HARISH K. CHANDAK, MUMBAI V. ITO 24(3)(1), MUMBAI

ITA 3471/MUM/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1212 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: misc
• Appeal Filed On: 08-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure; Peak credit; Accommodation entries
• Section: 69C; 143(3); 142(1); 133(6); 147; 145; 148

Judgement Text

ITA NO. 3471, 3472 & 3473/MUM/2015 1 H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.3471 TO 3473/ MUM/2015 ( / ASSE SSMENT YEAR : 2009 - 10, 2010 - 11 & 2011 - 12) MR. HARISH K. CHANDAK 1001, DWING, BUILDING NO. 27, ANURUDDHA BUILDING, A BOVE ICICI BANK, TILAK NAGAR, CHEMBUR(W), MUMBAI - 400089 / V. ITO 24(3)(1) PRA T Y AKASHKAR BHAVAN, BKC, BANDRA (E), MUMBAI 400051 ./ PAN : AABPC6410H ASSESSEE BY: NONE REVENUE BY : SHRI. MANOJ KUMAR SINGH (DR) / DATE OF HEARING : 27.11.2018 / DATE OF PRONOUNCEMENT : 27 .11.2018 / O R D E R PER BENCH : THESE THREE APPEALS, FILED BY ASSESSEE, BEING ITA NO. 3471 TO 3473/MUM/2015 , ARE DIRECTED AGAINST SEPERATE APPELLATE ORDER (S) ALL DATED 12.03.2015 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 42, MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2009 - 10, 2010 - 11 & 2011 - 12 , THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM SEPARATE ASSESSMENT ORDE R (S) ALL OF DIFFERENT DATES VIZ.26.02.2014, 28.03.2013 AND 26.02.2014 RESPECTIVELY PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED ITA NO. 3471, 3472 & 3473/MUM/2015 2 THE AO) FOR AY 2009 - 10, 2010 - 11 & 2011 - 12 . SINCE , COMMON ISSUES ARE INVOLVED , ALL THESE THREE APPEALS WERE HEARD TOGETHER AND DISPOSED BY THIS COMMON ORDER. FIRST , WE SHALL TAKE UP APPEAL OF THE ASSESSEE FOR AY 2009 - 10 AND OUR DECISION IN APPEAL FOR AY 2009 - 10 SHALL APPLY MUTATIS MUTANDIS TO THE APPEALS FOR AY 2010 - 11 AND 2011 - 12 RESPECTIVELY. 2. THE GROUNDS OF AP PEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) IN ITA NO. 3471/MUM/2015 FOR AY 2009 - 10, READ AS UNDER: - 1.1 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE REASSESSMENT FRAMED U/S. 147 OF THE INCOME - TAX ACT, 1961 ['THE ACT'] IS BAD IN LAW. WITHOUT PREJUDICE TO THE ABOVE 2.1 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 42, MUMBAI ('LD. CIT (A)'], ERR ED IN CONFIRMING THE ADDITION U/S. 69C OF THE ACT MADE BY THE A.O. ON THE GROUND OF ALLEGED BOGUS PURCHASES TO THE EXTENT OF RS. 16,98,513 / - BY AP PLYING AVERAGE GROSS PROFIT RATE AT 5.64% TO THE AMOUNT OF ALLEGED BOGUS PURCHASES. 2.2 IT IS SUBMITTE D THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH ADDITION WAS CALLED FOR. 2.3 WITHOUT PREJUDICE TO THE ABOVE, IN THE ALTERNATIVE, ASSUMING - BUT NOT ADMITTING - THAT SOME DISALLOWANCE WAS CALLED FOR, THE COMPUTATION OF THE SAME IS NOT IN ACCORDANCE WITH THE LAW, IS ARBITRARY AND EXCESSIVE. 3. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARING. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF RUBBER PRODUCTS, CHEMICAL S AND COMPOUNDS AND IS PROPRIETOR OF THE CONCERN ITA NO. 3471, 3472 & 3473/MUM/2015 3 M/S. GIRIRA J ENTERPRISES. THE AO RECEIVED INFORMATION FROM SALES TAX DEPARTMENT, MUMBAI AS WELL AS DGIT(INV.) MUMBAI THAT ASSESSEE HAS RECEIVED ACCOMMODATION ENT RIES OF PURCHASES FROM SUSPICIOUS PARTIES WHO ARE HAWALA DEALERS WHICH ARE ONLY ISSUING BOGUS ACCOMMODATION BILLS WITHOUT SUPPLYING ANY MATERIAL . THE AO INVOKED REOPENING PROVISIONS AS ARE CONTAINED IN SECTION 147 OF THE ACT, AFTER RECORDING REASONS THEREOF AND NOTICES U/S . 148 DATED 25.03.2013 WAS ISSUED BY THE AO AND SERVED ON THE ASSESSEE . THE RETURN OF INCOME IN THIS CASE WAS ORIGINALLY FILED BY THE ASSESSEE ON 24.09.2009 FOR AY 2009 - 10 DECLARING NIL INCOME WHICH WAS PROCESS ED BY REVENUE U/S. 143(1) OF THE 1961 ACT . THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT WERE PROVIDED BY THE AO TO THE ASSESSEE VIDE L ETTER DATED 14.08.2013 . THE STATUTORY NOTICES U/S 143(2) AND 142(1) WERE ISSUED TO THE ASSESSEE BY THE AO. THE ASSESSEE HAD SUBMITTED COPIES OF AUDIT REPOR T IN FORM NO. 3CB AND 3CD , COPIES OF PROFITS AND LOSS ACCOUNT AND BALANCE S HEET , AUDITED STATEMENT OF ACCOUNTS ETC. . T HE TURNOVER OF THE ASSESSEE DURING THE AY 2009 - 10 UNDER CONSIDERATION WAS RS. 6,74,61,625/ - AND GP DECLARED WAS RS. 33,31,662/ - I.E @ 4.94 % . T HE AO OBSERVED THAT THE ASSESSEE HAD DEBITED PURCHASES TO THE TUNE OF RS. 6,41,29,630/ - TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS ASKED TO FILE COMPLETE DETAILS OF PURCHASES ALONG WITH NAME AND ADDRESSES OF THE PARTIES FROM WHOM PURCHASES W ERE MADE ALONG WITH THEIR TIN NUMBERS. THE ASSESSEE FILED DETAILS CALLED FOR BY THE AO ALONG WITH DOCUMENTARY EVIDENCES AS RECORDED IN THE ASSESSMENT ORDER. THE AO OBSERVED THAT THE ASSESSEE HAS MADE PURCHASES FROM FOLLOWING PARTIES , AS UNDER: - SR . NO. NAME TIN PAN PARTICULARS OF TRANSACTIONS A.Y AMOUNT 01 D H TRADING CORPORATION 27580139600V ACIPV6880A 2009 - 10 2,09,54,2347 - ITA NO. 3471, 3472 & 3473/MUM/2015 4 TH E AO OBSERVED THAT THE SALES TAX DEPARTMENT MADE ENQUIRIES WITH RESPECT TO AFORESAID PARTIES WHICH PROVED THAT THESE PARTIES WERE HAWALA DEALERS ISSUING BOGUS ACCOMMODATION INVOICES WITHOUT SUPPLYING ANY MATERIAL. THE NOTICE S WERE ISSUED BY THE AO TO ALL THESE THREE PARTIES U/S 133(6) WHICH RETURNED UNSERVED BY POSTAL AUTHORITIES AS THESE PARTIES WERE NOT TRACABLE AT THE GIVEN ADDRESSES . THE ASSESSEE WAS ASKED BY THE AO TO PROVE WHEREABOUT S OF ALL THESE THREE PARTIES OR TO PRODUCE THESE PARTIES FOR VERIFICATION AND PROVE THE GENUINENESS OF THE PURCHASES . T HE ASSESSEE ONLY SUPPLIED LEDGER ACCOUNT S OF THESE PARTIES . THE ASSESSEE DID NOT PRODUCED THESE PARTIES NOR SUPPLIED NEW ADDRESSES OF THESE PARTIES BEFORE THE AO . THE AO MADE ADDITION S TO THE TUNE OF RS. 6,60,35,324/ - TO THE INCOME OF THE ASSESSEE U/S. 69C BY TREATING THESE PURCHASES AS AN UNEXPLAINED EXPENDITURE , VIDE ASSESSMENT ORDER DATED 26.02.2014 PASSED U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT. 4.T HE ASSESSEE FILED FIRST APPEAL BEFORE THE LD. CIT(A) AND SUBMITTED DETAILS BEFORE THE LD. CIT(A) WHICH ARE REPRODUCED AS HEREUNDER: - 2.2. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT HAS SUBMITTED THAT ALL THE NECESSARY DOCUMENTS AND DETAILS AS REQUIRED BY THE AO WERE FURNISHED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE APPELLANT ALSO SUBMITTED ALL THE DETAILS CALLED FOR SUCH AS QUANTITATIV E RECONCILIATION OF OPENING STOCK, PURCHASE, SALES AND CLOSING STOCK, PAYMENTS MADE THROUGH A/C PAYEE CHEQUES AND COPIES OF BANK STATEMENTS DULY HIGHLIGHTING THE PAYMENTS ARE HELD ON RECORD. 02 BS ENTERPRISES 27750288644V ATBPS5210L 2009 - 10 2,23,54,7067 - 03 NK TRADERS 27570136744V AEDPC2617J 2009 - 10 2,27,26,3847 - TOTAL 6,60,35,324/ - ITA NO. 3471, 3472 & 3473/MUM/2015 5 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSES SEE PARTLY ALLOWED APPEAL OF THE ASSESSEE BY RESTRICTING THE ADDITIONS TO THE EXTENT OF GROSS PROFIT MARGIN S TO RS. 35,11,220/ - U/S. 69C , VIDE APPELLATE ORDER DATED 12.03.2015 , BY HOLDING AS UNDER: - 2.3 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT, MATERIAL AVAILABLE ON RECORD AND THE IMPUGNED ASSESSMENT ORDER ON THIS ISSUE. THE LIST OF THE SUSPICIOUS DEALERS AND HAWALA PARTIES HAVE BEEN OBTAINED FROM DGIT(INV), MUMBAI. THE APPELLANT HAS UNABLE TO PROVE THE GENUINENESS OF THE TRANSACTIONS BY PRODUCING THE PARTIES OR GETTING THE CONFIRMATIONS FROM THESE PARTIES. NO REPLY OR CONFIRMATION HAS BEEN OBTAINED TO THE NOTICE/S ISSUED U/S. 133(6) OF THE INCOME - TAX ACT, 1961. 2.4 FURTHER, CONSIDERING THAT THE SALES OF THE APPELLANT ARE GENUINE AND H AS NOT BEEN UNDER DOUBT, THE ENTIRE AMOUNT OF PURCHASES CANNOT BE DISALLOWED. ALSO, THE AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO REFLECT THAT THE SALES OF THE APPELLANT ARE INCORRECT OR IN GENUINE OR THAT THERE APPEARS TO BE SOME ANOMALY IN THE RECONCI LIATION OF THE STOCK STATEMENTS. THE GROSS PROFIT MARGIN OF THE APPELLANT IS AS UNDER - PARTICULARS AY 2007 - 08 AY 2008 - 09 AY 2009 - 10 GROSS PROFIT RATIO 6.29% 4.72% 4.94% THE GROSS PROFIT MARGIN FOR THE CURRENT YEAR IS 4.94% AND THE AVERAGE GROSS PROFIT OF THE LAST THREE YEAR/S IS 5.32%. ACCORDINGLY, THE I DO HEREBY DIRECT TO DISALLOW ONLY THE SUM OF RS.35,L1,220 BEING THE GROSS PROFIT MARGIN ON THE PURCHASES FROM THE PARTIES COVERED UNDER HAWALA OF RS.6,60,35,324. IN VIEW OF THESE FACTS, THE ENTIRE ADDITIONS MADE BY THE AO OF RS.6,60,35,324 IS NOT JUSTIFIED AND ACCORDINGLY I DIRECT THE AO TO RESTRICT THE ADDITIONS TO THE EXTENT OF GROSS PROFIT MARGINS AT RS. 35,11,220 MADE U/S. 69C. THIS GROUND OF APPEAL IS PARTLY ALLOWED. ITA NO. 3471, 3472 & 3473/MUM/2015 6 6. AGGRIEVED BY TH E APPELLATE ORDER PASSED BY LEARNED CIT(A) DATED 12.03.2015 , T HE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL .N ONE APPEARED ON BEHALF OF THE ASSESSEE . THE NOTICES THAT WERE SENT TO THE ASSESSEE BY TRIBUNAL INTIMATING DATE OF HEARING HAD RETURNED UNSERVED WH ICH ARE PLACED IN FILE . O N ONE OCCASION ON 4 TH MAY, 2017 ,T HE ASSESSEE ENTERED APPEARANCE BEFORE TRIBUNAL AND SOUGHT ADJOURNMENT WHICH WAS GRANTED BY THE TRIBUNAL , WHILE ON OTHER OCCASIONS ON 9 TH FEB RUARY , 2017, 15 TH MARCH, 2017, 12 TH JUNE, 2017, 26 TH NO V, 2018 AND 27 TH NOV, 2018 , THE ASSESSEE DID NOT ENTERED APPEARANCES WHEN THE APPEAL WAS CALLED FOR HEARING BEFORE THE BENCH . THE NOTICES WHICH WERE SENT BY REGISTERED AD POST ON 15 TH FEB RUARY , 2017, 24 TH JULY, 2017 AND 8 TH NOV, 2018 HAD RETURNED UNSERVED AND THE ORIGINAL ENVELOP S RETURNED BY POSTAL AUTHORITIES ARE PLACED IN FILE . THE ASSESSEE IS NOT VIGILANT IN PERSUING HIS APPEAL WITH TRIBUNAL. 7. THE LD. DR ON THE OTHER HAND SUBMITTED THAT REVENUE HAD ALSO FILED APPEAL (S) FOR ALL THESE THREE YEARS I.E. AY 2009 - 10, 2010 - 11 AND 2011 - 12 , VIDE APPEAL IN ITA NO. 3578, 3659, 3579/MUM/2015 RESPECTIVELY WHICH WERE DISPOSED OF BY TRIBUNAL VIDE COMMON ORDERS DATES 11.07.2017 , WHEREIN THE TRIBUNAL WAS PLEASED TO RESTRICT DISAL LOWANCE TO THE TUNE OF 12.5% OF BOGUS PURCHASES . IT WAS SUBMITTED THAT THE SAME PRINCIPAL WAS APPLIED BY TRIBUNAL IN ALL THE THREE AFORESAID APPEALS FILED BY REVENUE FOR ALL THESE THREE YEARS NAMELY AY 2009 - 10 TO 2011 - 12 . THE SAID COMMON ORDER DATED 11.07 .2017 OF THE TRIBUNAL IS PLACED IN THE FILE. IT WAS SUBMITTED THAT THE ASSESSEE ALSO DID NOT APPEARED BEFORE THE TRIBUNAL WHEN THE REVENUE APPEAL WAS CALLED FOR HEARING BEFORE THE TRIBUNAL . THUS, IT WAS SUBMITTED THAT THE ASSESSEE IS NOT VIGILANT IN PERSUI NG HIS LEGAL REMEDIES AND THE ASSESSEE APPEAL MAY BE DISMISSED. 8. WE HAVE CONSIDERED CONTENTION S OF THE LD. DR AND PERUSED THE MATERIAL ON RECORD . W E HAVE OBSERVED THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF R UBBER PRODUCTS, CHEMICAL S AND COMPOUNDS. THE AO RECEIVED INFORMATION FROM MAHARASHTRA SALES TAX DEPARTMENT AS WELL ITA NO. 3471, 3472 & 3473/MUM/2015 7 FROM DGIT(INV.), MUMBAI THAT THE ASSESSEE HAD MADE PURCHASES FROM CERTAIN PARTIES WHO ARE HAWALA DEALERS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES WHEREIN BOGUS PURCHASES BILLS WERE ISSUED BY THESE DEALERS WITHOUT SUPPLYING ANY MATERIAL. THE MAHARASHTRA SALES TAX DEPARTMENT MADE ENQUIRIES WHEREIN IT WAS CONCLUDED THAT THESE PARTIES ARE HAWALA DEALERS ENGAGED IN ISSUING BOGUS INVOICES WITHOUT SUPPLYING ANY MATERIAL. THE ASS ESSEE IS ONE OF THE BENEFICIARIES OF THE BOGUS ACCOMMODATION ENTRIES FROM THESE HAWALA DEALERS. THE ASSESSEE HAS CLAIMED TO HAVE MADE PURCHASES FROM FOLLOWING PARTIES WHO WERE LISTED AS HAWALA DEALERS BY MAHARASHTRA SALES TAX DEPARTMENT : - T H E A O THE AO ALSO MADE INQUIRIES U/S. 133(6) FROM ALL THESE THREE PARTIES WHEREIN NOTICES SENT WERE RETURNED UNSERVED BY POSTAL AUTHORITIES AS THESE PARTIES WERE NOT TRAC E ABLE AT THE GIVEN ADDRESSES. THE ASSESSEE DID NOT FURNISH NEW ADDRESSES OF THESE PARTIES NOR PRODUCED THESE PARTIES BEFORE THE AO . THE ASSESSEE HOWEVER HAD SUBMITTED DETAILS CONCERNING THESE PURCHASES BEFORE THE AO. THE ASSESSEE , HOWEVER COULD NOT PROVE THE MOVEMENT OF MA TERIAL PURCHASED FROM THESE PARTIES . T HE AO ADDED 100% OF THE SAID PURCHASES TO THE INCOME OF THE ASSESSEE , WHILE THE LD. CIT(A) CONSIDERED THE THREE YEARS GROSS PROFIT TO DETERMINE THE DISALLOWANCE , WHEREIN GROSS PROFIT OF THE SR. NO. NAME TIN PAN PARTICULARS OF TRANSACTIONS A.Y AMOUNT 01 D H TRADING CORPORATION 27580139600V ACIPV6880A 2009 - 10 2,09,54,2347 - 02 BS ENTERPRISES 27750288644V ATBPS5210L 2009 - 10 2,23,54,7067 - 03 NK TRADERS 27570136744V AEDPC2617J 2009 - 10 2,27,26,3847 - TOTAL 6,60,35,324/ - ITA NO. 3471, 3472 & 3473/MUM/2015 8 ASSESSEE WAS COMPUTED AT RS.35,11,220/ - AS AGAINST DECLARED GROSS PROFIT OF RS.33,31,662/ - . THE MATTER REACHED TRIBUNAL AT THE BEHEST OF REVENUE ALSO AS THE REVENUE WAS ALSO AGGRIEVED BY THE APPELLATE ORDER PASSED BY LEARNED CIT(A) GRANTING PARTIAL RELIEF. WE HAVE OBSERVED THAT THE TRIBUNAL IN ITA NO. 3578, 3659 & 3579/MUM/2015 , AY 2009 - 10, 2010 - 11 & 2011 - 12 IN REVENUES APPEAL FOR ALL THESE THREE YEARS , VIDE COMMON ORDERS DATED 11 TH JULY, 2017 HAS PASSED A WELL REASONED ORDER , WHEREIN THE DISA LLOWANCE W AS RESTRICTED TO 12.5 % OF SUCH BOGUS PURCHASES , WHEREIN TRIBUNAL VIDE ORDERS DATED 11.07.2017 HELD AS UNDER: - THESE APPEAL HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDERS OF THE CIT(A) - 42, MUMBAI DATED 12.03.2015 FOR ASSESSMENT YEARS 2009 - 10 TO 201 1 - 12. SINCE COMMON ISSUES ARE INVOLVED IN ALL THESE APPEALS, THEY ARE DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS FOR ASSESSMENT YEARS 2009 - 10 AND 2011 - 12: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ALLOWING THE BOGUS PURCHASES MADE BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO FURNISH DOCUMENTARY EVIDENCE TO PROVE THAT PURCHASE MADE WERE GENUINE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE PROVISIONS OF SECTIONS OF SECTION 69C OF THE ACT WHICH CATEGORICALLY STATES THAT WHERE THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF. FOR A.Y. 2010 - 11 ASSESSEE HAS RAISED ONE MORE GROUND WHICH READS AS UNDER: - 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE PROVISIONS OF SECTION 145 WHERE THERE IS A GROSS DEVIATION IN MAINTENANCE OF ACCOUNTS OF THE ASSESSEE AND THE SAME IS NOT IN CONFORMITY WITH THE PRESCRIBED NORMS THE ASSESSEE HAS FAILED TO MAINTAIN AND PRODUCE THE BOOKS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS THE PROPRIETOR OF M/S. GIRIRAJ ENTERPRISE S, ENGAGED IN THE BUSINESS OF TRADING IN RUBBER & RUBBER CHEMICALS. THE ASSESSEE MADE PURCHASES FROM THE FOLLOWING PARTIES WHO WERE FOUND TO BE HAWALA PARTIES BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF MAHARASHTRA: - ITA NO. 3471, 3472 & 3473/MUM/2015 9 THE AO ISSUED NOTICE UNDER SECTION 133(6) TO THE ABOVE MENTIONED PARTIES. HOWEVER, THE SAME WAS RETURNED BACK. THEREFORE THE AO HAS ADDED THE PEAK BALANCE OF RS. 1,02,57,284/ - (FOR A.Y. 2010 - 11) AND MADE ADDITION UNDER SECTION 69C OF THE I.T. ACT. THE AO H AS ALSO ADDED THE GP @8% ON THE TOTAL BOGUS PURCHASES. 4. THE MATTER WAS CARRIED TO THE CIT(A) AND THE CIT(A) HAS APPLIED GP MARGIN AT 5.07% AND RESTRICTED THE ADDITION TO RS. 30,86,720/ - . 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE LEARNED D.R. SU BMITTED BEFORE THAT IN THE CASE OF NK PROTEINS LTD. VS. DCIT THE HON'BLE SUPREME COURT HAS CONFIRMED THE ADDITION ON ACCOUNT OF BOGUS PURCHASES AT 100% AND SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE GUJARAT HIGH COURT AND APPLIED GP @6%. 6. HAVING HEARD T HE LEARNED D.R. WE FIND THAT IT IS THE CASE OF REVENUE THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVING THE PURCHASES AND COULD NOT PRODUCE EVIDENCE TO SHOW THE ACTUAL DELIVERY OF MATERIAL AND COULD NOT PRODUCE CONFIRMATION LETTERS FROM THE ALLEGE D SUPPLIERS. HOWEVER, WE FIND THAT THE ASSESSEE IS IN POSSESSION OF PURCHASE INVOICES AND PAYMENTS ARE THROUGH BANKING CHANNELS. THEREFORE, IF AT ALL THE PURCHASES ARE FOUND TO BE BOGUS WE NOTE THAT THE SALES TURNOVER HAS NOT BEEN DISPUTED BY THE REVENUE. THEREFORE, IN SUCH A CASE THE ADDITION CAN BE MADE ONLY ON THE PROFIT ELEMENT EMBEDDED IN THESE PURCHASE TRANSACTIONS TO FACTORISE THE PROFIT EARNED BY THE ASSESSEE AGAINST THE PURCHASE OF MATERIAL IN GRAY MARKET. WE FIND THAT THERE ARE DIVERGENT VIEWS OF VARIOUS HIGH COURTS ON WHAT AMOUNT OF GP SHOULD BE APPLIED IN SUCH BOGUS PURCHASES. WE FIND THAT IN THE CASE OF SMITH AND SHETH THE HON'BLE GUJARAT HIGH COURT HAS HELD THAT A TRADER SOLD SOME GOODS AND HE WOULD PURCHASE THE SAME FROM OTHER SOURCES. WHEN TH E TOTAL SALE IS ACCEPTED BY THE AO HE COULD NOT HAVE QUESTIONED THE VERY BASIS OF PURCHASE. THEREFORE PURCHASES ARE NOT BOGUS BUT THEY ARE MADE FROM PARTIES OTHER THAN THOSE WHO ARE MENTIONED IN THE BOOKS OF S.NO. NAME OF THE PARTY AMOUNT 1 M/S. BALAJI TRADERS 1,89,32,986/ 2 M/S. MAHAVEER ENTERPRISES 1,54,90,497/ - 3 M/S. NEETA SALES CORPORATION 54,69,269/ - 4 M/S. KRSNA ENTERPRISES 1,89,16,208/ - 5 M/S. JAIN CORPORATION 20,61,330/ - TOTAL 6,08,70,272/ - ITA NO. 3471, 3472 & 3473/MUM/2015 10 ACCOUNT. THIS BEING THE DECISION NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. WE FIND THAT WE ARE TAKING A CONSISTENT VIEW THAT THE DISALLOWANCE TO THE EXTENT OF 12.5% OF SUCH BOGUS PURCHASE WILL BE JUSTIFIED IN THE FACTS OF THIS CASE ALSO. THEREFORE, WE MODIFY THE ORDER OF THE CIT(A) AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE THE EXTENT OF 12.5% OF SUCH BOGUS PURCHASES. WE HAVE OBSERVED THAT THE ASSESSEE HAS DULY RECONCILE D QUANTITATIVE PURCHASES WITH SALES AND THE ASSESSEE IS ENGAGED IN THE TRADING ACTIVITIES. THE ASSESSEE COULD NOT PROVE MOVEMENT OF MATERIAL NOR VERIFICATION FROM THESE PARTIES COULD BE CONDUCTED. THESE PARTIES ARE UNDISPUTEDLY LISTED AS HAWALA DEALERS BY MAHARASHTRA SALES TAX DEPARTMENT AND ON ENQUIRIES CO NDUCTED BY MAHARASHTRA SALES TAX DEPARTMENT, IT WAS PROVED THAT THESE PARTIES ARE HAWALA DEALERS ISSUING BOGUS ACCOMMODATION BILLS WITHOUT SUPPLYING ANY MATERIAL. THE ASSESSEE IS BENEFICIARY OF THESE ACCOMMODATION ENTRIES. THE SALES ARE HOWEVER NOT DOUBTED BY REVENUE AND THE ASSESSEE BEING TRADER HAS RECONCILED QUANTITATIVE SALE AND PURCHASE OF GOODS DEALT WITHIN BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, ONLY PROFIT ELEMENT EMBEDDED IN SUCH BOGUS PURCHASES NEED TO BE BROUGHT TO TAX AS INCOME OF THE ASSESS EE WHICH DEFINITELY INVOLVED GUESS WORK. THE RATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS V.JCIT REPORTED IN (2007) 288 ITR 10(SC) IS APPLICABLE. WE DO NOT FIND ANY REASON TO DEVIATE FROM WELL REASON ED ORDER PASS ED BY TRIBUNAL IN R EVENUE APPEAL AS DETAILED ABOVE, WHICH WE AFFIRM/CONFIRM. THUS THE ASSESSEE S APPEAL FOR AY 2009 - 10 IS DISPOSED OFF BY FOLLOWING THE ORDER DATED 11.07.2017 PASSED BY TRIBUNAL IN REVENUE S APPEAL IN ASSESSEE S OWN CASE FOR AY 2009 - 10,2010 - 11, 2011 - 12. TH US, WE CONFIRM ADD ITIONS TO THE TUNE OF 12.5% OF SUCH BOGUS PURCHASES FOR AY 209 - 10 . THE ASSESSEE APPEAL FOR AY 2009 - 10 STOOD DISMISSED. WE ORDER ACCORDINGLY. 9. IN THE RESULT ASSESSEES APPEAL IN ITA NO. 3471/MUM/2015 FOR AY 2009 - 10 STOOD DISMISSED, AS IN DICATED ABOVE. ITA NO. 3471, 3472 & 3473/MUM/2015 11 10. SINCE COMMON ISSUES ARE INVOLVED IN ALL THE THREE YEARS VIZ. AY 209 - 10, 2010 - 11 AND 2011 - 12 , THE ADDITIONS ARE CONFIRMED TO THE TUNE OF 12.5% OF BOGUS PURCHASES IN ALL THESE THREE YEARS AND ALL THE THREE APPEALS FILED BY THE ASSESSEE VI Z. ITA NO. 3471 TO 3473/MUM/2015 FOR AY 2009 - 10 TO 2011 - 12 STOOD DISMISSED , AS INDICATED ABOVE . WE ORDER ACCORDINGLY. 11 . THUS, IN NUTSHELL ALL TH E THREE APPEAL S FILED BY THE ASSESSEE IN ITA NO. 3471 TO 3473/MUM/2015 FOR AY 2009 - 10 TO 2011 - 12 STOOD DISMISSED AS INDICATED ABOVE . ORDER PRONO UNCED IN THE OPEN COURT ON 27 .11 .2018. 27 .11 .2018 S D / - S D / - ( C.N PRASAD ) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 27 .11 .2018 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI