ITO 19(3)(1), MUMBAI V. RATNARAM K CHOUDHARY, MUMBAI

ITA 3441/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8687 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 11-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Bogus purchase; Rejection of books of accounts; Accommodation entries
• Section: 133(6)

Judgement Text

P A G E | 1 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, M UMBAI BEFORE SHRI RAJENDRA , AM AND SHRI RAVISH SOOD, JM ITA NO. 3441 /MUM/2017 ( / ASSESSMENT YEAR:2009 - 10) ITO - 19(3 )(1), MATRU MANDIR, 2 ND FLOOR, ROOM NO. 202 , TARDEO ROAD, MUMBAI - 400 020 / VS. SHRI RATNARAM K. CHAUDHARI, OFFICE NO. 14, 1 ST FLOOR, BUILDING NO.8 HAJI KASAM CHAWL, DURGADEVI STREET, MUMBAI - 400004 ./ ./ PAN NO. AEAPC6124R ( / REVENUE) : ( / ASSESSEE ) / REVENUE BY : SHRI / ASSESSEE BY : NONE / DATE OF HEARING : 1 2 .10.2017 / DATE OF PRONOUNCEMENT : 25 .10.2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST T HE ORDER PASSED BY THE CIT(A) - 30, MUMBAI, DATED 17 .02.2017, WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O U/S 143 (3) R.W.S 147 OF THE INCOME TAX ACT,1961 (FOR SHORT ACT) , DATED 20 .03.2015. THE P A G E | 2 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI REVENUE ASSAILING THE ORDER PASSED BY THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O TO RESTRICT THE ESTIMATION OF THE PROFIT @ 6.5% INSTEAD 25% OF THE TOTAL NON - GENUINE PURCHASES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE HIS DUTY TO PROVE THAT THE PURCHASES MADE FROM THE THIRTEEN PARTIES WER E GENUINE AND DID NOT PRODUCE ANY DELIVERY CHALLANS, TRANSPORT RECEIPTS, GOODS INWARD REGISTER MAINTAINED AT GODOWN ETC.? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN SUSTAINING ONLY AN ADDITION @ 6.5% PROFIT RATE ON TOTAL PURCHASES OF RS. 3,61,50,427/ - MADE FROM 13 PARTIES. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED CIT(A) ON THE ABOVE GROUNDS BE SET - SIDE AND THAT OF THE A.O BE RESTOR ED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE WHO IS A RESELLER IN FERROUS AND NON - FERROUS METALS HAD FILED HIS RETURN OF INCOME O N 26.09.2009, DECLARING TOTAL INCOME OF RS. 5,51,310/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH U/S 143(1) OF THE ACT. THAT ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT (INV.), MUMBAI THAT THE ASSESSEE WAS ONE OF THE BENEFI CIARIES OF THE ACCOMMODATION ENTRIES PROVIDED BY SOME OF THE MVAT DEALERS WHO WERE PROVIDING BOGUS PURCHASE BILLS WITHOUT SUPPLYING ANY GOODS , THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 OF THE ACT . 3. THAT DURING THE COURSE OF THE ASSESSMENT PROCEED INGS THE A.O ON THE BASIS OF THE INFORMATION RECEIVED FROM THE DGIT (INV.), MUMBAI OBSERVED THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES FOR PURCHASES AGGREGATING TO RS. 3,61,50,427 / - FROM THE FOLLOWING PARTIES : - P A G E | 3 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI SR. NO. NAME OF THE HAWALA PARTIES BILL AMOUNT (IN RS.) 1 JAY AMBE METAL 44,33,627/ - 2 M P TRADERS 2,62,924/ - 3 N B ENTERPRISES 28,623/ - 4 ASIAN IMPEX (INDIA) 1,96,725/ - 5 RIDDHI SIDDHI IMPEX (INDIA) 14,09,226/ - 6 ASIAN METAL INDUSTRIES 21,33,724/ - 7 NEW EVEREST STEEL 2,62,06,870/ - 8 MILLENNIUM FORGE (INDIA) 42,729/ - 9 MONAL METAL ALLOYS PVT. LTD. 1,46,474/ - 10 SHRUTI IMPEX INDIA 1,96,676/ - 11 SAMIR TRADING CORPORATION 87,168/ - 12 ALFA INDUSTRIES 2,41,835/ - 13 DEEP METAL & TUBE 7,63,826/ - TOTAL 3,61,50,427/ - THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS T HE A.O DIRECTED THE ASSESSEE TO PLACE ON RECORD DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, VIZ . (I) SALE BILL S ; (II) TRANSPORTATION DOCUMENTS; (III)DELIVERY CHALLANS/BILL; (IV) LORRY RECEIPTS/BILL S ETC; (V) COPY OF LEDGER ACCOUNT S ; (VI) DATE WISE PAYMENT DETAILS; (VII) COPY OF BANK STATEMENT; (VIII) COPY OF STOCK REGISTER; AND (IX) COPY OF SALES TAX RETURN, VAT CHALLAN ETC. THE A.O FURTHER IN ORDER TO VERIFY THE VERACITY OF THE AFOREMENTIONED PURCHASE TRANSACTIONS ISSUED NOTICES U/S 133(6) TO THE AFOREMENTIONED PARTIES AT THE ADDRESSES WHICH WERE PROVIDED BY THE ASSESSEE , WHICH HOWEVER, WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN OR LEFT ETC. THE A.O IN THE BACKDROP OF THE AFORESAID FACTS P A G E | 4 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI DIRECTED THE ASSESSEE TO PRODUCE THE AFOREMENTIONED PARTIES ALONG WITH DOCUMENTARY EVIDENCES IN SUPPORT OF THE GENUINENESS OF THE PURCHASE TRANSACTION S UNDER CONSIDERATION. THE ASSESSEE FURNISHED WITH THE A.O THE COP IES OF THE LEDGER ACCOUNTS OF THE RESPECTIVE PARTIES IN ITS BOOKS OF ACCOUNTS , COP IES OF THE PURCHASE BILLS , COP IES OF CHALLANS EVIDENCING PAYMENT OF SALES TAX/ VAT AND TH E COPIES OF BANK STATEMENTS REFLECTING THE PAYMENTS MADE TO THE AFOREMENTIONED PARTIES IN RESPECT OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION, BUT HOWEVER FAILED TO PRODUCE EITHER OF THE AFORESAID PARTIES FOR EXAMINATION BEFORE THE A.O. THE A.O BEING OF THE VIEW THAT AS NEITHER THE ASSESSEE HAD PRODUCED THE PARTIES FOR NECESSARY EXAMINATION, NOR SUBSTANTIATED THE GENUINENESS AND VERACITY OF THE PURCHASE TRANSACTIONS ON THE BASIS OF IRREFUTABLE DOCUMENTARY EVIDENCE, THEREFORE, OBSERVED THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS AS WAS SO CAST UPON HIM. THE A.O AFTER DELIBERATING ON THE FACTS OF THE CASE CONCLUDED THAT IN THE ABSENCE OF THE RELEVANT SUPPORTING DOCUMENTS WHICH COULD GO TO EVIDENCE THE GENUINENESS OF THE PURCHASE TRANSACTIONS CLAIM E D BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES , THE SAME COULD NOT BE ALLOWED AS AN EXPENDITURE , BY OBSERVING AS UNDER : (I) IT IS PERTINENT TO MENTION HERE THAT THE SALES TAX DEPARTMENT HAS CONDUCTED INDEPENDENT ENQUIRES IN EACH OF THE HAWALA PARTIES AND CONCLUSIVELY PROVED THAT THESE PARTIES ARE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES ONLY. ALL OF THE ABOVE DOCUMENTS ESTABLISH BEYOND DOUBT THAT THE AFORESAID PARTIES DID NOT SUPPLY ANY GOODS TO THE ASSESSEE. THE PARTIES ARE ISSUING BILLS WITHOUT DELIVERING ANY GOODS AND SERVICES. THE PAYMENTS RECEIVED BY THESE PARTIES ARE RETURNED P A G E | 5 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI TO ASSESSEE IN CASH AFTER DED UCTING A SMALL PORTION FOR COMMISSION. (II) IT MAY ALSO BE POINTED OUT HERE THAT THE SALES TAX INFORMATION ABOUT BOGUS BILLERS IS NOT THE SOLE BASIS AND INVESTIGATION HAS BEEN CARRIED OUT UNDER THE I.T. ACT AND THE ASSESSEE HAS DULY BEEN CONFRONTED WITH TH E SAME. EVIDENTLY, THE ASSESSEE HAD ADOPTED A MODUS OPERANDI TO REDUCE HIS TRUE PROFITS BY INFLATING HIS EXPENSES INCLUDING PURCHASE EXPENSES BY TAKING ACCOMMODATION ENTRIES FROM SUCH PARTIES. IN VIEW OF THE ABOVE FACTS, THE CONTENTIONS/SUBMISSIONS MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS ARE NOT CONVINCING AND ACCEPTABLE. (III) THE ASSESSEE COULD NOT FILE THE VITAL DOCUMENTS SUCH AS DELIVERY CHALLANS, TRANSPORT RECEIPTS, OCTROI RECEIPTS FOR PAYMENT OF OCTROI DUTY, RECEIPT OF WEIGHBR IDGE FOR WEIGHING OF GOODS, EXCISE GATE PASS, GOODS INWARD REGISTER MAINTAINED AT GODOWN/WAREHOUSE/STORAGE HOUSE ETC. WHATEVER DOCUMENTS PLACED ON RECORD IS NOT CAPABLE OF SUSTENANCE. THE ITEMS SHOWN TO HAVE PURCHASED FROM THE SAID PARTIES ARE OF SUCH IN N ATURE THAT THEY REQUIRE SEPARATE TRANSPORTATION. (IV) THE ONUS WAS UPON THE ASSESSEE ESTABLISH THE GENUINENESS OF PURCHASES MADE BY THE ASSESSEE. (V) THE SALE S TAX DEPARTMENT CERTIFIED THAT THE AFORESAID PARTIES ARE HAWALA OPERATORS AFTER CONDUCTING INDEPE NDENT ENQUIRIES. IT IS EVIDENT THAT THE ASSESSEE DID NOT MAKE ANY EFFORT TO CONVERT THE FINDING RECORDED BY THE DGIT (INV.) AND IT MADE TO EFFORTS TO PRODUCE THE SELLER PARTIES. (VI) IF ALL THE EVIDENCES POINT TO THE FACT THAT NO ACTUAL GOODS WERE SUPPLIE D BY THE ABOVE PARTIES, THEN THE ARGUMENT OF ASSESSEE THAT IT PURCHASED GOODS IN GOOD FAITH IS NOT TENABLE. P A G E | 6 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI (VII) MERE FILING OF EVIDENCES IN SUPPORT OF PURCHASES AND PAYMENT THROUGH ACCOUNT PAYEE CHEQUE CANNOT BE CONCLUSIVE IN A CASE WHERE GENUINENESS OF TRANSACTION IS IN DOUBT. THE A.O ON THE BASIS OF HIS AFORESAID DELIBERATIONS THEREIN BEING OF THE VIEW THAT IT STOOD PROVED TO THE HILT THAT THE PURCHASES MADE BY THE ASSESSEE FROM THE AFOREMENTIONED PARTIES HAD REMAINED UNVERIFIABLE, THEREFORE, REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SEC. 145(3) OF THE ACT. THE A.O FURTHER HOLDING A CONVICTION THAT THE ASSESSEE BY PROJECTING THE AFORESAID BOGUS PURCHASES HAD INTENDED TO SUPPRESS HIS TRUE PROFIT AND REDUCE THE TAX LI ABILITY, THEREFORE , BEING OF THE VIEW THAT THE ASSESSEE MUST HAD GENERATED PROFIT TO THE EXTENT OF 25% OF THE AFOREMENTIONED PURCHASES AGGREGATING TO RS. 3,61,50,427/ - (SUPRA), MADE AN ADDITION OF RS. 90,37,607/ - IN THE HANDS OF THE ASSESSEE. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE A.O CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) . THE CIT(A) AT THE VERY OUTSET UPHELD THE REOPENING OF THE ASSESSMENT U/S 147 WHICH WAS ASSAILED BEFORE HIM BY THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTE D BEFORE THE CIT(A) THAT IN THE BACKDROP OF THE FACT THAT THE GP RATE FOR THE YEAR UNDER CONSIDERATION WAS 4.2%, THEREFORE , DISALLOWANCE OF 25% OF THE TOTAL ALLEGED NON - GENUINE PURCHASES OF RS. 3,61,50,427/ - (SUPRA) RESULTING INTO AN ADDITION OF RS. 90,37,6 07/ - (SUPRA) MADE BY THE A.O WAS UNCALLED FOR. THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE A.O DISCARDING THE SUBSTANTIAL DOCUMENTARY EVIDENCE, VIZ. BANK STATEMENTS, COPIES OF LEDGER ACCOUNTS ALONG WITH DETAILS OF PAYMENTS MADE TO THE AFOREMENTIONED PARTIES TOWARDS PURCHASE CONSIDERATION , AS WELL AS DETAILS THEREIN CORRELATING THE SALES MADE AGAINST THE AFORESAID PURCHASES WERE PLACED ON THE RECORD OF THE A.O DURING THE P A G E | 7 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI COURSE OF THE ASSESSMENT PROCEEDINGS , HAD THEREIN MERELY ON THE BASIS OF SUSPICION CHARACTERIZED THE TRANSACTIONS OF PURCHASE OF GOODS BY THE AS S E S SEE FROM THE AFOREMENTIONED PARTIES AS BOGUS TRANSACTIONS. THE ASSESSEE IN ORDER TO FORTIFY ITS CLAIM THAT THE PURCHASE TRANSACTIONS WITH THE AFOREMENTIONED PARTIES WERE GENUINE, THEREIN SUBM ITTED THAT THE PAYMENTS MADE TOWARDS THE PURCHASE CONSIDERATION WERE THROUGH CHEQUES AND HENCE THE FACTUM THAT THE ASSESSEE HAD MADE PURCHASES FROM THE AFOREMENTIONED PARTIES STOOD ESTABLISHED BEYOND ANY SCOPE OF DOUBT. THE ASSESSEE FURTHER AVERRED BEFORE THE CIT(A) THAT SOLELY FOR THE REASON THAT THE NAMES OF THE AFOREMENTIONED PARTIES APPEARED ON THE WEBSITE OF THE STATE GOVERNMENT WOULD NOT JUSTIFY TREATING THE GENUINE PURCHASES AS NON - GENUINE PURCHASES , AS THE SAME COULD ONLY BE CONCLUDED AFTER CONSIDER ING THE FACTS OF THE CASE IN TOTALITY . THE ASSESSEE FURTHER SUBMITTED BEFORE THE CIT(A) THAT IN ITS OWN CASE FOR A.Y. 2010 - 11 AND A.Y. 2011 - 12 INVOLVING SIMILAR FACTS , HIS PREDECESSOR HAD VIDE HIS ORDER DATED 23.12.2016 RESTRICTED THE ADDITION TO 6% AS AGAINST THE DISALLOWANCE TO THE EXTENT OF 25% MADE BY THE A.O. 6. THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE AS REGARDS HIS CLAIM IN RESPECT OF THE GENUINENESS OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION, HOWEVER , DID NOT FIND FAVOR WITH THE SAME. THE CIT(A) OBSERVED THAT IN THE BACKDROP OF THE FACTS WHICH HAD A STRONG BEARING ON THE ADJUDICATION OF THE GENU INENESS OF THE PURCHASE TRANSACTION UNDER CONSIDERATION, VIZ. (I) THE NOTICES ISSUE D UNDER SEC. 133(6) WERE RETURNED UNSERVED BY THE POSTAL DEPARTMENT WITH THE REMARKS NOT KNOWN, LEFT, ETC .; (II) NO DOCUMENTARY DETAILS SUBSTANTIATING THE GENUINENESS OF THE PURCHASES AND THE CORRELATING SALES HAVING BEEN PLACED BY THE ASSESSEE ON RECORD ; AND THE STATEMENT S OF THE AFOREMENTIONED SUPPLIER PARTIES RECORDED BY THE P A G E | 8 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI SALES TAX AUTHORITIES , WHEREIN THEY HAD ACCEPTED THAT THE Y WERE ONLY ISSUING HAWALA BILLS AND N O GOODS WERE SUPPLIED BY THEM, IT COULD SAFELY BE CONCLUDED THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS AS WAS SO CAST UPON HIM , AND THUS PROVE ON THE BASIS OF IRREFUTABLE EVIDENCE THE VERACITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION. IT WA S OBSERVED BY THE CIT(A) THAT NOT ONLY THE ASSESSEE HAD FAILED TO FURNISH CRUCIAL EVIDENCES LIKE PROOF OF DELIVERY OF PURCHASES, TRANSPORT CHALLANS AND GOODS INWARD REGISTER AT GODOWN ETC., EITHER BEFORE THE A.O OR BEFORE HIM, NOR RECONCILED THE PURCHASES WITH THE ITEMS SOLD , THEREFORE, IT COULD SAFELY BE PRESUMED THAT EITHER THE PARTIES UNDER CONSIDERATION WERE NON - EXISTENT OR EVEN IF THEY DID EXIST, THEY WERE NOT BACKED BY SUFFICIENT EVIDENCE TO UNDERGO THE TEST OF SCRUTINY. THE CIT(A) IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS CONCLUDED THAT AS THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED 13 PARTIES WHO WERE INTO PROVIDING BOGUS BILLS WITHOUT SUPPLY OF ANY MATERIAL HAD THUS REMAINED UNVE RIFIED , THEREFORE , TAKING SUPPORT OF THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM 385 (GUJ) , WHEREIN THE H IGH COURT IN RESPECT OF THE CASE BEFORE IT HAD RESTRICTED THE ADDITION @ 12.5% (ADDITIONAL ADVANTAGE TOWARDS TAX BENEFIT 10% + PROFIT MARGIN 2.5%), CONCLUDED THAT AS THE ASSESSEE WAS ALSO IN THE SAME LINE OF BUSINESS, I.E. TRADING IN FERROUS AND NON - FERROU S METALS, THEREFORE , LOGICALLY THE PROFIT MARGIN COULD SAFELY BE ADOPTED @ 2.5%. THUS, IN THE BACKDROP OF HIS AFORESAID OBSERVATION S THE CIT(A) RESTRICTED THE ADDITION IN THE HANDS OF THE ASSESSEE TO 6.5% (I.E. 4% OF VAT LEVIED + 2.5% TOWARDS PROFIT MARGIN ) OF THE AGGREGATE VALUE OF THE TOTAL PURCHASES OF RS. 3,61,50,427/ - CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED 13 PARTIES. THUS , T HE CIT(A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. P A G E | 9 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI 7. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT THE RESPONDENT ASSESSEE DESPITE HAVING BEEN THE INTIMATED ABOUT THE DATE OF HEARING OF THE APPEAL HAD NEITHER PUT UP AN APPEARANCE, NOR ANY APPLICATION SEEKING ADJOURNMENT HAD BEEN FILED BEFORE US. WE THUS IN THE BACKDROP OF THE AFORESAID FACTS , BEING LEFT WITH NO OTHER ALTERNATIVE , THEREFORE , PROCEED WITH IN TERMS OF RULE 25 OF THE APPELLATE TRIBUNAL RULES, 1963, AND THEREIN DISPOSE OF THE APPEAL AFTER HEARING THE APPELLANT REVENUE. THE LEARNED DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R.) SUBMITTED THAT THE A.O HAD RIGHTLY DISALLOWED 25% OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES , HOWEVER, THE CIT(A) HAD ERRED IN RESTRICTING THE SAID DISALLOWANCE TO 6.5%. IT WAS THUS SUBMITTED BY THE LD. D.R. THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE A.O BE RESTORED. 