Appeal details
Counselvise Citation
[2017] 126 COUNSELVISE.COM (IT) 9817 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 3 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-08-2017
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
Not Allotted
Assessment Year
2009-2010
Appeal Filed On
20-05-2016
Judgement Text
D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 3547/ MUM/2016 ( / ASSESSMENT YEAR : 2009-10) M/S URVASHI INDUSTRIES, 3, NITYANAND CONSUMER SOCIETY, NITYANAND NAGAR NO. 4, ANDHERI (EAST), MUMBAI 400 069. / V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 4, THANE. ./ PAN : AAAFU7651H ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 749/ MUM/2016 ( / ASSESSMENT YEAR : 2009-10) DY. COMMISSIONER OF INCOME TAX CIRCLE 4, 6 TH FLOOR, ASHAR IT PARK, RD NO. 16Z, WAGLE INDL ESTATE, THANE (W) 400 602. / V. M/S URVASHI INDUSTRIES, FAFADIA INDUSTRIAL ESTATE, VILLAGE WALIV, VASAI (E), TALUKA VASAI (E), THANE. ./ PAN : AAAFU7651H ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI DEVENDRA JAIN REVENUE BY : SHRI PURUSHOTHAM KUMAR, (DR) ITA 3547/MUM/2016 & ITA 749/MUM/2016 2 / DATE OF HEARING : 04.07.2017 / DATE OF PRONOUNCEMENT : 22-08-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE BEFORE THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAF TER CALLED THE TRIBUNAL). THESE CROSS APPEALS ARE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. THESE CROSS APPEALS ARE DIRECTED AGAINST THE APPELLATE ORDER DATED 26.1 1.2015 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 3, THANE (HER EINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2009-10, THE APPE LLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 30.12.2014 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CA LLED THE AO) U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT,1961 (HEREINAFTER CALLED THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL READ AS UNDER:- 1. THE LD. CIT (A) HAS COMPLETED THE ASSESSMENT WI THOUT CONSIDERING THE FACTS & CIRCUMSTANCES OF THE CASE, WHICH IS CONTRARY TO LAW AND IS AGAINST THE PRINCIPLES OF NA TURAL JUSTICE. 2. A. THE LD. CIT (A) HAS ERRED IN FACTS AND IN LAW BY DISALLOWING A SUM OF RS. 7,63,815/-, BEING 15% OF THE ALLEGED BOG US PURCHASES (OF RS. 50,92,100/-), AS INFLATED PURCHASES MADE FR OM UNVERIFIABLE PARTIES, WHICH IS WITHOUT ANY BASIS AS SUCH. B. THE LD. CIT (A) HAS ERRED IN IGNORING VARIOUS DO CUMENTARY EVIDENCES SUBMITTED IN SUPPORT OF THE GENUINE PURCH ASES MADE BY THE APPELLANT FIRM. ITA 3547/MUM/2016 & ITA 749/MUM/2016 3 C. THE LD. CIT (A) OUGHT TO HAVE CONSIDERED THAT TH E LD. AO HAS NEITHER AFFORDED ANY OPPORTUNITY OF CROSS EXAMI NATION NOR HAS MADE ANY EFFORTS TO CONDUCT INDEPENDENT ENQUIRI ES. 3. THE FOLLOWING GROUNDS OF APPEAL ARE RAISED BY TH E REVENUE IN ITA NO. 749/MUM/2016 FOR THE ASSESSMENT YEAR 2009-10 IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL WHICH READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-3, THANE ERRED IN DELETING THE ADDIT ION OF RS. 43,28,285/- OUT OF THE TOTAL ADDITION OF RS. 50,92, 100/- MADE ON ACCOUNT OF BOGUS PURCHASES, DESPITE HOLDING THAT TH E PURCHASES WERE NOT GENUINE AND THE ASSESSEE FAILED TO PROVE G ENUINENESS OF THE TRANSACTIONS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(A)-3, THANE ERRED IN DELETING THE ABOVE ADD ITION DESPITE THE FACT THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS OF PROVING THE PURCHASES. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A)-3, THANE, MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. AT THE OUTSET, WE HAVE OBSERVED THAT THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 3547/MUM/2016 IS LATE BY 76 DAYS, BEYOND TH E TIME PERIOD STIPULATED FOR FILING OF APPEAL U/S 253(3) OF THE 1 961 ACT. THE ASSESSEE HAS DULY FILED AFFIDAVIT DATED 18.5.2016 SIGNED BY SHRI JAYESH PREMJI DEDHIA, PARTNER OF THE ASSESSEE FIRM. IT IS AVERRED IN THE AFORE-STATED AFFIDAVIT THAT THE DELAY IN FILING APPEAL LATE BY 76 DAYS HAD MAIN LY OCCURRED AS THE PARTNER OF THE ASSESSEE WAS TRAVELLING OUTSIDE INDIA IN CON NECTION WITH HIS BUSINESS ON MORE THAN ONE OCCASION AND ALSO THE SAID PARTNER WAS SUFFERING FROM ILLNESS WHICH PREVENTED HIM FROM ATTENDING TO TAX M ATTER. FURTHER IT IS AVERRED IN THE SAID AFFIDAVIT THAT CA OF THE ASSES SEE FIRM NAMELY CA SATISH V. SHANBHAG WAS ALSO TRAVELLING IN THE MONTH OF APRIL, 2016 WHICH RESULTED IN FURTHER DELAY IN FILING OF THIS APPEAL , HENCE, TH E ASSESSEE PRAYED FOR ITA 3547/MUM/2016 & ITA 749/MUM/2016 4 CONDONATION OF AFORESAID DELAY IN FILING OF THIS A PPEAL WITH THE TRIBUNAL BEYOND TIME STIPULATED U/S 253(3) OF 1961 ACT. THE SAID AFFIDAVIT IS PLACED ON RECORD IN FILE. ON THE OTHER HAND, LD DR OPPOSED TH E PRAYER OF CONDONATION OF DELAY BY THE ASSESSEE AND SUBMITTED THAT THIS APPEA L IS FILED LATE BY 76 DAYS AND THE SAME MAY NOT BE ADMITTED IN THE INTEREST OF JUSTICE. AFTER HEARING BOTH THE PARTIES AND CONSIDERING MATE RIAL ON RECORD AND BY RELYING UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF COLLECTOR LAND ACQUISITION V. MST KATIJI & ORS. (1987) 167 IT R 471(SC) , IN OUR CONSIDERED VIEW IN THE INSTANT CASE BASED ON FACTUA L MATRIX AS IS EMERGING FROM RECORDS , THE ASSESSEE HAS DEMONSTRATED A SUFF ICIENT CAUSE WHICH PREVENTED THE ASSESSEE FROM FILING THIS APPEAL IN T IME BEFORE THE TRIBUNAL AS STIPULATED AND MANDATED U/S 253(3) OF 1961 ACT AND UNDER THESE CIRCUMSTANCES KEEPING IN VIEW SUBSTANTIAL INTEREST OF JUSTICE, WE ARE INCLINED TO CONDONE DELAY OF 76 DAYS IN FILING THIS APPEAL B Y THE ASSESSEE BEYOND THE TIME STIPULATED U/S 253(3) OF 1961 ACT, MORE-SO THE REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT STAND AND CLAI MS OF THE ASSESSEE AS AVERRED IN THE AFFIDAVIT . THUS, WE ADMIT THIS APPE AL AND PROCEED TO DECIDE THIS APPEAL ON MERITS. WE ORDER ACCORDINGLY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTING STEEL UTENS ILS. THE ASSESSEE HAD SHOWN GROSS RECEIPT OF RS. 8.41 CRORES WITH A GROS S PROFIT OF RS. 1,54,56,032, A NET PROFIT OF RS. 43,83,238/- , WITH GP RATIO OF 18.37% AND NP RATIO OF 5.21%. THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 24 TH SEPTEMBER, 2009 DECLARING TOTAL INCOME OF RS. 44,08 ,529/- WHICH WAS SCRUTINIZED U/S 143(3) OF THE ACT , VIDE ASSESSMENT ORDERS DATED 08-12-2011 WHEREIN TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 44,56,020/-. THEREAFTER, INFORMATION WAS RECEIVED BY REVENUE FRO M MAHARASHTRA SALES TAX DEPARTMENT GIVING DETAILS OF CERTAIN PERSONS WHO HA VE PROVIDED ITA 3547/MUM/2016 & ITA 749/MUM/2016 5 ACCOMMODATION ENTRIES TO A LARGE NUMBER OF BENEFICI ARIES FOR BOGUS PURCHASE BILLS AND THE NAME OF THE ASSESSEE ALSO APPEARED IN THE LIST OF BENEFICIARIES WHO HAD OBTAINED BOGUS PURCHASE BILLS FROM THE ENTR Y PROVIDERS WITHOUT PURCHASING ACTUAL GOODS/MATERIAL FROM THEM. SURVEY ACTION U/S 133A OF THE ACT WAS ALSO CARRIED OUT ON THE BUSINESS PREMISES O F THE ASSESSEE ON 7 TH DECEMBER, 2013 AND DURING THE COURSE OF THE SURVEY ACTION U/S 133A , THE ASSESSEE WAS ABLE TO PRODUCE ONLY BILLS OF RS. 15,6 6,656/- AS AGAINST TOTAL ALLEGED BOGUS PURCHASE OF RS. 50,92,100/-. THE ASS ESSEE WAS ASKED TO PRODUCE DELIVERY CHALLANS AND TRANSPORT BILLS PERTA INING TO THE EARLIER YEARS AND IN RESPONSE, THE ASSESSEE STATED AS UNDER:- THE ABOVE RAW MATERIALS ARE RECEIVED AT THE FACTOR Y PREMISES - FAFDIA INDL. ESTATE, VALIV, VASAI EAST, THANE BY TH E OFFICE STAFF. FOR THE CURRENT F. Y. 2012-13, THE INVOICES, DELIVE RY CHALLAN AND TRANSPORT BILLS ARE AVAILABLE. THE OFFICE STAFF REC EIVING THE RAW MATERIALS ACKNOWLEDGES THE SAME ON TRANSPORT BILLS, DELIVERY CHALLAN. FOR EARLIER YEARS, ONLY INVOICES ARE MAINT AINED. THE CASE WAS RE-OPENED BY THE AO U/S 147 OF THE 196 1 ACT, AND NOTICE U/S 148 OF THE ACT WAS ISSUED ON 20 TH MAY, 2013 AND SERVED UPON THE ASSESSEE, AFTER RECORDING THE REASONS FOR THE SAME. THE REASO NS RECORDED ARE AS UNDER: .SUBSEQUENTLY, INFORMATION HAS BEEN RECEIVED FR OM SALES TAX DEPARTMENT, MAHARASHTRA GIVING NAMES AND ADDRES SES AND OTHER DETAILS OF CERTAIN PERSONS WHO HAVE PROVIDED ACCOMMODATION ENTRIES FOR BOGUS PURCHASES TO A LARG E NUMBER OF TAX-PAYERS WHO ARE THE BENEFICIARIES. THE INFORMATI ON RECEIVED ALSO CONTAINS THE DETAILS OF THE BENEFICIARIES OF S UCH BOGUS BILLS. THE SALES TAX AUTHORITIES HAVE ALSO PROVIDED EXTRAC TS OF STATEMENTS OF THE BILL PROVIDERS RECORDED BY THEM A ND ALSO EXTRACTS OF AFFIDAVITS FILED BY THE BILL PROVIDERS DURING THE COURSE OF THEIR INVESTIGATION OF THE 'HAWALA' BUSINESS. AS PER THESE STATEMENTS AND/OR AFFIDAVITS, IT IS SEEN THAT THE P ERSONS WHO HAVE PROVIDED ENTRIES TO VARIOUS BENEFICIARIES HAVE STAT ED THEREIN THAT THEY HAVE INDULGED IN BOGUS BILLING UNDER VARIOUS N AMES WITHOUT SUPPLYING THE ACTUAL GOODS/MATERIALS AS MENTIONED I N THE BILLS. ITA 3547/MUM/2016 & ITA 749/MUM/2016 6 3. THE NAME OF THE ABOVE ASSESSEE ALSO APPEARS IN T HE LIST OF PERSONS WHO HAS OBTAINED BOGUS PURCHASE BILLS FROM THE ACCOMMODATION ENTRY PROVIDERS. DETAILS OF BOGUS PUR CHASE BILLS TAKEN BY THE ASSESSEE INCLUDES THE FOLLOWING: 4 . BASED ON THIS INFORMATION SURVEY U/S 133A OF THE AC T WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 07/ 02/2013 AND IT IS FOUND THAT THE ASSESSEE FIRM HAS INDEED CLAIM ED TO HAVE PURCHASED MATERIAL FROM ABOVE NAMED PARTY AS BILLS OF THE SAID PARTY WERE FOUND AND IMPOUNDED DURING THE COURSE OF SURVEY PROCEEDINGS. DURING THE COURSE OF SURVEY PROCEEDING S, IT IS CLEAR FROM THE ABOVE THAT THESE PURCHASES ARE BOGUS AND B ILLS FOR THESE HAVE BEEN OBTAINED BY THE ASSESSEE FROM ENTRY PROVI DERS TO INFLATE ITS PURCHASES, AS A RESULT OF WHICH, THE IN COME OF THE ASSESSEE FOR A. Y. 2009-10 HAS BEEN UNDERSTATED BY THE ASSESSEE. THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR A. Y. 2009-1 0. 5. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE T HAT INCOME OF THE ASSESSEE FOR A.Y. 2009-10 TO THE TUNE OF RS. 50,92, 100/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE I. T. ACT. 6.ACCORDINGLY NOTICE U/S 148 IS ISSUED. THUS, IT CAN BE SEEN THAT THE ASSESSMENTS HAVE BEE N REOPENED U/S 147 OF THE 1961 ACT WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE RETURN WAS ORIGINALLY PROCESSED U/S 143(1 ) AND NO SCRUTINY ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 143(2) OF T HE 1961 ACT. IN REPLY TO NOTICE U/S 148, THE ASSESSEE SUBMITTED THAT THE RET URN OF INCOME FILED U/S 139 (1) ON 24.09.2009 MAY BE TREATED AS RETURN OF I NCOME FILED IN RESPONSE TO S.NO. NAME OF THE ENTRY PROVIDER MAHARASHTRA VAT NO. F.Y AMOUNT IN THE BILLS TAKEN BY THE ASSESSEE 1. DHANERA METAL CORPORATION 27199257913V 2008- 09 RS.50,92,100/- ITA 3547/MUM/2016 & ITA 749/MUM/2016 7 NOTICE U/S 148 OF THE ACT. NOTICE U/S 143(2) AND 1 42(1) OF THE ACT WERE ISSUED . IN RESPONSE , THE ASSESSEE SUBMITTED THE D ETAILS CALLED FOR BY THE AO AND ALSO PRODUCED BOOKS OF ACCOUNT, BILL AND VOUCHE RS AND BANK STATEMENTS FOR VERIFICATION, WHICH WERE VERIFIED BY THE A.O. O N TEST CHECK BASIS. THE ASSESSEE ALSO FILED COPY OF RETURN OF INCOME ALONG WITH COMPUTATION OF INCOME AND AUDIT REPORT IN FORM NO 3CB AND 3CD. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE A.O . OBSERVED THAT THE ASSESSEE HAD MADE PURCHASES FROM M/S DHANERA METAL CORPORATION TO THE TUNE OF RS. 50,92,100/- WHOSE NAME FEATURED IN THE WEBSITE OF SALES TAX DEPARTMENT AS BOGUS BILLS PROVIDERS WHO ARE ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL AND THESE LISTS HAVE BEEN FO RWARDED BY MAHARASHTRA SALES TAX DEPARTMENT TO THE REVENUE. NOTICE U/S 133(6) OF THE ACT WAS ISSUED BY THE AO TO THE SAID PARTY DHANERA METAL CORPORATION TO VERIFY GENUINENESS OF THE PURC HASE TRANSACTIONS, WHICH RETURNED UN-SERVED. THE ASSESSEE WAS ASKED TO PRODU CE THE PARTY SHRI AMRUT LAXMAN PATEL, PROPRIETOR OF M/S DHANERA METAL CORPO RATION FOR VERIFICATION BUT THE ASSESSEE DID NOT PRODUCE THE SAID PARTY BEF ORE THE A.O. THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD SENT A COPY OF LEDG ER ACCOUNT FOR CONFIRMATION TO THE SAID PARTY BY REGISTERED POST A D BUT THE SAME RETURNED BY POSTAL AUTHORITIES WITH THE REMARK LEFT. THE ASSE SSEE SUBMITTED BEFORE THE AO PROOF OF THE RETURNED LETTER FROM POSTAL AUTHORI TIES. IT WAS SUBMITTED BY THE ASSESSEE THAT THE PERSONAL VISIT TO THE PLACE O F SAID PARTY DHANERA METAL CORPORATION WERE MADE , BUT THE SAID PARTY COULD NO T BE TRACED AS THE SAID PARTY NO LONGER WAS OPERATING FROM SAID PREMISES. T HE ASSESSEE SUBMITTED THAT EVEN THIRD PARTY ENQUIRIES FROM THE BUSINESS A SSOCIATES WERE MADE TO TRACE THE SAID PARTY DHANERA METAL CORPORATION BUT THE WHEREABOUTS OF THE SAID PARTY COULD NOT BE TRACED. ITA 3547/MUM/2016 & ITA 749/MUM/2016 8 THE ASSESSEE SUBMITTED FOLLOWING INFORMATION IN SUP PORT OF ITS TRANSACTIONS WITH DHANERA METAL CORPORATION:- 1. LEDGER ACCOUNT OF M/S DHANERA METAL CORPORATION AS APPEARING IN ASSESSEES BOOK. 2. COPIES OF THE TAX INVOICES ISSUED BY SAID PARTY WHICH CARRY THEIR VALID REGISTRATION NOS. UNDER MVAT ACT HAVING VAT TIN NO. 27090546348V AND CST TIN NO. 27090546348C RESPECTIV ELY. 3. COPIES OF DELIVERY CHALLANS MENTIONING THE PARTI CULARS OF GOODS DELIVERED AND DETAILS OF TRANSPORTATION; 4. RELEVANT EXTRACTS OF ASSESSEE FIRM'S CURRENT ACC OUNT HAVING NO. 315501010031056 MAINTAINED WITH UNION BA NK OF INDIA; EVIDENCING THAT ALL THE PAYMENTS PERTAINING TO SUBJECT PURCHASES WERE MADE BY CROSSED ACCOUNT PAYEE CHEQUE S DRAWN ON REGULAR BANK ACCOUNT. THE AO OBSERVED THAT EVEN NOTICES U/S 133(6) HAS RE TURNED UNSERVED AS ALSO SAID PARTY WAS NOT PRODUCED BY THE ASSESSEE, THE ON US TO PROVE GENUINENESS AND CORRECTNESS OF PURCHASE TRANSACTION IS ON THE A SSESSEE WHICH DID NOT STOOD DISCHARGED. THE AO OBSERVED THAT EXCEPT FOR F ILING THE LEDGER OF M/S DHANERS METAL CORPORATION AND CLAIMING THAT THE PAY MENTS WERE MADE THROUGH CHEQUES AND THE SAID GOODS HAVE BEEN RECEIV ED AND UTILIZED FOR MANUFACTURE OF FINISHED GOODS SOLD TO THIRD PARTIES , BUT NEITHER CONFIRMATION OF THE SAID PARTY I.E. M/S DHANERA METAL CORPORATIO N WAS FILED NOR WAS ANY DELIVERY CHALLANS, OR SITE GATE PASS/SITE , OCTROI RECEIPT, STOCK REGISTER COPIES WERE FILED SHOWING THE RECEIPT OF GOODS FROM THE AB OVE PARTIES TO THE ASSESSEE'S FACTORY. THE A.O. OBSERVED THAT THE MAHA RASHTRA SALES TAX DEPARTMENT HAD CONDUCTED INVESTIGATIONS IN THE CASE S OF SEVERAL DEALERS AND BENEFICIARIES AND SUCH INVESTIGATIONS HAD UNEARTHED A FRAUDULENT RACKET INVOLVING MANY HAWALA DEALERS WHO ARE ISSUING FAKE BILLS TO THE BENEFICIARY CONCERNS FOR AVAILING INPUT TAX CREDIT AND GET A CO MMISSION IN RETURN. THE ITA 3547/MUM/2016 & ITA 749/MUM/2016 9 A.O. ALSO OBSERVED THAT THE PARTIES DID NOT HAVE AN Y INFRASTRUCTURE TO SUPPLY THE MATERIAL. THE AO OBSERVED THAT THE SAID PARTIES HAVE SUBMITTED AFFIDAVITS BEFORE SALES TAX DEPARTMENT STATING THAT PURCHASE T RANSACTIONS WERE NOT GENUINE. THE SALES TAX DEPARTMENT HAS CONDUCTED DET AILS ENQUIRIES OF THESE BOGUS OPERATORS AND THEY HAVE IN THEIR STATEMENT RE CORDED BEFORE SALES TAX DEPARTMENT ADMITTED TO HAVE ISSUED BOGUS BILLS. THE AO OBSERVED THAT BOGUS PURCHASES ARE BOOKED TO INFLATE EXPENDITURE AND RED UCE INCOME CHARGEABLE TO TAX. THE AO OBSERVED THAT SALES TAX DEPARTMENT HA VE CANCELLED THE REGISTRATION GRANTED TO THESE HAWALA DEALERS FROM T HE DATE OF GRANTING OF THE REGISTRATION. THE AO OBSERVED THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF THE BOGUS BILLS. THE A.O. OBSERVED THAT ALTHOUGH THE AS SESSEE HAS CLAIMED THAT THE SAID MATERIAL WAS UTILIZED FOR AT ITS SITE, THE FACT IS THE GOODS CLAIMED TO HAVE BEEN UTILIZED WERE PURCHASED FROM SOME OTHER P ARTY I.E. FROM THE GREY MARKET FOR WHICH PAYMENTS HAVE BEEN MADE OUT OF BOO KS IN CASH. THUS, THE A.O. CAME TO THE CONCLUSION THAT THE ASSESSEE HAD M ADE BOGUS PURCHASES FROM THE HAWALA PARTIES IN VIOLATION OF SECTION 40A (3) OF THE 1961 ACT AND WHICH ALSO ATTRACT THE PROVISIONS OF SECTION 69C OF THE 1961 ACT , AND THUS ADDITION TO THE TUNE OF RS. 50,92,100/- WAS MADE BY THE AO WITHIN THE MEANING OF SECTION 69C OF THE ACT AS UNEXPLAINED EX PENDITURE .NO SEPARATE ADDITIONS WAS MADE BY THE AO U/S 40A(3) OF THE 1961 ACT, VIDE ASSESSMENT ORDER DATED 30-12-2014 PASSED BY THE AO U/S 143(3) R.W.S. 147 OF THE 1961 ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 30-12-20 14 PASSED BY THE A.O. U/S 143(3) R.W.S. 147 OF THE 1961 ACT , THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND MADE SUBMISSIONS B EFORE LEARNED CIT(A). THE ASSESSEE SUBMITTED BEFORE LEARNED CIT(A) THAT COPIE S OF INVOICES TO THE TUNE OF RS. 50,92,000/- ISSUED BY DHANERA METAL CORPORATION ALONG WITH DELIVERY CHALLANS WERE SUBMITTED BEFORE THE AO. IT WAS SUBMI TTED THAT LEDGER ACCOUNT OF THE SAID PARTY WAS ALSO SUBMITTED ALONG WITH DET AILS OF PAYMENTS MADE BY ITA 3547/MUM/2016 & ITA 749/MUM/2016 10 CROSSED ACCOUNT PAYEE CHEQUE TO THE SAID PARTY . TH E ASSESSEE SUBMITTED BEFORE LEARNED CIT(A) THAT COPY OF BANK STATEMENT E VIDENCING PAYMENT FOR SAID PURCHASES WERE ALSO SUBMITTED BEFORE AO. IT W AS SUBMITTED THAT PURCHASE REGISTER, MONTHLY STOCK STATEMENTS CONTAIN ING EXHAUSTIVE DETAILS OF QUANTITATIVE MOVEMENT IN RAW MATERIALS , SEMI-FINIS HED GOODS AND FINISHED GOODS WERE ALSO SUBMITTED BEFORE THE AO . IT WAS S UBMITTED THAT COMPARATIVE DETAILS OF NP RATIO FOR AY UNDER CONSIDERATIONS ALO NG WITH EARLIER YEARS WERE SUBMITTED. THE ASSESSEE EXPLAINED THAT MERELY BECAU SE THE NAME OF SUPPLIER APPEARS IN THE LIST OF SUSPICIOUS DEALERS DOES NOT MEAN THAT PURCHASES ARE BOGUS. IT ONLY REFLECTS THAT THE DEALER HAS NOT COM PLIED WITH THE PROVISIONS OF SALES TAX LAW AND/OR PAYMENT OF SALES TAX HAS NOT B EEN DEPOSITED WITH SALES TAX DEPARTMENT BY THE SAID DEALER, FOR WHICH THE AS SESSEE CANNOT BE HELD LIABLE. IT WAS SUBMITTED THAT THE ASSESSEE WAS NOT ALLOWED TO CROSS EXAMINE THE SAID PARTY DHANERA METAL CORPORATION. IT WAS S UBMITTED THAT MERE NON PRODUCTION OF THE PARTY BEFORE THE AO IS NOT SUFFIC IENT TO HOLD AGAINST THE ASSESSEE AS THE ASSESSEE HAD ONLY BUSINESS RELATION S WITH THE SAID PARTY AND THE ASSESSEE CANNOT COMPEL THE SAID PARTY TO APPEAR BEFORE THE AO.THE ASSESSEE ALSO SUBMITTED CONSUMPTION RATIO FOR THE F INANCIAL YEAR 2006-07 TO 2010-11 TO CONTEND THAT CONSUMPTION HAS BEEN IN THE RANGE OF 80.7-84.5% FOR ALL THESE YEARS AND GP RATIO HAS BEEN RANGING F ROM 15.34-17.47% ALL THESE YEARS , WHILE FOR THE SUBJECT ASSESSMENT YEAR CONSU MPTION IS AT 83.95%, GP RATIO IS AT 17.47% AND NP RATIO IS AT 5.94%. THUS, IN NUT-SHELL THE ASSESSEE MADE ELABORATE EXPLANATIONS BEFORE LEARNED CIT(A) W HICH ARE DETAILED IN LEARNED CIT(A) APPELLATE ORDER TO JUSTIFY THAT PURC HASES WERE GENUINE AND NO DISALLOWANCE IS CALLED FOR . THE LD. CIT(A) GRANTED PART RELIEF TO THE ASSESSEE WHEREBY DISALLOWANCE @ 15% OF RS. 50,92,100/- WHICH WORKED OUT TO RS. 7,63,815 /- WAS SUSTAINED/UPHELD BY LEARNED CIT(A) AND THE SAME WAS ADDED TO THE TOT AL INCOME OF THE ASSESSEE. ITA 3547/MUM/2016 & ITA 749/MUM/2016 11 THE FINDINGS OF THE LD. CIT(A) , VIDE APPELLATE ORD ERS DATED 26-11-2015 ARE REPRODUCED HEREUNDER:- 6.0 GROUND NOS. 2A TO 2D ARE DIRECTED AGAINST THE ADDITION OF RS.50,92,100/- AS BOGUS PURCHASES, THEREFORE, THESE GROUNDS ARE TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. (I) I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT IN GROUNDS AND STATEMENT OF FACTS, THE OB SERVATION OF THE AO IN THE ASSESSMENT ORDER, CASE LAWS RELIED UP ON BY THE APPELLANT AND THE FACTS OF THE CASE, AND I PROCEED TO DECIDE THE APPEAL OF THE APPELLANT. (II) THE A.O HAS DISALLOWED THE PURCHASES AS BOGUS PURCHASES ON THE FOLLOWING GROUNDS (A) SURVEY U/S.133A OF THE ACT WAS CARRIED OUT AND IT WAS FOUND THAT THE APPELLANT HAD MADE PURCHASES FROM M/S. DHANERA METAL CORPORATION, A CO NCERN WHO PROVIDES ACCOMMODATION BILLS WITHOUT THE MOVEMENT O F GOODS/MATERIALS. B) THE APPELLANT FAILED TO SUBMIT CONFIRMATION FROM THE ALLEGED SUPPLIER AND BY MAKING THE PAYMENT BY ACCOUNT PAYEE CHEQUES DOES NOT JUSTIFY THAT THE PURCHASES A RE GENUINE. C) NO DELIVERY CHALLANS, OCTROI BILLS OR STOCK REGISTE R WAS FOUND DURING THE COURSE OF SURVEY CONDUCTED ON 07.02.2013 . D) THE WARD INSPECTOR HAS ALSO REPORTED THAT THE ALLEGED S UPPLIER IS NOT OPERATING AT THE GIVEN ADDRESS E) IN ANSWER TO Q.11 STATEMENT RECORDED BY THE MAHARASHTRA SALES TAX DEPARTMENT, I T WAS ADMITTED BY THE OWNER OF M/S. DHANERA METAL CORPORA TION THAT THE PARTY HAS MERELY PROVIDED BILLS WITHOUT ANY ACT UAL PURCHASE OF MATERIAL. (III) THE AR OF THE APPELLANT ON THE OTHER HAND, JU STIFY THAT THESE PURCHASES ARE GENUINE ON THE FOLLOWING GROUND S A) BEFORE AO, THE FOLLOWING RELEVANT DOCUMENTS WERE FURNISHED VIZ, ALL COPIES OF INVOICES ALONG WITH DELIVERY CHALLANS, LE DGER ACCOUNTS AS APPEARING IN THE BOOKS OF ACCOUNTS, COPY OF . PURCH ASE REGISTER, MONTHLY STOCK STATEMENTS CONTAINING EXHAUSTIVE DETA ILS OF QUANTITATIVE MOVEMENT IN RAW MATERIALS, SEMI-FINISH ED GOODS AND FINISHED GOODS, STATEMENT CONTAINING COMPARISON OF GP & NP RATIOS FOR THE YEAR UNDER CONSIDERATION AND EARL IER ASSESSMENT YEARS, WHICH SHOWED NO MAJOR CHANGES, A DETAILED NO TE CONTAINING VARIOUS REASONS JUSTIFYING THE CAUSES FO R VARIOUS IN ITA 3547/MUM/2016 & ITA 749/MUM/2016 12 MONTHLY SCRAP GENERATIONS. B) DETAILS OF PAYMENTS B Y ACCOUNT PAYEE CHEQUES TO THE PARTY EVIDENCED BY RELEVANT EX TRACTS OF THE BANK STATEMENT. C) A.O. HAS NOT GIVEN OPPORTUNITY T O CROSS EXAMINE THE PARTY ETC D) PURCHASES ARE GENUINE EXCE PT THAT THE SUPPLIERS WERE NOT VERIFIABLE AS THEY WERE ABSCONDI NG DUE TO EVASION OF VAT. (IV) FROM THE ABOVE DISCUSSION, IT IS SEEN THAT THE APPELLANT DID NOT PRODUCE THE HAWALA DEALERS BEFORE THE ASSESSING OFFICER FOR CROSS VERIFICATION. THE APPELLANT HAS BOOKED THE AF ORESAID PURCHASES IN HIS BOOKS OF ACCOUNTS AS EXPENSES, THE REFORE, THE ONUS TO PROVE THE GENUINENESS AND CORRECTNESS OF TH E PURCHASE TRANSACTIONS LIES WITH THE ASSESSEE BUT THE ASSESSE E FAILED TO PRODUCE THE PARTY ALONG WITH BANK STATEMENT ETC. TH E STATEMENT OF AFFIDAVIT FILED BY THE HAWALA DEALERS BEFORE THE SALES TAX DEPARTMENT HAS EVIDENTIARY VALUE, WHICH CANNOT BE I GNORED. IF THE PURCHASES WERE GENUINE IN TOTO, THE APPELLANT C OULD HAVE FILED COUNTER AFFIDAVIT AND SHOULD NOT HAVE PAID THE VAT ON BEHALF OF THE HAWALA DEALERS/UNVERIFIABLE DEALERS, BUT FAILED TO DO SO. HOWEVER, ON THE PURCHASES THERE WERE CORRESPONDING SALES AND THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND STOCK STATEMENT CONTAINING QUANTITATIVE DETAILS OF RAW MA TERIAL WAS PRODUCED, THEREFORE, THE DISALLOWANCE OF ENTIRE PUR CHASES MADE FROM HAWALA DEALER IS NOT JUSTIFIED. (V) THERE ARE VARIOUS REASONS AS TO WHY THE HAWALA DEALERS WERE ABSCONDING AND ALSO NOT APPEARED BEFORE THE AS SESSING OFFICER FOR CROSS EXAMINATION DURING ASSESSMENT PRO CEEDINGS, WHEREAS IN OTHER PURCHASES NO SUCH ANOMALY HAVE BEE N FOUND BY THE ASSESSING OFFICER. AT LEAST, THE APPELLANT COUL D HAVE PRODUCED COPY OF RETURN FILED ALONG WITH P&L A/C AND B/S OF HAWALA DEALER BEFORE ASSESSING OFFICER BUT FAILED TO DO SO. (VI) FROM THE ABOVE DISCUSSION, IT CAN BE CONCLUDED THAT, IT IS CASE WHERE THE GOODS WERE RECEIVED FROM THE PARTIES OTHER THAN THE PERSONS WHO HAD ISSUED THE BILLS OF SUCH GOODS. THOUGH THE PURCHASES WERE SHOWN TO HAVE BEEN MADE BY MAKING PA YMENT TO HAWALA DEALERS BUT GOODS MUST HAVE COME FROM GREY M ARKET, THEREFORE, UNDER SUCH CIRCUMSTANCES, THE CHANCES OF PURCHASE COST BEING INFLATED COULD NOT BE RULED OUT. ITA 3547/MUM/2016 & ITA 749/MUM/2016 13 (VII) CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND ALSO VARIOUS COURTS HAVE UP HELD THE DISALLOWANCE ON SUC H PURCHASES FROM 12.5 % TO 25%, THEREFORE, I AM OF THE CONSIDER ED OPINION TO DISALLOW 15% AS INFLATED PURCHASES OF THE TOTAL PUR CHASES MADE FROM UNVERIFIABLE PARTY. IN VIEW OF THE ABOVE STATED FACTS, THE DISALLOWANCE @ 15% OF RS. RS.50,92,100/- WORKS OUT TO RS.7,63,815/- AND THE S AME IS ADDED TO THE TOTAL INCOME OF THE APPELLANT. THEREFO RE, THE APPELLANT GET RELIEF OF RS. (50,92,100-7,63,815) = 43,28,285/-. WITH REGARDS TO VIOLATION OF SECTION 40A(3) OF THE ACT, THE LD. CIT(A) OBSERVED THAT SINCE THE ASSESSEE HAS PRODUCED THE DETAILS OF PAYMENT BY ACCOUNT PAYEE CHEQUES AND SUPPORTED BY RELEVANT DETAILS, THE LD. CIT(A) ALLOWED THIS GROUND. 5. AGGRIEVED BY THE APPELLATE ORDER DATED 26-11-201 5 PASSED BY THE LD. CIT(A), BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEF ORE THE TRIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE IS ENGAGED IN THE BUSINESS AS MANUFACTURER AND EXPORTER OF UTE NSIL , WHEREBY ALL STEEL UTENSILS MANUFACTURED BY THE ASSESSEE ARE EXPORTED OUTSIDE INDIA. IT IS SUBMITTED THAT THE A.O. HAS MADE DISALLOWANCE OF 10 0% OF THE PURCHASES IE. RS. 50,92,100/- MADE FROM DHANERA METAL CORPORATION , WHILE THE LD. CIT(A) HAS RESTRICTED DISALLOWANCE TO 15% OF THE ALLEGED B OGUS PURCHASES. IT IS SUBMITTED THAT INFORMATION FROM SALES TAX AUTHORITI ES WAS RECEIVED BY THE REVENUE THAT THE SAID PARTY M/S DHANERA METAL CORPO RATION IS ENGAGED IN THE ACTIVITIES OF ISSUING BOGUS BILLS TO VARIOUS ENTITI ES WITHOUT SUPPLYING ANY MATERIAL. THE ASSESEE IS STATED TO BE ONE OF THE B ENEFICIARIES OF BOGUS BILLS ISSUED BY SAID DHANERA METAL CORPORATION . SURVEY ACTION HAD BEEN CONDUCTED BY REVENUE U/S 133A OF THE ACT IN THE BUS INESS PREMISES OF THE ASSESSEE ON 07-12-2013 AND BILLS TO THE TUNE OF RS. 15,66,656 WERE AVAILABLE AT THE TIME OF SURVEY AS AGAINST TOTAL PURCHASES OF RS. 50,92,100/- FROM DHANERA METAL CORPORATION. THE CASE WAS REOPENED B Y AO U/S 147 OF THE ITA 3547/MUM/2016 & ITA 749/MUM/2016 14 1961 ACT AND NOTICE U/S 148 OF THE ACT WAS ISSUED W HICH WAS WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR. IT IS SUBMI TTED THAT COMPLETE DETAILS WERE SUBMITTED WITH RESPECT TO THE PURCHASE OF MATE RIAL INCLUDING STOCK RECONCILIATION SHOWING UTILIZATION OF MATERIAL FOR MANUFACTURING THE FINISHED GOODS BEFORE THE AUTHORITIES. IT IS SUBMITTED CONF IRMATION FROM THE SAID PARTY COULD NOT BE PRODUCED. THE AO ISSUED NOTICES U/S 1 33(6) TO DHANERA METAL CORPORATION BUT THE SAID NOTICE RETURNED UNSERVED. THE ASSESSEE HAD TRIED TO LOCATE THE PARTY BUT THE SAID PARTY COULD NOT BE TR ACED DESPITE BEST EFFORTS. IT IS SUBMITTED THAT NO CROSS EXAMINATION WAS PROVIDED TO THE ASSESSEE BY THE REVENUE OF THE PROPRIETOR OF DHANERA METAL CORPORAT ION.IT WAS SUBMITTED THAT THE STATEMENT OF PROPRIETOR OF DHANERA METAL CORPOR ATION WHICH WAS RECORDED BEFORE THE SALES TAX DEPARTMENT WHEREIN HE ADMITTED TO BE ENGAGED IN ISSUING BOGUS BILLS HAS NOT BEEN PROVIDED TO THE AS SESSEE. THE LD. COUNSEL RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF M/S ANDAMAN TIMBER INDUSTRIES V. COMMISSIONER OF CENTRA L EXCISE, CIVIL APPEAL NO. 4228 OF 2006 DATED SEPTEMBER, 02, 2015 AND SUBM ITTED THAT THE ADDITION NEED TO BE DELETED. THE LEARNED COUNSEL FOR THE ASS ESSEE ALSO RELIED UPON DECISION OF THE TRIBUNAL IN THE CASE OF ACIT V. MR BHARAT GAJANI IN ITA NO. 5171 TO 5175 /MUM/2014 VIDE ORDER DATED 08-05-2017 AND IN THE CASE OF IMPERIAL IMP. & EXP. V. ITO IN ITA NO. 5427/MUM/201 5 VIDE ORDERS DATED 18-03-2016. 7. THE LD. D.R. SUBMITTED THAT THE A.O. HAS ASKED T HE ASSESSEE TO PRODUCE THE PARTY M/S DHANERA METAL CORPORATION FOR VERIFIC ATION BUT THE ASSESSEE COULD NOT PRODUCE THE PARTY. THE PARTY DHANERA ME TAL CORPORATION FROM WHOM THE PURCHASES WERE MADE WAS STATED TO BE ENGAG ED AS HAWALA OPERATOR BY ISSUING BILLS WITHOUT SUPPLYING ANY MATERIAL. D ETAIL INVESTIGATION HAS BEEN CARRIED OUT BY THE SALES TAX AUTHORITIES WHEREBY IT WAS ADMITTED BY DHANERA METAL CORPORATION THAT THEY ARE ENGAGED IN ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. A SURVEY U/S 133A WAS COND UCTED AGAINST ASSESSEE ITA 3547/MUM/2016 & ITA 749/MUM/2016 15 AND DURING THE COURSE OF SURVEY NO DOCUMENTS WERE F OUND RELATING TO THE STOCK AND PURCHASES . THE LD. DR RELIED ON THE DECI SION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V. NARENDRA K UMAR GUPTA, [2015] 55 TAXMANN.COM 371 (P&H) AND ALSO DECISION OF HONBLE SUPREME COURT IN THE CASE OF N K PROTEINS LIMITED V. DCIT REPORTED IN 20 17-TIOL-23-SC-IT AND PRAYED THAT THE ORDER OF THE AO BE UPHELD. THE LEAR NED DR HAS FILED WRITTEN SUBMISSIONS WHICH ARE TAKEN ON RECORD. 8. IN REJOINDER, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID DEALERS OF SALES TAX DEPARTMENT ARE REGISTERED BY S ALES TAX DEPARTMENT AFTER DUE VERIFICATION . IT IS SUBMITTED THAT PAYMENTS WE RE MADE THROUGH ACCOUNT PAYEE CHEQUE AGAINST THESE ALLEGED BOGUS PURCHASES. THE LD. COUNSEL DISTINGUISHED THE DECISION AS CITED BY THE LD. D.R. . IT IS ALSO SUBMITTED THAT I T DEPARTMENT HAS NOT RECORDED ANY STATEMENT OF DHANER A METAL CORPORATION. IT IS SUBMITTED THAT NO CROSS EXAMINATION WAS GRANT ED BY THE REVENUE OF DHANERA METAL CORPORATION AND HENCE NO ADDITION IS SUSTAINABLE. THE ASSESSEE SUBMITTED THAT THE ASSESSEES UNIT IS REGI STERED UNDER CENTRAL EXCISE ACT SINCE 21-12-2002. COPY OF REGISTRATION CERTIFIC ATE IS PLACED ON FILE. IT IS SUBMITTED THAT STAINLESS STEEL UTENSIL( CODE 7323) AND STAINLESS STEEL CUTLERY ( CODE 8215) DEALT WITH BY THE ASSESSEE ARE EXEMPTED FROM PAYING CENTRAL EXCISE FROM 01-03-2006 VIA NOTIFICATION NO 10/2006- CE DATED 01-03-2006. IT WAS SUBMITTED THAT SINCE ASSESSEE IS 100% EXPORT OR IENTED UNITS , ALL RECORDS FOR UTILIZATION OF RAW MATERIAL , SEMI FINISHED GOO DS AND FINISHED GOODS ARE MAINTAINED, WHICH WERE PRODUCED BEFORE THE AO AS WE LL LEARNED CIT(A) WHICH ALSO FIND MENTIONED IN LEARNED CIT(A) APPELLATE ORD ER. 9. WE HAVE HEARD RIVAL CONTENTIONS AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING CASE LAWS RELIED UPON BY BOTH T HE PARTIES. WE HAVE OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINE SS OF MANUFACTURING AND EXPORTING STEEL UTENSILS. THE ASSESSEE HOLDS CENTRA L EXCISE REGISTRATION AND IS ITA 3547/MUM/2016 & ITA 749/MUM/2016 16 AN 100% EOU. INFORMATION WAS RECEIVED BY REVENUE FR OM MAHARASHTRA SALES TAX DEPARTMENT THAT THE ASSESSEE HAS PURCHASED MATE RIAL TO THE TUNE OF RS. 50,92,100/- FROM DHANERA METAL CORPORATION WHO IS ALLEGEDLY ENGAGED IN ISSUING BOGUS BILLS WHERE NO MATERIAL IS PHYSICALLY SUPPLIED AGAINST THOSE BILLS AND THE ASSESSEE IS STATED TO BE BENEFICIARY OF SAI D BOGUS BILLS ISSUED BY DHANERA METAL CORPORATION. THE SALES TAX DEPARTMENT HAD CONDUCTED INTENSIVE ENQUIRY AND THE SAID PARTY HAS IN STATEME NT RECORDED BEFORE SALES TAX DEPARTMENT HAS ADMITTED THAT IT IS ENGAGED IN P ROVIDING ACCOMMODATION ENTRIES BY ISSUING BOGUS BILLS. THE ASSESSEE IS STA TED TO BE THE BENEFICIARY OF BOGUS BILLS ISSUED BY SAID PARTY DHANERA METAL CORP ORATION TO THE TUNE OF RS. 50.92 LACS. THE REGISTRATION OF DHANERA METAL CORPO RATION HAS BEEN CANCELLED BY SALES TAX AUTHORITIES FROM THE DATE OF GRANT OF REGISTRATION. THE REVENUE ALSO CONDUCTED SURVEY U/S 133A AT BUSINESS PREMISES OF THE ASSESSEE ON 07- 12-2013 WHEREIN BILLS OF RS. 15.66 LACS WERE FOUND AS AGAINST BILLING OF RS. 50.92 LACS DONE BY SAID DHANERA METAL CORPORATION. THE REVENUE REOPENED THE ASSESSMENT U/S 147 OF THE ACT BY ISSUING NOTICE U/S 148 OF THE ACT DATED 20.05.2013 , WHICH WAS WITHIN FOUR YEARS FROM THE E ND OF THE ASSESSMENT YEAR. THE ASSESSEE DID NOT CHALLENGE THE REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT . THERE WAS NO SCRUTINY ASSESSMENT FRAME D ORIGINALLY U/S 143(3) R.W.S. 143(2) OF THE 1961 ACT BY REVENUE AND RETURN OF INCOME WAS PROCESSED ORIGINALLY U/S 143(1) OF THE 1961 ACT. THE AO ISSUE D NOTICES U/S 133(6) TO M/S DHANERA METAL CORPORATION BUT THE SAID NOTICES RETURNED UN-SERVED BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT. THE ASSESSEE ALSO TRIED TO TRACE THE SAID PARTY BUT THE SAID PARTY COULD NOT BE TRAC ED. THE ASSESSEE DESPITE BEING ASKED BY THE AO COULD NOT PRODUCE THE SAID PA RTY BEFORE THE AO. AS IS EMERGING FROM THE ASSESSMENT ORDER , THE ASSESSEE S UBMITTED DETAILS OF UTILIZATION/CONSUMPTION OF MATERIAL FOR MANUFACTURI NG THE FINISHED GOODS. THE ASSESSEE IS REGISTERED UNDER CENTRAL EXCISE ACT . THE ASSESSEE BEING 100% EOU HAS MAINTAINED DETAILS OF UTILIZATION/CONS UMPTION OF MATERIAL FOR PRODUCTION OF FINISHED GOODS. THE AO HAS NOT DOUBTE D SALES BUT IT IS HELD BY ITA 3547/MUM/2016 & ITA 749/MUM/2016 17 THE AO THAT THE ASSESSEE PURCHASED THE ACTUAL MATER IAL FROM GREY MARKET IN CASH AT LOWER PRICE WHILE INVOICES WERE OBTAINED FR OM M/S DHANERA METAL CORPORATION OF HIGHER VALUE WHERE NO GOODS WERE SUP PLIED PHYSICALLY WITH THE OBJECTIVE OF REDUCING PROFITS AND CONSEQUENTLY TAX. THE ASSESSEE HAS DEMONSTRATED THAT CONSUMPTION RATIO , GP RATIO AND NP RATIO FOR YEARS PRIOR TO AND SUCCEEDING TO THE SUBJECT ASSESSMENT YEAR ARE I N LINE AND THERE IS NO MARKED VARIATION. THE ASSESSEE COULD NOT PRODUCE TH E PARTY BEFORE THE AO. THE NOTICES U/S 133(6) SENT BY THE AO TO THE SAID P ARTY RETURNED UNSERVED..THE ASSESSEE ON ITS PART ALSO DID NOT DIS CHARGE ONUS CAST ON IT AS THE PURCHASES ARE CREDITED IN ASSESSEES BOOKS OF A CCOUNTS. IT WAS HELD BY AUTHORITIES BELOW THAT SINCE THE ASSESSEE HAD MADE SALES WHICH WERE RECONCILED BY THE ASSESSEE WITH PURCHASES AND ITS C ONSUMPTION/UTILISATION, THE PURCHASES WERE MADE BY THE ASSESSEE BUT THE SAM E WERE MADE AT LOW PRICE FROM GREY MARKET AND TO COVER DEFICIENCIES IN DOCUMENTS, INVOICES OF HIGHER VALUE WERE OBTAINED TO INFLATE EXPENSES FROM THE DHANERA METAL CORPORATION WHO ISSUED BOGUS BILLS TO THE ASSESSEE WITHOUT SUPPLYING ANY MATERIAL. THUS, THE AO HELD THAT THE ASSESSEE FAILE D TO PROVE THE ONUS CAST UPON IT TO PROVE THAT PURCHASES TO THE TUNE OF RS. 50.92 LCS MADE BY THE ASSESSEE WERE GENUINE PURCHASES, WHICH WERE HELD BY THE AUTHORITIES BELOW TO BE BOGUS PURCHASES AS NO MATERIAL WAS SUPPLIED TO T HE ASSESSEE BY THIS SUPPLIER WHICH MATERIAL IN-FACT WAS PURCHASED BY TH E ASSESSEE FROM GREY MARKET AT LOWER PRICE WHICH LED TO PROFITS EARNED O UT OF BOOKS WHICH NEED TO BE ESTIMATED AND ADDED TO THE INCOME OF THE ASSESSE E. THESE ARE INFORMATION WHICH ARE ESPECIALLY IN THE KNOWLEDGE OF THE ASSESS EE AND THE ONUS IS ON THE ASSESSEE TO PROVE THAT PURCHASES ARE GENUINE AS THE SE PURCHASES ARE RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. SECTION 106 OF INDIAN EVIDENCE ACT, 1872 CLEARLY STIPULATES AS UNDER: ITA 3547/MUM/2016 & ITA 749/MUM/2016 18 '106. BURDEN OF PROVING FACT ESPECIALLY WITHIN KNOW LEDGE WHEN ANY FACT IS ESPECIALLY WITHIN THE KNOWLEDGE OF ANY PERSON, THE BURDEN OF PROVING THAT FACT IS UPON HIM. ILLUSTRATIONS ( A ) ** ** ( B ) A IS CHARGED WITH TRAVELING ON A RAILWAY WITHOUT A TICKET. THE BURDEN OF PROVING THAT HE HAD A TICKET IS ON HIM.' THE ASSESSEE WAS NOT ABLE TO DISCHARGE BURDEN CAST U/S 106 OF 1872 ACT AS THE ASSESSEE DID NOT PRODUCE THE RELEVANT DOCUMENTS F OR SHOWING MOVEMENT OF GOODS FROM SUPPLIER TO ASSESSEE. THE ASSESSEE DID N OT FILE CONFIRMATIONS FROM THESE PARTIES. THE PARTIES WERE ALSO NOT PRODUCED B EFORE THE AUTHORITIES BELOW. THE RIGHT OF CROSS EXAMINATION IS NOT ABSOLUTE. THE ASSESSEE HAS TO FIRST DISCHARGE ITS PRIMARY ONUS CAST UNDER LAW AND IF TH E SAME STOOD DULY DISCHARGED WHICH IS NOT REBUTTED BY AUTHORITIES, BU T DESPITE THAT THEN ALSO THE AUTHORITIES PROCEED TO PUT ASSESSEE TO PREJUDICE SO LELY RELYING ON THE BASIS OF INCRIMINATING STATEMENT RECORDED OF THIRD PARTY AT THE BACK OF THE ASSESSEE, THEN CERTAINLY THE RIGHT TO CROSS EXAMINATION THE S AID THIRD PARTY WHOSE INCRIMINATING STATEMENT RECORDED AT THE BACK OF THE ASSESSEE IS RELIED UPON BY AUTHORITIES TO PREJUDICE THE ASSESSEE WILL BECOME A BSOLUTE. BUT IN THE INSTANT CASE, PRIMARY ONUS CAST ON THE ASSESSEE ITSELF DID NOT STOOD DISCHARGED BY THE ASSESSEE AS DISCUSSED ABOVE. THE A.O. MADE ADDITION S @ 100% OF THE TOTAL BOGUS PURCHASES OF RS. 50,92,100/- WHICH WERE HELD TO BE NON-GENUINE BY THE AUTHORITIES BELOW, WHICH ADDITION WAS CONFIRMED BY THE LEARNED CIT(A) TO THE EXTENT OF 15% OF BOGUS PURCHASES ON THE GROUNDS THA T THE ASSESSEE MADE PURCHASES FROM GREY MARKET AT LOWER PRICE AND CHANC ES OF INFLATION OF PURCHASES COST CANNOT BE RULED OUT. BOTH ASSESSEE AND REVENUE HAVE FILED CROSS APPEALS BEFORE THE TRIBUNAL BEING AGGRIEVED BY THE APPELLAT E ORDER OF LEARNED CIT(A). IN SUCH CIRCUMSTANCES REVENUE CONTENTIONS HAS MERITS B UT GP RATIO NEEDS TO BE ITA 3547/MUM/2016 & ITA 749/MUM/2016 19 ESTIMATED WHICH DEFINITELY INVOLVED SOME ESTIMATION /GUESS WORK BUT THE SAID ESTIMATION/GUESS WORK SHOULD BE FAIR, HONEST AND RA TIONAL KEEPING IN VIEW FACTUAL MATRIX OF THE CASE . WE HAVE GONE THROUGH T HE CASE LAWS RELIED UPON BY THE ASSESSEE. REFERENCE IS DRAWN TO DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF KACHWALA GEMS V. JT. CIT [2007] 288 ITR 10/158 TAXMAN 71 (SC) , WHEREIN HON'BLE LORDSHIPS HELD AS UNDER : '4. THE FACTS OF THE CASE ARE IN A SHORT COMPASS. T HE APPELLANT- ASSESSEE DEALS IN PRECIOUS AND SEMI- PRECIOUS STONES. IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THE FOLLOWING DEFE CTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE : '1. THE ASSESSEE HAS NOT MAINTAINED AND KEPT ANY QU ANTITATIVE DETAILS/STOCK REGISTER FOR THE GOODS TRADED IN BY THE ASSESSEE. 2. THERE IS NO EVIDENCE ON RECORD OR DOCUMENT TO VE RIFY THE BASIS OF THE VALUATION OF THE CLOSING STOCK SHOWN BY THE ASSESSE E. THE ASSESSEE IS NOT ABLE TO PREPARE SUCH DETAILS EVEN WITH THE HELP OF BOOKS OF ACCOUNT MAINTAINED, PURCHASE BILLS & SALE INVOICES. 3. PROVISIONS OF SECTION 145(3) ARE CLEARLY ATTRACT ED IN THIS CASE. 4. THE GENUINENESS OF PURCHASES TO THE EXTENT OF RS . 42 LAKHS (APPROX.) IS NOT PROVED WITHOUT ANY DOUBT. 5. THE GP RATE DECLARED BY THE ASSESSEE AT 13.49 PER CENT DURING THE ASSESSMENT YEAR IS NOT A MATCH TO THE RESULT DECLAR ED BY THE ITSELF IN THE PREVIOUS ASSESSMENT YEARS. 6. M/S. GEM PLAZA, ENGAGED IN LOCAL SALES OF SIMILA R GOODS DECLARED VOLUNTARILY RATE OF 35 PER CENT IN ITS ASSESSMENT FOR THE ASSESSMENT YEAR 1997-98. 7. M/S. DHADDA EXPORTS, ANOTHER ASSESSEE DEALING IN SAME ITEMS, BUT DOING EXPORT BUSINESS DECLARED GP RATE OF 43.8 PER CENT ( EVEN WITHOUT CONSIDERING THE VALUE OF EXPORT INCENTIVES) IN ASSESSMENT YEAR 1997-98.' 5. THEREAFTER, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER AND HE RESORTED TO BEST JUDGMENT ASSESSMENT UNDER SECTION 144 OF THE INCOME- TAX ACT. THE ASSESSING OFFICER IN THE ASSESSMENT OR DER MENTIONED SOME COMPARABLE CASES AN D WAS OF THE VIEW THAT THE CASE OF THE ITA 3547/MUM/2016 & ITA 749/MUM/2016 20 ASSESSEE IS MORE OR LESS HAVING SIMILAR FACTS AS TH AT OF M/S. GEM PLAZA WHERE THE GROSS PROFIT HAS BEEN TAKEN AS 35.48 PER CENT. THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT OF THE ASSESSEE AS 40 PE R CENT. 6. THE ASSESSING OFFICER FURTHER HELD THAT THE ASSESSE E HAS SHOWN BOGUS PURCHASES IN ORDER TO REDUCE THE GROSS PROFITS. 7. IN APPEAL, THE COMMISSIONER OF INCOME- TAX (APPEALS) UPHELD MOST OF THE FINDINGS OF THE ASSESSING OFFICER, BUT REDUCED THE GROSS PROF IT FROM 40 PER CENT TO 35 PER CENT. 8. IN FURTHER APPEAL, THE TRIBUNAL HAD GIVEN FURTHE R RELIEF TO THE ASSESSEE AND REDUCED THE GROSS PROFIT RATE TO 30 PER CENT. 9. THE COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFOR E US THAT THE INCOME- TAX AUTHORITIES WRONGLY HELD THAT APPELLANT HAS SHOWN B OGUS PURCHASES, AND THE BOOKS OF ACCOUNT WERE WRONGLY REJECTED. 10. IN OUR OPINION, WHETHER THERE WERE BOGUS PURCHA SES OR NOT, IS A FINDING OF FACT, AND WE CANNOT INTERFERE WITH THE SAME IN THIS APPEAL. AS R EGARDS THE REJECTION OF THE BOOKS OF ACCOUNT, COGENT REASONS H AVE BEEN GIVEN BY THE INCOME- TAX AUTHORITIES FOR DOING SO, AND WE SEE NO REASON TO TAKE A DIFFERENT VIEW. 11. IT IS WELL-SETTLED THAT IN A BEST JUDGMENT ASSESSMENT, THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT THE AUTHORIT IES CONCERNED SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT, AND SHOULD NOT ACT TOTALLY ARBITRARILY, BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGME NT ASSESSMENT, AND IT IS THE ASSESSEE HIMSELF WHO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS. IN OUR OPINION, THERE WAS NO ARBITRARINESS IN THE PRES ENT CASE ON THE PART OF THE INCOME- TAX AUTHORITIES. THUS, THERE IS NO FORCE IN THIS AP PEAL, AND IT IS DISMISSED ACCORDINGLY. NO COSTS.' THE REVENUE MADE AFORESAID ADDITIONS RELYING ON THE PRESUMPTION THAT THE MATERIAL WAS IN-FACT PURCHASED FROM GREY MARKET AT A LOWER RATE AND TO COVER DEFICIENCIES IN RECORD, THE INVOICES WERE PROCURED FROM THESE ENTRY OPERATORS AT HIGHER RATES TO REDUCE THE PROFIT. THE LEARNED C IT(A) HAS ESTIMATED DISALLOWANCE TO THE TUNE OF 15% OF ALLEGED BOGUS PU RCHASES, WHICH IN OUR OPINION IS A PLAUSIBLE VIEW OF ESTIMATION OF PROFIT S BY LEARNED CIT(A). UNDER ITA 3547/MUM/2016 & ITA 749/MUM/2016 21 THESE CIRCUMSTANCES, WE ARE NOT INCLINED TO INTERFE RE WITH THE APPELLATE ORDER OF LEARNED CIT(A) WHICH WE CONFIRM/SUSTAIN. WE ORDE R ACCORDINGLY 10. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 3547/MUM/2016 AND APPEAL OF THE REVENUE IN ITA NO. 749/MUM/2016 FOR A SSESSMENT YEAR 2009- 10 ARE DISMISSED. WE ORDER ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND AUGUST, 2017. # $% &' 22-08-2017 ( ) SD/- SD/- (D.T. GARASIA) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 22-08-2017 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI D BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI
