MITESH ILESH GADHIA, MUMBAI V. DCIT CEN CIR 4(2) , MUMBAI

ITA 354/MUM/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8420 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 28-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NARENDRA JANG
• Keywords: Bogus purchase; Rejection of books of accounts; Question of law
• Section: 143(3); 153A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 354/MUM/2019 (ASSESSMENT YEAR: 2010-11) SHRI MITESH ILESH GADHIA 201, VYAPAR BHAVAN, 2ND FLOOR 368/270 NARSHI NATHA STREET MASJID BUNDER (W) MUMBAI 400009 VS. DCIT, CENTRAL CIRCLE - 4(2) ROOM NO. 1918 AIR INDIA BUILDING NARIMAN POINT MUMBAI 400021 PAN AEGPG2818A APPELLANT RESPONDENT APPELLANT BY: SHRI MAYUR KISNADWALA RESPONDENT BY: SHRI NARENDRA JANG PANGI DATE OF HEARING: 07.03.2019 DATE OF PRONOUNCEMENT: 12.04.2019 O R D E R PER B.R. BASKARAN, AM THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 5.11.2018 PASSED BY LD CIT(A)-52, MUMBAI AND IT REL ATES TO THE ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE HAS RAISED FOUR GROUNDS. AT TH E TIME OF HEARING, THE LD A.R DID NOT PRESS GROUND NO.2 AND HENCE THE SAME IS DISMISSED AS NOT PRESSED. THE GROUND NO.3 & 4 ARE GENERAL IN NATURE /CONSEQUENTIAL. THE SURVIVING GROUND RELATES TO THE ADDITION OF RS.197. 94 LAKHS RELATING TO ALLEGED BOGUS PURCHASES SUSTAINED BY LD CIT(A). 3. THE FACTS RELATING TO THE ISSUE ARE DISCUSSE D IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN STEEL AND MET AL ITEMS UNDER THE NAME AND STYLE M/S CNK INTERNATIONAL. THE REVENUE CARRIED OUT SEARCH OPERATIONS IN THE HANDS OF A COMPANY NAMED M/S USHD EV INTERNATIONAL LTD. DURING THE COURSE OF SEARCH, IT WAS NOTICED T HAT IT HAS PURCHASED GOODS FROM CERTAIN DEALERS, WHO HAVE BEEN IDENTIFIE D AS HAWALA DEALERS BY ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 2 THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHT RA, I.E., THOSE DEALERS WERE PROVIDING ONLY ACCOMMODATION BILLS WITHOUT ACT UALLY SUPPLYING MATERIALS. IT WAS ALSO NOTICED THAT CERTAIN OTHER GROUP CONCERNS WERE ALSO PURCHASING MATERIALS FROM SUCH HAWALA DEALERS. IT WAS NOTICED THAT THE ASSESSEE HAS ALSO PURCHASED GOODS FROM A CONCERN M/ S RAGINI TRADING & INVESTMENTS P LTD, WHICH, IN TURN, HAS PURCHASED GO ODS FROM SOME HAWALA DEALERS. THE AO HAS STATED THAT THE ASSESSEE HEREI N IS A GROUP CONCERN OF M/S USHDEV INTERNATIONAL. HOWEVER, THE LD A.R DISP UTED THE SAID FACT AND SUBMITTED THAT THE ASSESSEE DOES NOT BELONG TO THE ABOVE SAID GROUP. CONSEQUENT TO THE SEARCH OPERATIONS, THE ASSESSEES CASE WAS ALSO CENTRALISED WITH THE PRESENT ASSESSING OFFICER AND THE PRESENT ASSESSMENT HAS BEEN COMPLETED U/S 143(3) R.W.S 153A OF THE ACT . 4. THE AO NOTICED THAT THE ASSESSEE HAS PURCHASE D MATERIALS TO THE TUNE OF RS.5268.07 LAKHS FROM M/S RAGINI TRADING AND INV ESTMENTS LTD (HEREINAFTER REFERRED AS RTIL). AS NOTICED EARLI ER, M/S RTIL HAD PURCHASED GOODS FROM SOME OF PARTIES IDENTIFIED AS HAWALA DEALERS BY THE SALES TAX DEPARTMENT. HENCE THE REVENUE HAD ALSO C ARRIED OUT SURVEY OPERATIONS IN THE HANDS OF RTIL AND IT WAS NOTICED THAT THE PURCHASES HAVE BEEN MADE FROM PARTIES IDENTIFIED AS HAWALA DE ALERS. IT WAS ALSO NOTICED THAT THOSE HAWALA DEALERS HAD CONFESSED BEF ORE THE SALES TAX DEPARTMENT THAT THEY HAVE PROVIDED ONLY ACCOMMODATI ON BILLS WITHOUT ACTUALLY SUPPLYING MATERIALS. 5. M/S RTIL HAS SOLD THE GOODS TO VARIOUS PERSON S AND THE ASSESSEE HEREIN IS ONE OF THEM. THE AO NOTICED THAT THE ASS ESSING OFFICER OF RTIL HAD REJECTED THE BOOKS OF ACCOUNTS OF RTIL, SINCE I T HAD DECLARED LOSS OF RS.4.42 CRORES ON A SALES OF RS.836.63 CRORES AND A CCORDINGLY ESTIMATED PROFIT OF M/S RTIL AT 0.25% OF THE SALES. IN VIEW OF THE ABOVE, THE AO FORMED THE VIEW THAT THE PURCHASES MADE BY THE ASSE SSEE HEREIN FROM M/S RTIL CANNOT BE CONSIDERED AS GENUINE, SINCE THE ASS ESSEE HAS ALSO USED THE SAME MODUS OPERANDI OF BOOKING BOGUS PURCHASES FROM VARIOUS HAWALA PARTIES THROUGH M/S RTIL. ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 3 6. THE AO FURTHER NOTICED THAT THE ASSESSEE COUL D NOT SUBMIT PROOF FOR DELIVERY OF MATERIALS AND ALSO DID NOT FOLLOW THE S TANDARD OPERATING PROCEDURE FOR THE PURCHASES MADE FROM M/S RTIL. BE FORE THE AO, THE ASSESSEE FURNISHED COPIES OF LEDGER ACCOUNT, SAMPLE COPIES OF BILLS, DETAILS OF SALES AND CORRESPONDING PROFIT MADE, COPIES OF B ANK STATEMENTS. THE ASSESSEE FURTHER SUBMITTED THAT SALES MADE BY M/S R TIL WERE ACCEPTED AND FURTHER IT HAS NEVER CONFESSED THAT IT DID NOT SELL GOODS TO THE ASSESSEE. IT WAS ALSO SUBMITTED THAT RTIL IS REGUL ARLY ASSESSED TO TAX AND FURTHER THE ASSESSEE ALSO FURNISHED CONFIRMATION LE TTERS OBTAINED FROM M/S RTIL CONFIRMING THE SALES MADE TO THE ASSESSEE ALON G WITH THE DETAILS OF CORRESPONDING PURCHASES. 7. THE AO WAS NOT CONVINCED WITH THE EXPLANATION S FURNISHED BY THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE HAS FAILED TO FURNISH INWARD- OUTWARD REGISTER AND ALSO DID NOT FURNISH PROOF FOR DELIVERY OF MATERIALS. BY PLACING RELIANCE ON THE DECISION RENDERED BY HON BLE SUPREME COURT IN THE CASE OF CIT VS. CALCUTTA AGENCY LTD (19 ITR 191 ), THE AO HELD THAT THE ONUS LIES UPON THE ASSESSEE TO PROVE ALL EXPENSES. HE FURTHER HELD THAT PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT A ND IS NOT SUFFICIENT TO ESTABLISH GENUINENESS OF THE PURCHASES AS PRONOUNCE D BY HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS VS. JCIT (2007) (288 ITR 10). THE AO ALSO OBSERVED THAT THE REAL TEST WITH REGARD TO THE GENUINENESS OF TRANSACTION IS PREPONDERANCE OF PROBABILITIES AND SURROUNDING CIRCUMSTANCES AS PER THE DECISION RENDERED BY HONB LE SUPREME COURT IN THE CASE OF C. VASANTLAL & CO. VS. CIT (1962)(45 IT R 206), CHATURBHUJ PANAUJ AIR 1969 (SC) AND SUMATI DAYAL VS. CIT (1995 )(214 ITR 801)(SC) AND CIT VS. DURGA PRASAD MORE (82 ITR 540). THE AO ALSO HELD THAT THE PURCHASES MADE FROM HAWALA DEALERS FALLS WITHIN THE AMBIT OF COLOUORABLE DEVICES AS OBSERVED BY HONBLE SUPREME COURT IN TH E CASE OF MC DOWELL AND CO LTD VS. CTO (154 ITR 148). THE AO ALSO RELI ED UPON VARIOUS OTHER CASE LAWS TO HOLD THAT THE ENTRIES MADE IN THE BOOK S OF ACCOUNTS ARE NOT DETERMINATIVE OF THE GENUINENESS. HE ALSO TOOK SUP PORT OF THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. LA MEDICA (250 ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 4 ITR 575) TO HOLD THAT THE SUM PAID TOWARDS FICTITIO US PURCHASES SHOULD BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. 8. ACCORDINGLY, THE AO HELD THAT THE PURCHASES M ADE BY THE ASSESSEE REMAINED UNVERIFIABLE AND ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. IN THIS REGARD, HE TOOK SUPPORT OF DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS (SUPRA) AND DURGAPRASAD MORE (SUPRA). THE AO FURTHER TOOK THE VIEW THAT THE ASSESSEE HAS MADE PURCHASES FROM HAWALA PARTIES WITH THE INT ENTION TO INFLATE EXPENSES. HE FURTHER OBSERVED THAT THE DETAILED IN VESTIGATION REGARDING MODUS OPERANDI OF SUCH PARTIES HAS SHOWN THAT THE P AYMENTS WERE RECEIVED BY THESE PARTIES AGAINST THE BOGUS BILLS B Y CHEQUE AND THE SAME AMOUNTS WERE RETURNED IN CASH TO THE BENEFICIARIES. THE AO TOOK THE VIEW THAT THE ASSESSEES CASE FALL IN THE ABOVE SAID CAT EGORY AND ACCORDINGLY HELD THAT THE ASSESSEE HAS INFLATED THE EXPENSES BY ROUTING CASH THROUGH HAWALA PARTIES. ACCORDINGLY HE DISALLOWED ENTIRE P URCHASES OF RS.5268.07 LAKHS MADE FROM M/S RTIL IN FY 2009-10, I.E., THE Y EAR UNDER CONSIDERATION. 9. THOUGH THE AO HAS MENTIONED THAT THE PURCHASE S HAVE BEEN MADE FOR AY 2009-10 TO 2014-15 IN PARAGRAPH 10 OF THE ASSESS MENT ORDER, THE LD A.R CLARIFIED THAT THE ADDITION HAS BEEN MADE ONLY IN FY 2009-10 RELEVANT TO AY 2010-11. 10. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) NOTICED THAT THE ASSESSEE HAS NOT DIRECTLY PURCHASED GOODS FROM THE HAWALA DE ALERS. THE LD CIT(A) FURTHER TOOK THE VIEW THAT THE ASSESSEE CANNOT BE G IVEN ANY SPECIAL TREATMENT, WHICH IS DIFFERENT FROM A CASE WHERE THE TAINTED PURCHASES WERE MADE DIRECTLY FROM SUSPICIOUS HAWALA DEALERS. HE F URTHER NOTICED THAT THE ASSESSEE, IN THE STATEMENT TAKEN FROM IT DURING THE COURSE OF SURVEY, HAD STATED THAT IT WOULD PROCURE THE MATERIALS FROM THE MARKET, ONLY AFTER RECEIVING ORDERS FROM ITS CUSTOMERS. ACCORDINGLY H E NOTICED THAT THE ASSESSEE HAS MADE BACK TO BACK SALES OF MATERIALS P ROCURED FROM M/S RTIL. HE FURTHER NOTICED THAT THE SOFTCOPY OF ACCO UNTS IMPOUNDED DURING ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 5 THE COURSE OF SURVEY REVEALED THE QUANTITATIVE DETA ILS OF PURCHASES AND SALES. THE TAX AUDIT REPORT ALSO GAVE THE QUANTITAT IVE DETAILS. UNDER THESE SET OF FACTS, THE LD CIT(A) TOOK THE VIEW THAT THE PROFIT ELEMENT EMBEDDED IN THE PURCHASE TRANSACTIONS ALONE SHOULD BE BROUGH T TO TAX. IN THIS REGARD, THE LD CIT(A) RELIED UPON FOLLOWING DECISIO NS:- (A) HARIRAM BHAMBHANI (ITA NO.313 OF 2013)(BOM) (B) BHOLANATH POLY FAB P LTD 9355 ITR 290)(GUJ) (C) SANJAY OIL CAKE IND. (316 ITR 274)(GUJ) THE LD CIT(A) FURTHER NOTICED THAT THE PROFIT RATE WAS ESTIMATED AT 12.50% OF PURCHASES IN THE CASE OF CIT VS. SIMIT SHETH (20 13)(38 TAXMANN.COM 385)(GUJ). THE LD CIT(A) NOTICED THAT THE MUMBAI BE NCH OF ITAT HAS ALSO ESTIMATED G.P RATE OF 12.50% OF BOGUS PURCHASES IN THE CASE OF M/S RATNAGIRI STEELS (80 TAXMANN.COM 265)(MUM-ITAT), BU T ALLOWED CREDIT OF GROSS PROFIT DECLARED ON BOGUS PURCHASES. FOLLOWIN G THE SAME, THE LD CIT(A) DIRECTED THE AO TO ESTIMATE PROFIT AT 12.50% ON PURCHASES AND ALLOW CREDIT OF GROSS PROFIT ALREADY SHOWN BY THE ASSESSE E IN THE REGULAR BOOKS OF ACCOUNTS. 11. AGGRIEVED BY THE ORDER PASSED BY LD CIT(A), THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 12. THE LD A.R SUBMITTED THAT THE ASSESSEE HA S NOT PURCHASED GOODS FROM ANY OF THE TAINTED/HAWALA DEALERS. IT IS THE CASE OF THE REVENUE THAT M/S RTIL, FROM WHOM THE ASSESSEE HAS PURCHASED GOOD S, HAD PURCHASED GOODS FROM HAWALA DEALERS. HE SUBMITTED THAT THE S ALES MADE BY M/S RTIL HAVE BEEN ACCEPTED IN THE HANDS OF RTIL, MEANI NG THEREBY, THE PURCHASES MADE BY THE ASSESSEE FROM RTIL COULD NOT HAVE BEEN SUSPECTED. HE SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL TH E RELEVANT DETAILS, VIZ., THE PURCHASE INVOICES, THE QUANTITY DETAILS, SALES DETAILS, PAYMENT DETAILS AND THE QUANTITY DETAILS RECONCILING THE PURCHASES WITH SALES. FURTHER THE ASSESSEE HAS ALSO FURNISHED CONFIRMATION LETTER OBT AINED FROM M/S RTIL. HE SUBMITTED THAT THE AO HAS DISBELIEVED THE PURCHA SE TRANSACTIONS ONLY FOR THE REASON THAT THE ASSESSEE HAS NOT FURNISHED INWARD-OUTWARD REGISTER ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 6 AND DELIVERY CHALLANS. HE SUBMITTED THAT THE ASSES SEE HAS CLARIFIED IN THE STATEMENT TAKEN DURING THE COURSE OF SURVEY THAT IT WOULD BE PLACING ORDERS WITH RTIL AFTER RECEIVING ORDERS FROM ITS CU STOMERS. THE MATERIALS WERE DELIVERED TO THE CUSTOMERS DIRECTLY FROM THE S ITE OF RTIL. THE ASSESSEE HAS DULY ACCOUNTED FOR THE PURCHASES AND S ALES IN ITS REGULAR BOOKS OF ACCOUNTS. HENCE THE AO WAS NOT JUSTIFIED IN INSISTING FOR DELIVERY CHALLANS, EVEN AFTER EXPLAINING THE BUSINESS MODEL OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS MADE PAYMEN TS BY WAY OF ACCOUNT PAYEE CHEQUES AND THE AO HAS OBSERVED ON SURMISES A ND CONJECTURES THAT THE ASSESSEE WOULD HAVE RECEIVED BACK THE AMOUNT BY WAY OF CASH, WITHOUT BRINGING ANY MATERIAL ON RECORD TO SUPPORT HIS CASE . THE LD A.R SUBMITTED THAT THE AO DID NOT HAVE ANY MATERIAL TO SUPPORT HI S INFERENCE. FURTHER THE VERY FACT THAT THE ASSESSEE HAS SOLD THE GOODS WOULD PROVE THAT THE ASSESSEE HAS PURCHASED GOODS, SINCE THE GOODS COULD NOT BE SOLD WITHOUT PURCHASING IT. ACCORDINGLY, THE LD A.R SUBMITTED T HAT THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT THE ENTIRE PURCHASES COUL D NOT BE DISALLOWED. 13. THE LD A.R SUBMITTED THAT THE LD CIT(A) , HOWEVER, WAS NOT JUSTIFIED IN ADOPTING THE GROSS PROFIT RATE OF 12.5 0% FOR ESTIMATING THE PROFIT FROM ALLEGED BOGUS PURCHASES. HE SUBMITTED THAT THE LD CIT(A) HAS PLACED HIS RELIANCE ON THE DECISIONS RENDERED IN TH E CASE OF PURCHASES MADE FROM HAWALA DEALERS. HE SUBMITTED THAT THE FA CTS IN THE PRESENT CASE ARE DIFFERENT, I.E., THE ASSESSEE HAS NOT PURCHASED GOODS FROM ANY OF THE HAWALA DEALERS. THE ASSESSEE HAS PURCHASED GOODS F ROM M/S RTIL, WHICH, IN TURN, HAS BEEN ALLEGED TO HAVE PROCURED MATERIAL S FROM HAWALA DEALERS. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS BEEN OPE RATING ON A THIN MARGIN AND THE OVERALL GROSS PROFIT DECLARED IN THE CASE OF TRADING IN STEEL IS ONLY 0.10%. HE FURTHER SUBMITTED THAT THE ASSES SEE HAS WORKED OUT THE GROSS PROFIT RATE FROM THE PURCHASES MADE FROM RTIL AND OTHER PURCHASES. THE SAME WORKS OUT TO 0.06% AND 0.11% RESPECTIVELY. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN A DOPTING THE GROSS PROFIT RATE OF 12.50% IN THE FACTS OF PRESENT CASE. ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 7 14. THE LD A.R FURTHER SUBMITTED THAT AN ALMOST IDENTICAL ISSUE WAS CONSIDERED BY AHMEDABAD BENCH OF TRIBUNAL IN THE CA SE OF TEJUS ROHIT KUMAR KAPADIA VS. ACIT (ITA NO.1994, 1990 & 2095/AH D/2010 DATED 16.01.2017) AND THE TRIBUNAL HAS CONFIRMED THE ORDE R OF LD CIT(A) IN DELETING THE DISALLOWANCE OF PURCHASES. THE DECISI ON SO RENDERED BY THE TRIBUNAL HAS SINCE BEEN UPHELD BY THE HONBLE GUJAR AT HIGH COURT, VIDE ITS ORDER DATED 18-09-2017 REPORTED IN (2018)(94 TAXMAN N.COM 324). 15. THE LD D.R, ON THE CONTRARY, SUPPORTED THE ORDER PASSED BY LD CIT(A). HE FURTHER SUBMITTED THAT THE ASSESSEE HAD AGREED FOR ADDITION OF 12.50% OF VALUE OF PURCHASES BEFORE LD CIT(A). HE ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS TAKEN THE VIEW THAT THE ASSES SEE HAS USED M/S RTIL AS PIPELINE AGENCY FOR PURCHASING GOODS FROM HAWALA DEALERS. 16. IN THE REJOINDER, THE LD A.R SUBMITTED THA T THE ASSESSEE HAS NOT ACCEPTED FOR ADDITION OF 12.50% OF VALUE OF PURCHAS ES, AS SUBMITTED BY LD D.R. HE SUBMITTED THAT THE ASSESSEE HAD RAISED AN ALTERNATIVE CONTENTION BEFORE LD CIT(A) THAT THE PROFIT MAY BE ESTIMATED. HOWEVER, THE ASSESSEE IS STANDING BY ITS ORIGINAL CONTENTION THAT THE PURCHA SES MADE FROM M/S RTIL CANNOT BE CONSIDERED AS BOGUS IN NATURE. HE F URTHER REITERATED THE POINT THAT THE SALES MADE BY M/S RTIL HAVE BEEN ACC EPTED IN ITS HANDS AND THE VERY SAME SALES CONSTITUTE PURCHASES IN THE HANDS OF THE ASSESSEE. ACCORDINGLY HE SUBMITTED THAT THERE IS NO REASON TO SUSPECT THE PURCHASES MADE BY THE ASSESSEE. HE FURTHER SUBMITTED THAT M/ S RTIL IS ASSESSED TO TAX AND HENCE THE AOS OBSERVATION THAT THE ASSESSE E HAS MADE PURCHASES FROM HAWALA DEALERS THROUGH M/S RTIL IS BASED ON SU RMISES AND CONJECTURES ONLY. 17. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSE D THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSE E HAS NOT PURCHASED GOODS FROM ANY OF THE DEALERS, WHO HAVE BEEN IDENTI FIED AS HAWALA DEALERS BY THE SALES TAX DEPARTMENT. THE ASSESSEE HAS PURC HASED GOODS FROM M/S RTIL, WHICH IN TURN HAS BEEN ALLEGED TO HAVE PURCHA SED GOODS FROM HAWALA DEALERS. FROM THE ASSESSMENT ORDER, WE NOTICE THAT THE ASSESSING OFFICER OF ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 8 M/S RTIL HAS REJECTED THE BOOK RESULTS AND ESTIMATE D NET PROFIT OF M/S RTIL @ 0.25% OF THE VALUE OF SALES, MEANING THEREBY , THE SALES MADE BY THE ABOVE SAID PARTY, I.E., M/S RTIL HAS BEEN ACCEP TED BY ITS ASSESSING OFFICER. AS SUBMITTED BY LD A.R, THE SALES MADE BY M/S RTIL TO THE ASSESSEE WOULD CONSTITUTE PURCHASES IN THE HANDS OF THE ASSESSEE. HENCE THERE IS MERIT IN THE CONTENTIONS OF LD A.R THAT TH ERE IS NO REASON TO SUSPECT THE PURCHASES, WHEN THE SALES MADE BY M/S R TIL HAVE BEEN ACCEPTED IN ITS HANDS. 18. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS FAILED TO PRODUCE INWARD-OUTWARD REGISTER AS WELL AS DELIVERY CHALLANS IN RESPECT OF PURCHASES MADE FROM M/S RTIL. HE HAS ALSO OBSERVED THAT THE STANDARD OPERATING PROCEDURE HAS NOT BEEN FOLLOWED IN RESPEC T OF THESE PURCHASES. HOWEVER, IT IS THE SUBMISSION OF THE ASSESSEE THAT THE PURCHASES MADE FROM M/S RTIL HAVE BEEN SOLD ON BACK TO BACK BASIS AND GOODS WERE DELIVERED DIRECTLY FROM THE SITE OF SUPPLIERS TO TH E SITE OF ITS CUSTOMERS. WE NOTICE THAT THE LD CIT(A) HAS ACCEPTED THIS FACT. THE LD CIT(A) HAS FURTHER NOTICED THAT THE ASSESSEE HAS FURNISHED QUANTITY DE TAILS BEFORE THE AO AND THE TAX AUDITORS HAVE ALSO CERTIFIED THE SAME. ACC ORDINGLY WE NOTICE THAT THE ASSESSEE IS ABLE TO MAKE ONE TO ONE RECONCILIAT ION OF PURCHASES MADE FROM M/S RTIL WITH THE SALES MADE BY IT. AS RIGHTL Y POINTED OUT BY LD A.R, THE ASSESSEE COULD NOT HAVE SOLD THE GOODS WITHOUT ACTUALLY PURCHASING THE SAME. THOUGH THE ASSESSING OFFICER HAS OBSERVE D THAT THE ASSESSEE MIGHT HAVE RECEIVED THE CASH BACK FROM ITS SUPPLIER S, YET THE SAME IS BASED ON SURMISES AND CONJECTURES ONLY AND NOT BASE D ON ANY MATERIAL ON RECORD. 19. BEFORE US, THE LD A.R PLACED RELIANCE ON THE DECISION RENDERED BY AHMEDABAD BENCH OF TRIBUNAL IN THE CASE OF SHRI TEJ US ROHITKUMAR KAPADIA (SUPRA), WHICH HAS SINCE BEEN UPHELD BY HON BLE GUJARAT HIGH COURT. IN THE ABOVE SAID CASE, THE PURCHASES MADE BY THE ASSESSEE WERE DISBELIEVED ON THE BASIS OF INFORMATION OBTAINED IN THE HANDS OF ANOTHER ASSESSEE. THE LD CIT(A), HOWEVER, NOTICED THAT THE ASSESSEE WAS A TRADER AND HE HAS SOLD THE GOODS PURCHASED FROM A CONCERN NAMED M/S RAJ ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 9 IMPEX. FURTHER, THE PAYMENTS HAVE BEEN MADE BY WAY OF ACCOUNT PAYEE CHEQUES. ACCORDINGLY THE LD CIT(A) HELD THAT THERE IS NO BASIS OR EVIDENCE TO TREAT THE PURCHASES MADE FROM M/S RAJ IMPEX AS B OGUS AND ACCORDINGLY DIRECTED THE AO TO DELETE THE ADDITION. THE ITAT, WHILE CONFIRMING THE VIEW TAKEN BY LD CIT(A), ALSO OBSERVED THAT THERE IS NO EVIDENCE TO DRAW THE CONCLUSION THAT THE ENTIRE PURCHASE CONSIDERATION W HICH THE ASSESSEE HAD PAID TO M/S RAJ IMPEX HAD COME BACK TO THE ASSESSEE IN CASH. THE VIEW SO TAKEN BY THE TRIBUNAL HAS BEEN UPHELD BY HONBLE GU JARAT HIGH COURT BY HOLDING THAT NO QUESTION OF LAW ARISES. 20. BEFORE US, THE LD A.R ALSO FILED A CHART TO S HOW THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS IN ORDER TO PROVE THE GEN UINENESS OF PURCHASES MADE FROM M/S RTIL. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE SAME. SR. NO. PARTICULARS ASSESSMENT ORDER CIT(A) ORDER 1. WHETHER RAGINI IS REGULARLY ASSESSED TO INCOME TAX YES. PAGE 4,8 YES, PAGE 4, 5, 9 2. WHETHER RAGINI IS REGULARLY ASSESSED TO SALES TAX YES, PAGE 8 YES, PAGE 4, 5, 8, 9 3. WHETHER THE CONFIRMATION, INCLUDING PAN, OF RAGINI IS FILED. YES. PAGE 8 YES, PAGE 3 ,4, 9 4. WHETHER N OTICE U/S 133(6) SERVED ON RAGINI RESPONDED YES, PAGE 4 YES 5. WHETHER RAGINI HAS EVER STATED THAT NO GOODS ARE SOLD TO THE ASSESSEE. NO, PAGE 8 NO 6. WHETHER RAGINI IS DECLARED AS SUSPICIOUS PARTY BY SALES TAX AUTHORITIES NO SUCH ALLEGATION IN THE ORDER NO PAGE 4, 5 7. WHETHER THE BILLS OF RAGINI HAVE BEEN PRODUCED YES, PAGE 6. YES, PAGE 4 ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 10 8. WHETHER THE DELIVERY CHALLANS, TRANSPORT PROOF, INWARD OUTWARD PROOF PRODUCED NO, PAGE 5, 6 - HOWEVER, NOT APPLICABLE CONSIDERING THE MODUS OPERAND! OF THE ASSESSEE. 9. WHETHER RAGINI HAS PAID VAT ON SUCH ALLEGED BOGUS PURCHASES/ SALES YES, PAGE 8 10. WHETHER ASSESSEE HAS PAID VAT ON SUCH ALLEGED BOGUS PURCHASES / SALES YES, PAGE 8 11. WHETHER QUANTITATIVE RECORDS MAINTAINED BY THE ASSESSEE YES, PAGE 8 YES. PAGE 4, 8, 10 12. WHETHER ONE TO ONE CO - RELATION OF PURCHASES FROM RAGINI ESTABLISHED WITH SALES YES. PAGE 11 YES. PAGE 4, 8, 9, 11 13. WHETHER ENTIRE PURCHASES MADE BY ASSESSEE FROM RAGINI RECORDED AS SALES BY RAGINI. YES, PAGE 8 YES 14. WHETHER ANY ADVERSE INFERENCE HAS BEEN DRAWN FOR SALES MADE BY THE ASSESSEE OUT OF THE PURCHASES FROM RAGINI NO, PAGE 12 NO, PAGE 4 15. WHETHER PAYMENTS TO RAGINI MADE BY CROSSED ACCOUNT PAYEE CHEQUES YES. PAGE 6 YES, PAGE 4, 8 16. WHETHER ANY EVIDENCE TO SHOW THAT MONEY RECEIVED BACK BY THE ASSESSEE FROM RAGINI YES, PAGE 12; HOWEVER SUCH STATEMENT IS NOT SUBSTANTIATED NO, PAGE 4 A PERUSAL OF THE CHART WOULD SHOW THAT THERE IS MER IT IN THE CONTENTIONS OF THE ASSESSEE. WE NOTICE THAT THE ASSESSEE HAS TAKE N ALL POSSIBLE STEPS AND PRODUCED RELEVANT DOCUMENTS TO PROVE THE GENUINENES S OF PURCHASES MADE FROM M/S RTIL. ON THE CONTRARY, THE VARIOUS EVIDEN CES FURNISHED BY THE ASSESSEE HAS NOT BEEN DISPROVED BY THE ASSESSING OF FICER. HENCE THE VIEW TAKEN BY THE AO WAS NOT BASED ON ANY MATERIAL. WE NOTICE THAT THE LD CIT(A) HAS, HOWEVER, ESTIMATED THE PROFIT FROM PURC HASES, EVEN THOUGH HE HAS ACCEPTED THAT THE ASSESSEE HAS SOLD THE GOODS A ND THE SAID SALES HAS ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 11 BEEN ACCEPTED BY THE AO. WE HAVE EARLIER NOTICED T HAT THE LD CIT(A) HAS ESTIMATED THE PROFIT AT 12.50% OF THE VALUE OF PUR CHASES AND ALLOWED CREDIT OF G.P DECLARED BY THE ASSESSEE ON SUCH PURC HASES. 21. BEFORE US, THE LD A.R FURNISHED A CHART SHOW ING THE G.P RATE EARNED ON THE PURCHASES MADE FROM M/S RTIL, G.P RATE EARNE D FROM OTHER PURCHASES AND OVERALL G.P RATE DECLARED BY IT. WE NOTICE THAT THE OVERALL G.P RATE DECLARED BY THE ASSESSEE IS 0.10%, WHILE T HE G.P RATE DECLARED ON PURCHASES MADE FROM M/S RTIL AND OTHERS WAS 0.06% A ND 0.11%. WE NOTICE THAT THE ASSESSEE IS OPERATING ON LOW MARGIN AND HENCE THE G.P RATE OF 12.50% ESTIMATED BY THE LD CIT(A) IS VERY MUCH O N THE HIGHER SIDE. FROM THE DISCUSSIONS MADE SUPRA, WE ARE OF THE VIEW THAT THERE IS NO MATERIAL TO SUBSTANTIATE THE VIEW TAKEN BY THE AO A ND HENCE THE ENTIRE ADDITION SHOULD BE DELETED. HOWEVER, THE ASSESSEE HAS NOT CITED ANY REASON AS TO WHY THE G.P RATE ON PURCHASES MADE FRO M M/S RTIL IS LOWER THAN THAT EARNED FROM OTHER PURCHASES. HENCE, IN O RDER TO PUT THIS ISSUE AT REST, WE MODIFY THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ESTIMATE THE G.P ON PURCHASES MADE FROM M /S RTIL AT 0.11% , I.E., THE RATE OF G.P, THE ASSESSEE EARNED FROM OTH ER PURCHASES AND SUSTAIN THE ADDITION TO THAT EXTENT. WE ORDER ACCORDINGLY. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2019. SD/ - SD/ - (RAVISH SOOD) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH APRIL, 2019 ITA NO. 354/MUM/2019 SHRI MITESH ILESH GADHIA 12 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -52, MUMBAI 4. THE PR.CIT, CENTRAL-2, MUMBAI 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.