8. WE HAV E HEARD THE LD. D.R., PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE FACT THAT THE NOTICES ISSUE D BY THE A.O TO THE AFOREMENTIONED 13 PARTIES WERE RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN, LEFT, ETC., THE VERY EXISTENCE OF THE SAID PARTIES CAME UNDER SERIOUS DOUBT S. WE FURTHER FIND THAT IT REMAINS AS A MATTER OF FACT THAT THE ASSESSEE EVEN OTHERWISE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE AFOREMENTIONED PURCHASE TRANSACTIONS ON THE BASIS OF IRREFUTABLE DOCUMENTARY EVIDENCES, VIZ. DELIVERY CHALLANS, TRANS PORTATION RECEIPTS, OCTROI RECEIPTS, RECEIPT OF WEI GH BRIDGE FOR WEIGHING OF GOODS, EXCISE GATE PASS, GOODS INWARD REGISTER MAINTAINED AT GODOWN/WAREHOUSE/ P A G E | 10 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI STORAGE HOUSE ETC., THEREFORE, THE A.O BEING OF THE CONSIDERED VIEW THAT THE GENUINENESS OF THE PURCHASE TRANSACTIONS COULD NOT BE VERIFIED, HAD THUS RIGHTLY REJECTED THE BOOK S OF ACCOUNT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SEC. 145(3) OF THE ACT. WE FIND THAT AFTER REJECTION OF THE BOOKS OF ACCOUNT THE CIT(A) HAD FAIRLY RESTRICTED THE ADDITION IN THE HANDS OF THE ASSESSEE @ 6.5% OF THE TOTA L PURCHASES AGGREGATING TO RS. 3,61,50,427/ - WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED 13 PARTIES. WE ARE OF THE CONSIDERED VIEW THAT THE ADOPTION OF THE RATE OF 6.5% BY THE CIT(A) IS WELL SUPPORTED ON THE BASIS OF THE RE ASONING ADOPTED BY THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM 385 (GUJ) . WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) ON THE BASIS OF HIS AFORESAID REASONING FOR RESTRICTING THE DISALLOWANCE /ADDITION TO 6 .5% OF THE TOTAL NON - GENUINE PURCHASES, HAD ALSO TAKEN D UE COGNIZANCE OF THE FACT THAT IN THE CASE OF THE ASSESSEE FOR THE IMMEDIATE SUCCEEDING YEARS, VIZ. A.Y. 2010 - 11 AND A.Y. 2011 - 12 THE ADDITION WAS RESTRICTED BY THE FIRST APPELLATE AUTHORITY TO 6%. WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) IN THE PRESENT CASE HAD ON THE BASIS OF A VERY WELL REASONED ORDER RESTRICTED THE ADDITION IN THE HANDS OF THE ASSESSEE TO 6.5% OF THE TOTAL P URCHASES AGGREGATING TO RS. 3,61,50,427/ - WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED 13 PARTIES . WE ARE PERSUADED TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) , AND FINDING NO REASON TO DISLODGE THE VIEW TAKEN BY HI M, THEREFORE, UPHOLD HIS ORDER. 9. THE APPEAL OF THE REVENUE IS DISMISSED. P A G E | 11 ITA NO. 3441/MUM/2017 AY: 2009 - 10 ITO VS. SHRI RATNARAM K. CHAUDHARI ORDER PRONOUNCED TO THE OPEN COURT ON 25 /10/2017 SD/ - SD/ - ( RAJENDRA ) (RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; . 10 .2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI