Appeal details
Counselvise Citation
[2022] 106 COUNSELVISE.COM (IT) 2566 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 1 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-07-2022
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
G
Assessment Year
2010-2011
Appeal Filed On
09-06-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI PAVAN KUMAR GADALE, JM ITA No. 4152 to 4154 /Mum/2019 (For A.Ys. 2010–11, 2009–10 & 2011–12 respectively) DCIT Ci rc le–15(3 )(1 ) Room no. 451, 4 th Floo r, Aaya kar Bha van, M.K. Road, Mum bai-400 020 Vs. M/s Sanjivani Parenteral Ltd. 205, P.N. Kothari Industrial Estate, L.B.S Marg, Bhandup (W), Mumbai-400 078 (Appellant) (Respondent) PAN No. AAACCS 2369 B CO No. 57/Mum/2020 (Arising out of ITA no. 4152/Mum/2019 for A.Y. 2010–11) CO No. 58/Mum/2020 (Arising out of ITA no. 4153/Mum/2019 for A.Y. 2009–10) CO No. 59/Mum/2020 (Arising out of ITA no. 4154/Mum/2019 for A.Y. 2011–12) M/s Sanjivani Parenteral Ltd. 205, P.N. Kothari Industrial Estate, L.B.S Marg, Bhandup (W), Mumbai-400 078 Vs. DCIT Ci rc le–15(3 )(1 ) Room no. 451, 4 th Floo r, Aaya kar Bha van, M.K. Road, Mum bai-400 020 (Appellant) (Respondent) Assessee by : Shri Mehul Shah, AR Revenue by : Shri Hemant Kumar Chimanlal Leava, CIT DR Date of hearing: 05.07.2022 Date of pronouncement : 27.07.2022 O R D E R PER BENCH: 01. These are the three appeals filed by the learned Dy. Commissioner of Income Tax, (the learned Assessing Officer) Circle 15(3)(1), Mumbai in case of Sanjivani Page | 2 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 Parenteral Ltd. (assessee/ appellant) for A.Ys. 2009-10, 2010-11 & 11-12. For all these three years, assessee also filed cross objection. The common issues are involved in this appeal, the parties argued them together and therefore, these are disposed off by this common order. 02. For A.Y. 2009-10, the learned Assessing Officer filed appeal in ITA No. 4153/Mum/2019 against the order passed by Commissioner of Income-tax (Appeals)-24, Mumbai [the learned CIT (A)], dated 4 th March, 2019, wherein the appeal filed by the assessee against the order passed under Section 143(3) read with section 147 of the Income-tax Act, 1961 (the Act) by the Dy. Commissioner of Income Tax, was challenged and learned CIT (A) partly allowed the appeal of the assessee. Therefore, the learned Assessing Officer is aggrieved with the order of the learned CIT (A) in this ITA and assessee has filed cross objection challenging the part of additions confirmed. 03. Revenue in ITA no. 4153/Mum/2019 for A.Y. 09–10 has raised following grounds of appeal:– “1. On the facts and in the circumstances of the case and in Law, the Ld.CIT(A), Mumbai erred in estimating the gross profit at product percentage of 8.75% on circular transactions and directing the AO to restrict the addition to Rs.1,62,531/- as against Rs. 16,48,30,000/- stating that, "whilst the assessee has indulged itself into circular trading as was accepted before the survey team, without giving any findings as to how 8.75% GP can be taken since the Page | 3 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 corresponding expenditures have already been claimed in the P&L account and further erred in ignoring the statement recorded of Mr. Ashwin Khemka, Managing Director of the assessee company that the purchases made against the circular trading activities were mere paper entities, and that these fictitious bills/vouchers are meticulously maintained to avoid fault finding. 2. On the facts and circumstances of the case and in Law, the Ld.CIT(A), Mumbai erred in estimating the gross profit at product percentage of 8.75% on circular transactions and directing the AO to restrict the addition to Rs. 1,62,531/- as against Rs. 16,48,30,000/- without taking the ratio of judgement of the Hon'ble Supreme Court in case of N.K. Proteins Ltd. (2017-TIOL-23-SC-IT) in SLP (C) CC No.769 of 2017 dated 16.01.2017. 3. On the facts and circumstances of the cases and in Law, the Ld.CIT(A) erred in deleting the addition of Rs. 1,18,00,000/- made by the AO on account of unexplained cash expenditure, without appreciating that within 20 days of the agreement the share price had shot up by approximately 50%, and thus, it is clear that the company made unexplained expenditure to the tune of Rs. 1,18,00,000/- for manipulation of share price and the same was disallowed as per the provisions of section 69C of the I.T. Act, 1961. Page | 4 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 4. The appellant prays that the order of CIT (A) on the above ground be set aside and that of the Assessing Officer be restored." 5. The appellant craves leave to add, amend or alter any grounds or add a new ground, which may be necessary." 04. Assessee in CO no. 58/Mum/2020 for A.Y. 09–10 has raised following grounds of appeal:- “1. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in partly upholding addition of Rs. 162,531 estimating benchmark gross profit of 8.75% against declared gross profit of 8.66% out of addition made by the Assessing Officer amounting to Rs. 164,830,000 being 100% of purchases involved in circular trading without appreciating that all material facts and evidences with respect to purchase and sale of goods were placed to prove the circular transactions during the course of reassessment, and without appreciating that, there cannot be sale without corresponding purchases, and without considering that he was expected to tax the income flowing from the circular trading transaction, and not the transaction itself.” 05. The brief fact of the case shows that assessee is a company engaged in pharmaceutical formulation business. It filed its return of income on 29 th September, 2009 declaring total income of ₹4,30,02,030/-. The assessment Page | 5 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 under Section 143(3) of the Act was completed on 29 th December, 2011 at a total income of ₹4,30,67,990/-. 06. Subsequently, case of assessee was reopened under Section 147 of the Act for the reason that income to the extent of ₹16,48,30,000/- being bogus purchases and ₹1,18,00,000/- being unexplained expenditure has escaped assessment. Accordingly, notice under Section 148 of the Act was issued on 29 th March, 2016. Assessee submitted that on 26 th April, 2016 that original return filed may be treated as return in response to the above notice. 07. In this case, a survey under Section 133A of the Act was carried out, wherein it was found that assessee company has obtained bogus purchases and accommodation bills of ₹16,48,30,000/- from Dr. Daston Labs Ltd. and further there is an unexplained cash expenditure of ₹1,18,00,000/- for manipulation of share price. The learned Assessing Officer issued show cause on 18 th November, 2016 and after the reply of the assessee company, the learned Assessing Officer made an addition of ₹16,48,30,000/- on account of bogus purchases and further ₹1,18,00,000/- for manipulation of share prices under Section 69C of the Act, the total income of the assessee was assessed at ₹21,96,97,990/-. The reason for making such an addition are in paragraph no. 4.2 to 5.3 of the assessment order as under:- “4.2 Accordingly, show cause notice was issued to the assessee company on 18.11.2016, the relevant Page | 6 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 extract of which is reproduced as under for ready reference: 2. In the survey report prepared by the ADIT, Unit 2(2), Mumbai, it has been concluded that you have taken accommodation entry of purchases to the extent of Rs.30,35,32,600/- from M/s.Dr. Datson Labs Limited (DDLL). The said conclusion was drawn after collection of evidences, documents and particularly sworn in statement of Shri Kannan K. Vishwanath, Managing Director of DDLL u/s.131 of the I.T. Act, 1961 on 23.08.2014. Further statement of Shri Ashwani A. Khemka, Chairman cum Managing Director of your company on the date of survey i.e. 22.08.2014 and findings recorded during the survey and post-survey proceedings establishes the same. The yearwise bifurcation of bogus purchases is as under: - FY. in which accommodation entry was Amount in involved (In Rs.) 2008-09 16,48,30,000 2009-10 12,12,89,600 2010-11 1,74,13,000 Total 30,35,32,600 2.1 The above conclusion that you have booked bogus purchases in your books also get strengthened from the various statements recorded during survey proceedings in your case at your office Page | 7 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 and at Rabale factory. Please note when the authorized officers of the survey team asked Mr. Ashwani Khemka, to substantiate these purchases shown to have been made from DDLL, he admitted to the assessee company having entered into accommodation entry of purchase bills from DDLL for which no physical delivery was received, during his sworn statement recorded during the course of survey action. Further, you have failed to substantiate your plea that the said bogus purchases were part of turnover purposes only as corresponding bogus sales had been affected. However, no cogent documentary evidences in support of this claim were furnished. Further, you have failed to provide bill-to-bill mapping of such transactions despite considerable time interval of almost 17 months from the survey action before the ADIT (Inv.), Unit-2(2), Mumbai 2.3 During the post-survey proceedings, summons u/s.131 of the IT.Act were issued to M/s.Hercules Chem and M/s.Odyssey Chemicals to verify the sales made by the assessee company to them. However, the said parties could not be traced at the given address. Therefore, the contention of the assessee that the purchases from M/s.Dr. Datson Labs Page | 8 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 Limited were a part of circular trading activity were not substantiated by the assessee. 2.4 In view of the above, you are hrereby show cause as to why the said bogus purchases as tabulated above should not be disallowed and added to the total income of respective assessment years in your case. "........... 3. During the course of survey proceedings at 205, P.N.Kothari Industrial Estate, LBS Marg, Bhandup(West), Mumbai-400078, certain loose papers were numbered 1 to 4 and impounded as Annexure A-1. While explaining the contents of the said pages, Mr. Ashwani Khemka in his sworn statement stated that page No. 1 and 2 contains details of understanding had with one Mr. Bipin Shah, who had approached him in the year 2008 for helping the assessee to manipulate the share price of his shares in lieu of consideration, however the same did not go through. 3.4 However, the ADIT in survey report brought out that there is no truth in the contention of Mr.Ashwani Khemka. He had observed that the share price movement of the assessee company during the months September, 2008 to Page | 9 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 August, 2009, the period for which there was an alleged agreement between Mr. Ashwani Khemka and Mr.Bipin Shah for manipulation of share price, the share price of assessee company was in the range of Rs. 10 to Rs.31.5. Further, it is seen that the share price had shot up from a low of Rs.21.9 on 08.09.2008 to a high of 31.5 on 25.09.2008. Thus, within 20 days of the agreement the share price had shot up by approximately 50%. 3.2 In view of the above, you are hereby show cause as to why an amount of Rs. 1,18,00,000/- should not be treated as unexplained expenditure for A.Y.2009-10 on account of payment made for manipulation of share price of the assessee company as discussed above............ 4.3 The Authorized Representative of the assessee, Shri Amit Doshi, Chartered Accountant filed submission dated 06.12.2016 in respect of the issue raised. The relevant portion of said reply is reproduced herein under: "Purchases from M/s. Dr.Datsun Labs Ltd. It is alleged in your notice that purchases of Rs.30,35,32,600/- from the said party is accommodation entry. Our client strongly refute Page | 10 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 the said charge and have following submission to make: 1) During the survey carried out at our premises by the ADIT, Unit 2(2), Mumbai all the details were submitted and the corresponding sales were also confirmed. Contention of our client genuineness of the said transaction were also accepted by the visiting party. 2) If the purchases, as alleged are considered, then sale of the material is also under question. Logically the sale should also be removed. Also, if purchases are considered as accommodation entries, no sale can take place. The detailed chart showing movement of material on purchases to sale was also on record by the survey party. 3) Our client strongly refute the contention/statement by Shri Kannan K. Vishwanath, Managing Director. The said statement must have been given under duress and would like to request you to give our client an opportunity to cross examine him on the said transaction before you. At this stage we would like to re iterate that a copy of account duly signed and confirmed by them is also submitted in your office which confirms Page | 11 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 this transaction. In the light of above, it can be easily concluded that statement given by him is not correct and given by him is not correct and given under duress We are enclosing the said chart containing details of purchases and sales again for your verification with a request to re-confirm the same again with these parties." 4.5 The above submission of the assessee is duly considered, but not accepted for the following reasons: i. It needs to be mentioned that during the course of statements recorded during survey, Shri Ashwani Khemka was asked to substantiate these purchases shown to have been made from DDLL, he admitted that the assessee company having entered into accommodation entry of purchase bills from DDLL for which no physical delivery was received. However, Shri Ashwani Khemka failed to substantiate his plea that the said bogus purchases were part of turnover purposes only as corresponding bogus sales had been affected and no cogent documentary evidences in support of this claim were furnished. It may also be noted that vide question No.14, Mr.Ashwin Khemka, Managing Page | 12 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 Director of the assessee company was requested to state whether any bills/vouchers pertaining to the circular trading as stated by him are maintained in the office of the assessee company. In response, Mr.Ashwin Khemka reiterated the above deposition that the purchases made against the circular trading activities were mere paper entities for which no entry of these goods in inward register of the factory is maintained. Mr.Ashwin Khemka further stated that the bills and vouchers in respect of circular trading are sent to Rabale factory after necessary paperwork, however stated that these fictitious bills/vouchers are meticulously maintained to: avoid fault finding. However, bills and vouchers for circular trading were never produced. The relevant part of sworn statement of Ashwin Khemka is re-produced herein below for ready perusal: Q.14: Kindly state whether any bills/vouchers pertaining to this circular trading is being maintained in this office? Ans.: No, sir the bills and vouchers for circular trading are sent to Rabale factory after necessary paperwork. These fictitious bills/vouchers are meticulously maintained to avoid fault finding, however, these are only paper entities as Page | 13 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 mentioned in answer to Q.No.13. Since, these are transactions are trading transactions of paper entities, therefore, there is no entry of these goods in inward register of the factory. Apart from the above sworn statement of Mr.Ashwin Khemka, at the time of survey action at the different premises of the assessee company, statement of various key persons engaged in issuing purchase orders, material receipt, quality control units etc. have been recorded u/s.131 of the 1.T.Act. Such personnel of the assessee company in their sworn statements during the survey action have clearly admitted of having not received the purchase material from DDLL during F.Ys.2008-09 to 2010-11. Shri Mahendra Kalwankar, Head of Quality Assurance and Director of the company, was recorded u/s.131 of the Act at the business premises of the assessee company's manufacturing unitat R-40, TTC Rabale Industrial Estate, Navi Mumbai-400 701. Shri Mahendra Kalwankar is responsible for signing the purchase order issued by assessee company in respect of material purchases by assessee company at Rabale unit. During the survey action, vide Q.No.19, Shri Mahendra Kalwankar was requested to furnish the details of any Page | 14 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 purchase material received from DDLL. In response, Shri Mahendra Kalwankar stated that he did not remember any such party by name DDLL. Further, vide Q.No.20, shri Mahendra Kalwankar was shown the set of bills founds in the accounts department at Rabale unit regarding purchase of material from M/s.Anjaneya Biotech P. Ltd. for F.YS.2008-09 and 2009-10 containing the receiver's signature of SPL on the same. Accordingly, Shri Mahendra Kalwankar was requested to confirm whether any such material had ever been received at Rabale unit as stated in the said bills and whether any purchase order ever issued for such material. In response, Shri Mahendra Kalwankar stated that no such material had ever been received by SPL at Rabale unit. For the sake of ready reference, the scanned copy of the relevant portion of the question Nos. 19 & 20, and answer thereto of sworn statement of Shri Mahendra Kalwankar is as under : "Q.19 Are you aware of a purchase party called Anjaneya Biotech P. Ltd./Anjaneya Life Sciences Ltd./Datsons Labs Ltd.? If so, what is the material supplied by such party? Page | 15 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 Ans.: I don't remember any such party. Q.20 I am showing you a set of bills found in the accounts department at this unit pertaining to M/s.Anjaneya Biotech P. Ltd.(Vishwam, 8/B, Postal colony, chembur, Mumbai) for FY.2008-09 and 2009-10. Kindly confirm the same. They mention the delivery of material Quinine Sulphate, Quinine Bisulphate and Quiine HCL and addressed to SPL at its head office at Bhandup (W). There is no receiver's signature on the bills. Has such material ever been received here ? was any PO ever issued for such material. Ans. No, and no such material has been received here." Furthermore, the statement of Shri Vijay Soni, Accounts Manager of assessee company at Rabale Unit, was recorded u/s.131 of the Act. Vide question nos. 16,17,18 and 19 of the said sworn statement, Shri Vijay Soni was shown the bills and challans of DDLL and was requested to state whether the purchase material as indicated in the said bills had ever been received at the Rabale unit. In response, thereto, Mr. Vijay Soni stated that the said bills are sent to Rabale unit only for the purpose of accounting and the material as stated therein had never been Page | 16 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 received at the Rabale unit. Mr. Vijay Soni further deposed that as the goods are not received in the factory at Rabale, the standard procedure of purchase including documentation such delivery and tracking have not been sent to him from the head office of the assessee company. The scanned copy of the relevant portion of the questions No.16,17, 18 & 19, and answers thereto of sworn statement of Shri Vijay Soni is reproduced herein below: "Q.16 I am showing you the bills and challans of a purchase party called Anjaneya Biotech P. Ltd./Anjaneya Life Sciences Ltd. Are the purchases in the nature of raw material for manufacturing or trading? Ans: The purchases are in the nature of trading. Only on one occasion they have given us material for manufacturing in FY2009-10 for Rs.22,93,200/-. I am submitting the ledger copy for the same as Annexure-1. Remaining transactions are trading activity. Q.17 I am showing you a set of bills found in the accounts department at this unit pertaining to M/s.Anjaneya Biotech P. Ltd. (Vishwam, 8/B, Postal Colony, Chembur, Mumbai) for FY.2008-09 and 2009-10. Page | 17 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 Kindly confirm the same. They mention the delivery of material Quinine Sulphate, Quinine Bisulphate and Quinine HCL and address to SPL at its head office at Bhandup (W). There is no receiver's signature on the bills. Has such material ever been received here? Was any PO ever issued for such material ? How was the entry in the accounts made for the same ? Ans.: No, and no such material has never been received here. The bills were sent to me from the head office (Mr. Hitesh Khona) and I have entered the transactions in the accounts. Q.18 There are some other parties in the trading account ledger which I am showing to you currently. It includes parties such as Sharon Bio-medicine Ltd., Benzochem Lifesciences P. Ltd., Adiatika Pharma (P) Ltd., G.M.H.Laboratories, Unijules Lifesciences Ltd., Cheryl Laboratories Ltd. Has any trading activity happened with them? Ans: All these are trading parties, whose bills are sent here for accounting purpose. The material is never received in the Rabale unit. Page | 18 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 Q.19. M all these cases, only bills and challans are available. No lorry receipts and no packing list are available. There is no proof of delivery of the matieral. Unlike manufacturing material, where GRN is created and all kinds of documentation, including Register entries and BIN cards, are done for purchase, in trading details are available. Please explain the same. Ans: As the goods are not received in factory and received at the head office, the standard procedure of purchase including documentation is not followed. Only the bills are made available to me from head office and other documents related to delivery and tracking have not been sent to me from the head office. Therefore, it is not available with me. I do not know if these details are maintained at the head office. We maintain proper records of bills and other documents as made available to us. 4.6 From the above, it can be seen that there are enough evidences as discussed above, which were confronted during the course of survey proceedings and post survey proceedings, from which inference can be drawn that the purchases were bogus in nature and no physical delivery of goods were taken place. With regard to the bill to bill mapping of such transactions for establishing circular trading, the Page | 19 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 assessee had not submitted the same before ADIT(Inv.) 2(2), Mumbai during survey proceedings or post-survey proceedings even after lapse of 17 months after the date of survey. Even, during scrutiny proceedings the assessee has failed to establish the same. 4.7 During the post-search proceedings, summons u/s.131 of the I.T. Act were issued to M/s. Hercules Chem and M/s. Odyssey Chemicals to verify the sales made by the assessee company to them. However, the Inspector of Investigation Wing reported that the address of M/s. Hercules Chem and M/s. Odyssey Chemicals was incomplete and the said parties could not be traced. Thus, the assessee company had failed to substantiate its claim that circular trading transactions have taken place with supporting bills/vouchers. Further, the assessee has failed to furnish one to one correspondence between all purchases and sales. Therefore, the contention of the assessee that the purchases from M/s. Dr. Datson Labs Limited were a part of circular trading activity is not acceptable. 4.8 The assessee company in his reply dated 06.12.2016 in response to show cause notice issued has refuted the statement of Shri Kannan Vishwanath, Managing Director of DDLL recorded under oath u/s.131 of the Act on 23.06.2014 and assessee company contended in its reply that he must have been given the statement in unduress and requested to cross examine him. It is certainly an Page | 20 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 afterthought as after lapse of 30 months from the date of statement recorded such claim was being made. 4.9 The assessee company has also failed to furnish with conclusive documentary evidence the details of the parties to whom they have actually sold and delivered these materials. Thus, the assessee company in its submission has failed to prove the genuineness of the transactions made from the mentioned parties. 4.10 The first and foremost, the assessee has failed to establish genuineness of delivery of goods by any third parties evidence even after given ample opportunities. 4.11 The onus is on the assessee to prove that the purchases were genuine by producing the parties and related evidences The onus to prove the correctness and genuineness of any claim made by the assessee is the assessee itself as it is held in the case of CIT vs. Calcutta Sales Agency Ltd. 19 ITR 191. In this regard, it is also pertinent to mention that while dealing with the concept of burden of proof, onus of proving is always on the person who makes the claim and not on the Revenue. The Hon'ble Supreme court in the case of CIT VS Durgaprasad More 82 ITR 540 and Sumati Dayal Vs. CIT 214 ITR 801 has held that the apparent must be considered real until it is shown that there are reason to believe that the apparent is not real and that taxing authorities are entitled to look into surrounding circumstances to find out the Page | 21 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 reality and the matter has to be considered by applying the test of human probabilities. The Hon'ble Apex Court also held that, it is no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing 15 (3) 12) provision and if a receipt is in the nature of income, the burden to prove that it is not taxable because it falls within exemption provided by the act, lies upon the assessee. In the case of Durgaprasad More (Supra), the Hon'ble Court went on to add that a party who relies on a recital in a deed as to establish the truth on the recital, otherwise it will be very easy to make self serving statements in documents either executed or taken by a party who relied on those recitals. If all that an assessee who want to evade tax has to have some recitals made in a document either executed by him or executed in his favor then the door will be left wide open to evade tax. The Hon'ble court further held that the Taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look in to the surrounding circumstances to find out the reality of the recitals made in those documents. There are many case laws of Hon'ble Apex Court, High Courts & Tribunals on the issue of bogus/hawala purchase parties, which are discussed hereunder: 4.12 In the case of Indian Woolen Carpet Factory vs. Income Tax Appellate Tribunal [2002] 125 Taxman 763 (Raj) it was held as under: Page | 22 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 If the transaction were genuine and if the parties had migrated somewhere else, their latest addresses should have been supplied and burden was on the assessee to prove the genuineness of the transactions, when the assessee claimed that the purchases were genuine. It was true that no loan had been taken from those parties. The case before the Assessing Officer was that the assessee claimed some purchases from some parties, whom he could not produce or those parties were not available when the summons under section 131 issued. Therefore, the initials dispute was with regard to genuineness of the transaction regarding purchase of wool from the parties, the assessee had failed to discharge the onus to prove the genuineness of the transactions, mere mentioning of section 68 did not affect the addition made when transaction were found bogus. 4.13 In Sanjay Oilcake Industries vs. Commissioner of Income Tax [2009] 316 ITR 274 (Guj), it was held as under: "Thus, it is apparent that both the commissioner (Appeals) and the Tribunal have concurrently accepted the finding of the Assessing officer that the apparent Page | 23 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 sellers who had issued sale bills were not traceable. Those goods were received from the parties other than the person who had issued bills for such goods. Though the purchases are shown to have been made by making payment thereof by account payee cheque, the cheque have been deposited in bank accounts ostensibly in the name of the apparent seller, thereafter the entire amounts have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount from the bank account. In the light of the aforesaid nature of evidence, it is not possible to record a different conclusion, different from the one recorded by the commissioner (Appeals) and the tribunal concurrently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee firm and the actual sellers of the raw materials. Both the commissioner (Appeal) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether the purchase price reflected in the books of accounts matches the purchase price stated to have been paid to other persons. The Page | 24 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 issue is whether the purchase price paid by the assessee is reflected as receipts by the recipients. The assessee has, by set of evidence available on record made it possible for the recipients not being traceable for the purpose of inquiry as whether the payments made by the assessee have been actually received by the apparent sellers. Hence, the estimate made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should be at a particular sum or at a different sum can never be an issue of law." 4.14 Therefore, the genuineness of the purchase transactions from the above mentioned accommodation bill providers is not verifiable. The onus lies on the assessee to prove the genuineness of purchase transactions. In the absence of conclusive supporting documentary evidences and explanation by the assessee, the assessee's contention that the purchases made from the above parties are genuine is not acceptable. 4.15 Another contention of the assessee that the payments were made through banking channel and therefore the purchases were genuine are also not tenable because of the following reasons: (a) Merely because, the so called payment was made through banking channel, cannot establish that the transactions are Page | 25 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 genuine. There are several judgments delivered on this issue, wherein it is clearly mentioned that the transactions through banking channel in itself cannot be sacrosanct and make the transaction genuine. b) The Hon'ble ITAT, Jaipur in the case of M/s. Kachwala Gems vs. JCIT ITA No 134/JP/2002 dated 10.12.2003 affirmed by the Hon'ble Supreme Court in the case of M/s. Kachwala Gems vs. JCIT (2006) 206 CTR (SC) 585, 288 ITR 10 (SC) has held that even payment by account payee cheque is not sufficient to establish the genuineness of purchases. c) In the most recent judgment delivered on 07.01.2015 by the Hon'ble Bombay High Court in the case of Shri Naresh Pahuja 54 taxmann.com 258, it has been held that mere routing of a gift through a banking channel would not by itself establish that gift was genuine. The Headnote of the above cited judgment is reproduced hereunder; Section 68, read with section 254 of the Income-tax Act, 1961 Cash credits (gift) Assessment year 1995-96 Assessing Officer made addition in income of assessee as income from undisclosed sources holding that gifts Page | 26 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 received by assessee from one 'K' were not genuine Commissioner (Appeals) as well as Tribunal upheld findings of Assessing Officer On rectification application, Tribunal held that there was no error apparent on record after recording that mere routing of a gift through a banking channel would not by itself establish that gift was genuine - Whether, therefore, finding of facts recorded by Tribunal could not be interfered with - Held, yes" d) The Hon'ble Supreme Court, following the earlier decision in CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78, noted that where the conclusion of the Tribunal was not unreasonable or perverse or based on no evidence, no question of law as such would arise for consideration. The Hon'ble Court further observed thus: "25. ...The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process Page | 27 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 of banking transaction but that itself is of no consequence. 4.16 As discussed above, there is no merit in the assessee's argument that the payment was made through banking channel is a sufficient reason to believe that the transactions from the above mentioned parties are genuine, especially when the entire gamut of facts and circumstances clearly indicate that these parties are non existing and bogus parties. 4.17 After carefully going through the submissions and discussion made in the above paras, it becomes crystal clear that: (a) The primary onus is on the assessee to establish the genuineness of the transactions recorded in its books of account and assessee has failed to do so. (b) Since the primary facts were in the knowledge of the assessee, it is the duty of the assessee to provide the correct details with regard to the impugned transactions, which has not been produced by the assessee. (c) If the investigation conducted by the Department leads to doubt regarding the genuineness of the transactions, it is incumbent on the assessee to produce the parties along with the necessary documents to establish the genuineness of Page | 28 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 the transactions; which the assessee failed to do in the instant case. (d) Payment by account payee cheque is not sacrosanct, as discussed above. 4.18 As the assessee could not discharge the onus. Therefore, the assessee did not fulfill the burden of proof on its part as well, that the purchases made from DDLL are indeed genuine purchases, Further, it is to be pointed out here that the assessee has not furnished any conclusive evidence to support its claim of the purchases made from the DDLL and hence, could not discharge the burden of proof cast upon it. The contention of the assessee in his submission primarily relates to sales having been effected and hence the alleged purchases cannot be doubted, which too has not been proven to be circular as discussed. 4.19 Taking into account the above facts and circumstances, the only fair conclusion that can be arrived in this case is that the assessee was indeed a beneficiary of the accommodation bills issued by the DDLL wherein there was not any actual / physical delivery of goods from the mentioned parties. An accommodation bill is obtained for introducing unaccounted goods into the accounting system. After considering the entire submission and documents produced by the assessee, it is crystal clear that the assessee did not purchase the goods from DDLL. Further, summons u/s. 131 of the IT.Act, 1961 were again issued during scrutiny proceedings to sale Page | 29 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 parties as per addresses given by assessee. However, as per the Inspector's report the said parties could not be traced. Hence, assessee's contention that purchases made are a part of circular trading does not hold ground. 4.20 In view of the above discussion, the disallowance on account of bogus purchases of Rs. 16,48,30,000/- is being made to the total income of the assessee company. 4.21 The penalty proceedings u/s 271(1)(c) of the IT Act, 1961 are being initiated separately for filing inaccurate particulars of income leading to concealment of income Manipulation of share price: 5. With regard to manipulation of share price, during the course of survey proceedings at 205, P.N. Kothari Industrial Estate, LBS Marg, Bhandup (West). Mumbai- 400078, certain loose papers, which have been page numbered 1 to 4 and impounded as Annexure A-1. While explaining the contents of the said pages, Mr. Ashwani Khemka stated that page No.1 and 2 contains details of understanding had with one Mr. Bipin Shah, who had approached him in the year 2008 for helping to manipulate the share price of his shares in lieu of consideration, however the same did not go through. 5.1 The ADIT in survey report brought out that there is no truth in the contention of Mr. Ashwani Khemka. He had observed that the share price movement of Page | 30 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 the assessee company during the months September, 2008 to August,2009, the period for which there was an alleged agreement between Mr. Ashwani Khemka and Mr. Bipin Shah for manipulation of share price, the share price of assessee company was in the range of Rs. 10 to Rs. 31.5. Further, it was observed by him that the share price had shot up from a low of Rs. 21.9 on 08.09.2008 to a high of Rs. 31.5 on 25.09.2008. Thus, within 20 days of the agreement the share price had shot up by approximately 50%. 5.2 In response to the show cause notice issued, assessee company vide its submission dated 06.12.2016 contented that understanding with Shri Bipin Shah was never effectively carried out. Also there are no evidences on record to prove that share prices were actually manipulated. It's contention that increase in stock price, if any, is attributable to good market scenario and good results declared by the company and there were never any allegation in the life time of the company by Securities and Exchange Board of India (SEBI). During scrutiny proceedings, the assessee submitted that: "Understanding with Mr. Bipin Shah: During the survey proceedings loose paper containing understanding with Mr. Bipin Shah was found. However, our client would like to place on record that was only and understanding which was never effectively Page | 31 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 carried out. Also, there are no evidences on record to prove that share prices were actually manipulated. Increase in stock price, if any, is attributable to good market scenario and good results declared by the company. There is not an iota of evidence to conclude that price was manipulated by the company and there are never any allegation in the life time of the company by the watch dog of stock market namely, Securities and Exchange Board of India (SEBI), 5.3 The assessee's contention is not acceptable in view of above discussion. Thus, it is clear that there is unexplained expenditure to the tune of Rs. 1,18,00,000/- by the assessee company for manipulation of share price and the same needs to be disallowed as per the provisions of section 69C of the 1.T.Act, 1961.” 08. Aggrieved by the order of the learned Assessing Officer assessee preferred the appeal before the learned CIT (A), who passed an order as per paragraph no. 5.1 to 6 as under:- “5.1 I have given my careful consideration to the rival submissions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position. 5.2 Ground No. 1- Addition of Rs.16,48,30,000 as Bogus Purchase Page | 32 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 5.2.1 The matter relates to the goods with respect to which no physical delivery has taken place. On this point, the AO as well as the Appellant have agreement. The AO's version is that these are bogus purchases; whereas the Appellant right from the day of survey has been conceding that it entered into circular transactions; and the profit on each transaction is offered for taxation. 5.2.2 The goods were claimed to have been sourced from Aanjaneya Biotech Private Limited that later on changed its name to Dr. Dastons Labs Limited (and Group) and were sold to Hercules Chem and Odyssey Chemicals. The survey action on Dr. Daston Labs Limited wherein Managing Director of said Company gave a statement that the transaction was circular in nature which triggered survey action on the Appellant. The Appellant submitted address, copies of purchase bills, sale bills, and bank statements demonstrating payments having been made by cheque to the AO during the proceedings. The Appellant also submitted tabulated statement of the entire movement of goods right from sourcing the goods to sale of goods. 5.2.3 The Appellant submitted following documents in its initial submission dated September 13, 2017: a. Statement of payment received from Hercules Chem and Odyssey Chemicals and payments made to Aanjaneya Biotech Private Limited; Page | 33 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 b. Sales bills of Hercules Chem and Odyssey Chemicals; c. Purchase invoice from Aanjaneya Biotech Private Limited; d. Statement indicating purchase and sale of goods; e. Copy of Annual Report and Tax Audit Report of the Appellant for financial year 2008-09 (Assessment Year 2009-10); f. VAT confirmation certificate from Dr. Daston Labs Limited (formerly known as Aanjaneya Biotech Private Limited); g. Copy of account of the Appellant in the books of Aanjaneya Biotech Private Limited; h. Copy of MVAT Returns of Aanjaneya Biotech Private Limited and VAT paid challans; i. Fresh certificate of incorporation evidencing change of name from Aanjaneya Biotech Private Limited to Dr. Dastons Labs Limited J. A few Survey documents that the Appellant had evidencing impounding of documents; 5.2.4 The Appellant was specifically queried as to which documents were not placed on records of the AO and formed the additional evidences before this office. Later on, the Appellant vide letter dated September 27, 2017 segregated and submitted certain documents which were admitted as additional Page | 34 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 evidence and sent to the AO for his Remand Report. The documents submitted are as under: j. VAT confirmation certificate from Dr. Datsons Lab Limited (formerly known as Aanjaneya Biotech Private Limited) indicating that they were registered under the MVAT Act 2005 k. Confirmation from Aanjaneya Biotech Private Limited as to entering in of transactions with Your Appellant l. Copy of VAT Returns filed by Aanjaneya Biotech Private Limited m. Fresh certificate of incorporation for change of name n. Complete Chart showing details of purchases, sales, Gross Profit made on each of the transaction, and percentage of Gross Profit o. Mapping of Sales vis-à-vis purchases p. Returns of Central Excise showing trading turnover made q. Copies of bank statements showing details of receipts from debtors and payments made to creditors indicating the same amounts being received and disbursed under the circular trading: r. Agreement with Bipin Shah to arrange funds for expansion of the Company for which he was to be paid professional fees. It was further mentioned that share prices were to be raised to Rs.60 to enable the Page | 35 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 financers issue credit line to the Company, however, the share prices were never raised to that extent. Various BSE price trends indicating movement of shares is submitted. 5.2.5 From the documents submitted, I find that the transactions of purchase from Aanjaneya Biotech Private Limited have been confirmed by the said Company, and even the AO, during Remand Proceedings, has not raised any adverse inference on this. It has also bought to the notice that Aanjaneya Biotech Private Limited has filed its VAT Returns and discharged VAT liability as evidenced by VAT payment challans, and the AO has not commented on the same in Remand Proceedings, although it was case of the AO that purchase were bogus in nature. 5.2.6 The very basis on which the Department holds the purchases to be bogus is for the following reasons. a. The selling party is declared by the MVAT Department as suspicious in nature: b. The reason for such declaration is either such party has not file VAT Returns or not discharged VAT liability: c. The purchasing party has claimed set off which is withdrawn and the purchasing party is asked to pay VAT. 5.2.7 Section 48(5) of MVAT Act provides that if the State has not received tax into their treasury, set-off Page | 36 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 will be denied on such transaction. Hence, even if genuine dealer does not deposit tax, set-off claimed is withdrawn u/s.48 (5). He is treated as a "suspicious" dealer by the MAVT Department. A suspicious dealer does not mean a "Bogus" dealer or non genuine dealer. If in future it is found that such dealer deposits tax into treasury, set-off will be granted on such of tax and may cease to be "suspicious dealer. The MVAT department had put up a list of such "suspicious" or "bogus dealers" on website of MVAT. Based on this information, Income Tax department had disallowed purchases in Income- Tax Assessment. 5.2.8 It is important to note that the AO has not brought any such finding that the selling party was declared as "Suspicious" dealer by the MVAT department. On the same lines, it is not a case of the AO that the Appellant was called upon by the MAVT Department to pay MVAT in place of the selling party as no set off (input credit) of the Appellant was withdrawn 5.2.9 Next point that is worth noting is that there may be a case wherein an Assessee may just obtain bills of purchases in order to inflate the purchases and thereby reduce the taxable income without accounting for corresponding sales. The Appellant has duly submitted the manner of disposal of goods and also profit on each transaction. All these transactions are verified by the AO as recorded by the AO in paragraph 5.6 of the Remand Report. Page | 37 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 5.2.10 Further, the AO has not challenged the sales made by the selling party. This means that when the AO has not disputed the sales transactions disclosed by the supplier in its books, who is an income tax assessee, then it cannot be assumed that the purchases are bogus more so when the transaction has been supported by proper documentary evidences and payments are made to suppliers through proper banking channels. This view is supported by ACIT v. M/s Jaybharat Textiles & Real Estate Ltd. Appeal No. 5163/Mum2013 (Mum) ITAT). Hon'ble ITAT observed that in response to the notices issued under 133(6) to the suppliers whom AO doubted to have be bogus one appeared before the AO and confirmed effecting sales to assessee. Further, the AO also enquired the directors of these companies and on perusal of statement recorded from directors there is nothing on record to suggest that sale and purchase transaction between the assessee and these companies are non genuine. On the contrary suppliers have submitted copies of their audited books of accounts wherein they have considered the sales made to assessee in their books and tax returns. Further, the assessee produced purchases and sales bills and other documentary evidences in support of purchases effected by it from all suppliers and it is also not in dispute that payment made to the suppliers through proper banking channels. The department has not disputed the sales made by suppliers to assessee. Therefore, when the sales effected by the suppliers, are accepted in their Page | 38 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 hands, the purchases made from them by the assessee cannot be held to be non-genuine. 5.2.11 The Hon'ble Supreme Court in the case of PCIT vs. Tejua Rohitkumar Kapadia SPECIAL LEAVE PETITION (CIVIL) Diary No(s). 12670/2018 (Arising out of impugned final judgment and order dated 18- 09-2017 in TA No. 691/2017 passed by the High Court Of Gujarat At Ahmadabad), has held that Purchases cannot be treated as Bogus if (a) they are duly supported by bills, (b) all payments are made by account payee cheques, (c) the supplier has confirmed the transactions, (d) there is no evidence to show that the purchase consideration has come back to the assessee in cash, (e) the sales out of purchases have been accepted & (f) the supplier has accounted for the purchases made by the assessee and paid taxes thereon 5.2.12 In this case, the Appellant himself has admitted before the survey team that it is indulged into circular transactions forming a sort of cartel where the same goods were rotated without effecting actual delivery. This fact was confirmed by Dr. Daston Labs Limited also during the course of survey on them. In fact, the very basis of conducting survey on the Appellant was information received from Dr. Daston Labs Limited. Therefore, unilaterally concluding that the purchases were bogus because no delivery of goods took place is unrealistic. If this view is adopted, even sales made in the process were also not genuine. Therefore, in my opinion what was Page | 39 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 required to be done by the AO was adopting a pragmatic approach to tax such circular transactions. What is taxable under the Income-tax Act 1961 would be the income and not receipt. 5.2.13 Overall Gross Profit comparison of the Appellant (including other transactions as well as circular trading transactions) of various years is as under: Year Sales Gross Profit Gross Profit % 31.03.2009 1,038,763,531 72,976,744 7.03% 31.03.2010 1,391,678,464 160,410,018 11.53% 31.03.2011 1,440,962,506 142,809,317 9.91% 5.2.14 As for circular trading, from the details submitted as verified by the AO during remand proceedings, it can be seen that the Appellant has shown profit ranging from @ 1.96% to 16.67%. From the charging pattern, it is very apparent that the purchases are made at a fixed rate for a few months and the sales are made at fixed rate for a few months and Gross profit of exact percentage is derived for particular period. It is pertinent to observe that name of the product is Quinine Sulphate throughout the impugned assessment year; and the Gross profit made initially was 1.96%, which rose to 16.67%, which declined in 9.09%, again rose to 16.67%, which fell down to 2.91% in financial year 2009-10 (Assessment Year 2010-11) throughout, which rose to 4.76% in financial year 2010-11 (Assessment Year 2011-12). Such unrealistic movement fetching exactly the same percentage of profit from period to period in a systematic way leads to an inference that Page | 40 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 the purchases as well as sales were made under a particular pre-determined scheme. The profitability movement is tabulated for the sake of brevity as under: 5.2.15 Above table indicates that, the sales and purchases are entered in a pre determined pattern with a regulated price band. Moreover, there cannot be such a huge variation in profitability percentage in the same period for the same product as can be seen from the pattern of profit going up and down unless there is a clear artificial mechanism introduced. 5.2.16 In light of the above, I conclude that whilst the Appellant has indulged itself into circular trading as was accepted before the survey team, the AO except alleging that the purchases are bogus has not Period % of Profit Total Sales Total Purchase Gross Profit F.Y. 2008-09 (AY 2009-10) 17/05/2008 to 23/08/2008 1.96% 65,254,500 63,975,000 1,279,500 05/09/2008 to 29/09/2008 16.67 19,680,000 16,400,000 3,280,000 02/10/2008 to 24/11/2008 9.09% 64,053,000 58,230,000 5,823,000 06/12/2008 to 17/01/2009 16.67% 31,470,000 26,225,000 5,245,000 Average Profit (I) 8.66% 180,457,500 164,830,000 15,627,500 F.Y. 20099-10 (A.Y. 2010-11) 05.05.2009 to 05.05.2009 2.36% 440,000 429,600 10,400 05.09.2009 to 28.11.2009 2.91% 124,485,800 120,860,000 3,625,800 Average Profit (II) 2.91% 124,925,800 121,289,600 3,636,200 F.Y. 2010-11 (A.Y. 2011-12) 06.04.2010 to 18.04.2010 4.76% 18,283,650 17,413,000 870,650 Average Profit (III) 4.76% 18,283,650 17,413,000 870,650 Total Average (I) + (III) 6.22% 323,666,950 303,532,600 20,134,350 Page | 41 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 brought on record as to why the transactions as accepted by the Appellant are not circular trading in nature. Sales and purchases as reflected as part of the trading results in audited accounts. Therefore, considering only purchases disregarding corresponding structured sales to deduce correct income is not acceptable. In CIT v. Balchand Ajit Kumar 263 ITR 610 (MP) has held that the total sales cannot be regarded as the profit of the assessee. In Manmohan Sadani v. CIT 304 ITR 52 (MP) the Hon'ble High Court held that total sales cannot be regarded as profit of the assessee, on the contrary it is a net profit rate which has to be adopted in such cases. In N.K. Industries Ltd. v. Dy. CIT (Guj), Tax Appeal Nos. 240 to 242, 260 & 261 of 2003, the Gujarat High Court has held that the addition should be made of income component only. 5.2.17 In view of the above findings of facts and relying on the judicial precedents, I am of the considered opinion that the entire sale of the Appellant cannot be taxed as 'Income' of the appellant only the net profit part can be taxed. 5.2.18 Reliance is placed on the decision of hon'ble Income Tax Appellate Tribunal – Ahmadabad in the case of Arman Fashion Pvt. Ltd., v. ITO ITA No.2400 and 2407/Ahd/2012 wherein it was held that, "Ethical aspects of such an exercise can be debated and there may be adverse consequences under other acts/rules for such conduct. However, as for Income Tax Act is concerned, what is required to Page | 42 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 be seen is the correct amount of taxable income generated from such transaction. As noticed (supra) the total sales of appellant are on Rs.18.23 crores. Since GP is only 0.04%, purchases are also of almost equal amount. If the appellant has given bogus entries to others, appropriate commission income for giving bogus entries need to be estimated as taxable income of the appellant. In case appellant has only indulged in circular transactions, then there may not be any taxable income in the hands of appellant except what has been shown in the return of income. However, if AO's view is accepted that purchases are not verifiable, even then it will be a case of net profit estimation." It was further held that: (i) All the parties from whom the assessee had made purchases were assessed to tax and were disclosed in their trading account. (ii) The parties from whom the assessee had made purchases had only wrongly classified in their books of accounts as loan instead of showing the balance due to the assessee as receivable from the assessee as debtors. (iii) In such circumstances, the transactions of the purchases and sales made by the assessee need not be doubted. (iv) However, during the year the assessee had a turnover of Rs. 18.23 Crores with gross profit at 0.04% and net profit at 0.02%. During the subsequent assessment year, the turnover declared Page | 43 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 was nil and had shown negligible administrative expenses of Rs.46,187/- and had outstanding debtors and creditors. From these facts it could be inferred that both the purchases and sales are bogus and only book entries. Such transactions are generally made to extend bogus entries to other concerns in order to help them to evade tax or it could be a circular transaction to generate a healthy balance sheet to deceive financial institutions or for other purposes. (v) From the above facts, the income of the assessee could not be to the extent of 25% of unverifiable purchases. Further, drawing support from the other decisions of the ITAT Ahmadabad Benches, net profit could be estimated at 0.05% on the total turnover of Rs. 18.23 Crores. 5.2.19 On analyzing the Appellant's data, it is inferred that there is huge variation) gross profit margin for each year and there is no uniformity in trading results from circular trading. Accordingly, respectfully following the decision of Hon'ble Ahmadabad ITAT in the case of Arman Fashion Private Limited (supra), I resort to estimation of profit percentage. 5.2.20 The maximum profit offered is 8.66% and minimum profit offered is 1.96% for the impugned assessment year, I estimate a percentage of 8.75% on circular transactions. The rationale for adopting 8.75% is that even section 44AD of the Act gives a benchmark rate of 8%. Since the Appellant has indulge into circular trading, in order to plug any possible leakage of revenue, the estimation of 8.75% Page | 44 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 profit on overall transactions will meet the end of justice in my view. Separately, the estimate of 8.75% also matches the overall Gross Profit of the Appellant. The addition based on aforesaid estimation is worked out as under: 5.2.21 Having discussed the above, I hereby direct the AO to restrict the addition to Rs. 1,62,531 only. This ground of appeal is partly allowed. 5.3 Ground Nos. 2 & 3 - Addition of Rs.1,18,00,000 as unexplained cash expenditure 5.3.1 Brief facts of the case are that, during the course of survey, a lose paper was found wherein the survey team observed that an understanding with one Bipin Shah was reached for manipulating stock prices. The Appellant explained to the survey team that no such understanding was ever implemented, and none of the Appropriate Authority like Stock Exchange or SEBI charged the Appellant with an allegation of price manipulation in the Stock Market. The AO alleged that market price during this period had rose by around 50% to which the Appellant explained that market price is driven by the market forces and the Appellant Company had no role to play. The Appellant argued that the understanding did not take final shape, and was not acted upon. It was also submitted that, in any case the Appellant Asst Year sales Gross Profit Gross profit % Estimated addition @ 8.75% on sales Net addition sustained 20099-10 8,04,57,500 1,56,27,500 8.66% 1,57,90,031 1,62,531 Page | 45 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 Company had no role to play in such arrangement as the Company being an artificial juridical person cannot enter into any such deal on its own, and therefore no action lies against it. The AO was explained that in any case there is no cash expenditure involved at end of the Company. The AO made addition of Rs.1,18,00,000 treating it as unexplained cash expenditure. 5.3.2 On a perusal of the impugned order, I find that the AO has not given his calculation to arrive at the figure of Rs. 1,18,00,000. The matter was sent on remand, but the AO has not given any comments on this issue. 5.3.3 Before this office, the appellant filed the detailed submissions which have been taken on record. The same are not repeated here for the sake of brevity. 5.3.4 The AR of the Appellant placed on record copy of the agreement, which was available with the AO, duly signed and sealed by the Survey Team, between the Managing Director, Mr. Ashwin Khemka and Bipin Shah dated September 6, 2008. The crux of this agreement is that, Bipin Shah would help the raise funds to the tune of Rs. 10 crore either through preferential allotment or rights issue over the period of 12 months. In order to achieve this objective, he will move the stock market price to make it to Rs. 60 to Rs. 80 in next six months. The modes-operandi was to acquire 12 to 15 lac shares from market in next six months for which financial requirement was Page | 46 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 projected at around Rs.3 crore. Mr. Ashwin Khemka was to provide funds to the tune of Rs.1 crore initially to manipulate the market price. The "Screen Management charges" were fixed at Rs.1.50 lac per month for six months. 5.3.5 During the course of hearing, the Appellant submitted that whilst there was an agreement entered between Managing Director, Mr. Ashwin Khemka and Bipin Shah, the Appellant was neither beneficiary of this deal nor had anything to do with it. Further, the share price movement between April 2008 to April 2010 along with daily price movement between 01/08/2008 to 30/04/2009 were submitted before this office. The high and low stock market price of the Appellant are tabulated hereunder: submitted before this office. The high and low stock market price of the Appellant are tabulated hereunder: Month High Price Low Price August 2008 26.40 20.20 September 2008 31.50 20.50 October 2008 30.00 19.05 November, 2008 24.00 14.35 December 2008 17.40 13.90 January, 2009 17.00 13.50 February 2009 15.90 11.55 March, 2009 14.70 10.00 April 2009 18.46 11.05 Even in subsequent period, the Appellant has submitted that the share prices did not rise to the level of Rs. 60 to 80 per share. Page | 47 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 5.3.6 Further, it was submitted that there was no increase in capital as was agreed between the Managing Director and Bipin Shah. Moreover, the Appellant Company could not be the beneficiary of this price mechanism as the Company could not buy its own shares due to restrictions under the Companies Act 1956. 5.3.7 The Appellant further submitted that even if it was assumed that the screen management charges were paid for six months, the same could not exceed Rs.9,00,000 (Rs.1,50,000 per month 6). On the contrary, the AO has made an addition of Rs. 1,18,00,000 without providing any calculation of the same. 5.3.8 I have considered the facts of the case and the details and documents produced before me. On a perusal of the impugned assessment order, the AO has made an addition of Rs. 1,18,00,000 based on the agreement without giving any rationale as to the addition. Separately, the agreement was executed between Mr. Ashwin Khemka and Bipin Shah; and the Appellant was not a beneficiary to it except that its share price would have or were intended to have been increased to meet the projections. In reality, basis the data submitted by the Appellant, such share prices were never reached on the stock exchange. Further, the Appellant could not also benefit with the increased price as it was not permitted to buy its own shares. Also, there has not been any increase in capital either by way of preferential allotment or Page | 48 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 rights. This all concludes that the Appellant has not been directly or indirectly benefitted by the agreement in question. 5.3.9 Now coming to the addition made of Rs.1,18,00,000, the AO has not placed any document on record to establish how the said amount has been arrived at. Even if it is assumed that the screen management charges were paid, the same could not be more than Rs.9,00,000 for six months but by no stretch of imagination would have gone to Rs. 1,18,00,000/- (which requires 79 months of operating being 1,18,00,000 1,500,000) which was not even the agreement period. 5.3.10 Considering the above facts and circumstances, in the absence of any detailed evidence or documents by the AO on the addition made and not establishing the fact that how the Appellant Company was beneficiary of this agreement, I hereby delete the addition made by the AO of Rs. 1,18,00,000/-. These grounds of appeal are allowed. 6. In the result, the appeal is partly allowed”. 09. Therefore aggrieved by the order of the learned CIT – A the parties are in appeal before us. The learned assessing officer is aggrieved that the learned CIT – A has deleted the addition of ₹ 164,830,000 on account of bogus purchases and restricted it to only ₹ 162,531/– applying the gross profit percentage rate of 8.75% on circular transaction. The learned assessing officer is further Page | 49 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 aggrieved that the addition of Rs 1.80 Cr made by the learned assessing officer on account of unexplained cash expenditure where share price of the assessee company increased approximately 50% and assessee company has incurred unexplained expenditure of ₹ 180 lakhs, is deleted by CIT (A). 010. The assessee has also filed cross objection wherein it is aggrieved that the learned CIT – A has upheld the addition of ₹ 162,531/– a where the gross profit of the assessee was benchmarked at 8.75% against the declared gross profit of 8.66%. According to the assessee the gross profit as declared by the books of account should have been accepted. 011. The learned departmental representative vehemently supported the order of the learned assessing officer. 012. Learned authorised representative supported the order of the learned CIT – A for deletion of addition and further submitted that even the additions confirmed by the learned CIT – A cannot be sustained in view of the audited books of accounts and acceptable gross profit ratio of the assessee. The learned authorised representative took us to the various paragraphs of the findings of the learned CIT – A. He submitted that in paragraph number 5.2.13 the overall gross profit ratio of the assessee for three different financial year was compared which is in the range of 11.53% – 7.03%. He also referred to paragraph number 5.2.14 wherein the gross profit ratio with respect to circular trading was also mentioned. He also specifically Page | 50 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 refereed to the finding of the ld CIT (A) where the transactions were held to be genuine. He submitted that for assessment year 2009 – 10 the average profit ratio is 8.66%, 2.91% for subsequent year and 4.76% for assessment year 2011 – 12. He further referred to paragraph number 5.2.16 – 17 wherein the learned CIT – A held that entire sales of the assessee cannot be taxed as income of the appellant and only the net profit can be taxed. He further submitted that the learned CIT – A adopted 8.75% as the net profit ratio after holding that the books of accounts of the assessee are not reliable because of the wide variance, and considering the benchmarking of profit @ 8% u/s 44AD. He therefore submitted that to that extent i.e. in deleting addition of 100 % made by the learned AO, no infirmity can be pointed out in the order of the learned CIT – A. 013. We have carefully considered the rival contention and perused the orders of the lower authorities. Fact shows that during the course of reopened assessment for reasons that assessee has purchases of ₹ 164,830,000/– as part of bogus purchases being a circular trading. The learned assessing officer also referred to survey u/s 133A of the income tax act and a statement of managing director Mr Ashwin Khemka where certain incriminating material was found including hard disk and loose papers. Statement of the various employees was also recorded u/s 131 of the act. The employees have also been shown the bills of purchase of the goods and it was confirmed by them that material has not been received at the factory Page | 51 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 premises. The managing director of the assessee company has accepted that assessee is involved in circular trading. Accordingly the goods are sourced from one company and sold to another company in circular transaction fictitiously without any movement of goods or even with any real intention of trading in those goods. The transactions were only of trading and not affecting manufacturing activities of assessee. The parties who were involved in circular trading of goods were summoned by AO but could not be traced. Therefore the learned assessing officer held that assessee has failed to substantiate the circular trading of amount of purchases of ₹ 164,830,000/– for assessment year 2009 – 10, ₹ 121,289,604 assessment year 2010 – 11 and ₹ 17,413,004 assessment year 2011 – 12. Hence, learned AO made addition of 100 % of such tainted purchases. On appeal before the learned CIT – A, assessee submitted that it is a case of the circular trading where assessee has shown profit at the rate of 1.96% to 16.67%. Assessee also submitted that the gross profit for these three respective assessment years is 8.66%, 2.91% and 4.76%. Assessee also pleaded that the coordinate bench in one of the cases has considered only 0.5% of gross profit as a reasonable addition. The learned CIT – A considered the submission of the assessee and in paragraph number 5.2.5 that the transactions of purchases from the above party have been confirmed by the said company and also corroborated by VAT payments and returns. In the remand proceedings the AO did not controvert this. The learned CIT – A also held that the Page | 52 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 seller was not a „suspicious‟ or „bogus dealer‟ declared by VAT department. Further it was held that sales made by the assessee, corresponding to the tainted purchase, is not disputed by AO in the remand report. He therefore concluded that when the sales affected by the suppliers are accepted in their hands and purchases made by assessee from them has also gone into the sales of the assessee, the whole transaction cannot be held to be bogus. However he held that when the assessee himself has admitted before the survey team that it is a circular transaction, then in that case, what is taxable Under the act is the income and not the receipt. Thereafter, he tabulated the gross profit earned by the assessee for these three years and held that such gross profit cannot be accepted as in a circular trading transaction there is a predetermined sale price and purchase price. He also noted that there is a wide variance in the gross profit earned by the assessee which is 8.66% for this year, he estimated the gross profit of the assessee at 8.75%, taking support of 8% net profit prescribed u/s 44AD of the act, he estimated gross profit of the assessee of the whole business considering 8.75% as the GP ratio, computed the net addition that should have been is Rs 157,90,031/–, as assessee has disclosed gross profit of ₹ 15,627,500/– and therefore the net addition sustained was of ₹ 162,531/–. On careful analysis of the above order, we hold that the learned CIT – A has erred in adopting the gross profit ratio for the whole business of the assessee for the purpose of making/sustaining the Page | 53 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 addition in the hands of the assessee with respect to the circular trading transactions entered into by it. There is no dispute with respect to sanctity of the other parts of the business of the assessee, such as manufacturing or any other segment of the business of the assessee. Therefore there is no reason why the profitability with respect to the genuine business of the assessee should be disturbed. By adopting the gross profit of whole business, ld CIT has done violence to the genuine business of the assessee, which is not permitted. He is only required to estimate profit embedded in the circular trading transaction of bogus purchases only. The bogus purchases were to the extent of ₹ 164,830,000/–. This has been accepted to be the circular trading purchases made by the assessee along with other parties. Therefore, the profit is required to be imputed only with respect to the bogus purchases of ₹ 164,830,000/–. Therefore, the approach of the learned CIT – A of estimating the gross profit of whole of the business of the assessee instead of taking profit element embedded in the bogus purchases is not correct, hence same is rejected. 014. There is another flaw in the order of the ld CIT (A). The learned CIT – A has estimated gross profit rate of the assessee at 8.75%. To support it, a shelter was taken Under the provisions of Section 44AD of the act. The provisions of Section 44AD determines the net taxable profit of an assessee, who is carrying on his business with all genuineness. The learned CIT appeal applied the net profit ratio, which is applicable to a tax compliant Page | 54 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 business of an assessee, for estimating the profit of an absolutely bogus transactions carried out by the assessee of circular trading transaction. We do not find any justification for taking support of net profit ratio prescribed Under Section 44AD of 8% for estimating the gross profit of the assessee at the rate of 8.75%. 015. The learned CIT – A has also grossly erred in holding that merely because the supplier has confirmed the above transaction in its VAT return, same have become genuine, when the employees of the assessee and director is stating on oath that it is merely a circular trading transaction and there is no movement of goods with the bill. 016. Further if a bogus supplier is not caught by Vat authorities, wherein the purchaser himself is saying that it is a bogus purchase, does not matter at all for estimating the income embedded in such bogus purchases of the assessee. As the Bogus supplied was not declared as Bogus by VAT authorities, ld CIT (A) accepted the transaction of Circular Trading as Genuine. 017. Learned CIT A also held that the payments have been made through banking channel and purchases have gone into sales of the assessee and therefore purchases made by the assessee from those bogus suppliers cannot be held to be non genuine. Transaction through banking channel, quantitative details of purchases and sales are the basic traits of circular trading, is not appreciated by the learned CIT – A. Therefore, We do not find any justification or Page | 55 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 evidence available with learned CIT – A to hold that the purchases from the suppliers cannot be held to be a non genuine. 018. Therefore now the question arises that what is the amount of income earned by the assessee out of the bogus purchases arising out of the circular trading. We do not have any hesitation in confirming the action of the learned CIT – A in stating that the 100 % of the purchases cannot be added in the hands of the assessee. But now, the question arises is that how much income is to be imputed and in what manner. The honourable jurisdictional High Court in principal Commissioner of income tax versus Jhakahari Fabrics Pvt Ltd [2020] 118 taxmann.com 406 (Bombay) has confirmed that in such a circumstances the profit of 17.5% is appropriate. 019. Recently in [ 2022] 136 taxmann.com 345 (Mumbai - Trib.) Deputy Commissioner of Income-tax v DBM Geotechnics and Construction (P.) Ltd.* has upheld the income embedded at the rate of 12.5% in such purchases as income of the purchaser. 020. The assessee has relied upon the decision of the coordinate bench in ITA number 790/AHD/2018 for assessment year 2000 1314 in case of Pradeep overseas Ltd dated 16/9/2021, where in the case of circular trading where the AO made the addition to the extent of 5% of the bogus purchases, the learned CIT – A reduced it to 0.3%. On appeal before the coordinate bench, the order of the learned CIT – A was upheld. The another decision of Page | 56 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 the coordinate bench in ITA number 4874/M/2017 for assessment year 2013 – 14 dated 27/11/2018 in case of Kiran Ali Bist was relied upon where the learned assessing officer estimated the profit at that rate of 2% of the turnover, the learned CIT – A restricted to 0.1% and same was confirmed by the coordinate bench. Therefore, the claim of the assessee is that the profit ratio should be estimated at this low percentage. We do not agree with the argument of the assessee for the simple reason that in the case of the assessee there was a specific survey carried out by the revenue, during that survey specific evidences were found, statement of employees were taken and the director of the company also confirmed that the transactions are bogus in the form of circular trading and further the profit declared by the assessee itself is higher then those profit ratio. Further the case involved in impugned appeal is of a listed limited company at the stock exchange, where 85.41% shares are held by non- promoters, i.e. Public and Director of the company, who is a trustee of the company, is engaged in circular trading. Further, the lower gross profit as has been depicted in the above two decisions of the coordinate benches were not at all justified looking at the gross profit ratio earned by the assessee in its regular business. Further, in those cases the bills were issued which were discounted by the purchaser for financing and in the another case it was the employee who was used for the purpose of issue of the bogus bills. Here, in this case the assessee himself is engaged in this activity. Therefore we Page | 57 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 reject the argument of the learned authorised representative for adopting such a low gross profit. 021. As we have the guidance available of the honourable High Court as well as the other coordinate benches that how much profit should be imputed to bogus purchases transactions, we deem it fit and proper that profit is required to be estimated only on the amount of bogus purchases. The quantum of the profit as generally estimated in the cases of bogus purchases should be at the rate of 12.5% of such purchases. Accordingly we reverse the order of the learned CIT – A and direct the learned assessing officer to compute the unaccounted profit earned by the assessee at the rate of 12.5% on bogus purchases. 022. For assessment year 2009 – 10 assessee has bogus purchases of Rs. 16,48,30,000/- and profit thereon at the rate of 12.5% is ₹ 20,603,750/–. Accordingly we reverse the finding of the learned CIT – A in restricting the addition made by the learned assessing officer of ₹ 16,48,30,000/– to ₹ 162,531 and we confirm the addition to the extent of ₹ 20,603,750/–. 023. As the facts for assessment year 2010 – 11 and 2011 – 12 are also identical where the bogus purchases accounted for by the assessee is ₹ 121,289,600/– and ₹ 17,413,000/– respectively. In both these cases the learned CIT – A sustained the addition to the extent of ₹ 7,294,808 and ₹ 729,169/–. Against this we direct the learned assessing officer to retain the addition to the Page | 58 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 extent of 12.5% of the bogus purchases, i.e. Rs 1,51,61,200/– (being 12.5% of ₹ 121,289,600/–) for assessment year 2010 – 11 and ₹ 2,176,625/– (being 12.5% of ₹ 17,413,000/–) for assessment year 2011 – 12. 024. Accordingly, ground number 1 and 2 of the appeal of learned assessing officer for assessment year 2009 – 10, 2010 – 11 and 2011 – 12 are partly allowed. 025. Now we come to ground number 3 of the appeal of the learned AO for assessment year 2009 – 10 with respect to the deletion of the addition of Rs 1,18,00,000/- as unexplained expenditure. The facts relating to the additions shows that during the course of survey a loose paper was found wherein the survey team observed that an understanding with one person was reached for many polluting the stock prices of the assessee. The assessee submitted that no such understanding was ever implemented. It was also stated that neither the stock exchange nor the securities and board of India has alleged any price money inflation in the market price of the shares of the assessee. The learned assessing officer made an ad hoc addition of ₹ 118 lakh/– treating it as unexplained expenditure. The learned CIT – A noted that the learned assessing officer has made the addition merely on the basis of the agreement without giving any reason for the addition. Further the agreement was executed between Mr Ashwin Khemka and One Mr Bipin Shah and the assessee company was not at all a beneficiary. He further held that the assessee could not have benefited by the Page | 59 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 price rigging in the shares of the assessee company the beneficiaries would have been the shareholders at the most promoters. There was also no evidence available of incurring of the expenditure except the agreement. Therefore the addition was deleted. We find that in the present case there existed some agreement between the director of the company with some other party where the other party would help raise the funds to the assessee to preferential allotment or write issue over the period of 12 months. In order to achieve the above object, the other party will move the stock market prices to make it a breach ₹ 60 – ₹ 80 within six months. The modus operandi was to acquire 12 – 15 lakh shares from the market and promoter would be providing funds to the tune of Rs 1 Cr to manipulate market prices. The whole name of this price rigging mechanism was given as “ screen management charges”. We are not concerned with the mechanism as well as the people involved in that. It is for the other regulator to look into this. We are just supposed to know whether assessee has incurred any expenditure or not and consequently addition is sustainable or not. The learned AO has not brought on record any with dense that assessee has incurred this expenditure. Therefore the learned CIT – A deleted the same. No infirmity is were shown by the learned departmental representative in the order of the learned CIT – A. Accordingly we confirm his order with respect to ground number 3 of the appeal. 026. In the result, all the three appeals of the learned assessing officer are partly allowed. Page | 60 ITA Nos. 415 to 4154/M/19 & CO nos.57 to 59/M/20 Sanjivani Parenteral Ltd; A.Y. 10–11 027. The cross objection is filed by the assessee are against the addition sustained by the learned CIT – A. In view of our finding in the grounds of appeal number 1 and 2 of the appeal of the learned AO, all the cross objection is filed by the assessee are dismissed. In the result cross objections filed by the assessee for all the three years are dismissed. 028. Accordingly, all the three appeals filed by the learned assessing officer are partly allowed and Cross objections of the assessee in all these three appeals are dismissed. Order pronounced in the open court on 27.07.2022. Sd/- Sd/- (PAVAN KUMAR GADALE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 27.07.2022 Sudip Sarkar, Sr.PS 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// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai
