Amar Mining Company, Baroda V. The ACIT.,Circle-5, Baroda

ITA 361/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5813 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-11-2016
• Assessment Year: 1998-1999
• Appeal Filed On: 07-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Bogus purchase; Royalty expenses

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.361/AHD/2013 ( / ASSESSMENT YEAR : 1998-99) AMAR MINING COMPANY 22, MEGHDOOT SOCIETY KARELIBAUG BARODA 390 018 / VS. THE ACIT CIRCLE-5 AYAKAR BHAVAN RACE COURSE, BARODA # ./ ./ PAN/GIR NO. : AACFM 7177 L ( #% / APPELLANT ) .. ( &#% / RESPONDENT ) #%' / APPELLANT BY : MR. S.N. SOPARKAR, AR &#%(' / RESPONDENT BY : MR. JAMES KURIAN, SR.DR )*(+ / DATE OF HEARING 07/04/2017 ,-./(+ / DATE OF PRONOUNCEMENT 18/05/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-V, BAROD A [CIT(A) IN SHORT] DATED 03/12/2012 FOR THE ASSESSMENT YEAR (AY) 1998-99. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER:- 1. THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT THE APPELLANT FIRM HAD FAILED TO FURNISH THE DETAILS REQUIRED BY THE LEARNED ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 2 - ASSESSING OFFICER AND FURTHER ERRED IN HOLDING THAT YOUR APPELLANT HAD NOT DISCHARGED THE ONUS CAST UPON IT. 2. THE LEARNED CIT(APPEALS) FURTHER ERRED IN NOT P ROVIDING THE APPELLANT FIRM THE OPPORTUNITY REGARDING THE ROYALT Y INFORMATION COLLECTED BY HIM FROM THE DISTRICT MINING OFFICER. 3. THE LEARNED CIT (APPEALS) ERRED IN COMING TO TH E CONCLUSION THAT THE ILLEGAL EXCAVATION WAS DONE BY THE APPELLANT FI RM. 4. THE LEARNED CIT (APPEALS) ERRED IN DISREGARDING THE FINDINGS OF THE HONOURABLE TRIBUNALS ORDER PASSED BY IT. 5. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING T HE BOGUS PURCHASE AMOUNTING TO RS.68,55,330/- DISREGARDING T HE ORIGINAL CIT(APPEALS) ORDER PASSED IN THE CASE OF THE FIRM. 6. IT IS PRAYED THAT THE DISALLOWANCE OF BOGUS PUR CHASES AMOUNTING TO RS.68,55,330/- BE DELETED. 3. THE ASSESSEE HAS RAISED MULTIPLE GROUNDS BUT IN ESSENCE SEEKS TO CHALLENGE THE ADDITION TO THE TOTAL INCOME ON ACCOU NT OF ALLEGED BOGUS PURCHASE OF RS.68,55,330/-. THE RELEVANT FACTS CO NCERNING THE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE MINING AND CRUS HING OF RUBBLES AND SALE OF GRIT. THE ASSESSEE FILED RETURN OF INCOME FOR THE AY 1998-99 ON 30/10/1998 DECLARING TOTAL INCOME AT RS.9,37,010/-. THE ASSESSMENT WAS FRAMED UNDER S.143(3) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS 'THE ACT') WHEREIN ADDITION OF RS.68,55,330/- WAS INTER-ALIA MADE ON ACCOUNT OF BOGUS PURCHASES FROM FIVE PARTIES. T HE AFORESAID ADDITION ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 3 - WAS CARRIED BEFORE THE TRIBUNAL WHEREIN THE CO-ORDI NATE BENCH OF THE ITAT SET ASIDE THE ISSUE BACK TO THE FILE OF THE AS SESSING OFFICER (AO) TO DECIDE THE MATTER AFRESH AFTER CONDUCTING CERTAIN E NQUIRIES AS DIRECTED. THE COORDINATE BENCH DIRECTED THE AO TO MAKE NECESS ARY FURTHER ENQUIRIES FROM (A) CONCERNED BANK AUTHORITIES OR OT HERWISE IN RESPECT OF PERSON MAKING WITHDRAWALS IN CASH AGAINST RECEIPT O F PROCEEDS FROM THE ASSESSEE TOWARDS AFORESAID PURCHASES, (B) SALES TAX AUTHORITIES IN RESPECT OF GENUINENESS OF TRANSACTIONS IN PURCHASE AND TO ALLOW OPPORTUNITY TO THE ASSESSEE TO FURNISH THE ACTUAL W ORKING OF GROSS PROFIT (GP) ON ACCOUNT OF TRADING AND MANUFACTURING OF RU BBLE, KAPCHI, GRIT, ETC. AND ITS IMPACT ON THE PROFITABILITY OF THE YEA R UNDER APPEAL VIS--VIS PRECEDING YEARS IN THE LIGHT OF THE BOOKS OF ACCOU NTS AND OTHER RECORDS AND (C) TO PRODUCE PROPPRIETORS OF THESE FIVE CONCE RNS IN SUPPORT OF GENUINENESS OF THE PURCHASES. AS BORNE OUT FROM TH E ASSESSMENT ORDER PURSUANT TO THE DIRECTIONS UNDER S.254 OF THE ACT, THE ASSESSEE COULD NOT FURNISH ANY FURTHER DETAILS. IT ALSO FAILED TO PRO DUCE THE PARTIES FOR VERIFICATION. THE DETAILED INVESTIGATIONS CARRIED IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS WERE NOT FOUND TO BE NEGATE D BY THE ASSESSEE. IT WAS ALLEGED THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM THAT THE PURCHASES WERE GENUINE. AFTE R DETAILED DISCUSSION IN THE BODY OF THE ASSESSMENT ORDER AND RELYING ON SOM E JUDICIAL PRONOUNCEMENTS, THE AO CONCLUDED THAT THE ASSESSEE HAD SHOWN PURCHASES FROM PARTIES WHICH DO NOT EXIST AND WHOLE PROCEDURE FOR ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 4 - INTRODUCING THE BOGUS PURCHASE BILL WERE ADOPTED BY THE ASSESSEE TO INFLATE THE EXPENSES. IT WAS ALLEGED THAT THE ASSE SSEE FAILED TO DISCHARGE ITS OBLIGATION TO SUPPORT THE ALLEGED PURCHASES. C ONSEQUENTLY, THE AO ADDED BACK AMOUNT OF RS.68,55,330/- TO THE TOTAL IN COME OF THE ASSESSEE HOLDING THE SAME AS BOGUS PURCHASES. 4. IN FIRST APPEAL, THE CIT(A) REVISITED THE ENTIR E FACTS AND CIRCUMSTANCES OF THE CASE AND DELINEATED THE FACTS IN GREAT DETAI L. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) READS AS UNDER: 4.1 I HAVE CONSIDERED THE FACTS OF THE CASE, T HE REASONS RECORDED BY THE AO WHILE MAKING THE ADDITION AND THE SUBMISSION OF THE APPELLANT. FACTS LEADING TO THE ADDITION OF RS.68,55,330/-CAN BE SUMMARISED AS HEREUNDER: - A. GROSS PROFIT OF THE APPELLANT DECLINED FROM 17.6 7% TO 8.34% DURING THE PREVIOUS YEAR UNDER CONSIDERATION. NO REASONS FOR T HE DECLINE IN THE GROSS PROFIT HAVE BEEN GIVEN BY THE APPELLANT EITHER BEFO RE THE AO OR BEFORE ANY OF THE APPELLATE AUTHORITIES. B. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT EVEN THOUGH THE APPELLANT IS ENGAGED IN THE MINING OF RU BBLES, IT HAS SHOWN THE PURCHASES OF RUBBLES FROM THE FOLLOWING FIVE PARTIE S: - 1. M/S R.K.TRADERS 2. M/S ASHIRWAD CORPORATION 3. M/S BHAGYALAXMI TRADING CO. 4 M/S SHALIN CORPORATION 5. M/S BHARAT SALES CORPORATION. C. THE APPELLANT WAS ASKED BY THE AO TO FILE THE CO NFIRMATION OF ALL THE PARTIES. HOWEVER, THE APPELLANT COULD FILE THE CONFIRMATION OF ONLY TWO PARTIES. ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 5 - ADDRESSES OF THE REMAINING THREE PARTIES WERE FILED BY THE APPELLANT. THE AO OBSERVED THAT IN RESPECT OF THE CONFIRMATION FILED IT WAS NOT CLEAR AS TO WHO HAD SIGNED THEM. THE AO ISSUED THE SUMMONS TO THE THREE PARTIES AT THE ADDRESSES PROVIDED BY THE APPELLANT WITH WERE RETURNED UNSERV ED BY THE POSTAL AUTHORITIES. D. THE AO MADE ENQUIRIES IN RESPECT OF ALL THE FIVE PARTIES FROM SEVALIA URBAN CO-OP. BANK LTD., SEVALIA. COPIES OF ACCOUNT OPENIN G FORM, BANK ACCOUNTS, COPIES OF CHEQUES ISSUED BY THE APPELLANT AND COPIE S OF SOME CHEQUES USED FOR MAKING SELF WITHDRAWAL WERE COLLECTED BY THE AO. E. ON EXAMINATION OF ACCOUNT OPENING FORMS, THE AO FOUND THAT FOUR PARTIES EXCEPT M/S SHALIN CORPORATION WERE INTRODUCED BY ON E SHRI. IBRAHIMBHAI Y.VORA OF SEVALIA. SUMMONS UNDER SECTION 131(1) WER E ISSUED TO HIM. IN HIS STATEMENT ON OATH, SHRI VORA INFORMED THAT HE DID N OT RECOGNISE ANY OF THE FOUR PARTIES. HE FURTHER STATED THAT NONE OF THE FOUR PA RTIES WERE DOING ANY BUSINESS IN SEVALIA NOR WERE THEIR PROPRIETORS RESIDING IN S EVALIA IN LAST 10 YEARS. BANK ACCOUNT OF M/S SHALIN CORPORATION WAS INTRODUCED BY SHRI ATUL J. PATEL. ON BEING EXAMINED ON OATH SHRI PATEL INFORMED THAT HE INTRODUCED THE PROPRIETOR OF M/S SHALIN CORPORATION ON THE DIRECTION OF SHRI. IBRAHIMBHAI VORA. HE FURTHER STATED THAT THIS PARTY WAS NEITHER LIVING I N SEVALIA NOR DOING ANY BUSINESS THERE FOR THE LAST 10 YEARS. AS THERE WERE DIFFERENT ADDRESSES ON THE ACCOUNT OPENING FORM, THE INSPECTOR OF THE AO VISIT ED THOSE ADDRESSES AND GATHERED THAT NEITHER THE FIRMS EXISTED ON THE GIVE N ADDRESSES NOR WERE THE PROPRIETORS AVAILABLE AT THOSE ADDRESSES AT ANY TIM E DURING LAST 10 YEARS. F. ON BEING CONFRONTED WITH THESE FACTS, THE APPELL ANT CLAIMED THAT THE ADDRESSES WERE GIVEN BY IT ON THE BASIS OF INFORMAT ION AND RECORDS AVAILABLE WITH IT AND THAT IT WAS NOT AWARE OF THE PRESENT AD DRESSES OF THE PARTIES. HOWEVER, THE APPELLANT FAILED TO PRODUCE ANY RECORD ON THE BASIS OF WHICH THIS INFORMATION WAS GIVEN BY IT. THUS, THE APPELLANT FA ILED TO PROVE THE BONA FIDES OF THE INFORMATION SUPPLIED BY IT. G. IT WAS ALSO OBSERVED BY THE AO THAT THE SIGNATUR ES ON THE CONFIRMATION FILED BY THE APPELLANT WERE DIFFERENT FROM THOSE IN THE A CCOUNT OPENING FORM. THE AO FURTHER OBSERVED THAT PAYMENTS MADE BY THE APPEL LANT WERE WITHDRAWN IN ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 6 - CASH THROUGH SELF CHEQUES ISSUED BY THOSE PARTIES A ND ONLY ONE PERSON WAS WITHDRAWING CASH FROM ALL THESE BANK ACCOUNTS. IT W AS ALSO OBSERVED THAT THE PERSON WITHDRAWING CASH WAS DIFFERENT FROM THE ACCO UNT HOLDERS. H. THE APPELLANT FAILED TO PRODUCE ANY OF THE PARTI ES FOR EXAMINATION. DURING THE COURSE OF PROCEEDINGS U/S 143(2)R.W.S.25 4 OF THE IT ACT, THE AO ONCE AGAIN GAVE THE APPELLANT AND OPPORTUNITY TO PR ODUCE THESE PARTIES FOR EXAMINATION, FURNISH REASONS FOR DECLINE IN GROSS P ROFIT AND GIVE THE WORKING OF GROSS PROFIT AS DIRECTED BY HONOURABLE TRIBUNAL. HO WEVER, THE APPELLANT FAILED TO FURNISH ANY INFORMATION WHICH COULD HAVE SUPPORT ED ITS CASE. SEPARATE GROSS PROFIT STATEMENTS FOR SALE OF RUBBLE AND GRIT WERE NOT PROVIDED. THE AO TRIED TO COLLECT SOME MORE INFORMATION FROM SALES TAX AUTHOR ITIES AS WELL AS THE BANK. HOWEVER, THE ISSUE BEING VERY OLD NO FURTHER INFORM ATION COULD BE PROVIDED BY THEM. IN VIEW OF THESE FACTS, THE AO ONCE AGAIN MAD E THE ADDITION OF RS.68,55,330/- TO THE TOTAL INCOME OF THE APPELLANT TOWARDS BOGUS PURCHASES. 4.2 IT CAN BE SEEN FROM THE ABOVE SUMMARY THAT THE APPELLANT HAS TOTALLY FAILED TO DISCHARGE THE ONUS CAST UPON IT BY THE HO NOURABLE TRIBUNAL. THE AO HAS TRIED TO COLLECT FURTHER INFORMATION AS DIRECTE D BY HONOURABLE TRIBUNAL, HOWEVER, HE DID NOT SUCCEED. UNDER THESE CIRCUMSTAN CES, THE ISSUE IS TO BE DECIDED ON THE BASIS OF MATERIAL ON RECORD AT THE T IME OF MAKING ORIGINAL ASSESSMENT. IT HAS TO BE REMEMBERED THAT THE APPELL ANT IS ENGAGED IN THE MINING OF RUBBLES AND THE ILLEGAL MINING IS RAMPANT . THEREFORE, THE FACT THAT A CERTAIN QUANTITY OF MATERIAL WAS SOLD BY THE APPELL ANT OVER AND ABOVE THE QUANTITY CLAIMED TO BE MINED BY IT, DOES NOT AUTOMA TICALLY PROVE THAT THE MATERIAL WAS PURCHASED BY IT FROM SOMEBODY. T HE FACT OF PURCHASE OF THIS SURPLUS MATERIAL HAS TO BE ESTABLISHED BY THE APPELLANT BY PRODUCING NECESSARY EVIDENCES. THE APPELLANT HAS FAILED MISERABLY IN PROVING THIS CLAIM. THERE IS NEITHER ANY EVIDENCE O F TRANSPORTATION OF MATERIAL NOR THE SELLERS ARE IN EXISTENCE. ALL PAYMENTS MADE BY THE APPELLANT HAVE BEEN WITHDRAWN IN CASH BY A SINGLE PERSON WHICH IS DIFF ERENT FROM SO CALLED SELLERS. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPE LLANT WAS ASKED TO FILE DETAILS OF ROYALTY EXPENSES. IT IS SEEN FROM THE DE TAILS THAT IT IS NOT POSSIBLE TO FIND ANY CORRELATION BETWEEN ROYALTY PAID BY THE AP PELLANT AND RUBBLE EXCAVATION SHOWN BY THE APPELLANT. ROYALTY APPEARS TO HAVE BEEN PAID ON LUMP-SUM BASIS. RATES OF ROYALTY PAYABLE BY THE APP ELLANT WERE CALLED FROM THE ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 7 - DISTRICT MINING OFFICER AS THE APPELLANT COULD NOT FURNISH THE SAME. AS PER THE INFORMATION GIVEN BY THE DISTRICT MINING OFFICER TH E RATES OF ROYALTY FOR THE RELEVANT FINANCIAL YEAR WERE RS.20 PER TONNE AND 1 M 3 OF RUBBLE TYPICALLY WEIGHS 4 TONNES. THUS RATES OF ROYALTY DURING THE R ELEVANT PERIOD WERE RS.80 PER CUBIC METRE. TOTAL ROYALTY PAID BY THE APPELLAN T DURING THE YEAR IS RS.10,29,600/-. THUS THE APPELLANT COULD HAVE EXCA VATED 12870 M 3 OF RUBBLE DURING THE YEAR, HOWEVER, IT IS SHOWING PRODUCTION OF 87165 M 3 OF RUBBLE. THIS IN ITSELF SHOWS ILLEGAL EXCAVATION BY THE APPELLANT . CONSIDERING THESE FACTS FURTHER ILLEGAL EXCAVATION OF 71873.51 CUBIC METRES (QUANTITY CLAIMED TO BE PURCHASED BY THE APPELLANT') BY THE APPELLANT CANNO T BE TOTALLY RULED OUT. THE APPELLANT HAS FAILED TO PRODUCE THE PARTIES FRO M WHICH THE SO CALLED PURCHASES HAVE BEEN MADE AND ENQUIRIES CONDUCTED BY THE AO SUGGEST THAT EXISTENCE OF THESE PARTIES IS DOUBTFUL. THE APPELLA NT HAS ALSO FAILED TO PROVE THE BONA FIDES OF DETAILS SUBMITTED BY IT IN RESPECT OF THESE PARTIES. NO EVIDENCES REGARDING TRANSPORTATION ETC. HAVE BEEN PRODUCED EI THER. THE APPELLANT HAS ALSO FAILED TO GIVE ANY REASONS F OR DECLINE IN GROSS PROFIT WITH NECESSARY EVIDENCES. UNDER THESE CIRCUMSTANCES, I AM INCLINED TO AGREE W ITH THE CONCLUSION DRAWN BY THE AO THAT PURCHASES AMOUNTING TO RS.68,55,330/ - SHOWN BY THE APPELLANT ARE BOGUS PURCHASES AIMED AT INFLATING EXPENSES AND DIVERTING PROFIT. ADDITION OF RS.68,55,330/- MADE BY THE AO IS HEREBY CONFIRME D. THE CIT(A), THUS, DECLINED TO GRANT RELIEF TO THE A SSESSEE. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE PREFERRED APPEAL ONCE AGAIN BEFORE THE ITAT. 6. AT THE OUTSET, THE LD.AR FOR THE ASSESSEE SUBMIT TED THAT THE ISSUE CONCERNS ADDITION ON ACCOUNT OF BOGUS PURCHASES WHE RE IN THE LIGHT OF ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 8 - SEVERAL JUDICIAL PRECEDENTS, A CERTAIN REASONABLE E STIMATE TOWARDS GPS IS TYPICALLY MADE. FOR THIS PROPOSITION, THE LD.AR RE LIED UPON THE DECISION OF THE CO-ORDINATE BENCH OF ITAT IN THE CASE OF SHR I TOTARAM B.SHARMA VS. ITO IN ITA NOS.2239 & 2291/AHD/2004 WHICH DECIS ION WAS ENDORSED BY THE HONBLE GUJARAT HIGH COURT IN TAX A PPEAL NOS.1344 & 1355 OF 2008. SIMILAR ESTIMATION OF AROUND 25% OF THE TOTAL ALLEGED BOGUS PURCHASES WAS CONTENDED TO BE CONFIRMED BY TH E HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. KISHOR AMRUTLAL P ATEL IN TAX APPEAL NO.679 OF 2010 ORDER DATED 16/08/2011. THE LD.AR NEXT RELIED UPON THE DECISION RENDERED IN THE CASE OF CIT VS. GUJARA T AMBUJA EXPORT LTD. (2014) 43 TAXMANN.COM 244 (GUJ.) WHEREIN 25% OF THE ALLEGED BOGUS PURCHASES WERE ENDORSED BY THE HONBLE GUJARAT HIGH COURT. THE LD.AR ACCORDINGLY SUBMITTED THAT A FAIR ESTIMATE HA VING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE IS AT BEST CALL ED FOR AND THE ENTIRE AMOUNT TOWARDS BOGUS PURCHASES IS NOT SUSTAINABLE I N LAW. THE LD.AR CONTENDED THAT THE ASSESSEE HAS EFFECTED PURCHASE O F CERTAIN QUANTITIES OF RUBBLE FROM VARIOUS PARTIES AS NOTED IN THE ORDER O F THE CIT(A) AND PAYMENT TO THESE PARTIES WERE MADE BY CROSSED ACCOU NT PAYEE CHEQUE ONLY. THE PARTIES COULD NOT BE LOCATED DUE TO LONG TIME GAP. THE LD.AR THEREAFTER ADVERTED OUR ATTENTION TO THE AVERMENTS MADE BY THE CIT(A) IN PARA NO.4.2 OF ITS ORDER TO THE EFFECT THAT THERE I S A CASE FOR ILLEGAL EXCAVATION BY THE ASSESSEE OF CERTAIN QUANTITY CLAI MED TO HAVE BEEN PURCHASED BY THE ASSESSEE. THE LD.AR TOOK STRONG E XCEPTION TO THE ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 9 - AFORESAID OBSERVATIONS OF THE CIT(A) AND SUBMITTED THAT SUCH OBSERVATIONS ARE BASED ON SURMISES WITHOUT GIVING A NY OPPORTUNITY TO THE ASSESSEE IN THIS REGARD. THE LD.AR SUBMITTED THAT THE OUTRIGHT DISALLOWANCE OF ENTIRE PURCHASES AMOUNT IS THUS UNC ALLED FOR AND ACCORDINGLY SOUGHT SUITABLE RELIEF IN THE MATTER. 7. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE AS SESSMENT ORDER PASSED IN PURSUANCE OF THE DIRECTION OF THE ITAT IN FIRST ROUND OF PROCEEDINGS AND CONSEQUENT APPELLATE ORDER OF THE C IT(A). THE LD.DR SUBMITTED THAT THE FACTS INVOLVED IN THE PRESENT CA SE ARE GROSS AND ALL POSSIBLE ENQUIRIES WERE MADE BY THE AO ON ITS OWN. THE ASSESSEE HAS FAILED TO DISCHARGE ONUS WHICH RESTED UPON IT TO JU STIFY THE BONAFIDES OF THE PURCHASES. THE LD.DR ACCORDINGLY SUBMITTED THA T IN THE LIGHT OF FACTS INVOLVED, NO OTHER INFERENCE THAN WHAT HAS BEEN DRA WN BY THE CIT(A) CAN BE TAKEN. HE THEREFORE URGED THAT NO INTERFERENCE WITH THE ORDER OF THE CIT(A) IS CALLED FOR. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL THE CAS E-LAWS CITED AND OTHER FACTS AND EVIDENCES REFERRED TO IN THE COURSE OF HE ARING. THE BROADER ISSUE INVOLVED IN THE PRESENT CASE IS WHETHER THE P URCHASES AGGREGATING TO RS.68,55,330/- FROM FIVE PARTIES CAN BE TAKEN AS BO NAFIDES PURCHASES AND ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 10 - IF NOT, WHETHER ESTIMATION TOWARDS POSSIBLE DISALL OWANCE ON TOTAL VALUE OF ALLEGED PURCHASES AT CERTAIN PERCENTAGE IS PERMI SSIBLE OR NOT. 8.1. WE NOTE THAT THE ASSESSEE IS ENGAGED IN MININ G AND CONSEQUENT SALE OF CRUSHED STONES AGGREGATES, ETC. VIZ. RUBBLE KAPC HI, GRIT, ETC. THE ASSESSEE CLAIMS TO HAVE EXCAVATED 87165.49 M OF RUBBLE AND ALSO CLAIMED TO HAVE PURCHASED 71873.51 CUBIC METERS FR OM FIVE PARTIES WHICH HAVE BEEN UTILIZED FOR ITS SALE REQUIREMENT. THE CASE OF THE REVENUE IS THAT THE PURCHASE MADE FROM THESE FIVE P ARTIES ARE BOGUS AND HAS NOT HAPPENED AT ALL. AFTER ANALYSIS OF THE ROYA LTY PAYMENT BY THE ASSESSEE OF RS.10,29,600/-, THE CIT(A) ATTEMPTED TO DEMONSTRATE THAT THE SUPPLY TOWARDS SALES DECLARED IS POSSIBLY OUT OF EX CAVATION FROM ITS OWNMINING ACTIVITY WHICH HAS NOT BEEN REPORTED IN B OOKS BUT WAS REPLENISHED BY BOGUS PURCHASE BILLS INTRODUCED TO S UPPORT THE CORRESPONDING SALES. 8.2. WE FIND THAT IN SUPPORT OF THE PURCHASE MADE, THE REVENUE HAS DISCOVERED STARTLING FEATURES. THE AO HAS MADE A T HREADBARE ENQUIRY. NONE OF THE FIVE PARTIES CAME FORWARD TO ADMIT THE SUPPLY IN SPITE OF NOTICES ISSUED UNDER S.131/136 OF THE ACT. THE PA YMENTS MADE AGAINST PURCHASES HAVE BEEN FOUND TO BE IMMEDIATELY WITHDRA WN IN CASH. THE ACCOUNT CONFIRMATION FURNISHED BY THE ASSESSEE WAS ALSO FOUND TO BE MARRED WITH VARIATION IN THE SIGNATURE QUA SPECIMEN SIGNATURE AVAILABLE ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 11 - IN THE ACCOUNT OPENING FORM WITH THE BANK. THE BAN K ACCOUNTS OF FOUR OUT OF FIVE PARTIES HAVE BEEN INTRODUCED BY ONE PER SON, NAMELY, SHRI IBRAHIMBHAI VORA. ON ENQUIRY, THE SAID PERSON EXP RESSED INABILITY TO RECOGNIZE ANY OF THE FOUR PARTIES. NONE OF THE SUP PLIER WAS FOUND TO BE DOING BUSINESS AT THE PURPORTED PLACE OF WORK IN LA ST TEN YEARS. THE EVIDENCE REGARDING TRANSPORTATION OF THE SUPPLY WAS ALSO NOT FURNISHED. THE ASSESSEE HAS FAILED TO ANSWER ANY OF THESE ABNO RMAL FEATURES AND SOUGHT TO SHIFT ENTIRE ONUS ON THE REVENUE TO DISPR OVE THE SUPPLY. 8.3. IN ESSENCE, EXCEPT FOR THE SO-CALLED BILL OF THE SUPPLIER AND PAYMENT TO THE SUPPLIER BY WAY OF CHEQUE (WHICH IS IMMEDIAT ELY WITHDRAWN IN CASH), THERE IS NOTHING ON RECORD TO LEND ANY CRED ENCE TO THE SUPPLY. THE ASSESSEE HAS FAILED TO PRODUCE THE SUPPLIER BEFORE THE AO AS DIRECTED IN THE EARLIER ORDER OF THE ITAT. THE ASSESSEE HAS DO NE NOTHING TO SUPPORT THE PURCHASE ENTRIES RECORDED IN THE BOOKS OF ACCOU NTS WHICH HAS DIRECT IMPACT ON THE TAXABLE INCOME. WE FIND THAT THE DEP ARTMENT HAS MADE EXTENSIVE ENQUIRY OF ALL SORT ON ITS PART TO ASCERT AIN THE BONAFIDES OR OTHERWISE OF THE PURCHASES. THESE ENQUIRIES GIVE UNMISTAKABLE IMPRESSION THAT THE SO-CALLED PURCHASES ARE NON-EXI STENT. THIS HAS RESULTED IN DISTORTION IN BOOK RESULTS AND UNDER RE PORTING OF TAXABLE INCOME. ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 12 - 8.4. SIGNIFICANTLY, THE ASSESSEE ITSELF IS ENGAGE D IN EXCAVATION OF MINES. THE EXCAVATED CRUSHED STONES, AGGREGATES, ETC. ARE ULTIMATELY SOLD. WE DO NOT FIND ANY EXPLANATION WHATSOEVER FROM THE ASS ESSEE AS TO WHAT ACTUATED THEM TO INDULGE PURCHASES OF RUBBLES WHICH WERE BEING EXCAVATED BY THEM ON THEIR OWN. NOT A SINGLE PURCH ASE OF RUBBLE HAVE BEEN ESTABLISHED TO BE GENUINE. ON THE OTHER HAND, THE ENQUIRY MADE BY THE DEPARTMENT UNRAVELED AN ARTIFICIAL FACADE WHERE BY BOGUS PURCHASES INTRODUCED HAVE COME OUT IN OPEN. THE CIT(A) IN TH E CONTEXT OF THE BUSINESS OF THE ASSESSEE NOTED THAT THE ASSESSEE IS ENGAGED IN THE MINING OF RUBBLES WHERE ILLEGAL MINING IS A POSSIBILITY. IN THE CONTEXTUAL BACKGROUND OF THE BUSINESS OF THE ASSESSEE, THE CIT (A) OBSERVED THE ASSESSEE ITSELF HAS GIVEN THE COLOUR OF PURCHASE TO ITS OWN EXCAVATED GOODS. TO LEND STRENGTH TO THIS THEORY, THE CIT(A ) HAS OBJECTIVELY ANALYZED THE ROYALTY PAYMENT. STRONG EXCEPTIONS HAVE BEEN TAKEN ON BEHALF OF THE ASSESSEE FOR SUCH OBSERVATIONS ON ALL EGED ILLEGAL/UNREPORTED EXCAVATION OBSERVED BY THE CIT(A). HOWEVER, IN THE SAME VAIN, WHILE APPRECIATING THE PLEA ON BEHALF OF THE ASSESSEE THA T CIT(A) HAS ARGUABLY NOT ACTED FAIRLY IN MAKING SUCH OBSERVATIONS OF UNR EPORTED EXCAVATION WITHOUT GRANTING AN OPPORTUNITY TO REBUT THE SAME, WE FIND THAT THE ASSESSEE HAS NOT PLACED ANY MATERIAL ON RECORD BEFO RE US TO DISPLACE THE FACTUAL OBSERVATIONS OF THE CIT(A) ON ESTIMATED QUA NTUM OF EXCAVATION BASED ON ROYALTY PAYMENT. THERE IS NOTHING ON RECO RD TO SUGGEST ANY CO- RELATION BETWEEN THE AMOUNT OF ROYALTY PAYMENT AND CORRESPONDING ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 13 - EXCAVATION OF RUBBLES AS CLAIMED. ON THE CONTRARY, THE CIT(A) HAS COME OUT WITH SOME FACTS AND FIGURES TO ESTABLISH LIKELI HOOD OF ADDITIONAL UNREPORTED EXCAVATION. THEREFORE, MERE BALD OBJECT ION BY THE ASSESSEE WITHOUT ANY DEMONSTRATIVE ACTION IN REBUTTAL DO NOT IMPEL US TO VIEW IT DIFFERENTLY THAN WHAT HAS BEEN OBSERVED BY THE CIT( A). 8.5. WE BEAR IN MIND THE PLEA RAISED ON BEHALF OF T HE ASSESSEE THAT TYPICALLY A CERTAIN PERCENTAGE OF SUCH PURCHASES C AN BE TAKEN AS ESTIMATED DISALLOWANCE UNDER THESE CIRCUMSTANCES AS SUPPORTED BY VARIOUS JUDICIAL PRECEDENTS. HOWEVER, WE DO NOT F IND MERIT IN SUCH PLEA HAVING REGARD TO PECULIAR FACTS OF THIS CASE. THE POINT UNDERPINNING THE PRESENT CASE IS THAT IT IS NOT MERELY ABSENCE OF WHEREABOUTS OF SUPPLIER BUT THE ABSENCE OF SUPPLY ITSELF. IT IS NOT A CASE WHERE SUPPLIERS ARE NOT IDENTIFIABLE BUT THE SUPPLY IS IDENTIFIABLE AND THE RE IS MERELY VARIATION IN THE COST INVOLVED IN THE SUPPLY. IT IS A CASE WHER E THE PURCHASES HAVE NOT TAKEN PLACE AT ALL EITHER FROM THESE FIVE PARTIES IN QUESTION OR FROM ANY OTHER PARTY. IT IS A CASE WHERE THE SALES CLAIMED TO HAVE TAKEN PLACE ARE OUT OF UNREPORTED EXCAVATION AS OBSERVED BY THE CIT (A) WITH WHICH WE AGREE FOR THE REASONS NOTED EARLIER. THE PURCHASES HAVE BEEN FOUND TO BE FICTITIOUS AND IN THE WAKE OF THE FACT THAT THE ASS ESSEE ITSELF IS ENGAGED IN THE EXCAVATION, THE OBSERVATION OF THE REVENUE THA T THE CORRESPONDING SALES HAVE BEEN SOURCED OUT OF UNREPORTED EXCAVATIO N CANNOT BE OUTRIGHTLY REJECTED. AS NOTED, THE ASSESSEE HAS NO T DONE ANYTHING TO DISLODGE THE OBSERVATION OF THE CIT(A) IN THIS REGA RD EXCEPT CRIBBING ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 14 - ABOUT THE INCORRECTNESS OF THE OBSERVATIONS. ON T HE OTHER HAND, CIT(A) HAS OBTAINED INFORMATION GIVEN FROM DISTRICT MINING OFFICER TO CALCULATE THE POSSIBLE PRODUCTION AGAINST THE ROYALTY PAID. THEREFORE, THE OBSERVATION OF THE CIT(A) CANNOT BE SAID TO BE IN V ACUUM. THE ASSESSEE HAS NOT PLACED ANY MATERIAL IN REBUTTAL TO SUCH OBS ERVATIONS. 8.6. WE HAVE PERUSED THE JUDICIAL PRECEDENTS CITED . THE JUDICIAL PRECEDENTS CITED ON BEHALF OF THE ASSESSEE ARE IN A N ALTOGETHER DIFFERENT FACT SITUATION AND THUS HAS NO APPLICATION IN THESE PECULIAR FACTS. THE COMMON THREAD IN ALL THESE DECISIONS ARE THAT THE S UPPLY ITSELF WAS NOT IN QUESTION. THE VERACITY OF SUPPLIER ALONE WAS IN QU ESTION. IN THESE FACTS, THE CONCLUSION WAS DRAWN FOR SOME FAIR ESTIMATION O F DISALLOWANCE OWING TO POSSIBILITY OF MANEUVERING IN VALUE OF PURCHASES SHOWN. AS NOTED IN THE PRESENT CASE BEFORE US, THE REVENUE HAS ALLE GED ABSENCE OF PURCHASE AND SUCCESSFULLY. THUS, SUGGESTION MADE O N BEHALF OF THE ASSESSEE FOR ESTIMATION OF DISALLOWANCE COMPONENT I N OUR VIEW DOES NOT MERIT ACCEPTANCE. THE ASSESSEE HAS ALLEGED THAT TH E REVENUE HAS NOT DISCHARGED THE ONUS CAST UPON IT WHILE DISPROVING T HE PURCHASES. WE FIND NO RATIONALE IN SUCH PLEA. AS NOTED IN THE EARLIER PARAS, THE REVENUE HAS MADE EXTENSIVE ENQUIRY AND UNEARTHED PRESENCE OF FI CTITIOUS PURCHASES WITH A VIEW TO DENY THE REVENUE OF ITS LEGITIMATE T AXES. THE REVENUE HAVING SUCCESSFULLY IMPEACHED THE GENUINENESS OF PU RCHASES DECLARED AND ALSO SIMULTANEOUSLY CAME OUT WITH EXPLANATION F OR SOURCE OF SUPPLY ITA NO.361/AHD/ 2013 AMAR MINING COMPANY VS. ACIT ASST.YEAR 1998-99 - 15 - WHICH IS PLAUSIBLE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A). TO SUM UP IN THE TOTALITY OF THE CIRCUMST ANCES, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 18 / 0 5 /201 7 SD/- SD/- () ( ) (RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 18/ 05 /2017 3..),.)../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &#% / THE RESPONDENT. 3. 456+ 7+ / CONCERNED CIT 4. 7+ ( ) / THE CIT(A)-V, BARODA 5. 89:+)56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<* / GUARD FILE. / BY ORDER, &8++ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 9.5.17(DICTATION-PAD 28-P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.5.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.18.5.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 18.5.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER