SANDAW PRINTS PVT.LTD, MUMBAI V. INCOME TAX OFFICER-1(3)(2), MUMBAI

ITA 4404/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4857 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 14-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: RUCHI RATHOD
• Keywords: Bogus purchase; Unexplained expenditure; Additional evidence; Accommodation entries
• Section: 148; 69C; 143(3); 133A; 133(6)

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.4404 & 4405 / MUM/2017 ( / ASSESSMENT YEAR : 2009 - 10 & 2010 - 11) SANDAW PRINTS PRIVATE LIMITED 87, JANMABHOOMI MARG, OCAFE BAHAR HOTEL, FORT, MUMBAI - 400001 / V. ITO - 1(3)(2) ROOM NO. 541, 5 TH FLOOR, AAYAKAR BHAWAN MUMBAI - 400020 ./ PAN : AALCS9866N ./ I.T.A. NO.4196 & 4202 / MUM/2017 ( / ASSESSMENT YEAR : 2009 - 10 & 2010 - 11) ITO - 1(3)(2) ROOM NO. 541, 5 TH FLOOR, AAYAKAR BHAWAN MUMBAI - 400020 / V. SANDAW PRINTS PRIVATE LIMITED 87, JANMABHOOMI MARG, CAFE BAHAR HOTEL, FORT, MUMBAI - 400001 ./ PAN : A ALCS9866N ASSESSEE BY: M S. RUCHI RATHOD REVENUE BY : SHRI. CHAUDHARY ARUN KUMAR SINGH / DATE OF HEARING : 15 .11.2018 / DATE OF PRONOUNCEMENT : 13 .02 .2019 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS, FILED BY ASSESSEE AND REVENUE FOR ASSESSMENT YEAR(S) ( AY ) 2009 - 10 AND 2010 - 11 RESPECTIVELY , ARE DIRECTED AGAINST SEPARATE APPELLATE ORDER (S) BOTH DATED 30 .03 .2017 I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 2 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) - 3 , MUMBAI (HEREINAFTER CALLED THE CIT(A)) IN APPEAL NO. CIT(A) - 3/IT - 116/ITO - 1(3)(2)/14 - 15 AND CIT(A) - 3/IT - 144/ITO - 1(3)(2)/14 - 15 , FOR ASSESSMENT YEAR S 2009 - 10 & 2010 - 11 RESPECTIVELY , THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM SEPARATE ASSESSMENT ORDER (S) DATED 27.03.2014 AND 28.03.2014 RESPECTIVELY PASSED BY LEARNED ASSESSING OFFICER (HERE INAFTER CALLED THE AO) U/S 143(3) R.W.S. 1 47 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY 2009 - 10 & 2010 - 11 RESPECTIVELY . SINCE THESE CROSS APPEALS FOR BOTH THE AYS RAISES SIMILAR ISSUES AND COMMON GROUNDS, ALL THESE APPEALS WERE HEARD TOGETHER AND DISPOSED O F B Y THIS COMMON ORDER. 2. FIRST WE SHALL TAKE - UP CROSS APPEAL IN ITA NO. 4196 & 4404 /MUM/2017 FOR AY 2009 - 10 FILED BY REVENUE AND THE ASSESSEE RESPECTIVELY . THE SOLITARY ISSUE REVOLVES AROUND BOGUS PURCHASES ALLEGEDLY MADE BY THE ASSESSEE FROM THE HAWALA DEALERS WHO WERE ALLEGEDLY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES BY ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRINTING, DESIGNING AND LAYOUT , OFFSET PRINTING, DIGITAL PRINTING, INJECT PRINTING, DRUM SCANNING, FLEX/VINYL BANNERS, FOUR COLOUR POSITIVES ETC. . THE ASSESSEE HAD TURNOVER OF RS. 5.08 CRORES WHILE PURCHASES CONSTITUTED MAJOR HEAD OF EXPENDITURE BEING RS . 3.79 CRORES. THE CASE OF THE ASSESSEE WAS REOPENED BY REVENUE BY INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT AND NOTICES DATED 14.03.2013 U/S 148 OF THE 1961 ACT WAS ISSUED BY THE AO TO THE ASSESSEE. THE ASSESSMENT IN THE CASE OF THE ASSESSEE WAS EARLIER COMPLETED U/S 143(3) VIDE ASSESSMENT ORDER DATED 30.11.2011. THE REASONS FOR REOPENING OF THE CONCLUDED ASSESSMENT WAS FURNISHED TO THE ASSESSEE. THERE IS NO DISPUTE BETWEEN RIVAL PARTIES SO FAR AS THE ABOVE FACTUAL MATRIX IS CONCERNED. DURING REAS S ESSMENT PROCEEDINGS CONDUCTED BY THE AO U/S 147 READ WITH SECTION 143(3) OF THE 1961 ACT, THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF PURCHASES EXCEEDING RS. 5 LACS . THE ASSESSEE SUBMITTED I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 3 DETAILS OF THESE PURCHASES. IN ORDER TO VERIFY THESE PURCHASES, THE AO ISSUED NOTICE TO SEVERAL PARTIES U/S 133(6) OF THE 1961 ACT. SOME OF THE PARTIES RESPONDED WHILE SOME OF THE NOTICES ISSUED BY THE AO U/S 133(6) RETURNED UN - SERVED. THE ASSESSEE WAS ASKED TO RECONCILE THE DIFFERENCES IN PURCHASES IN THOSE CASES WHER E REPLIES WERE RECEIVED FROM THE PARTIES WHILE W.R.T. WHERE NOTICES U/S 133(6) RETURNED UN - SERVED, THE AO SHOW CAUSED ASSESSEE AS TO WHY THESE PURCHASES BE NOT TREATED AS BOGUS PURCHASES AND EXPENSES BE TREATED AS UNEXPLAINED PURCHASES AND ADDED TO TOTAL I NCOME. THE FOLLOWING WAS THE CONCLUSION DRAWN BY THE AO W.R.T. THE PARTIES WHERE THE PURCHASES WERE HELD TO BE UNPROVED: 1 ) PURCHASES FROM SHAH ENTERPRISES, GOREGAON(E) THE ASSESSEE HAD SHOWN PURCHASES TO THE TUNE OF RS. 28,60,676/ - FROM THIS PARTY. NOTICES U/S 133(6) WERE SERVED ON THIS PARTY AND THIS PARTY DENIED TO HAVE ANY TRANSACTION WITH THE ASSESSEE DURING FINANCIAL YEAR 2008 - 09(AY 2009 - 10). THE SAID PARTY ALLEGED IN ITS REPLY TO THE AO THAT ITS TIN WAS MISUSED FOR ISSUING BOGUS BILLS. THE ASSESSEE, HO WEVER, BEFORE THE AO SUBMITTED COPY OF LEDGER ACCOUNT OF THIS PARTY, BANK STATEMENT IN SUPPORT OF ITS PURCHASES. THE AO OBSERVED THAT THIS PARTY THROUGH ITS PROPRIETOR SHRI BHUSHAN G. SHAH HAS FILED AN AFFIDAVIT WHEREIN HE AVERRED TO BE ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. THE AO , THEREFORE, TREATED ALLEGED PURCHASES OF RS. 28,60,676/ - MADE FROM SHAH ENTERPRISES AS BOGUS AND ADDED THE SAME TO INCOME OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 69C OF THE 1961 ACT. 2 ) PURCHASES FROM YASH I MPEX, KANDIVILI THE ASSESSEE HAD SHOWN PURCHASES TO THE TUNE OF RS. 41,34,364/ - FROM THIS PARTY. NOTICE ISSUED BY THE AO U/S 133(6) TO THIS PARTY RETURNED UN - SERVED. THE ASSESSEE SUBMITTED THAT THIS PARTY IS SUPPLYING FLEX AND OTHER RAW MATERIAL WHEREIN M ARGIN IS VERY THIN DUE TO FIERCE COMPETITION. THE ASSESSEE ALSO SUBMITTED THAT THIS I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 4 PARTY HAS CLOSED BUSINESS OR RELOCATED ITS BUSINESS TO SOME OTHER PLACE. THE ASSESSEE FILED COPY OF BANK STATEMENT TO SHOW THAT PAYMENTS WERE MADE TO THIS PARTY. THE ASSES SEE COULD NOT PRODUCE THE CORRECT ADDRESS OF THIS PARTY BEFORE THE AO. IT WAS OBSERVED BY THE AO THAT THIS PARTY HAS DEPOSED BEFORE SALES TAX AUTHORITIES THROUGH AFFIDAVIT FILED BY ITS PROPRIETOR MR HEMANT C. SHAH THAT HE HAS ONLY ISSUED BOGUS BILLS WITHOU T SUPPLYING ANY MATERIAL. IT WAS ALSO AVERRED BY THE PROPRIETOR THAT HIS CONCERN YASH IMPEX WAS USED BY MR DHARMESH R. HAKANI WHO USED HIS TIN AND HE RECEIVED RS. 16,000/ - FROM SAID MR DHARMESH R. HAKANI. THE AO ADDED THE SAID ALLEGED BOGUS PURCHASES TO TH E TUNE OF RS. 41,34,364/ - FROM YASH IMPEX AS INCOME OF THE ASSESSEE BEING UNEXPLAINED EXPENDITURE U/S 69C OF THE 1961 ACT. 3. PURCHASES FROM JAIN CORPORATION THE ASSESSEE HAD SHOWN PURCHASES TO THE TUNE OF RS. 37,85,392/ - FROM THIS PARTY. NOTICE ISSUED B Y THE AO U/S 133(6) TO THIS PARTY RETURNED UN - SERVED. THE ASSESSEE SUBMITTED THAT THIS PARTY IS SUPPLYING FLEX AND OTHER RAW MATERIAL WHEREIN MARGIN IS VERY THIN DUE TO FIERCE COMPETITION. THE ASSESSEE ALSO SUBMITTED THAT THIS PARTY HAS CLOSED BUSINESS OR RELOCATED ITS BUSINESS TO SOME OTHER PLACE. THE ASSESSEE FILED COPY OF BANK STATEMENT TO SHOW THAT PAYMENTS WERE MADE TO THIS PARTY. THE ASSESSEE COULD NOT PRODUCE THE CORRECT ADDRESS OF THIS PARTY BEFORE THE AO. IT WAS OBSERVED BY THE AO THAT THIS PARTY NAME IS PUBLISHED BY SALES TAX AUTHORITIES AS ONE WHO HAS ISSUED FALSE BILLS WITHOUT DELIVERY OF GOODS AS A HAWALA DEALER AND THE ASSESSEE IS LISTED AS BENEFICIARIES OF THESE TRANSACTION. THE AO ADDED THE SAID A LLEGED BOGUS PURCHASES TO THE TUNE OF RS. 37,85,392/ - FROM JAIN CORPORATION AS INCOME OF THE ASSESSEE BEING UNEXPLAINED EXPENDITURE U/S 69C OF THE 1961 ACT. THE REVENUE ALSO CONDUCTED SURVEY U/S 133A OF THE 1961 ACT ON THE ASSESSEES PREMISES ON 19.12.2 012. DURING COURSE OF SURVEY I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 5 PROCEEDINGS, STATEMENT OF DIRECTOR OF THE ASSESSEE NAMELY SHRI KISHORE SHAH WAS RECORDED . THE COPY OF SAID STATEMENT WAS GIVEN BY THE AO TO THE ASSESSEE. SHRI KISHORE SHAH HAD STATED IN HIS STATEMENT THAT THE ASSESSEE USED TO P LACE PURCHASE ORDERS OVER THE TELEPHONE TO A PARTICULAR INDIVIDUAL WHO USED TO SUPPLY MATERIAL WITHOUT ANY TRANSPORTATION CHARGES WHICH WERE BORNE BY SUPPLIER. IT WAS STATED THAT EVEN AFTER GETTING SUPPLIES, THEY WERE NOT AWARE FROM WHICH CONCERN THEY WILL GET BILL AND IT WAS AS PER WISH OF THAT PERSON ON WHOM ORDER WERE PLACED, THE BILL USED TO COME FROM. IT WAS STATED THAT THE ASSESSEE NEVER PLACED A N ORDER ON THESE CONCERNS AND IT WAS FURTHER STATED THAT THE ASSESSEE NEVER HAD BUSINESS RELATIONS WITH THE SE CONCERNS EXCEPT RECEIVING BILLS FROM THESE COMPANIES. IT WAS ALSO STATED THAT THE MATERIAL COVERED BY THESE INVOICES WERE IMPORTED MATERIAL AND THERE WAS NO MAJOR INDIAN SUPPLIER FOR ALL THESE MATERIALS. IT WAS FURTHER STATED THAT THE ASSESSEE WAS FORCE D TO BUY THESE MATERIAL FROM GREY MARKET AND TO ACCOUNT FOR PURCHASE, THE BILLS WERE OBTAINED FROM THESE PARTIES. THE ASSESSEE IN RES PONSE TO STATEMENT OF MR KISHOR SHAH, DIRECTOR OF THE ASSESSEE SUBMITTED THAT IT USED TO BUY MATERIAL THROUGH BROKERS WHO S UPPLIES GOODS AT PREMISES. THE BROKER USED TO ISSUE THE BILLS AND THE ASSESSEE MADE THE PAYMENT. IT WAS SUBMITTED THAT THE PAYMENTS ARE GENUINE AND THE ASSESSEE DOES NOT KNOW THE SUPPLIERS. IT WAS SUBMITTED THAT JUST BECAUSE, THE ASSESSEE DOES NOT KNOW THE SUPPLIER WILL NOT MADE THESE TRANSACTIONS AS NOT GENUINE . THE ASSESSEE DULY FILED COPIES OF BANK STATEMENTS FROM WHOM PAYMENTS WERE MADE TO THESE PARTIES. THE AO CONCLUDED THAT THE PARTIES THROUGH WHOM THE PURCHASES WERE MADE AND THE PARTIES TO WHOM PAYM ENTS WERE MADE ARE DIFFERENT. THE AO ALSO OBSERVED THAT IT WOULD BE INCORRECT TO HOLD THAT ALL THE PURCHASES MADE FORM BROKER ARE BOGUS. HOWEVER, FOR THESE THREE PARTIES NAMELY (I) JAIN CORPORATION (II) YASH IMPEX AND (III) SHAH ENTERPRISES WHEREIN THESE P ARTIES HAVE FILED AFFIDAVIT/STATEMENTS I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 6 BEFORE MAHARASHTRA SALES TAX DEPARTMENT TO BE INVOLVED IN BOGUS ACCOMMODATION ENTRIES BEING HAWALA DEALERS ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL, THE AO OBSERVED THAT THE MODUS OPERANDI WAS TO DEPOSIT CHE QUE RECEIVED FROM THE BENEFICIARIES AND RETURN THEM AFTER RETAINING COMMISSION AND THESE EXPENSES WERE TREATED AS UNEXPLAINED EXPENDITURE U/S 69C OF THE 1961 ACT AND ADDED TO THE INCOME OF THE ASSESSEE , VIDE ASSESSMENT ORDER DATED 27.03.2014 PASSED BY THE AO U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LEARNED CIT(A), WHO WAS PLEASED TO CONFIRM ADDITIONS TO THE TUNE OF 12.5% OF THE ALLEGED BOGUS PURCHASES VIDE APPELLATE ORDER DATED 30.03.2017 , BY OB SERVING AS UNDER: 6.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT SUBMITTED DETAILS OF INVOICES, LEDGER ACCOUNT, ETC. WHICH WERE FORWARDED TO THE AO FOR RECONSIDERATION AND TO SUBMIT ITS REPORT. THE AO SUBMITTED THAT THE PURCHASES WERE EFFECTED THROUGH THE BROKERS AND AS PER THE DIRECTION OF THE BROKERS PAYMENT BY WAY OF CHEQUE / RTGS MADE & GOODS ARE RECEIVED WITH BILLS. THE APPELLANT HAS NO OCCASION TO VERIFY THE AUTHENTICITY OF THE PERSONS SUPPLYING THE GOODS ALONG WITH THE BILLS AND THE SAME IS THE TRADE PRACTICE PREVAILING. NOTHING WRONG IN THE TRANSACTION AS THE VERY GOODS ARE SOLD ON WHICH INCOME OFFERED IN THE RETURN OF INCOMES. PAYMENTS WERE MADE AGAINST BILLS NOT ONLY THAT THE GOODS ARE FURTHER SOLD. 6.2 I HAVE CAREFULLY CONSIDE RED THE RIVAL SUBMISSIONS AND THE FACTS OF THE CASE. THIS IS A CASE IN WHICH THE AO HELD THE PURCHASES AS BOGUS AND THE APPELLANT ARGUED ACADEMICALLY THAT THE PAYMENTS WERE MADE BY CHEQUES AND THE BILLS WERE ISSUED AND THE TRANSACTIONS WERE REFLECTED IN TH E BOOKS OF ACCOUNTS AND THE RETURN OF INCOME. THE FACT REMAINS THAT THE APPELLANT HAS NOT PRODUCED THE DETAIL OF THE PARTIES TRANSACTED AND EVEN THE PARTIES WERE NOT FOUND LOCATED WHEN ISSUED NOTICES U/S 133(6). THOUGH THE PAYMENTS HAVE BEEN SHOWN TO BE MA DE BY CHEQUE/RTGS , THE PARTIES REMAINED UNIDENTIFIED , WHO HAVE NOT CONFIRMED THE TRANSACTIONS EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS. HOWEVER, SINCE THE SALES HAVE BEEN REFLECTED IN THE BOOKS OF ACCOUNTS, WHICH ARE N OT BEING DOUBTED BY THE AO, THE TRANSACTIONS REMAIN SUSPICIOUS. IN SUCH CASES, THE DEPARTMENT HAS TAKEN A UNIFORM DECISION KEEPING IN VIEW THE I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 7 VARIOUS TRIBUNAL JUDGMENTS ON THE ISSUE OF BOOK PROFIT TO FURTHER TAX THE INCOME OF THE APPELLANT @12.5% OF THE T RANSACTED AMOUNT. SINCE THE AMOUNT IN DISPUTE IS RS. 1,07,80,426/ - , ON WHICH 12.5% IS CALCULATED. THUS, AN AMOUNT OF RS. 13,47,553/ - IS CONFIRMED AND THE BALANCE OF RS. 94,32,873/ - IS DELETED. THEREFORE, GROUNDS NO. 1 TO 4 ARE PARTLY ALLOWED. 7. IN THE RE SULT, THE APPEAL FOR A.Y. 2009 - 10 IS PARTLY ALLOWED. 4. NOW, BOTH THE REVENUE AS WELL THE ASSESSEE HAVE FILED CROSS APPEALS BEFORE THE TRIBUNAL . THE ASSESSEE IS AGGRIEVED BY CONFIRMATION OF THE ADDITIONS TO THE TUNE OF 12. 5 % OF THE ALLEGED BOGUS PURCHASES BY LEARNED CIT(A) WHILE REVENUE IS AGGRIEVED WITH NON CONDUCTING OF THE ENQUIRY BY LEARNED CIT(A) WITH A VIEW TO UPHOLD 100% DISALLOWANCE AS WAS DONE BY THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS IN PRINTING BUSINESS BOTH OFFSET AND DIGITAL. IT WAS SUBMITTED THAT ASSESSMENT FOR AY 2009 - 10 WAS FRAMED U/S 143( 3 ) AND LATER THE ASSESSMENT WAS REOPENED BY INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT. THE AO HAS ADDED 100% OF THE ALLEGED BOGUS PURCHASES WHILE LEARNED CIT(A) HAS RESTRICTED THE SAME TO 12.5% . IT WAS SUBMITTED THAT GP EARNED BY THE ASSESSEE WAS 25.14% FOR AY 2009 - 10 AND 21.1% FOR AY 2010 - 11. IT WAS SUBMITTED THAT SURVEY WAS CONDUCTED BY REVENUE ON 19.12.2012 U/S 133A OF THE 1961 ACT AND STATEMENT OF DIRECTOR W AS RECORDED ON 19.12.2012. THE ASSESSEE RELIED UPON DECISION OF DIVISION BENCH OF ITAT, MUMBAI IS IN THE CASE OF NIKHIL KISHORE GANDHI V. ACIT IN ITA NO. 315/MUM/2016 , ORDER DATED 04.08.2017 AND DECISION OF SMC OF ITAT, MUMBAI IN THE CASE OF MR. MUUFFAZAL HAKIM PENWALA V. CIT(A) IN ITA NO. 3739/MUM/2017 VIDE ORDERS DATED 20.09.2017. BASED ON THESE DECISIONS, IT WAS PRAYED THAT ADDITIONS TO THE TUNE OF 2% BE ESTIMATED. THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAS ALLEGEDLY OBTAINED BOGUS ACCOMMODATION ENTRIES TOWARDS PURCHASES FROM THESE THREE PARTIES. IT WAS SUBMITTED BY LEARNED DR THAT THE ASSESSEE DID NOT SUBSTANTIATED THE TRANSACTIONS OF PURCHASES MADE FROM THESE THREE PARTIES. IT WAS SUBMITTED THAT GENUINENESS OF THESE PURCHASES COUL D NOT BE PROVED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE AO RIGHTLY MADE ADDITIONS I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 8 TO THE TUNE OF 100% WHILE LEARNED CIT(A) ERRED IN RESTRICTING THE ADDITIONS TO THE TUNE OF 12.5% . IT WAS SUBMITTED THAT DELIVERY OF GOODS COULD NOT BE PROVED. THE LEARNED DR RELIED UPON DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. BHOLA NATH POLY FAB PRIVATE LIMITED REPORTED IN (2013) 355 ITR 290(GUJ.) THE LEARNED COUNSEL FOR THE ASSESSEE IN REJOINDER SUBMITTED THAT DETAILS OF INVOICES ARE ON RECORD. IT WAS SUBMITTED THAT LEARNED CIT(A) CALLED FOR REMAND REPORT FROM THE AO . THE TRANSACTIONS WERE FROM BANKING CHANNEL. THE ASSESSEE RELIED UPON JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT V. TEJUA ROHITKUMAR KAPADIA IN TAX APPEAL NO. 691 OF 2 017 , DATED 18.09.2017 .THE ASSESSEE FURTHER SUBMITTED THAT SLP FILED BY REVENUE AGAINST SAID DECISION OF HONBLE GUJARAT HIGH COURT BEFORE HONBLE SUPREME COURT STOOD DISMISSED VIDE ORDERS DATED 04.05.2018 IN SLP(CIVIL) DIARY NO.(S) 12670/2018. 5. WE HA VE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING CITED CASE LAWS. WE HAVE OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRINTING, DESIGNING AND LAYOUT , OFFSET PRINTING, DIGITAL PRINTING, INJECT PRINTING, DRUM SCANNIN G, FLEX/VINYL BANNERS, FOUR COLOUR POSITIVES ETC. . THE ASSESSEE HAD TURNOVER OF RS. 5.08 CRORES WHILE PURCHASES CONSTITUTED MAJOR HEAD OF EXPENDITURE BEING RS. 3.79 CRORES. THE CASE OF THE ASSESSEE WAS REOPENED BY REVENUE BY INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT AND NOTICES DATED 14.03.2013 U/S 148 OF THE 1961 ACT WAS ISSUED TO THE ASSESSEE. THE ASSESSMENT IN THE CASE OF THE ASSESSEE WAS EARLIER COMPLETED U/S 143(3) VIDE ASSESSMENT ORDER DATED 30.11.2011. THE REASONS FOR REOPENING OF THE CONCL UDED ASSESSMENT WAS FURNISHED TO THE ASSESSEE. THE AO ISSUED NOTICE U/S 133(6) OF THE 1961 ACT TO THE PARTIES FROM WHOM THE ASSESSEE MADE PURCHASES . THE NOTICES ISSUED BY THE AO U/S 133(6) WITH RESPECT TO THE FOLLOWING PARTIES RETURNED UNSERVED. THE ASSES SEE COULD NOT PRODUCE THESE PARTIES BEFORE THE I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 9 AUTHORITIES BELOW NOR PRODUCE THEIR CORRECT ADDRESSES. THUS, THE AO COULD NOT CONDUCT AN ENQUIRY WITH RESPECT TO THESE PARTIES ,AS UNDER . PURCHASES FROM SHAH ENTERPRISES, GOREGAON(E) THE ASSESSEE HAD SHOWN PURCHASES TO THE TUNE OF RS. 28,60,676/ - FROM THIS PARTY. NOTICES U/S 133(6) WERE SERVED ON THIS PARTY AND THIS PARTY DENIED TO HAVE ANY TRANSACTION WITH THE ASSESSEE DURING FINANCIAL YEAR 2008 - 09(AY 2009 - 10). THE SAID PARTY ALLEGED IN ITS REPLY TO THE AO THAT ITS TIN WAS MISUSED FOR ISSUING BOGUS BILLS. THE ASSESSEE, HOWEVER, BEFORE THE AO SUBMITTED COPY OF LEDGER ACCOUNT OF THIS PARTY, BANK STATEMENT IN SUPPORT OF ITS PURCHASES. THE AO OBSERVED THAT THIS PARTY THROUGH ITS PROPRIETOR SHRI BHUSHAN G. SHAH H AS FILED AN AFFIDAVIT WHEREIN HE AVERRED TO BE ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. THE AO , THEREFORE, TREATED ALLEGED PURCHASES OF RS. 28,60,676/ - MADE FROM SHAH ENTERPRISES AS BOGUS AND ADDED THE SAME TO INCOME OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 69C OF THE 1961 ACT. PURCHASES FROM YASH IMPEX, KANDIVILI THE ASSESSEE HAD SHOWN PURCHASES TO THE TUNE OF RS. 41,34,364/ - FROM THIS PARTY. NOTICE ISSUED BY THE AO U/S 133(6) TO THIS PARTY RETURNED UNSERVED. THE ASSESSEE SUBMITTED T HAT THIS PARTY IS SUPPLYING FLEX AND OTHER RAW MATERIAL WHEREIN MARGIN IS VERY THIN DUE TO FIERCE COMPETITION. THE ASSESSEE ALSO SUBMITTED THAT THIS PARTY HAS CLOSED BUSINESS OR RELOCATED ITS BUSINESS TO SOME OTHER PLACE. THE ASSESSEE FILED COPY OF BANK S TATEMENT TO SHOW THAT PAYMENTS WERE MADE TO THIS PARTY. THE ASSESSEE COULD NOT PRODUCE THE CORRECT ADDRESS OF THIS PARTY BEFORE THE AO. IT WAS OBSERVED BY THE AO THAT THIS PARTY HAS DEPOSED BEFORE SALES TAX AUTHORITIES THROUGH AFFIDAVIT FILED BY ITS PROPRI ETOR MR HEMANT C. SHAH THAT HE HAS ONLY ISSUED BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. IT WAS ALSO AVERRED BY THE PROPRIETOR THAT HIS CONCERN YASH IMPEX WAS USED BY MR DHARMESH R. HAKANI WHO USED HIS TIN AND HE RECEIVED I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 10 RS. 16,000/ - FROM SAID MR DHARME SH R. HAKANI. THE AO ADDED THE SAID ALLEGED BOGUS PURCHASES TO THE TUNE OF RS. 41,34,364/ - FROM YASH IMPEX AS INCOME OF THE ASSESSEE BEING UNEXPLAINED EXPENDITURE U/S 69C OF THE 1961 ACT. PURCHASES FROM JAIN CORPORATION THE ASSESSEE HAD SHOWN PURCHASES TO THE TUNE OF RS. 37,85,392/ - FROM THIS PARTY. NOTICE ISSUED BY THE AO U/S 133(6) TO THIS PARTY RETURNED UNSERVED. THE ASSESSEE SUBMITTED THAT THIS PARTY IS SUPPLYING FLEX AND OTHER RAW MATERIAL WHEREIN MARGIN IS VERY THIN DUE TO FIERCE COMPETITION. THE A SSESSEE ALSO SUBMITTED THAT THIS PARTY HAS CLOSED BUSINESS OR RELOCATED ITS BUSINESS TO SOME OTHER PLACE. THE ASSESSEE FILED COPY OF BANK STATEMENT TO SHOW THAT PAYMENTS WERE MADE TO THIS PARTY. THE ASSESSEE COULD NOT PRODUCE THE CORRECT ADDRESS OF THIS P ARTY BEFORE THE AO. IT WAS OBSERVED BY THE AO THAT THIS PARTY NAME IS PUBLISHED BY SALES TAX AUTHORITIES AS ONE WHO HAS ISSUED FALSE BILLS WITHOUT DELIVERY OF GOODS AS A HAWALA DEALER AND THE ASSESSEE IS LISTED AS BENEFICIARIES OF THESE TRANSACTION. TH E AO ADDED THE SAID ALLEGED BOGUS PURCHASES TO THE TUNE OF RS. 37,85,392/ - FROM JAIN CORPORATION AS INCOME OF THE ASSESSEE BEING UNEXPLAINED EXPENDITURE U/S 69C OF THE 1961 ACT. THE REVENUE ALSO CONDUCTED SURVEY U/S 133A OF THE 1961 ACT ON THE ASSESSEE S PREMISES ON 19.12.2012. DURING COURSE OF SURVEY PROCEEDINGS U/S 133A , STATEMENT OF DIRECTOR OF THE ASSESSEE NAMELY SHRI KISHOR SHAH WAS RECORDED. THE COPY OF SAID STATEMENT WAS GIVEN BY THE AO TO THE ASSESSEE. SHRI KISHOR SHAH HAD STATED IN HIS STATEMENT THAT THE ASSESSEE USED TO PLACE PURCHASE ORDERS OVER THE TELEPHONE TO A PARTICULAR INDIVIDUAL WHO USED TO SUPPLY MATERIAL WITHOUT ANY TRANSPORTATION CHARGES WHICH WERE BORNE BY SUPPLIER. IT WAS STATED THAT EVEN AFTER GETTING SUPPLIES, THEY WERE NOT AWARE FROM WHICH CONCERN THEY WILL GET BILL FROM AND IT WAS AS PER WISH OF THAT PERSON ON WHOM ORDER WERE PLACED, THE BILL USED TO COME FROM. IT WAS I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 11 STATED THAT THE ASSESSEE NEVER PLACED AN ORDER ON THESE CONCERNS AND IT WAS FURTHER STATED THAT THE ASSESSEE NEVE R HAD BUSINESS RELATIONS WITH THESE CONCERNS EXCEPT RECEIVING BILLS FROM THESE COMPANIES. IT WAS ALSO STATED THAT THE MATERIAL COVERED BY THESE INVOICES WERE IMPORTED MATERIAL AND THERE WAS NO MAJOR INDIAN SUPPLIER FOR ALL THESE MATERIALS . IT WAS FURTHER S TATED THAT THE ASSESSEE WAS FORCED TO BUY THESE MATERIAL FROM GREY MARKET AND TO ACCOUNT FOR PURCHASE, THE BILLS WERE OBTAINED FROM THESE PARTIES. THE ASSESSEE IN RESPONSE TO STATEMENT OF MR KISHORE SHAH, DIRECTOR OF THE ASSESSEE SUBMITTED THAT IT USED TO BUY MATERIAL THROUGH BROKERS WHO SUPPLIES GOODS AT PREMISES. THE BROKER USED TO ISSUE THE BILLS AND THE ASSESSEE MADE THE PAYMENT. IT WAS SUBMITTED THAT THE PAYMENTS ARE GENUINE AND THE ASSESSEE DOES NOT KNOW THE SUPPLIERS. IT WAS SUBMITTED THAT JUST BECAU SE, THE ASSESSEE DOES NOT KNOW THE SUPPLIER WILL NOT MADE THESE TRANSACTIONS AS NOT GENUINE. THE ASSESSEE DULY FILED COPIES OF BANK STATEMENTS FROM WHOM PAYMENTS WERE MADE TO THESE PARTIES. THE AO CONCLUDED THAT THE PARTIES THROUGH WHOM THE PURCHASES WERE MADE AND THE PARTIES TO WHOM PAYMENTS WERE MADE ARE DIFFERENT. THE AO ALSO OBSERVED THAT IT WOULD BE INCORRECT TO HOLD THAT ALL THE PURCHASES MADE FORM BROKER ARE BOGUS. HOWEVER, FOR THESE THREE PARTIES NAMELY (I) JAIN CORPORATION (II) YASH IMPEX AND (III ) SHAH ENTERPRISES WHEREIN THESE PARTIES HAVE FILED AFFIDAVIT/STATEMENTS BEFORE MAHARASHTRA SALES TAX DEPARTMENT TO BE INVOLVED IN BOGUS ACCOMMODATION ENTRIES BEING HAWALA DEALERS ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL, THE AO OBSERVED THAT THE MODUS OPERANDI WAS TO DEPOSIT CHEQUE RECEIVED FROM THE BENEFICIARIES AND RETURN THEM AFTER RETAINING COMMISSION AND THESE EXPENSES WERE TREATED AS UNEXPLAINED EXPENDITURE U/S 69C OF THE 1961 ACT AND ADDED TO THE INCOME OF THE ASSESSEE . THE LEARNED CIT(A) HAD FORWARDED ADDITIONAL EVIDENCES FILED BY THE ASSESSEE BY WAY OF INVOICES, LEDGER ACCOUNT ETC FOR SUBMISSIONS OF REMAND REPORT. THE ASSESSEE HAD I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 12 CLAIMED THAT PURCHASES WERE MADE FROM BROKERS AND THEN BILLS USED TO COME FROM BROKERS IN FAVOUR OF DIFFERENT PARTIES TO WHOM PAYMENTS WERE MADE AND THE ASSESSEE NEVER GOT OPPORTUNITY TO VERIFY AUTHENTICITY OF THE PERSONS SUPPLYING MATERIAL BUT HOWEVER IT WAS CLAIMED THAT THE VERY GOODS WERE SOLD ON WHICH INCOME WAS OFFERED TO TAX IN THE RETURN OF INCOME. . THE L EARNED CIT(A) THEN RESTRICTED THE ADDITION TO 12.5% OF ALLEGED BOGUS PURCHASES BY ESTIMATING PROFITS EMBEDDED IN THE SAID ALLEGED BOGUS PURCHASES. AS WE HAVE SEEN THAT THE FINDINGS ARE THERE THAT GOODS SO PURCHASE D WERE SOLD BY THE ASSESSEE AND UNDER THESE CIRCUMSTANCES, PROFITS EMBEDDED IN THESE ALLEGED BOGUS PURCHASES HAS TO BE ESTIMATED. IT IS ALSO AVERRED BY THE DIRECTOR OF THE ASSESSEE MR KISHOR SHAH IN STATEMENT RECORDED ON 19.12.2012 THAT THE ASSESSEE USED TO BUY MATERIAL FROM GREY MARKET AND BILLS W ERE PROCURED FROM THESE BROKERS. IT IS ALSO AVERRED BY SAID DIRECTORS THAT THESE ARE IMPORTED MATERIAL AND THERE ARE HARDLY ANY SUPPLIERS IN INDIA FOR SUPPLY OF THE MATERIAL COVERED BY THESE INVOICES. THESE PARTIES FROM WHOM THE ASSESSEE ALLEGEDLY MADE PUR CHASES HAVE FILED AN AFFIDAVIT/STATEMENT BEFORE MAHARASHTRA VAT AUTHORITIES THAT THEY WERE ONLY INVOLVED IN ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. THE NOTICES ISSUED TO THESE PARTIES BY THE AO U/S 133(6) RETURNED UNSERVED. THESE PARTIES COULD NOT BE PRODUCED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW NOR THE ASSESSES COULD SUPPLY CORRECT ADDRESSES OF THESE PARTIES. THESE PURCHASES ARE APPEARING IN THE BOOKS OF THE ASSESSEE AND THERE IS AN UNCONTROVERTED ADMISSION BY THE DIRECTOR THAT ONLY BIL LS WERE OBTAINED FROM THESE PARTIES WHILE THE MATERIAL WHICH WAS IMPORTED WAS OBTAINED FROM GREY MARKET. THUS, UNDER THESE CIRCUMSTANCES NOT ONLY DID ASSESSEE OBTAINED ADVANTAGE OF LOWER PRICES BY OBTAINING MATERIAL FROM GREY MARKET WITHOUT BILL BUT ALSO GOT ADVANTAGE OF VAT/CST AND ALSO CUSTOM DUTY ON IMPORTED MATERIAL IN THE FORM OF BASIC CUSTOM DUTY, ADDITIONAL DUTY, CVD ETC. WHILE AT THE SAME TIME INFLATED PURCHASE BILLS WERE OBTAINED. THUS, IN SUCH CASES BOOK RESULTS ARE NOT RELIABLE AND AN ESTIMATION OF PROFITS EMBEDDED IN PURCHASES IS TO BE DONE WHICH I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 13 INVOLVES ESTIMATION WHICH SHOULD BE FAIR AND HONEST. THE RELIANCE IS PLACED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. BHOLANATH PLOY FAB PRIVATE LIMITED REPORTED IN (2013) 355 ITR 290(GUJ.) , WHEREIN HONBLE GUJARAT HIGH COURT HELD AS UNDER: 6. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTED NO ERROR. WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS IS ESSENTIALLY A QUESTION OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE THE CLOTH AND SELL THE FINISHED GOODS. IN THAT VIEW OF THE MATTER, AS NATURAL COROLLARY, NOT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDED THEREIN WOULD BE SUBJECT TO TAX. THIS WAS THE VIEW OF THIS COURT IN THE CASE OF SANJAY OILCAKE INDUSTRIES V. CIT [2009] 316 ITR 274 (GUJ). SUCH DECISION IS ALSO FOLLOWED BY THIS COURT IN A JUDGMENT DATED AUGUST 16, 2011, IN TAX APPEAL NO. 679 OF 2010 IN THE CASE OF CIT V. KISHOR AMRUTLAL PATEL . IN THE RESULT, TAX APPEAL IS DISMISSED . THE RELIANCE IS ALSO PLACED ON DECISION OF HONBLE SUPREME CO URT IN THE CASE OF KACHWALA GEMS V. JCIT REPORTED IN (2007) 288 ITR 10(SC), WHEREIN HONBLE SUPREME COURT HELD AS UNDER: 11. IT IS WELL - SETTLED THAT IN A BEST JUDGMENT ASSESSMENT, THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT THE AUTHORITIES CO NCERNED SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT, AND SHOULD NOT ACT TOTALLY ARBITRARILY, BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGMENT ASSESSMENT, AND IT IS THE ASSESS EE HIMSELF WHO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS. IN OUR OPINION, THERE WAS NO ARBITRARINESS IN THE PRESENT CASE ON THE PART OF THE INCOME - TAX AUTHORITIES. THUS, THERE IS NO FORCE IN THIS APPEAL, AND IT IS DISMISSED ACCORDINGLY. NO COSTS. U NDER THESE CIRCUMSTANCES KEEPING IN VIEW NATURE OF GOODS / INDUSTRY IN WHICH THE ASSESSEE IS DEALING AND KEEPING IN VIEW THAT GOODS INVOLVED ARE IMPORTED BEING PURCHASED FROM GREY MARKET WHO HAD BROUGHT THESE GOODS IN INDIAN MARKET WITHOUT PAYMENT OF CUSTO M DUTIES , IT WILL BE FAIR AND REASONABLE TO ESTIMATE PROFITS EMBEDDED IN THESE PURCHASES TO THE TUNE OF 25% ( TWENTY FIVE PERCENTAGE) OF THE ALLEGED PURCHASES AS INCOME TO BE BROUGHT TO TAX OVER AND ABOVE WHAT WAS DECLARED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS TO COVER ADVANTAGE IT GOT BY WAY OF INFLATED PURCHASE PRICES DUE TO BUYING FROM GREY MARKET, TAX ADVANTAGE BY WAY OF VAT/CST AND CUSTOM DUTY SAVED ON IMPORTED GOODS BEING BOUGHT FROM GREY MARKET WHO I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 14 OBVIOUSLY BROUGHT GOODS IN INDIAN TERRITORY WIT HOUT PAYING CUSTOM DUTIES . THE RELIANCE ON THE ASSESSEE ON OTHER CASE LAWS TO CONTEND THAT ADDITION OF 2% IS WARRANTED LACKS MERIT AS EACH CASE IS TO BE DECIDED ON ITS OWN MERIT KEEPING IN VIEW NATURE OF PRODUCT AND CIRCUMSTANCES SURROUNDING THE SAME. WE ORDER ACCORDINGLY. 6. IN THE RESULT, APPEAL OF THE A SSESSEE IN ITA NO. 4404/MUM/2017 FOR AY 2009 - 10 IS DISMISSED WHILE APPEAL OF THE REVENUE IN ITA NO. 4196 /MUM/2017 FOR AY 2009 - 10 STOOD PARTLY ALLOWED AS INDICATED ABOVE. 7 . OUR DECISION FOR AY 2009 - 10 WIT H RESPECT TO CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE SHALL APPLY MUTATIS MUTANDIS TO CROSS APPEAL FILED BY THE ASSESSEE AND REVENUE FOR AY 2010 - 11 IN ITA NO. 4405 /MUM/2017 AND ITA NO. 4202/MUM/2017 RESPECTIVELY FOR AY 2010 - 11 AS THE FACTS ARE SIMIL AR IN BOTH THE YEARS . 8.IN THE RESULT, APPEAL(S) OF THE ASSESSEE IN ITA NO.4404 - 4405/MUM/2017 FOR AY 2009 - 10 AND AY 2010 - 11 RESPECTIVELY AND REVENUES APPEAL IN ITA NO. 4196/MUM/2017 AND 4202/MUM/2017 FOR AY 2009 - 10 AND 2010 - 11 RESPECTIVELY STOOD PARTLY ALL OWED AS INDICATED ABOVE. ORDER PRONO UNCED IN THE OPEN COURT ON 1 3 .02 .2019. 1 3 .02 .2019 S D / - S D / - (SAKTIJIT DEY) (RAMIT KOCHAR) JU DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 3 . 02 .2019 NISHANT VERMA SR. PRIVATE SECRETARY I.T.A. NO.4196,4202,4404 - 4405/ MUM/2017 15 COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI