 M/S ANMOL INTERNATIONAL, 5, PLOT NO.2, HARA HIRA PARK, KURAR VILLAGE, MALAD(EAST), MUMBAI-400097 / VS. ITO-24(1)(3), MUMBAI ( /ASSESSEE) ( / REVENUE) P.A. NO. AAKFA2518B / DATE OF HEARING : 25/06/2019 / DATE OF ORDER: 28/06/2019 / O R D E R PER G. MANJUNATHA (ACCOUNTANT MEMBER) THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST ORDER OF THE LD. CIT(A)-41, MUMBAI, DATED 01/04/2016 AND THEY PERTAI NS TO AYS 2009-10 AND 2010-11. SINCE, FACTS ARE IDENTICAL AND ISSUES ARE COMMON, F OR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD ALTOGETHER AND ARE DISPOSED OF B Y THIS CONSOLIDATED ORDER. ! / ASSESSEE BY NONE ! / REVENUE BY SHRI V.K.CHATURVEDI 2 ITA NOS.3434 & 3435/MUM/2016 2. THE ASSESSEE HAS MORE OR LESS RAISED COMMON GROU NDS OF APPEAL FOR BOTH ASSESSMENT YEARS. FOR THE SAKE OF BREVITY, THE GROU NDS OF APPEAL FOR AY 2009-10 ARE REPRODUCED HEREUNDER:- A) BINDING PRECEDENT 1. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS IN NOT FOLLOWING BINDING PRECEDENTS IN THE CASE OF CIT V. NIKUNJ EXI MP ENTERPRISES (P) LTD. (2013) 216 TAXMAN 171 (MAG.) & BABULAL C.BORANA (282 ITR 251 (BOM) (HC) & BOMBAY TRIBUNAL JUDGMENTS QUOTED IN WRITTEN SUBMISSION BEFORE CIT(A ). B) ASSESSMENT BASED ON SUSPICION & ON SURMISES 1. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS TO CONFIRM ACTION OF A.O. ON THE BASIS OF CONJUNCTION, SUSPICI ON & SURMISES. 2. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS T HAT WHEN THE BOOKS BEING NOT REJECTED & ACCEPTED AS TRUE, THE BO OK RESULTS CANNOT BE DISTURBED BY MAKING ADDITION FOR BOGUS PU RCHASES. 3. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS T O APPRECIATE THAT THE BOOKS OF ACCOUNTS HAS TO BE TREATED AS EVI DENCE EXCEPT PROVING IS TO BE WRONG. 4. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS I N REJECTING THE EXPLANATION BY THE APPELLANT WITHOUT PROVING THAT I T IS FALSE & PURELY ON THE BASIS OF PREDETERMINED MIND WITHOUT L OOKING TO THE FACTS & EVIDENCES PRODUCED. 5. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS TO HELD THAT MATERIAL WAS PURCHASED FROM DIFFERENT SOURCE ONLY O N THE BASIS OF SUSPICION AND WITHOUT ANY CORROBORATIVE EVIDENCES & SPECIALLY WHEN TURNOVER & GROSS PROFIT IN PERCENTAGE TERMS IS HIGHER THAN EARLIER PREVIOUS YEAR. 6. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS FOR TREATMENT OF DECLARATION OF HAWALA DEALER BY VAT AUTHORITIES AS EVIDENCE WHEN THE STATEMENTS MADE BY HAWALA DEALERS ITSELF I S CONTRADICTORY AND CANNOT BE RELIED WHEN MADE ONE SI DED TO SAVE THEIR SKIN AND FAILED TO APPRECIATE THAT FINDING IN OTHER LAW CANNOT BE TREATED AS EVIDENCE WITHOUT PROVING IT TO BE SO & FAILED TO APPRECIATE THAT IN CERTAIN CASES VAT AUTHORITIES TH EMSELVES HAVE STATED TO BE SUSPICIOUS HAWALA DEALERS AND NOT CONF IRMED HAWALA DEALERS & SPECIALLY IN THE ABSENCE OF ANY CONCLUSIV E PROOF THEREOF AND ALSO DUE TO THE FACT THAT IN CASE OF CA NCELLED DEALERS 3 ITA NOS.3434 & 3435/MUM/2016 THEY WERE HELD AS GENUINE DEALERS BY VAT AUTHORITIE S BEFORE CANCELLATION. C) ADDITTION OF RS. 1,03,50,862 OF HAWALA PURCHASES 1. THE LEARNED CIT(A) HAS ERRED IN LAW & FACTS TO CONFIRM ADDITION TO THE EXTENT OF RS. 1,03,50,8627- ON THE GROUND OF BOGUS PURCHASE & TO CONFIRM ADDITION OF RS. 1,03,50 ,8627- BEING 25% OF GROSS PROFIT ON PURCHASES. 2. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS & FAILED TO APPRECIATE THE FACT THAT WHEN SALES HAVE BEEN DULLY ACCEPTED BY CIT(A) ALONG WITH QUANTITATIVE & PRODUCTION RECORDS THERE IS NO QUESTION OF UNACCOUNTED PURCHASES & THE LEARNED CIT (A) HAS ERRED IN LAW & IN FACTS TO MAKE ADDITION WHEN SALES HAVE BEEN EFFECTED CONSEQUENT TO THAT PURCHASES & SALES HAVE BEEN ACCEPTED AS TRUE & CORRECT & ALSO GP HAS BEEN ACCEP TED. 3. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS TO APPRECIATE THAT JUST BECAUSE OF NON APPEARANCE OF PARTIES IN R ESPONSE TO SUMMON U/S 133(6) DOES NOT AMOUNT THAT THE APPELLAN T HAS BOGUS PURCHASES & SPECIALLY WHEN CROSS EXAMINATION WAS NOT ALLOWED OF WITNESS INSPITE OF DEMANDED BY THE APPEL LANT. 4. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS T O APPRECIATE THAT ADDITION HAS RESULTED IN EXORBITANT G.P. WHICH IS I MPOSSIBLE IN THIS BUSINESS & ALSO WITH PAST RECORDS AND ALSO SUBSEQUE NT ASSESSMENT U/S 143(3) FOR A.Y.2013-14,WHERE THERE W AS NO HAWALA PURCHASE AND HENCE MAKING THE ADDITION BAD & ILLEGAL. 5. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS IN FOLLOWING JUDGMENTS IN CASE OF VIJAY PROTEIN LTD VS CIT &, C1 T VS S1MIT P SHETH WHERE FACTS ARE COMPLETELY DIFFERENT AND ALSO INSPITE OF BINDING PRECEDENTS OF JURISDICTIONAL HIG H COURT. 6. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS IN CONFIRMING ADDITION TO THE EXTENT OF 25% AS AGAINST 2.5% IN CA SE OF S1M1T P SHETH (AFTER EXCLUDING 10% (VAT IN CASE OF APPELLAN T @ 4% )RATE FOR VAT FOR WHICH NO EXPENSES HAS BEEN DEBITED IN P ROFIT & LOSS ACCOUNT). 7. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS TO TREAT PURCHASE PARTIES AS NON-GENUINE JUST FOR NON-PRODUC TION OF PURCHASE PARTIES & ON THE BASIS OF FINDING OF VAT A UTHORITIES WITHOUT ANYTHING FOUND BY AO & ALSO TO HELD THAT DE LIVERY OF GOODS IS NOT PROVED. 8. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS TO GIVE MORE WEIGHTAGE ON SECONDARY EVIDENCE I.E. AFFIDAVIT BY H AWALA DEALERS 4 ITA NOS.3434 & 3435/MUM/2016 THAN PRIMARY EVIDENCES AVAILABLE IN THE FORM OF BIL LS, CHEQUE PAYMENTS SUBSEQUENT SALES ETC. AND CONFIRMING ADDIT ION ON THE BASIS OF THIRD PARTY STATEMENTS WITHOUT ANY CORROBO RATIVE EVIDENCES. 9. THE LEARNED CIT (A) HAS ERRED IN LAW & IN FACT S TO MAKE ADDITION IN CURRENT YEAR EVEN IF IT IS HELD OF SUPP RESSION OF STOCK OF EARLIER YEAR. 10. THE LEARNED CIT(A) HAS ERRED IN LAW & IN FACTS TO NOTE THAT THE SOME OF THE PURCHASE PARTIES WERE ' VAT CANCELLED ' DEALERS & NOT HAWALA PARTIES & THE PARTIES ARE TREATED GENUIN E BY THE VAT DEPARTMENT BEFORE CANCELLATION & EVEN PURCHASES IN CASE OF APPELLANT HAS BEEN TREATED GENUINE IN VAT PENALTY O RDER BY VAT AUTHORITIES. 11. THE LEARNED CIT(A) ERRED IN LAW & IN FACTS TO A PPLY THE RATE OF G.P. RATHER THAN THE RATE OF N.P & ALSO ESTIMATING VERY HIGH RATE OF GP. D) REASSESSMENT 1. THE LEARNED CIT (A) HAS ERRED IN LAW & IN FACTS TO CONFIRM ACTION OF AO TO ISSUE NOTICE U/S 148 OF THE ACT. 2. THE LEARNED CIT (A) HAS ERRED IN LAW & IN FACTS TO CONFIRM ACTION OF AO OF VALIDITY OF REASSESSMENT U/S 147 WHICH IS BAD & ILLEGAL IN LAW AND ALSO TIME BARRED. 3. THE LEARNED CIT (A) HAS ERRED IN LAW & IN FACTS TO CONFIRM ACTION OF AO THAT REASSESSMENT CAN BE MADE FOR MAKING FISH ING ENQUIRIES. 4. THE LEARNED CIT (A) HAS ERRED IN LAW & IN FACTS TO DO REASSESSMENT MERELY ON THE BASIS OF INFORMATION OF INVESTMENT WING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL P RODUCTS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 20009-10 ON 25/09/2009, DEC LARING TOTAL INCOME AT RS.4, 83,170. THE RETURN WAS PROCESSED UNDER SECTION 143( 1) OF THE ACT (HEREINAFTER THE ACT). SUBSEQUENTLY, THE CASE HAS BEEN REOPENED UND ER SECTION 147 OF THE ACT, FOR THE REASONS RECORDED, AS PER WHICH INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED 5 ITA NOS.3434 & 3435/MUM/2016 ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT, ON ACCOUNT OF CLAIM OF BOGUS PURCHASES FROM SUSPICIOUS/HAWALA DEALERS, AS PER TH E INFORMATION RECEIVED FROM DGIT(INV.), THEREFORE, A NOTICE UNDER SECTION 148 O F THE ACT, DATED 03/12/2012 WAS SERVED UPON THE ASSESSEE. IN RESPONSE TO 148 NOTICE S, THE ASSESSEE NEITHER FILED ITS OBJECTIONS NOR FILED RETURN OF INCOME. THEREFORE, N OTICE UNDER SECTION 142(1) DATED 11/10/2013 WAS ISSUED AND DULY SERVED UPON THE ASSE SSEE. IN RESPONSE TO NOTICES, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEA RED FROM TIME TO TIME AND FILED DETAILS AS CALLED FOR. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE AO CALLED UPON THE ASSESSEE TO FURNISH DETAILS OF PURCHASES, MORE PARTICULARLY IN RESPECT OF PURCHASES FROM M/S MURPHY METALS PVT LTD., M/S SAND ESH SALES PVT. LTD. BHAVIK STEELS LTD. MANI BHADRA SALES PVT. LTD. AND SHREEJI TRADERS TOTAL AMOUNTING TO RS.4,14,03,447/- IN LIGHT OF INFORMATION RECEIVED F ROM DGIT(INV.). IN RESPONSE, THE ASSESSEE FURNISHED LIST OF PURCHASES ALONG WITH CER TAIN BASIC EVIDENCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN ORDER TO VERIF Y GENUINENESS OF PURCHASES FROM ABOVE PARTIES, THE AO ISSUED 133(6) NOTICES TO ALL THE PARTIES, BUT SUCH NOTICES WERE RETURNED UNSERVED WITH REMARK EITHER NOT KNOWN OR LEFT. THEREAFTER, THE AO CALLED UPON THE ASSESSEE TO PRODUCE PARTIES IN PERSON FOR VERIFICATION, BUT THE ASSESSEE FAILED TO PRODUCE PARTIES AND ALSO FAILED TO FILE N ECESSARY EVIDENCES TO JUSTIFY PURCHASES FROM THE ABOVE PARTIES. THEREFORE, THE AO , ON THE BASIS OF INFORMATION RECEIVED FROM DGIT(INV.), WHICH WAS FURTHER SUPPORT ED BY ENQUIRIES CONDUCTED BY MAHARASHTRA SALES TAX DEPARTMENT, GOVT. OF MAHARASH TRA, COUPLED WITH ENQUIRIES CONDUCTED DURING THE COURSE OF SURVEY, CAME TO THE CONCLUSION THAT PURCHASES FROM 6 ITA NOS.3434 & 3435/MUM/2016 ABOVE PARTIES ARE BOGUS IN NATURE WHICH IS NOT SUPP ORTED BY NECESSARY DETAILS OR EVIDENCE, THEREFORE, HE CAME TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO PRODUCE THE PARTIES AND ACCORDINGLY MADE ADDITIONS TOWARDS TOTAL PURCHASE FROM ABOVE PARTIES AMOUNTING TO RS.4,14,03,447/- UNDER S ECTION 69C OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A). 3. BEFORE THE LD CIT(A), THE ASSESSEE HAD CHALLENGE D REOPENING OF ASSESSMENT ON THE GROUND THAT THE AO HAS REOPENED ASSESSMENT O N THE BASIS OF CHANGE OF OPINION WITHOUT THERE BEING ANY MATERIAL TO SUGGEST THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT. THE ASSESSEE HAD ALSO CHA LLENGED ADDITIONS MADE BY THE AO TOWARDS PURCHASES ON THE GROUND THAT MERELY FOR THE REASON THAT PARTIES WERE NOT RESPONDED IN RESPECT OF 133(6) NOTICES, NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESSEE, WHEN THE ASSESSEE HAS DISCHARGED ITS BURDEN BY FILING NECESSARY DETAILS ABOUT PURCHASES. THE LD CIT(A), AFTER CONSI DERING THE RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO TAKEN NOTE OF THE FACT THAT T HE ASSESSEE HAS FILED CERTAIN BASIC INFORMATION INCLUDING THE PURCHASES, CAME TO THE CO NCLUSION THAT THE AO WAS INCORRECT IN MAKING ADDITIONS TOWARDS 100% ALLEGED HAWALA PUR CHASES, BUT WHAT NEEDS TO BE TAXED ONLY PROFIT ELEMENT EMBEDDED IN THOSE PURCHAS ES, THEREFORE, BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P. SETH (2013) 356 ITR 451(GUJ) SCALED DOWN ADDITIONS MADE BY THE AO T OWARDS 25% OF ALLEGED BOGUS PURCHASES AND ACCORDINGLY, SUSTAINED THE ADDITIONS TO THE EXTENT OF RS.1,03,50,862/- 7 ITA NOS.3434 & 3435/MUM/2016 OUT OF TOTAL ADDITIONS MADE BY THE AO OF RS.4,14,03 ,447/-. THE RELEVANT FINDINGS OF THE LEARN CIT(A) AS UNDER:- 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT. I HAVE ALSO PERUSED THE FINDINGS OF THE A.O. IN THE ASSESSMENT ORDER. 5.1 SO FAR THE VALIDITY OF RE-OPENING IS CONCERNED, IT IS FOUND THAT THE REASONS FOR REOPENING WAS PROVIDED BY THE AO WHEREI N PARTY WISE BOGUS PURCHASES MADE BY THE ASSESSEE AS PER INFORMA TION FROM THE OFFICE OF THE DGIT(INV.) HAS BEEN MENTIONED. TH EREFORE, IT IS FOUND THAT THE NOTICE UNDER SECTION 148 WAS ISSUED ON THE BASIS OF FRESH INFORMATION AND TANGIBLE MATERIALS. THE AO AL SO CONSIDERED THE OBJECTIONS RAISED BY THE APPELLANT AND REJECTED THE SAME. IN VIEW OF ABOVE, GROUND NOS.L TO 4 CHALLENGING THE VA LIDITY OF NOTICE U/S 148 ARE DISMISSED. 5.2 SO FAR ADDITION OF RS. 4,14,03,447 U/S 69C IS C ONCERNED, IT IS FOUND THAT THE NOTICES ISSUED TO 4 PARTIES OUT OF 5 PARTIES RETURNED UNSERVED. THE ONE PATTY ON WHOM THE NOTICE WAS SERV ED DID NOT FILE ANY REPLY. THE ASSESSEE FAILED TO PRODUCE THE PARTI ES. THE ENQUIRIES AND INVESTIGATION CONDUCTED BY THE SALES TAX DEPARTMENT ALONG WITH THE DEPOSITION OF ALLEGED SUPPLIERS CLEA RLY ESTABLISH THAT THESE PARTIES HAVE ISSUED BOGUS BILLS WITHOUT ANY S UPPLY OF GOODS. THE AO HAS CONFRONTED ALL THE MATERIALS AND FINDING S TO THE ASSESSEE. IN FACT, FINDINGS OF THE SALES TAX DEPART MENT ARE AVAILABLE ON ITS WEB-SITE AND IT IS IN PUBLIC DOMAI N. THE ASSESSEE HAS ALSO FAILED TO BRING EVIDENCE OF ACTUAL TRANSPO RTATION AND DELIVERY OF GOODS. IN VIEW OF ABOVE, THE AO'S VIEW OF TREATING THE PURCHASES FROM THE 5 PARTIES AS BOGUS IR UPHELD. NO W THE QUANTUM OF DISALLOWANCE/ ADDITION IS TO BE DECIDED BASED ON FACTS OF THIS CASE. ON THE ISSUE OF BOGUS PURCHASES, THERE ARE CONTRARY DECISIONS OF HIGH COURTS AND TRIBUNALS. 5.3 IN SOME OF THE DECISIONS, IT HAS BEEN HELD THAT THE FACT THAT SUPPLIER'S NAME APPEARED IN LIST OF HAWALA DEALERS OF SALES TAX DEPARTMENT AND THE ASSESSEE IS TO PRODUCE HIM DOES NOT MEAN THAT THE PURCHASES ARE BOGUS IF THE PAYMENT IS MADE THROUGH BANKING CHANNELS AND THE G.P. RATIO BECOMES ABNORMALLY HIGH IF THE ADDITIONS MADE BY THE AO IS ACCEPTED. THE ENTIRE AD DITIONS HAVE BEEN DELETED IN SUCH CASES ON THE GROUND THAT THERE IS NO PROOF THAT THE AMOUNT HAS BEEN RECEIVED BACK BY THE ASSES SEE AND ON THE GROUND THAT THE OPPORTUNITY OF CROSS EXAMINATIO N WAS NOT ALLOWED TO ASSESSEE. 5.4 IN ANOTHER SET OF DECISIONS, DISALLOWANCE OF A PARTICULAR PERCENTAGE OF THE PURCHASE PRICE HAS BEEN UPHELD ON THE GROUND 8 ITA NOS.3434 & 3435/MUM/2016 THAT IT IS A MATTER OF FACT THAT THE GOODS WERE NOT RECEIVED FROM THE PARTIES WHO ISSUED BILLS BUT FROM A DIFFERENT S OURCE WHICH IS EXCLUSIVELY WITHIN THE KNOWLEDGE OF THE ASSESSEE AN D NONE ELSE. THEREFORE, IT IS EVIDENT THAT THE ASSESSEE HAD INFL ATED THE EXPENDITURE IN QUESTION BY SHOWING HIGHER AMOUNT OF PURCHASE PRICE THROUGH FICTITIOUS INVOICES IN THE NAME OF BO GUS SUPPLIER. IT WAS ALSO HELD THAT ON THE BASIS OF ENTRIES RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE PROVISIONS OF SECTI ON 40A(3) OF THE ACT WOULD NOT BE APPLICABLE AS SUCH PAYMENTS WE RE SHOWN TO HAVE BEEN MADE BY CROSSED CHEQUES. 5.5 TO TAKE A FAIR AND REASONABLE DECISION IN SUCH A SITUATION, A BALANCED APPROACH IS REQUIRED TO BE FOLLOWED. IN TH E DECISIONS WHERE ADDITIONS HAVE BEEN TOTALLY DELETED ON THE GR OUND THAT MANUFACTURING/SALES ARE NOT POSSIBLE WITHOUT PURCHA SE, PROBABLY THE FACT THAT THE SALE MAY BE OUT OF SUPPRESSED STO CK OF PAST PERIOD HAS NOT BEEN CONSIDERED. FURTHER, IT IS NOT POSSIBLE TO FIND OUT EVIDENCE OF REFUND OF PAYMENTS IN CASH TO ASSES SEE IS EACH CASE PARTICULARLY WHEN THE SUPPLIER DID NOT APPEAR BEFORE THE AO OR THE ASSESSEE FAILED TO PRODUCE THE SAID PARTY BE FORE THE AO FOR EXAMINATION. IMMEDIATE CASH WITHDRAWALS FROM TH E BANK ACCOUNT MAY STRENGTHEN THE CASE OF REVENUE BUT IT I S NOT A CONCLUSIVE PROOF THAT THE AMOUNT WAS REFUNDED TO TH E ASSESSEE. IN A MORE SOPHISTICATED MECHANISM, THE CASH MAY NOT BE WITHDRAWN BY THE BOGUS SUPPLIER AND STILL CASH REFU ND IS POSSIBLE. FURTHER, EVIDENTIARY VALUE OF ENQUIRIES CONDUCTED B Y SALES TAX DEPARTMENT AND STATEMENTS OF SUPPLIERS RECORDED ADM ITTING ACCOMMODATION ENTRIES SHOULD NOT BE TOTALLY IGNORED . 5.6 IN VIEW OF ABOVE, I FIND THE SECOND SET OF DECISIONS MORE LOGICAL AND - REASONABLE WHEREIN CERTAIN PERCENTAG E OF PURCHASE PRICE HAS BEEN DISALLOWED. THE DISALLOWANCE IS JUST IFIED BECAUSE THE EXACT SOURCE OF GOODS OR EXACT AMOUNT OF INFLAT ION IS KNOWN TO THE ASSESSEE ONLY. FURTHER, WITHOUT A MUCH BIGGE R BENEFIT THAN THE NORMAL GP RATIO, NO PRUDENT PERSON WILL ENTER I NTO TRANSACTIONS OF PURCHASING MATERIALS FROM ONE SOURC E AND TAKING BILLS FROM ANOTHER. AS A CONSEQUENCE, THE PROFIT EM BEDDED IN SUCH TRANSACTIONS OF PURCHASE AND SALES WILL BE MUC H HIGHER THAN NORMAL GP RATIO. 5.7 THE VIEW OF DISALLOWING CERTAIN PERCENTAGE OF P URCHASE PRICE IN CASE OF BOGUS PURCHASES WAS UPHELD IN FOLLOWING DECISIONS OF GUJARAT HIGH COURT: 1. VIJAY PROTEINS LTD. VS. CIT [2015] 58 TAXMANN.CO M 44 (GUJ) - 25% DISALLOWANCE WAS UPHELD. 9 ITA NOS.3434 & 3435/MUM/2016 2. CIT VS. SIMIT P. SHETH [2013] 356 UR 451 (GUJ.)- 12.5 % WAS DISALLOWED WITH A FINDING THAT THE ESTIMATION OF RA TE OF PROFIT MUST NECESSARILY VARY WITH THE NATURE OF BUSINESS A ND NO UNIFORM YARDSTICK CAN BE ADOPTED. NORMAL G.P. WAS 3 .56 %. 5.8 THE APPELLANT HAS FILED PARTICULARS OF PURCHASE AND THE CORRESPONDING SALES, SUMMARY OF STOCK REGISTERS, BA NK STATEMENTS ETC. DISALLOWANCE OF 100% OF PURCHASE AS BOGUS DOES NOT SEEM TO BE JUSTIFIED FOR THE REASON THAT I N-DEPTH ENQUIRIES WERE NOT CONDUCTED BY THE AO. THE AO DID NOT CARRY OUT FURTHER INVESTIGATION FROM BANK TO EXAMINE WHET HER THE SUPPLIER HAS WITHDRAWN CASH FROM HIS ACCOUNT. HOWEV ER, THE APPELLANT HAS ALSO FAILED TO PROVE THAT THE GOODS W ERE PURCHASED FROM THE AFORESAID PARTIES. MOREOVER, THE SUPPLIERS ARE IN THE LIST OF HAWALA DEALERS OF SALES TAX DEPARTMENT WHO HAVE ISSUED BILLS ONLY AND THE APPELLANT FAILED TO PRODUCE THE SUPPLIER FOR EXAMINATION. THE TRANSPORTATION BILLS WERE ALSO MIS SING IN THIS CASE WHICH IS THE ADVERSE FINDING OF ASSESSMENT PRO CEEDINGS. THE NOTICE U/S 133 (6) ISSUED BY THE ASSESSING OFFI CER TO 4 PARTIES OUT OF 5 WERE RETURNED BACK UNSERVED. THE O NE PARTY ON WHOM THE NOTICES U/S 133(6) WAS SERVED DID NOT SUBM IT ANY REPLY. THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIE S FOR VERIFICATION WHICH WAS NOT COMPLIED WITH. THE ASSES SEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE DELIVERY AND TRANSPORT OF THE MATERIALS FROM THE ALLEGED PURCHASE PARTIES. IN SUCH A SITUATION, IT IS LOGICAL TO CONCLUDE THAT THE ASSES SEE HAS TAKEN BOGUS BILLS AND THE INFLATION OF PURCHASE AND THE E XTENT OF INFLATION HAS TO BE ESTIMATED BASED ON FACTS OF THI S CASE. 5.9 IN VIEW OF ABOVE IT IS HELD THAT THE APPELLANT HAS FAILED TO ESTABLISH THAT THE GOODS WERE PURCHASED FROM THE PA RTIES WHICH HAD ISSUED THE BILLS. NATURAL INFERENCE IS THAT EIT HER IT WAS PURCHASED FROM DIFFERENT SOURCE OR THE SAME WERE OU T OF SUPPRESSED STOCK OF PAST PERIOD BECAUSE SALES ARE N OT IN DISPUTE. SINCE THE SAID SOURCE IS NOT KNOWN, THE EX TENT OF INFLATION OF PURCHASE CANNOT BE ASCERTAINED. IT WIL L BE 100% ! F THE SALE IS MADE OUT OF OWN SUPPRESSED STOCK OF PAST PE RIOD OR IT WILL BE THE DIFFERENCE OF BILLED AMOUNT AND ACTUAL PAYME NT MADE TO PROCURE THE GOODS. 5.10 G.P. RATIO OF THE APPELLANT FOR ANY YEAR IS IN THE RANGE OF 4-6%. TOTAL PURCHASE OF RS. 9.54 CRORE HAS BEEN DEBITED O UT OF WHICH ADDITION OF RS. 4,14,03,447/- U/S 69C ON ACCOUNT OF BOGUS PURCHASE HAS BEEN MADE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, 25% OF PURCHASE PRICE IS ESTIMATED TO BE REASONABLE DISALLOWANCE FOR THE REASONS DISCUSSED ABOVE. IN VI EW OF 10 ITA NOS.3434 & 3435/MUM/2016 ABOVE, THE ADDITION/DISALLOWANCE TO THE EXTENT OF 2 5% OF PURCHASE PRICE OF RS. 4,14,03,4477- I.E. RS. 1,Q3,5 0,862/- IS SUSTAINED AND BALANCE ADDITION OF RS. 3,10,52,585/- IS DELETED. THE GROUNDS 5-21 OF APPEAL ARE PARTLY ALLOWED. 4. NONE, APPEARED FOR THE ASSESSEE. WE HAVE HEARD T HE LD. DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE O RDERS OF THE AUTHORITIES BELOW. THE APPEAL HAS BEEN INTIALLY DISPOSED OF BY THE TRIBUNA L AND DIRECTED THE AO TO ESTIMATE PROFIT @12.5% ON ALLEGED BOGUS PURCHASES. THE ASSES SEE HAS FILED MISCELLANEOUS APPLICATION BEFORE THE TRIBUNAL, AND REQUESTED TO R ECALL THE ORDER OF THE TRIBUNAL ON CERTAIN POINTS. THE TRIBUNAL VIDE ITS ORDER DATED 0 1/03/2019 IN M.A. NO.48 & 49/MUM/2018 RECALLED THE ORDER ON THE GROUND THAT T HERE IS ERROR IN SO FAR AS FACTS RECORDED IN RESPECT OF FINDINGS OF THE LD. CIT(A) T HAT THE LD. CIT(A) HAS SCALED DOWN ESTIMATION OF PROFIT @12.5%, WHEREAS THE CORRECT FA CTS AS BORNE OUT FROM THE RECORDS WAS THAT THE LD. CIT(A) HAS SCALED DOWN ADDITIONS M ADE BY THE AO @25%, EXCEPT THIS THERE IS NO SUBSTANTIAL CHANGES IN FACTS BROUG HT OUT BY THE TRIBUNAL OF ITS ORDER DATED 04/08/2017. DURING THE CURRENT PROCEEDINGS, T HE ASSESSEE NEITHER APPEARED NOR FILED ANY DETAILS TO CONTROVERT THE FINDINGS OF THE FACT RECORDED DURING COURSE OF EARLIER PROCEEDINGS. WE FURTHER NOTED THAT THE ADDITIONS MA DE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES FROM CERTAIN PARTIES IS ON THE BASI S OF REPORT OF THE DGIT(INV.) WHICH WAS FURTHER SUPPORTED BY THE REPORT OF M-VAT DEPART MENT, GOVT. OF MAHARASHTRA, WHERE CERTAIN PARTIES ADMITTED THAT THEY ARE INVOLV ED IN THE PROVIDING ACCOMMODATION ENTRIES WITHOUT THEIR BEING ANY BUSINESS ACTIVITY. EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHEN THE AO CALLED UPON THE ASSESSEE TO JUSTIFY THE 11 ITA NOS.3434 & 3435/MUM/2016 PURCHASES WITH NECESSARY EVIDENCES, THE ASSESSEE CO ULD ABLE TO FURNISH PURCHASE BILLS AND PAYMENT PROOF, BUT COULD NOT FILE FURTHER EVIDENCES IN THE BACKDROP OF CLEAR FINDINGS FROM THE AO THAT THE PARTIES FROM WHOM PUR CHASES CLAIMED TO HAVE BEEN MADE ARE NON-EXISTENCE ON THE BASIS OF 133(6) NOTIC ES ISSUED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHERE ALL NOTICES ISSUED TO ABOVE PARTIES ARE RETURNED UNSERVED WITH REMARK NOT KNOWN OR LEFT. FURTHER , WHEN THE AO CALLED UPON THE ASSESSEE TO PRODUCE THE PARTIES IN PERSON, THE ASSE SSEE FAILED TO DO SO. ALL THESE EVIDENCES, GOES TO PROVE AN UNDOUBTED FACT THAT THE PURCHASES FROM ABOVE PARTIES ARE NOT SUPPORTED BY NECESSARY EVIDENCES AND ALSO THE A SSESSEE IS NOT ABLE TO PLACE NECESSARY RECORD BEFORE THE AO AND PROVE GENUINENES S OF THE PURCHASES. UNDER THESE FACTS, IT IS DIFFICULT TO ACCEPT THE ARGUMENT OF THE ASSESSEE THAT PURCHASES FROM ABOVE PARTIES ARE GENUINE IN NATURE. AT THE SAME T IME, IT IS DIFFICULT TO ACCEPT THE FINDING OF THE AO THAT PURCHASES FROM ABOVE PARTIES ARE NON-GENUINE MERELY FOR THE REASON THAT PARTIES WERE NOT RESPONDED 133(6) NOTIC ES OR THE ASSESSEE COULD NOT PRODUCE THEM BEFORE THE AO FOR EXAMINATION. THE ASS ESSEE, AT BEST COULD PRODUCE WHATEVER HE CAN FILE BUT NON-APPEARANCE OF PARTIES OR NONPRODUCTION OF PARTIES BEFORE THE AO IS NOT IN THE HANDS OF THE ASSESSEE, MORE PA RTICULARLY AFTER A GAP OF LONG PERIOD. FURTHER, THE AO NEITHER POINTED OUT ANY DIS CREPANCY IN THE BOOKS OF ACCOUNTS OR OTHER EVIDENCE FILED BY THE ASSESSEE NOR MADE OU T A CASE OF SALES OUTSIDE BOOKS OF ACCOUNTS. IN ABSENCE OF ANY INCORRECTNESS IN BOOKS OF ACCOUNT OR OTHER EVIDENCE FILED BY THE ASSESSEE, MERELY FOR THE REASON OF NONAPPEAR ANCE OF PARTIES BEFORE THE AO IN RESPONSE TO 131/133(6) NOTICES, THE AO HAS DRAWN AD VERSE INFERENCE TO HOLD THAT 12 ITA NOS.3434 & 3435/MUM/2016 PURCHASES FROM ABOVE PARTIES ARE NON-GENUINE WITHOU T CARRYING OUT FURTHER VERIFICATION TO ASCERTAIN TRUE NATURE OF TRANSACTIONS BETWEEN TH E PARTIES. UNDER THESE FACTS, IT IS DIFFICULT TO ACCEPT THE ARGUMENTS OF THE LD. AO THA T PURCHASES FROM ABOVE PARTIES ARE NOT GENUINE AND THE ASSESSEE HAS FAILED TO PROVE TH E PURCHASES TO THE SATISFACTION OF THE AO WITH NECESSARY EVIDENCES. IN THIS FACTUAL BA CKGROUND, THE ONLY OPTION LEFT WITH US IS TO SETTLE THE DISPUTE BETWEEN THE PARTIES BY TAKING NOTE OF CERTAIN JUDICIAL PRECEDENCE. THEREFORE, WE ARE OF THE CONSIDERED VIE W THAT TO END DISPUTE BETWEEN THE PARTIES A REASONABLE AMOUNT OF PROFIT MAY BE ESTIMA TED IN ALLEGED/HAWALA PURCHASES. FURTHER THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SETH VS CIT (2013) 356 ITR 451(GUJ) HAD CONSIDERED IDENTICAL ISSUE AND HEL D THAT IN CASE OF ALLEGED BOGUS PURCHASES ONLY PROFIT ELEMENT EMBEDDED IN THOSE PUR CHASES NEEDS TO BE TAXED BUT NOT WHOLE PURCHASES FROM SO CALLED ALLEGED/HAWALA D EALERS. FURTHER, THE COURT HELD THAT DEPENDING UPON THE FACT OF EACH CASE, A REASON ABLE AMOUNT OF PROFIT NEEDS TO BE ESTIMATED. THE ITAT MUMBAI, IN NUMBER OF CASES, AFT ER CONSIDERING THE FACTS OF EACH CASE HAS DIRECTED THE AO TO ADOPT 12.5% TO 15% PROF IT ON ALLEGED BOGUS PURCHASES. IN THIS CASE, ON PERUSAL OF FACTS AVAILABLE ON RECO RD, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL PRODUCTS. CONSID ERING THE NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE AND ALSO TAKEN SUPPORT FROM THE JUDICIAL PRECEDENCE, WHERE IT WAS HELD THAT ONLY PROFIT ELEMENT EMBEDDED IN BOGUS PURCHASES NEEDS TO BE TAXED, WE ARE OF THE CONSIDERED VIEW THAT THE AO IS INCORRECT IN MAKING ADDITIONS TOWARDS 100% ALLEGED BOGUS PURCHASES FROM THE SO CA LLED HAWALA/SUSPICIOUS DEALERS. ALTHOUGH, THE LD. CIT(A) HAS ACCEPTED THE FACT THAT ONLY PROFIT ELEMENT 13 ITA NOS.3434 & 3435/MUM/2016 EMBEDDED IN BOGUS PURCHASES, NEEDS TO BE TAXED BUT YET ADOPTED 25% PROFIT WITHOUT BRINGING ON RECORD ANY COMPARABLE CASES OF SIMILAR NATURE. THEREFORE, CONSIDERING THE NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE AND ALSO CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH OF ITAT MUMBAI, IN NUMBER OF CASES, WE DEEM IT APPROPRIATE TO SCALE DOWN ADDITIONS MADE BY THE AO TOWARDS ALLEGED BOGUS PURCHASES TO THE EXTENT OF 12.5% OF SUCH PURCHASES. ACCORDINGLY, WE DIRECT THE AO TO ESTIMATE 12.5% PROFIT ON ALLEGED BOGUS PURCHASES. 5. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N FROM ASSESSEES APPEAL IS VALIDITY OF REOPENING OF ASSESSEE. WE FIND THAT ALT HOUGH THE ASSESSEE HAS CHALLENGED VALIDITY OF REOPENING OF ASSESSMENT, WE FIND THAT T HE AO HAS REOPENED THE ASSESSMENT ON THE BASIS OF INFORMATION RECEIVED FRO M DGIT(INV.) WHICH WAS FURTHER SUPPORTED BY REPORT OF M-VAT, GOVT. OF MAHARASHTRA WHICH SUGGEST ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE ACT . THEREFORE, THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEE IS THAT THE ASSESSMENT HAS BEEN REOPENED WITHOUT THEIR BEING ANY TANGIBLE MATERIAL, ACCORDINGLY, REJECT TH E GROUND TAKEN BY THE ASSESSEE CHALLENGING THE REOPENING OF ASSESSMENT. ITA NO.3435/MUM/2016 6. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL ARE IDENTICAL TO THE ISSUES WHICH WE HAVE ALREADY CONSIDERED IN ITA NO.3434/MUM/2016 FOR AY 2009-10. THE REASONS GIVEN BY US IN PRECEDING PARAGRAPH SHALL MUTATIS MU TANDIS APPLY TO THIS APPEAL ALSO, THEREFORE, FOR THE DETAILED REASONS RECORDED IN PRE CEDING PARAGRAPHS IN ITA 14 ITA NOS.3434 & 3435/MUM/2016 NO.3434/MUM/2016 FOR AY 2009-10, WE DIRECT THE AO T O ESTIMATE 12.5% PROFIT ON ALLEGED BOGUS PURCHASES. 7. AS REGARDS, THE REOPENING OF ASSESSMENT REASONS GIVEN BY US IN PRECEDING PARAGRAPH IN ITA NO..3434/MUM/2016 SHALL APPLY TO T HIS APPEAL ALSO. THEREFORE, WE REJECT THE GROUND TAKEN BY THE ASSESSEE CHALLENGING VALIDITY OF REOPENING OF ASSESSMENT. 8. AS A RESULT, BOTH APPEALS FILED BY THE ARE PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/06/2019. SD/- SD/- ( SAKTIJIT DEY ) (G. MANJUNATHA) '!# /JUDICIAL MEMBER $!# / ACCOUNTANT MEMBER MUMBAI; DATED : 28/06/2019 F{X~{T? F{X~{T? F{X~{T? F{X~{T? P.S P.S P.S P.S / /. /./. /. '.. &''()*)+' / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT (RESPECTIVE ASSESSEE) 2. '#$ ! / THE RESPONDENT. 3. %$ %$ & ( ) / THE CIT, MUMBAI. 4. %$ %$ & / CIT(A)- , MUMBAI, 5. ()*$ '+ , %$ $ +- , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI