ASST CIT 6(2)(1), MUMBAI V. CHANAKYA TECHNOLGIES INDIA P.LTD, MUMBAI

ITA 3546/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0148 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 09-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bogus purchase; Peak credit; Accommodation entries; Onus to prove
• Section: 69C; 133A; 133(6); 131; 148

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 3546 /MUM/ 2015 (ASSESSMENT YEAR 20 08 - 09 ) I.T.A. NO. 3547/MUM/2015 (ASSESSMENT YEAR 2009 - 10) ACIT CIRCLE 6(2)(1) ROOM NO. 563 AAYAK RA BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/S. CHANAKYA TECHNOLOGIES INDIA PVT. LTD. 101, 1 ST FLOOR SHAH AND NAHAR INDUSTRIAL ESTATE, OFF. DR.E.MOSES ROAD WORLI, MUMBAI - 400 018. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACC6958B ASSESSEE BY SHRI MALAV P. SHETH DEPARTMENT BY S HRI SUMAN KUMAR DATE OF HEARING 15 .6 . 201 7 DATE OF PRONOUNCEMENT 0 5.7 . 201 7 O R D E R PER B.R. BASKARAN(AM) : - BOTH APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED CIT(A) - 12, MUMBAI A ND THEY RELATE TO A.YS. 2008 - 09 AND 2009 - 10. 2. THE REVENUE IS AGGRIEVED BY THE DECIS I ON OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF ALLEGED BOGUS PURCHASES MADE BY THE ASSESSING OFFICER IN BOTH THE YEARS UNDER CONSIDERATION. SINCE THE ISSUE URG ED IN THESE APPEALS IS IDENTICAL IN NATURE, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE - COMPANY IS ENGAGED IN TRADING IN BUILDING MATERIALS SUCH AS MS GRID, FALLS CEILI NG TILES, FLOOR PARTITION BOARD ETC. T HE DEPARTMENT CARRIED OUT A SURVEY OPERATION U/S. 133A OF THE ACT ON 29.11.2012. DURING THE COURSE OF SURVEY PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAS M/S. CHANAKYA TECHNOLOGIES INDIA P. LTD. 2 INFLATED PURCHASED BY TAKING ACCOMMODATION ENTRIES. SURVE Y OFFICIALS CAME TO THE OPINION THAT THE ASSESSEE HAS INFLATED PURCHASES ON THE BASIS OF CERTAIN INFORMATION PROVIDED BY THE SALES TAX DEPARTMENT I.E. SALES TAX DEPARTMENT HAD REPORTED THAT CERTAIN DEALERS WERE PROVIDING ONLY ACCOMMODATION ENTRIES/BILLS WI THOUT ACTUALLY SUPPLYING THE MATERIAL. ACCORDINGLY, ASSESSMENTS OF BOTH YEARS UNDER CONSIDERATION WERE REOPENED BY ISSUING NOTICES U/S. 148 OF THE ACT. 4. FOR THE SAKE OF CONVENIENCE, WE DISCUSS BELOW THE FACTS RELATING TO A.Y. 2009 - 10. M/S. TRISHUL ENTERPRISES WAS IDENTIFIED AS ONE OF SUCH DEALERS AND THE ASSESSEE HAD PURCHASED MATERIALS FROM IT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF BILLS, VOUCHERS, LAGER COPY OF TRANSACTIONS, TRANSPORT BILLS, DELI VERY CHALLANS, OCTROI PAID DETAILS, EVIDENCE FOR CONSUMPTION OF THESE ITEMS AND PAYMENTS ETC. T HE ASSESSEE WAS ALSO ASKED TO PRODUCE THE SUPPLIERS BEFORE THE ASSESSING OFFICER. ACCORDINGLY, THE ASSESSEE PRODUCED MR. PRAKASH M. SHAH, PROPRIETOR OF M/S. TRI SHUL ENTERPRISES BEFORE THE ASSESSING OFFICER AND A STATEMENT U/S. 131 OF THE ACT WAS ALSO RECORDED FROM HIM. IN THE STATEMENT , MR. PRAKASH M. SHAH SUBMITTED THAT HE DOES NOT KNOW DETAILS OF BUSINESS TRANSACTIONS OF M/S. TRISHUL ENTERPRISES , SINCE BUSINESS IS BEING MANAGED BY MR. SURESH A. PAREKH. HENCE, THE ASSESSING OFFICER RECORDED A STATEMENT FROM MR. SURESH A. PAREKH U/S.131 OF THE ACT, WHEREIN HE ADMITTED THAT HE HAS SUPPLIED MATERIAL TO THE ASSESSEE UNDER THE BILL OF M/S. TRISHUL ENTERPRISES AND HE WAS GETTING COMMISSION OF 0.25% OF BILL AMOUNT. THE ASSESSING OFFICER HOWEVER OBSERVED THAT MR. SURESH A. PAREKH DID NOT PRODUCE ANY DOCUMENTARY EVIDENCE IN THAT REGARD. THOUGH THE AO HAS NOT STATED ABOUT THE DETAILS FURNISHED BY THE ASSESSEE, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS AND ALSO QUANTITATIVE DETAILS OF MATERIAL S ALONG WITH STOCK REGISTER TO THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EVIDENCE S FURNISHED BY THE ASSESSEE AND ACCOR DINGLY PROPOSED TO ASSESS THE PEAK CREDIT OF THE PURCHASES . THE M/S. CHANAKYA TECHNOLOGIES INDIA P. LTD. 3 ASSESSING OFFICER WORKED OUT THE PEAK CREDIT OF PURCHASE FOR A.Y. 2009 - 10 AT ` 2,87,96,789/ - . PEAK CREDIT OF PURCHASE WAS WORKED OUT AT ` 1,83,70,101/ - FOR A.Y. 2008 - 09. ACCORDINGLY, HE ASSESS ED THE PEAK CREDIT OF PURCHASES OF ` 1,83,70,101/ - IN A.Y. 2008 - 09 AND INCREMENTAL PEAK CREDIT OF ` 1,04,26,688/ - IN A.Y. 2009 - 10. THE ASSESSING OFFICER ALSO ADDED 1% OF THE PEAK CREDIT ADDITION AS CHARGES INCURRED BY THE ASSESSEE IN PROCURING ACCOMMODATION BILLS IN BOTH THE YEARS . 5. BEFORE THE LEARNED CIT(A) THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER SHOULD NOT HAVE PLACED RELIANCE SOLELY ON THE REPORT GIVEN BY THE SALES TAX DEPARTMENT SINCE THE ASSESSEE HAS PRODUCED THE S UPPLIES AND THEY HAVE ALSO CONFIRMED THE FACTUM OF SUPPLY OF MATERIALS TO THE ASSESSEE. FURTHER T HE ASSESSEE ALSO FURNISHED QUANTITY DETAILS AND STOCK REGISTER TO PROVE THE RECEIPT AND SALE OF MATERIALS. THE ASSESSEE ALSO PLACED RELIANCE ON VARIOUS CASE LA WS . THE LEARNED CIT(A) FORWARDED WRITTEN SUBMISSIONS ALONG WITH LEGAL COMPILATION OF CASE LAWS AND PAPER BOOK FURNISHED BY THE ASSESSEE TO THE ASSESSING OFFICER CALLING FOR A REMAND REPORT. HOWEVER, IN THE REMAND REPORT, THE ASSESSING OFFICER EXPRESSED THE VIEW THAT ALL THE ISSUES HAVE BEEN CONSIDERED BY HIM AT THE TIME OF FRAMING OF ASSESSMENT . ACCORDINGLY, HE DECLINED TO COMMENT UPON THE WRITTEN SUBMISSIONS GIVEN BY THE ASSESSEE. 6 . HOWEVER, T HE LEARNED CIT(A) WAS CONVINCED WITH THE EXPLANATION S AND CONT ENTIONS OF THE ASSESSEE AND ACCORDINGLY DELETED THE ADDITION IN BOTH THE YEARS. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY LD CIT(A) IN AY 2009 - 10, WHEREIN HE HAD FOLLOWED THE DECISION RENDERED IN AY 2008 - 09 : - POINT NO. 1 : ADDITION OF RS. 104,26688 - U/S. 69C ON ACCOUNT OF PEAK OF CREDIT PURCHASES (COVERED BY GROUND NO. 2) THE ISSUE IN DISPUTE IS THE SAME AND IDENTICAL AS EXISTS FOR A.Y. 2008 - 09. THE APPEAL FOR A.Y. 08 - 09 HAS BEEN DECIDED VIDE MY A PPELLATE ORDER NO. APPEAL NO. CIT(A) - 12/DCIT 6(2)(1) /04/2013 - 14 DATED 30/3/2015 AND DECIDED THE ISSUE. FOR EASE OF REFERENCE, FINDINGS ARE M/S. CHANAKYA TECHNOLOGIES INDIA P. LTD. 4 REPRODUCED AS UNDER : 'ON CAREFUL CONSIDERATION OF FACTS STATED IN ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE L D AR., AS WELL AS JUDICIAL PRONOUNCEMENTS RELIED UPON AND REPRODUCED IN PROCEEDING PARAS, IT IMMENSELY TRANSPIRES THAT THE GRIEVANCE OF THE ASSESSEE IS SUSTAINABLE ON MERIT. THE A.0. HAD MADE ADDITION ON THE BASIS OF INFORMATION PROVIDED BY THE SALES TAX D EPARTMENT WHO TREATED CERTAIN DEALER AS BOGUS AS THEY HAVE NOT PAID TAXES TO GOVERNMENT AND ISSUED SALE BILLS. HOWEVER, THE ASSESSEE PRODUCED CONCERN PERSONS BEFORE THE 4.0. WHO STATED U/S. 131 OF THE ACT THAT GOODS HAVE BEEN SOLD TO THE ASSESSEE. IN SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT PURCHASES ARE BOGUS AND MORE SO WHEN THERE ARE EVIDENCES AS TO PAYMENT THROUGH BANKING CHANNEL AND ALSO QUANTITATIVE TALLY WAS AVAILABLE. IT IS UNDISPUTED THAT THERE IS QUANTITATIVE TALLY OF STOCK, PURCHASES AND SALES. IF PURCHASES ARE BOGUS, AS ALLEGED BY THE A.O., HOW SALE IS POSSIBLE. THE A.0. HAS NOT DISPUTED CORRESPONDING SALE. THERE IS NO DISCREPANCY EITHER IN OPENING STOCK AND CLOSING STOCK ALL PAYMENTS HAVE BEEN MADE EITHER BY A/C PAYEE CHEQUE OR RTGS, AS THE CA SE MAY BE. NEITHER DURING ASSESSMENT PROCEEDING NOR APPELLATE PROCEEDING (THE A.O. WAS GIVEN OPPORTUNITY TO MAKE INQUIRY ETC.) ANY EVIDENCE COULD BE GATHERED THAT PAYMENT HAVE BEEN RECEIVED BACK IN CASH BY THE ASSESSEE. IN SPITE OF SURVEY ACTION U/S, .133, NO INCRIMINATING EVIDENCE AS TO EXCESS STOCK, CASH OR SHORTFALL OF STOCK OR CASH OR LOOSE PAPER ETC, WERE FOUND IN SUCH CIRCUMSTANCES, ALLEGATION OF BOGUS PURCHASES IS UNFOUNDED AND BASELESS. IT IS DIFFICULT TO UNDERSTAND THE LOGIC OF MAKING ADDITION OF P EAK CREDITS. THE JUDICIAL DECISIONS RELIED UPON BY LD. A.R. ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE AND NO ADDITION CAN SURVIVE ON ACCOUNT OF ALLEGED BOGUS PURCHASES AND TOO ON PEAK BASIS. MOREOVER, ADDITION U/S. 69C IS NOT ENABLE AT ALL AS IT APP LIES TO UNACCOUNTED EXPENSES ETC. HERE ALL PURCHASES, SALES, PAYMENTS ETC. ARE RECORDED AND EXPLAINED AND ARE PART AND PARCEL OF BOOKS OF ACCOUNTS. THE DECISION OF HONBLE HIGH COURT OF 6UJARAT IN THE CASE OF ITO VS TOTARAM SHARMA PROP. SUPER THERM (TAX APP EAL NO. 1344 OF 2008) WITH TAX APPEAL NO. 1355 OF 2008, DATE OF ORDER 9/2/2010), CLEARLY DISAPPROVES PEAK THEORY AND ANY ADDITION ON ACCOUNT OF SUCH TYPE OF ALLEGED BOGUS PURCHASES. HERE FACTS ARE MORE FAVOURABLE TO THE ASSESSEE BECAUSE INSTANT ASSESSEE PR ODUCED CONCERN SELLERS BEFORE A.O. WHO CONFIRMED SALES TO THE ASSESSEE, WHERE AS IN THAT CASE, AS NOTED IN THE ORDER OF HONBLE ITAT (ITA NO. 2239 AND 2291/AHD/2004) NOTICES U/S, 133(6) WERE RETURNED UNSERVED WITH REMARKS 'NOT KNOWN' AND THAT ASSESSEE NEIT HER FURNISHED ANY OTHER EVIDENCE NOR PRODUCED CONCERNED PARTY AND EVEN THOUGH, THE HONBLE ITAT TREATED M/S. CHANAKYA TECHNOLOGIES INDIA P. LTD. 5 PURCHASES AS GENUINE ON THE BASIS OF COLLATERAL EVIDENCES, LIKE PAYMENTS, CORRESPONDING SALE AND QUANTITATIVE DETAILS. HERE, EXTANT ASSESSEE FURNISHED A LL EVIDENCES INCLUDING CONCERNED SELLER. THEREFORE, I FIND NO REASON TO TREAT IMPUGNED PURCHASES AS BOGUS. ACCORDINGLY, THE ADDITION MADE BY THE A.0. IS NOT TENABLE IN THE EYES OF LAW EITHER FACTUALLY OR LEGALLY. HENCE ADDITION MADE BY THE A.0. STAND DELET ED AND RELEVANT GROUNDS STAND ALLOWED'. I FIND NO REASON TO DEVIATE FROM THESE FINDINGS AND ACCORDINGLY, ADDITION MADE BY THE A.O. STAND DELETED AND RELEVANT GROUND STAND ALLOWED. 7 . THUS, THE LEARNED CIT(A) DELETED THE ADDITION ON IDENTICAL REASONS IN BOTH THE YEARS UNDER CONSIDERATION. THE REVENUE IS AGGRIEVED BY THE DECISION RENDERED BY THE LEARNED CIT(A) IN BOTH THE YEARS. 8 . WE HEARD THE PARTIES AND PERUSED THE RECORD. T HE LEARNED D.R CONTENDED THAT THE PROPRIETOR OF M/S. TRISHUL ENTERPRISES H AS EX PRESSED THE IGNORANCE ABOUT THE BUSINESS ACTIVITIES AND SO CALLED AGENT MR. SURESH AMRITLAL PAREKH DID NOT FURNISH ANY DOCUMENTARY EVIDENCE TO SUPPORT HIS CLAIM THAT HE HAS SUPPLIED MATERIALS TO THE ASSESSEE. HE SUBMITTED THAT THE SALES TAX DEPARTMENT HAS REPORTED THAT M/S. TRISHUL ENTERPRISES WAS PROVIDING ONLY ACCOMMODATION ENTRIES WITHOUT SUPPLYING THE MATERIAL. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER PROVIDED OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE SUPPLI ER BUT THE ASSESSEE DID NOT AVAIL THE SAID OPPORTUNITY. HE SUBMITTED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN IGNORING THE REPORT GIVEN BY THE SALES TAX DEPARTMENT. 9 . ON THE CONTRARY, LEARNED AR SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS REL ATING TO THE PURCHASES MADE FROM M/S. TRISHUL ENTERPRISES AND THERE WAS NOTHING MORE TO BE FURNISHED BY THE SUPPLIERS. HENCE, THERE WAS NO NECESSITY FOR THEM TO FURNISH ANYTHING MORE. HE SUBMITTED THAT NECESSITY OF CROSS EXAMINING THE SUPPLIER DOES NOT ARI SE SINCE THE SUPPLIERS HAVE CONFIRMED THE TRANSACTION. LEARNED AR FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL INFORMATION SUCH AS BILLS, DELIVERY COPY, PAYMENT M/S. CHANAKYA TECHNOLOGIES INDIA P. LTD. 6 DETAILS, QUANTITATIVE DETAILS, STOCK REGISTER, SALES INVOICE ETC. TO PROVE THE PURCHAS ES AND ALSO TO PROVE THAT THE SAID MATERIALS HAVE BEEN SOLD BY IT. FURTHER SUPPLIERS HAVE ALSO CONFIRMED THE GEN UINENESS OF THE PURCHASES. HE SUBMITTED THAT THE ASSESSING OFFICER HAS SIMPLY PLACED RELIANCE ON THE REPORT GIVEN BY THE SALES TAX DEPARTMENT WI THOUT BRINGING ANY MATERIAL ON RECORD TO CONTRADICT THE EVIDENCE FURNISHED BY THE ASSESSEE. LEARNED AR FURTHER SUBMITTED THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF VID E OCON INDUSTRIES LTD. VS. DCIT (2017) 79 TAXMANN.COM 216 (MUM) , WHEREIN THE ASSESSEE THEREIN HAD ALSO PURCHASED GOODS FROM M/S. TRISHUL ENTERPRISES AND THE AGENT OF THE SUPPLIER MR. SURESH A. PAREKH HAS CONFIRMED THE SALES TRANSACTION. IDENTICAL CONTENTIONS WERE MADE IN THE SAID CASE BY THE REVEN UE. HOWEVER, THE TRIBUNAL HAS DELETED THE ADDITION HOLDING THAT NO ADVERSE INFERENCE QUA PURCHASES CAN BE MADE. 10 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICED THAT THE ASSESSEE HAS FURNISHED ALL THE EVIDENCES SUCH AS BILLS, DE LIVERY CHALLANS, LAGER ACCOUNT COPY OF THE SUPPLIER, PAYMENT DETAILS THROUGH BANK, QUANTITATIVE DETAILS, STOCK REGISTER, SALES INVOICE ETC. IN ORDER TO PROVE THE GENUINENESS OF THE PURCHASES. FURTHER, WE NOTICED THAT THE SUPPLIER M/S. TRISHUL ENTERPRISES T HROUGH ITS AGENT MR. SURESH A. PAREKH HAS CONFIRMED THE FACTUM OF SUPPLY OF MATERIALS TO THE ASSESSEE. HENCE, IN OUR VIEW , THAT THE ASSESSEE HAS SUFFICIENTLY DISCHARGED ITS BURDEN TO PROVE THE GENUINENESS OF THE PURCHASES. ON THE CONTRARY, WE NOTICED THAT THE ASSESSING OFFICER HAS SIMPLY PLACED RELIANCE ON THE REPORT GIVEN BY THE SALES TAX DEPARTMENT AND HE DID NOT BRING ANY MATERIAL ON RECORD TO DISPROVE THE CLAIM OF THE ASSESSEE. WE NOTICED THAT THE TRIBUNAL HAS CONSIDERED THE IDENTICAL ISSUE IN THE CASE OF VIDEOCON INDUSTRIES LTD. (SUPRA), WHEREIN THE SAID ASSESSEE HAD ALSO PURCHASED MATERIAL FROM M/S. TRISHUL ENTERPRISES. AFTER ANALYZING THE FACTS PREVAILING IN THAT CASE, THE TRIBUNAL CAME TO THE CONCLUSION THAT THERE IS NO MATERIAL TO SUSPECT THE GENUIN ENESS OF THE PURCHASES MADE BY THE VIDEOCON INDUSTRIES LTD. THE ONLY DIFFERENCE BETWEEN M/S. CHANAKYA TECHNOLOGIES INDIA P. LTD. 7 THE CASE OF THE ASSESSEE AND VIDEOCON INDUSTRIES LTD. IS THAT LATER PARTY HAS CONCEIVED THE MATERIAL IN ITS PRODUCTION, WHEREAS THE ASSESSEE - HEREIN HAS SOLD THE SAME TO OTHER PARTY. IT IS ADMITTED FACT THAT THE ASSESSING OFFICER DID NOT DISBELIEVE THE GENUINENESS OF THE SALES IN THE INSTANT CASE. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNA L IN THE CASE OF VIDEOCON INDUSTRIES LTD. (SUPRA): - 28. WE HAVE CAREFULLY CONSIDERED THE ENTIRE GAMUT OF FACTS, PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AS WELL AS THE RIVAL SUBMISSIONS MADE BY THE PARTIES BEFORE US VIS - A - VIS THE MATERIAL PLACED ON RECORD. THE ASSESSEE COMPANY IS ONE OF THE LEADING MANUFACTURING AND TRADING COMPANY OF CONSUMER ELECTRONICS, HOME APPLIANCES AND OTHER WHITE GOODS ETC. DURING THE FY 2010 - 11 THE ASSESSEE HAD MADE PURCHASES TO THE TUNE OF APPRO XIMATELY RS. 8000 CRORES. OUT OF WHICH PURCHASES AGGREGATING TO RS.63.07 CRORES HAVE BEEN ADDED BY THE AO ON THE GROUND THAT THESE ARE BOGUS PURCHASES MADE FROM HAWALA DEALERS ESPECIALLY FROM SURESH A. PAREKH. IT IS AN ADMITTED FACT, WHICH IS BORNE OUT FRO M THE VARIOUS INVOICES AND INFORMATION RECEIVED THAT SHRI SURESH A. PAREKH ALONG WITH HIS FAMILY MEMBERS HAD MADE VARIOUS ENTITIES THROUGH WHICH HE IS PROVIDING ACCOMMODATION BILLS. DURING THE COURSE OF INITIAL INVESTIGATION BY THE SALES TAX DEPARTMENT AS WELL AS BY THE INVESTIGATION WING OF THE INCOME - TAX DEPARTMENT, HE HAD ADMITTED THAT HE IS PROVIDING BOGUS BILLS AND ACCOMMODATION ENTRIES FOR PURCHASE OF VARIOUS MATERIALS AND ALSO EXPLAINED THE MODUS OPERANDI OF HIS BUSINESS TRANSACTION. SINCE THE STATEM ENT WAS TAKEN ON THE BACK OF THE ASSESSEE, THE TRIBUNAL HAD DIRECTED THE DEPARTMENT/AO TO RECORD FRESH STATEMENT OF SHRI SURESH A. PAREKH WHEREIN HE WAS GIVEN OPPORTUNITY TO BE CROSS EXAMINED BY THE ASSESSEE. DURING THE COURSE OF FRESH STATEMENT/ CROSS EXA MINATION BY THE AO IN THE IMPUGNED ASSESSMENT PROCEEDINGS AS DISCUSSED ABOVE, SHRI SURESH A. PAREKH HAD CATEGORICALLY CONFIRMED THAT HE DEALS IN VARIOUS ELECTRONIC ITEMS IN BULK AND THAT THERE IS HUGE DEMAND IN THE MARKET FOR SUPPLY OF THE AFORESAID ITEMS. HE HAD ALSO GIVEN THE NAME OF CONCERNS THROUGH WHICH HE HAD SUPPLIED VARIOUS ITEMS TO VARIOUS CORPORATE HOUSES INCLUDING M/S. VIDEOCON INDUSTRIES LTD., AURANGABAD. IN HIS STATEMENT, HE HAS STATED THAT ON TELEPHONIC OR ORAL ORDERS HE USED TO SOURCE THE SUP PLIERS IN THE GREY MARKET AS PER THE SPECIFICATION OF THE PRODUCTS AND DIRECTION OF THE PURCHASE DEPARTMENT OF THE ASSESSEE COMPANY AND THE SUPPLIERS FROM THE GREY MARKET SUPPLIED THESE ITEMS DIRECTLY TO THE ASSESSEE COMPANY. SINCE THESE SUPPLIERS OPERATE IN GREY MARKET, THEREFORE, TO REGULARIZE THE SAME, HE USED TO GIVE SALE BILLS TO THE ASSESSEE COMPANY BY RAISING INVOICES THROUGH HIS CONCERNS AGAINST WHICH THE PAYMENT WAS RECEIVED M/S. CHANAKYA TECHNOLOGIES INDIA P. LTD. 8 BY HIM AND THE SAME HAS BEEN DISTRIBUTED TO THE SUPPLIERS OF THE MATERIAL IN THE GREY MARKET. IN HIS CROSS EXAMINATION HE HAS ALSO EXPLAINED AND CLARIFIED HIS EARLIER STATEMENT AND ADMITTED THAT WHAT HAS BEEN SAID IS CORRECT BUT HE ADMITTED AND CLARIFIED THAT MATERIAL HAS BEEN ACTUALLY PROCURED AND DELIVERED FROM THE GREY MARKET TO THE ASSESSEE COMPANY. IN THE EARLIER STATEMENT ALSO HE HAS CONFIRMED THE SUPPLY OF MATERIAL IN HIS SWORN AFFIDAVIT DATED 08.01.2013 FILED BEFORE ADIT, KOLHAPUR. HE HAS ALSO ADMITTED TO DEAL IN NUMBER OF CORPORATE HOUSES AND HE IS IN THE BUSINESS OF SU PPLY OF ELECTRONIC ITEMS AND MATERIAL FOR SEVERAL YEARS. HOWEVER, WHEN CONFRONTED TO SPECIFIC SUPPLIES MADE TO VIDEOCON INDUSTRIES GROUP, HE DULY CONFIRMED THAT PHYSICAL GOODS WERE ACTUALLY SUPPLIED WHICH WERE PROCURED FROM GREY MARKET AND BILLS FOR PURCHA SES OTHER THAN ACTUAL SUPPLIERS WERE GIVEN TO THE ASSESSEE. THIS ASPECT OF THE MATTER HAS BEEN CONFIRMED BY HIM TWICE, ONCE IN HIS AFFIDAVIT DATED 08.03.2013 AND OTHER IN HIS STATEMENT BEFORE THE AO ON 12.03.2015. THE ASSESSEE TO PROVE THE GENUINENESS OF T HE PURCHASES, THAT IS, THE PURCHASE OF MATERIALS HAVE ACTUALLY BEEN SUPPLIED TO THE ASSESSEE HAD GIVEN THE ITEM WISE DETAILS AND UTILISATION OF SUCH MATERIALS IN THE MANUFACTURING AND HOW THE SAME HAS BEEN INVENTORISED IN THE BOOKS OF ACCOUNT. IT HAS BEEN POINTED OUT THAT THE ASSESSEE HAD ALSO MADE PURCHASES BASED ON ORAL ORDERS FROM OTHER PARTIES ALSO AND WHEN MATERIAL HAS BEEN RECEIVED AND ONCE THE MATERIAL PURCHASED FROM ANY SUPPLIER ENTERS THE GATE PREMISE OF THE FACTORY, GATE PASS IS PREPARED AND ENTRI ES IN REGULAR BOOKS OF ACCOUNT HAVE BEEN MADE. MR. SURESH A. PARIKH HAS ALSO ADMITTED THAT THE TRANSPORTATION GOODS AND OTHER RELATED EXPENDITURE FOR DELIVERING THE GOODS AT DELIVERY SITE HAS BEEN DRAWN BY THE SUPPLIERS AS THE ORDER IS PLACED AT A FIXED RA TE WHICH IS EVIDENT FROM THE BILLS, COPY OF INVOICES SUPPLIED BY SHRI SURESH A. PAREKH. THE MATERIAL PROOF FOR SUPPLY OF MATERIAL IS BY REFERENCE TO COPY OF INVOICES WHICH MENTIONS DELIVERY CHALLANS AND THEN THERE IS GATE PASS STAMP WHEN IT ENTERS THE FACT ORY PREMISES AND THIS GATE PASS STAMP HAS BEEN IMPOUNDED BY THE SURVEY PARTY WHICH HAS BEEN REFERRED TO BY THE AO. IT HAS ALSO BEEN BROUGHT ON RECORD THAT MORE THAN ONCE, STAMP ON DIFFERENT BILLS ON DIFFERENT DATES HAS BEEN PLACED WHICH IS NORMAL PRACTICE AND NO ADVERSE INFERENCE CAN BE MADE THAT THESE PURCHASES ARE BOGUS QUA THE ASSESSEE. APART FROM THAT, THE ASSESSEE HAS GIVEN THE DETAILS OF NATURE OF MATERIAL PURCHASED, COPY OF LEDGER ACCOUNT, PAYMENT DETAILS, MATERIAL UTILISATION OF THE ITEM WISE DETAIL S OF PURCHASES MADE FROM THE CONCERNS OF SHRI SURESH A. PAREKH. THE REVENUE IS HARPING GREATLY ON THE FIRST STATEMENT OF SHRI SURESH A. PAREKH WHEREIN HE HAS ADMITTED THAT HE IS PROVIDING ACCOMMODATION BILLS AND CHARGING COMMISSION ON THEM WITHOUT ACTUAL S UPPLY OF GOODS; AND NEITHER SHRI SURESH A. PAREKH NOR THE ASSESSEE COULD ADDUCE ANY EVIDENCE THAT ACTUALLY MATERIAL HAS BEEN SUPPLIED TO THE ASSESSEE. FROM THE RECORDS AS WELL AS THE HEADS UNDER WHICH ADDITION HAS BEEN MADE BY THE AO IT IS SEEN THAT THE AD DITION ON ACCOUNT OF ALLEGED BOGUS PURCHASES HAS BEEN M/S. CHANAKYA TECHNOLOGIES INDIA P. LTD. 9 MADE ON THE UTILISATION OF FOLLOWING MATERIALS AND THE TREATMENT IN ACCOUNTS: UTILIZATION OF MATERIAL AS AMOUNT ( ` ) TREATMENT IN ACCOUNTS PLANT AND MACHINERY/ MOULDS 23,79,82,268 ADDITION TO PLANT A ND MACHINERY TRAIL RUN 13,94,92,838 CHARGED TO CAPITAL WIP ACCOUNT TRAIL PRODUCTION 6,83,99,170 CHARGED TO CAPITAL WIP ACCOUNT MACHINERY SPARES 14,97,74,663 SHOW AS INVENTORY IN BALANCE SHEET RAW MATERIAL AND CONSUMABLES 3,50,24,425 CHARGED TO PROF IT AND LOSS ACCOUNT TOTAL 63,06,73,365 29. FROM THE AFORESAID ADDITIONS IT IS QUITE OSTENSIBLE THAT FIRSTLY IT HAS BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND MAJORITY OF THE MATERIAL PURCHASED ARE EITHER PART OF ADDITION TO THE PLANT AND MACHINERY OR IT HAS BEEN CHARGED TO CAPITAL WIP ACCOUNT OR SHOWN AS INVENTORY IN THE BALANCE SHEET. THERE IS NO IMMEDIATE EFFECT ON INFLATION OF EXPENDITURE WHICH CAN LEAD TO AN IMPRESSION THAT ASSESSEE HAS TRIED TO SUPPRESS ITS PROFIT BY ENTERING INTO ALLEGED BOGUS TRANSACTIONS WITH HAWALA DEALERS, WHICH IS GENERALLY RESORTED TO BY TRADERS AND SUCH SUPPRESSION OF PROFIT IS OFTEN OFFSET BY APPLYING SOME GP RATE TO FACTOR IN THE PROFIT ELEMENT. THE REVENUE CANNOT RESORT TO APPROBATE AND REPROBATE ON THE STATEMENT OF S HRI SURESH A. PAREKH, THAT IS, IT CANNOT CHOSE TO RELY UPON THE FIRST SET OF STATEMENTS RECORDED IN THE YEAR EXAMINATION CONDUCTED BY THE AO HIMSELF IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. EVEN IF WE AGREE THAT PURCHASES HAVE BEEN MADE BY THE ASSESSE E THROUGH SHRI SURESH A. PAREKH WHO HAS ARRANGED THE SUPPLY OF MATERIAL FROM GREY MARKET AND HAVE ISSUED ACCOMMODATION BILL, BUT IN THAT CASE ALSO SO FAR AS THE ASSESSEE IS CONCERNED, THE PURCHASES CANNOT BE TREATED AS BOGUS, BECAUSE THE ASSESSEE HAD MADE THE PAYMENT THROUGH CHEQUES IN LIEU OF WHICH MATERIAL HAS BEEN SUPPLIED TO THE ASSESSEE. THE SUPPLY OF MATERIAL IS EVIDENCED FIRSTLY, FROM THE INVOICES/BILLS AND STAMPED GATE PASSES AND SECONDLY, WHICH IS MOST IMPORTANT THAT THE MANUFACTURING AND CONSUMPTI ON DETAILS OF THE ITEM WISE MATERIAL PURCHASED FROM SHRI SURESH A. PAREKH HAVE BEEN DULY ENTERED IN THE BOOKS OF ACCOUNT AND CONSUMPTION OF THE SAME HAS NEITHER BEEN DISTURBED NOR DOUBTED. THERE COULD BE SOME DISCREPANCY ABOUT THE TRANSPORTATION BILLS FROM THE SUPPLIERS OF GREY MARKET OR TRANSPORTATION CANNOT BE PROVED BY DOCUMENTARY EVIDENCE BY SHRI SURESH A. PAREKH, HOWEVER, THE OTHER EVIDENCES SHOWING THE MATERIAL PURCHASED HAS BEEN DULY RECORDED IN THE BOOKS OF ACCOUNT AND ALSO THE DETAILS OF MATERIAL U TILISATION USED FOR MANUFACTURING, PLANT AND MACHINERY AND INVENTORY ETC. HAS NOT BE DISCARDED OR DOUBTED, ONLY GOES TO SHOW THAT MATERIAL HAS BEEN M/S. CHANAKYA TECHNOLOGIES INDIA P. LTD. 10 PURCHASED AND UTILIZED, ALBEIT THROUGH ROTATION MODE DONE BY SHRI SURESH A. PAREKH. HE HAS CATEGORICALLY STA TED IN HIS STATEMENT THAT EXPENDITURE ON DELIVERING OF GOODS ARE BORNE BY THE ACTUAL SUPPLIERS IN GREY MARKET THEN ONUS IS NOT ON THE ASSESSEE, BECAUSE, WHEN THE MATERIAL PURCHASED HAS BEEN RECORDED BY THE ASSESSEE IT ITS BOOKS OF ACCOUNT AND NEITHER THE M ANUFACTURING ACCOUNT NOR THE OTHER ENTRIES MADE IN THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED, THEN THESE ITEMS SHOWN IN THE BOOKS OF ACCOUNT CANNOT BE DISCARDED. AO HAS NOT BROUGHT ON RECORD THAT THE DETAILS OF ITEMS PURCHASED FROM SHRI SURESH A. PAREKH IS NOT APPEARING IN THE BOOKS OF ACCOUNT WHEN THE ASSESSEE HAS SPECIFICALLY RAISED THIS ISSUE BEFORE THE AO. EITHER THE ENTIRE STATEMENT OF SHRI SURESH A. PAREKH SHOULD BE ACCEPTED OR IT SHOULD BE DISCARDED IN ITS ENTIRETY. ONLY ONE PART OF THE STATEMENT G IVEN AT INITIAL STAGE CANNOT BE SOLELY RELIED UPON FOR MAKING THE ADDITION AND THE SECOND PART OF THE STATEMENT WHICH HAS BEEN MADE BEFORE THE AO HIMSELF DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WHEN IT WAS SUBJECT TO CROSS EXAMINATION CANNOT BE DIS REGARDED OR REJECTED BY THE REVENUE. AS STATED EARLIER, HERE, IN THIS CASE, UNLIKE IN THE OTHER CASES OF BOGUS PURCHASES THE ASSESSEE'S TRADING ACCOUNT IS NOT AFFECTED DIRECTLY BECAUSE THE MATERIAL PURCHASED HAVE BEEN UTILISED FOR ADDITION TO THE PLANT AND MACHINERY AND HAS BEEN CHARGED TO CAPITAL WIP ACCOUNT AND ONLY A PART OF IT HAS BEEN SHOWN AS INVENTORY IN THE BALANCE SHEET AND RAW MATERIAL CONSUMABLES WHICH HAS BEEN CHARGED TO THE P&L ACCOUNT. THERE IS NO DIRECT IMPACT OF SUPPRESSION OF PROFIT, AT LEA ST ON THE AMOUNT WHICH HAS BEEN CHARGED TO CAPITAL WIP ACCOUNT OR ADDITION MADE TO PLANT AND MACHINERY. THUS, WE ARE OF THE OPINION THAT THE ENTIRE PURCHASE CANNOT BE DISALLOWED BY THE DEPARTMENT SOLELY ON THE BASIS OF FIRST STATEMENT OF SHRI SURESH A. PAR EKH. AS REGARDS THE SUBMISSION AND CONTENTION OF THE LD. CIT, DR THAT THERE IS LACK OF DOCUMENTATION IN RESPECT OF PURCHASES MADE FROM THE HAWALA OPERATORS BECAUSE SUPPLY OF GOODS COULD NOT BE PROVED, IN THIS REGARD, ONE HAS TO SEE THE OTHER ATTENDED FACTS AND CIRCUMSTANCES ALSO WHICH ARE THAT, THE PURCHASE OF MATERIALS ARE BACKED BY FIRSTLY, ENTRY IN THE GATE PASS AT FACTORY PREMISES; AND SECONDLY, ENTRY IN THE BOOKS OF ACCOUNT AND MANUFACTURING ACCOUNT SHOWING ITEM WISE MATERIAL PURCHASE, MATERIAL CONSUME D, ADDITION IN THE PLANT AND MACHINERY, INVENTORY OF PARTS ETC. ONCE THE FACTUM OF MATERIAL CONSUMED IN THE MANUFACTURING OR INVENTORY IS NOT DISPUTED THEN NO ADDITION OF PURCHASES CAN BE MADE EVEN IF THE MATERIAL HAVE BEEN PURCHASED THROUGH THE HAWALA OPE RATOR. THE CRUCIAL POINT TO SEE HERE IS THAT, THE SOURCE OF PURCHASES HAVE GONE THROUGH BOOKS OF ACCOUNT AND IN LIEU OF PAYMENTS MADE MATERIAL HAS BEEN PURCHASED WHICH ARE PROVEN FROM ITEM WISE INVENTORY PREPARED AND ENTERED IN THE BOOKS OF ACCOUNT AND IS REFLECTED FROM MATERIAL CONSUMED IN MANUFACTURING OR CREDITED TO CAPITAL WIP, ETC.,( WHICH STANDS UNREBUTTED OR UNDISPUTED), THEN NO ADVERSE INFERENCE QUA THE PURCHASES CAN BE MADE, BECAUSE INSTEAD OF REGISTERED DEALERS ASSESSEE HAS MADE PURCHASE FROM GREY MARKET. M/S. CHANAKYA TECHNOLOGIES INDIA P. LTD. 11 30. AS REGARD THE OTHER DISCREPANCIES AS HIGHLIGHTED BY LD. CIT DR BY REFERRING TO AO'S ORDER QUA THE DELIVERY PART, THE SAME LOSES ITS CREDIBILITY WHENCE IT HAS BEEN SHOWN THAT MATERIAL PURCHASES ARE APPEARING IN THE BOOKS OF ACCOUNT AND CONSUMPT ION OF THE SAME HAS NOT BEEN DOUBTED. AO SHOULD HAVE CARRIED FURTHER THIS INFORMATION TO EXAMINE THE ENTRIES IN THE BOOKS OF ACCOUNT AND THE CONSUMPTION DETAILS. AS REITERATED ABOVE AT VARIOUS PLACES, THE FACTUM OF PURCHASE SO FAR AS THE ASSESSEE IS CONCER NED CANNOT BE DISPUTED WHEN THE HAWALA PERSON HIMSELF HAD ADMITTED THAT HE HAD ARRANGED THE PURCHASES FROM GREY MARKET AND GOT THEM SUPPLIED. THIS STATEMENT BEFORE THE AO CANNOT BE DISCARDED AT ALL. THUS, IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF T HE CASE, WE HOLD THAT THE ADDITION ON ACCOUNT OF SO CALLED ALLEGED BOGUS PURCHASES CANNOT BE ADDED AS INCOME OF THE ASSESSEE AND THE SAME AS DIRECTED TO BE DELETED. 11. SINCE THE FACTS OF THE PRESENT CASE ARE IDENTICAL EXCEPT THE FACT THAT IN THE CASE O F M/S VIDEOCON INDUSTRIES, THE MATERIAL WERE CONSUMED WHERE AS IN THE INSTANT CASE, THEY HAVE BEEN SOLD, WE ARE INCLINED TO FOLLOW THE DECISION RENDERED BY THE CO - ORDINATE BENCH. ACCORDINGLY WE UPHOLD THE ORDERS PASSED BY LD CIT(A). 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 5. 7. 201 7. SD/ - SD/ - (AMARJIT SINGH ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 5 / 7 / 20 1 7 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. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBA I