Shri Rajendrasingh Dharamsingh Rajpal HUF, Sendhwa V. The DCIT, Khandwa

ITA 497/IND/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6124 (ITAT-INDORE)
• Duration Of Justice: 5 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 19-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHANEY
• Assessee Lawyers: P D NAGAR
• Keywords: Bogus purchase; Search and seizure; Peak credit; Initiation of penalty proceedings; Revised return
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO.497/IND/2010 A.Y. : 2007-08 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL,HUF, DY. CIT, KHANDWA SENDHWA VS APPELLANT RESPONDENT I.T.A.NO. 501/IND/2010 A.Y. 2007-08 ACIT, KHANDWA SHRI RAJENDRA SINGH DHARAMPAL SINGH RAJPAL, HUF, SENDHWA VS APPELLANT RESPONDENT PAN NO. AAEHR5351P ASSESSEE BY : SHRI P.D.NAGAR, CA DEPARTMENT BY : SHRI RAJEEV VARSHANEY, CIT DR I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 2 2 O R D E R PER D.T.GARASIA, J.M. APPEAL BY THE ASSESSEE AND DEPARTMENT ARE DIRECTED AGAINST THE ORDER OF CIT(A)-II, INDORE, DATED 30.0 4.2010 FOR THE ASSESSMENT YEAR 2007-08. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER. 3. THE ASSESSEE HAS FILED THE RETURN OF INCOME DECLARI NG TOTAL INCOME OF RS. 2,51,51,370/-. DURING THE YEAR THE ASSESSEE HAS MADE PURCHASES OF RS. 3,11,72,462/- FR OM M/S. JAIDEEP TRADING COMPANY, SENDHWA. THE ASSESSEE WAS AS KED TO EXPLAIN AS TO WHY THE PURCHASES SHOULD NOT BE TRE ATED AS BOGUS. THE ASSESSEE HAS FILED THE WRITTEN SUBMISSION THAT THE ASSESSEE HAS PURCHASED THE GOODS FROM JAIDEEP TRADI NG COMPANY AND WERE SOLD TO VARIOUS PARTIES, HENCE IT WAS TREATED AS GENUINE. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS SHOWN PURCHASES TO M/S. ANUJ ENTERPRISES, M/S. SHRIKRISHNA TRADING AND M/S. JAIDEEP TRADING COMPAN Y DATE OF HEARING : 06 . 0 4 .2016 DATE OF PRONOUNCEMENT : 17 . 0 5 .2016 I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 3 3 AMOUNTING TO RS. 32,36,601/-, RS. 8,04,471/- AND RS . 3,11,72,462/- RESPECTIVELY. DURING THE SEARCH AND S URVEY AT THE BUSINESS PREMISES OF THE ASSESSEE PURCHASE BILL S OF M/S. ANUJ ENTERPRISES WERE FOUND. M/S. ANUJ ENTERPRISES I S A PROPRIETORY CONCERN OF SHRI MANJEET SINGH JUNEJA AN D IN TURN HE HAS SHOWN PURCHASE FROM SHRI DHARMESH PUROHIT, PR OP. M/S. SHRI KRISHNA TRADING COMPANY. IN THE SEARCH CO NDUCTED AT KRISHNA TRADING COMPANY, WHEREIN SHRI DHARMESH PU ROHIT IN HIS AFFIDAVIT DATED 4.3.2008 HAS DEPOSED THAT HE HAD GOT SOME BILLS PRINTED IN THE NAME OF SHRI KRISHNA TRAD ING COMPANY SOMEWHERE NINE YEARS BACK BUT HE HAS NEVER ISSUED ANY BILLS IN THE NAME OF SHRI KRISHNA TRADING COMPA NY. THE ASSESSEE HAS ACCEPTED THE ABOVE TRANSACTION AS BOGU S PURCHASE AND ACCORDINGLY HE HAS DECLARED INCOME OF RS. 40,41,072/-. SIMILARLY, IN FINANCIAL YEAR 2005-06 H E HAS ALSO MADE PURCHASES FROM M/S. ANUJ ENTERPRISES AMOUNTING TO RS. 83,83,322/- AS BOGUS DECLARED IN THE RETURN FOR THE ASSESSMENT YEAR 2006-07 AND SHRI DHARMESH PUROHIT S TATED THAT SHRI RINKY RAJPAL HAS USED THE BILLS OF SHRI KRISHNA TRADING COMPANY AND ALL THE TRANSACTIONS WERE ROUTE D I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 4 4 THROUGH BANK ACCOUNT BY TAKING BLANK CHEQUES SIGNED BY ME WITH A PROMISE THAT COMMISSION WILL BE PAID TO ME. I N VIEW OF THIS, THE PURCHASES MADE DURING THE ASSESSMENT YEAR 2007-08 AT RS. 3,11,72,462/- FROM M/S. JAIDEEP TRADING COMP ANY WAS TREATED AS BOGUS. 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS PARTLY ALLOWED THE APPEAL BY OBSERVING AS UNDER :- 4.1 THE ADDITION HAS BEEN MADE BY THE AO IN RESPECT OF PURCHASES CLAIMED TO BE MADE BY THE APPELLANT FROM M/S. JAIDEEP TRADING CO. I.E. PROPRIETORY CONCERN OF SHRI PARAMJEET SINGH RAJPAL, WHEREIN SIMILAR ADDITION WAS MADE BY THE AO FOR THE IDENTICAL AMOUNT OF RS. 3,11,72,462/- AND SUCH ISSU E WAS EXAMINED IN DETAIL IN THE APPEAL ORDER DECIDED IN THE CASE OF SHRI PARAMJEET SINGH RAJPAL ON 31.3. 10 AND THE RELEVANT PORTION FROM SUCH FINDING IS REPRODUCED HEREUNDER :- A. 4 .2.2 THE UNDISPUTED FACTS ON RECORD ARE THAT SEARCH AND SEIZURE OPERATION WAS I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 5 5 MOUNTED IN THE BUSINESS PREMISES OF MANJEET COTTON GROUP. FURTHER, THE AO HAS RECORDED AND CATEGORICAL FINDING, THAT THE TRANSACTION OF OTHER BOGUS PURCHASES WERE MADE BY RDR HUF FROM M/S. ANUJ ENTERPRISES, WHICH WERE ADMITTED AS BOGUS PURCHASES AND RDR HUF HAS OFFERED SUBSTANTIAL AMOUNT OF RS.40.4 LAKH FOR TAXATION FOR SUCH BOGUS PURCHASES WAS OFFERED FOR TAXATION DURING THE YEAR UNDER CONSIDERATION AND FURTHER AMOUNT OF RS.83.83 LAKH FOR A.Y. 2006-07. THE AO HAS ALSO NOTED THAT THE SAME MODUS OPERANDI, AS ADOPTED BY RDR HUF IN MAKING PURCHASES FROM M/S. ANUJ ENTERPRISES, WAS ADOPTED IN RESPECT OF PURCHASE TRANSACTIONS FROM THE APELLANT'S PROPRIETARY CONCERN M/S. JAIDEEP TRADING CO. HE HAS VERY CLEARLY AND CATEGORICALLY RECORDED FINDINGS THAT THE BILLS ISSUED BY I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 6 6 THE APPELLANT DID NOT CONTAIN ANY MODE OF TRANSPORTATION OF GOODS ' FROM THE BUSINESS PREMISES OF THE APPELLANT TO THE BUSINESS PREMISES OF RDR HUF WHILE MAKING THE ADDITION OF RS.311.72 LAKHS AS BOGUS PURCHASES IN THE CASE OF RDR HUF ON SUBSTANTIVE BASIS. 4.2.3 ONCE THERE IS SO CLEAR AND CATEGORICAL FINDING THAT THE AMOUNT OF BOGUS PURCHASES WAS LIABLE TO BE CONSIDERED IN THE HANDS OF THE ACTUAL BENEFICIARY RDR HUF THERE WAS ABSOLUTELY NO CASE FOR MAKING SIMILAR ADDITION IN THE HANDS OF THE APPELLANT, THAT TOO ON SUBSTANTIVE BASIS, WHEN IT WAS VERY CLEARLY PROVED ON RECORDS THAT THE APPELLANT WAS USED AS A CONDUIT FOR FACILITATING SUCH BOGUS TRANSACTIONS TO BE RECORDED IN THE BOOKS OF RDR HUF. IT IS AGAIN A BROADLY UNDISPUTED AND I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 7 7 ADMITTED FACT ON RECORD THAT FOR USING SUCH ACCOMMODATION BOGUS BILLS, THE APPELLANT IN TURN OBTAINED BOGUS BILLS FROM DHARMESH PUROHIT PROP. KTC. ONCE THAT WAS THE CASE, THERE WAS ABSOLUTELY NO CASE FOR RECORDING THE FINDING THAT THE APPELLANT COULD NOT PROVE THE PURCHASES FROM SHRI DHARMESH PUROHIT, PROP. KTC WHEN APPELLANT'S ADMITTED CASE IS THAT NO SUCH PURCHASES WERE AFFECTED. THUS, THE ACTION OF THE AO IN MAKING ADDITION OF FOUR SUCH BOGUS PURCHASES IN THE HANDS OF THE APPELLANT IS TOTALLY FOUND TO BE UNJUSTIFIED AND UNSUSTAINABLE BOTH IN FACTS AND IN LAW. 4.1.1 THE AFORESAID FINDING ARRIVED IN THE CONNECTED CASE SQUARELY APPLIES TO THE APPELLANT'S CASE AS THE SUPPLIER JAIDEEP TRADING CO. (JTC), HAS FROM THE VERY I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 8 8 BEGINNING DULY SUPPORTED BY AFFIDAVIT OF THE NEXT CHAIN OF THE BOGUS SUPPLIER SHRI DHARMESH PUROHIT, PROP. SHRI KRISHNA TRADING CO. (KTC) HAS MAINTAINED THAT ONLY ACCOMMODATION BILLS WERE ISSUED TO THE APPELLANT F OR WHICH A COMMISSION AMOUNT WAS CHARGED. THE FACTS AVAILABLE ON RECORD CLEARLY INDICATE THAT M/S JTC ISSUED ONLY ACCOMMODATION BILLS TO F HE APPELLANT AND HENCE AO'S ACTION IN TREATING THE PURCHASES AFFECTED FROM JTC AT RS. 3,11,72,463/- HAS TO BE NECESSARILY UPHELD AND ARE SO UPHELD. 4.2 THE NEXT ISSUE WHICH ARISES IS WHETHER THE AO'S ACTION IN ADDING THE ENTIRE AMOUNT OF RS.311.72 LAKHS AS BOGUS PURCHASES WOULD BE JUSTIFIED OR THE PEAK AMOUNT INVOLVED IN FINANCING OF SUCH BOGUS PURCHASES TRANSACTIONS I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 9 9 WOULD BE REQUIRED TO BE ADDED. THE APPELLANT IN PURSUANCE TO DISCUSSION HAS GIVEN THE PEAK WORKING WITHOUT PREJUDICE TO HIS SUBMISSION MADE ON MERITS OF SUCH ADDITIONS. IN SUCH WORKING, THE MAXIMUM AMOUNT HAS BEEN ARRIVED AT RS.66,55,625/- ON 8.2.07 AND THE SECOND LOWER PEAK IS ARRIVED ON 24.4.06 AT RS.62,52,248/-. IT HAS BEEN EXPLAINED BY THE AR THAT IF THE APPELLANT'S CONTENTIONS ARE NOT ACCEPTED AND PEAK AMOUNT IS TO BE ADDED, THEN THE' LOWER OF THESE TWO PEAKS SHALL BE REQUIRED TO BE CONSIDERED BECAUSE AN AMOUNT OF RS.10 LAKHS WAS DRAWN FOR PAYMENTS MADE TO M/S. ANUJ ENTERPRISES (ANOTHER BOGUS SUPPLIER) AT RS.10 LAKHS WHICH WILL BE AVAILABLE FOR EXPLAINING UNRECORDED PURCHASES ON 31.5.06 AND I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 10 10 A SEPARATE AMOUNT OF UNDISCLOSED INCOME FOR PURCHASES MADE FROM MIS. ANUJ ENTERPRISES AT RS.83.83 LAKHS FOR A.Y. 2006-07 WAS SURRENDERED FOR TAXATION FOR A.Y. 2006-07. 4.2.1 THE APPELLANTS CONTENTION IN THIS BEHALF ARE FOUND TO BE ACCEPTABLE BEING VERIFIABLE FROM THE ACCOUNT OF M/S. ANUJ ENTERPRISES AND THE AO HAS TAKEN NOTE OF THE FACT IN ASSESSMENT ORDER WHICH IS AS EXTRACTED ABOVE, THAT THE APPELLANT ADMITTED UNDISCLOSED INCOME OF RS. 83.83 LAKHS FOR BOGUS PURCHASES FROM M/S. ANUJ ENTERPRISES FOR A.Y.2006-07 AND ACCORDINGLY THE ADDITION FOR BOGUS PURCHASES IS DIRECTED TO BE REDUCED TO RS. 62,52,248/-BEING THE PEAK AMOUNT INVOLVED IN FINANCING THE SAID UNRECORDED PURCHASES AFTER NECESSARY I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 11 11 VERIFICATION BY AO OF ARITHMETICAL ACCURACY AND POSITION OF PAYMENTS ETC., AS AVAILABLE ON RECORD. RELIANCE IN THIS RESPECT IS PLACED ON THE DECISIONS OF HON'BLE ITAT, AHMEDABAD BENCH, AHMEDABAD IN THE CASE OF VIJAY PROTEIN LTD. V. ACIT 56 TTJ (AHD.) 76/58 ITD 428(AHD.). THE TRIBUNAL HAS AN ALTERNATIVE HAS ALSO UPHELD DISALLOWANCE OF 25% OF SUCH BOGUS PURCHASES AND THE SAID VIEW WAS CONFIRMED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF SANJAY OIL CAKE INDUSTRIES V. CIT 316 ITR 274(GUJ.). THE AFORESAID DISCUSSION DISPOSES OFF ALL THE FOUR GROUNDS OF APPEAL. 4.3 THE REMAINING GROUND NO.5 IS DIRECTED AGAINST CHARGING OF INTEREST U/S.234C AND INITIATION OF PENALTY I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 12 12 PROCEEDINGS U/S.271(1)(C). CHARGING OF INTEREST U/S.234B AND 243C ARE MANDATORY AND CONSEQUENTIAL IN NATURE AND THE APPELLANT SHALL ACCORDINGLY BE ENTITLED TO CONSEQUENTIAL RELIEF IN VIEW OF THE APPELLATE DIRECTIONS RECORDED ABOVE. HOWEVER, NO APPEAL LIES AGAINST INITIATION OF PENALTY PROCEEDINGS AND ACCORDINGLY SUCH GROUND IS REJECTED. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 5. THE DEPARTMENT IS IN APPEAL AGAINST THE RESTRICTING THE ADDITION OF BOGUS PURCHASE OF RS. 3,11,72,462/- TO PEAK CREDIT OF RS. 62,52,248/- AND ASSESSEE IS IN APPEAL ON THE GROUND THAT WHEN THE PURCHASES ARE GENUINE, THE PEAK ADDITI ON MAY BE DELETED. 6. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE H AS FILED THE WRITTEN SUBMISSION, WHICH READS AS UNDER :- I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 13 13 THE APPELLANT IN FACT PURCHASED COTTON FROM M/S. JAIDEEP TRADING COMPANY. HE WAS BEING ASSESSED TO TAX UNDER INCOME-TAX ACT AS WELL AS UNDER VAT ACT HAVING PAN AS WELL AS TAN ALLOTTED TO HIM. THE ACCOUNTS OF M/S. JAIDEEP TRADING COMPANY WERE ALSO AUDITED AND REPORT U/S 44AB OF THE ACT WAS FURNISHED BY HIM ALONG WITH INCOME TAX RETURN. BANK STATEMENT OF THE APPELLANT WERE ALSO SUBMITTED TO PROVE THAT THE PAYMENTS WERE MADE AGAINST SUPPLIES BY A/C PAYEE CHEQUES TO THE SUPPLIER. COTTON PURCHASED FROM THE SUPPLIER WAS SOLD AS SUCH TO OTHER PARTIES. COPIES OF SALE INVOICES ISSUED TO THEM AND COPIES OF THEIR LEDGER ACCOUNTS WERE ALSO SUBMITTED IN SUPPORT OF THE FACT THAT COTTON PURCHASED WAS IN FACT SOLD AND PROFIT EARNED ON SUCH SALE WAS OFFERED FOR TAX. NEITHER THERE WAS ANY EVIDENCE THAT COTTON WAS NOT SUPPLIED BY M/S. JAIDEEP TRADING COMPANY TO THE APPELLANT I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 14 14 NOR THERE WAS ANY INDICATION THAT PAYMENTS MADE BY THE APPELLANT WERE RECEIVED BACK IN ANY FORM. IN VIEW OF QUANTITATIVE RECORDS MAINTAINED, THE PURCHASES CANNOT BE TREATED TO BE BOGUS BECAUSE SAME GOODS WERE IN FACT SOLD FROM TIME TO TIME HENCE ENTIRE PURCHASES OF RS.3,11,72,462/- CANNOT BE ASSESSED U/S 68 OF THE ACT. THE LEARNED CIT(APPEALS) CONCLUDED THAT FACTS AVAILABLE ON RECORD INDICATE THAT M/S. JAIDEEP TRADING COMPANY ISSUED ONLY ACCOMMODATION BILLS TO THE APPELLANT. HOWEVER, HE RESTRICTED THE ADDITION TO THE EXTENT OF RS.62,52,248/- BEING MAXIMUM AMOUNT OF CREDIT LYING IN THE ACCOUNT OF M/S. JAIDEEP TRADING COMPANY INSTEAD OF ENTIRE PURCHASES OF RS. 3,11,72,462/- BEING THE PEAK CREDIT AS PER ACCOUNT OF THE SUPPLIER. APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST ADDITION OF RS.62,52,248/- WHEREAS DEPARTMENT HAS PREFERRED AN APPEAL AGAINST THE RELIEF GRANTED I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 15 15 BY CIT(A) BY WORKING THE AMOUNT BASED ON THEORY OF PEAK CREDIT. IT IS SUBMITTED THAT :- THERE IS NO DIRECT EVIDENCE THAT THE SUPPLIES MADE BY M/S. JAIDEEP TRADING COMPANY WERE ACCOMMODATION BILLS EXCEPT THAT SHRI DHARMESH PUROHIT PROP : M/S. SHREE KRISHNA TRADING COMPANY HAD STATED IN HIS AFFIDAVIT DATED 04.03.2008 THAT THE APPELLANT HAD ALSO USED THE BILLS OF M/S. SHREE KRISHNA TRADING COMPANY. IT WAS JUST PRESUMED BY THE AO THAT THE ASSESSEE FOLLOWED THE SAME MODUS OPERANDI IN REGARD TO PURCHASES SHOWN FROM M/S. JAIDEEP TRADING COMPANY WHICH WAS ADOPTED IN RELATION TO PURCHASES FROM M/S. SHREE KRISHNA TRADING COMPANY. ADDITION BASED ON SUCH PRESUMPTION IS ARBITRARY IN NATURE. THE APPELLANT CLAIMED THAT THE PURCHASE INVOICES I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 16 16 ISSUED BY M/S. JAIDEEP TRADING COMPANY WERE GENUINE HENCE NO ADDITION IS CALLED FOR. THE BONA FIDES ARE ALSO PROVED FROM THE FACT THAT THE APPELLANT HIMSELF SURRENDERED THE PURCHASES EFFECTED FROM M/S. KRISHNA TRADING COMPANY DURING THE YEAR AT RS.40,41,072/- AND OFFERED THE SAME FOR TAX DURING THE COURSE OF SEARCH. THE PURCHASES WERE EFFECTED ON CREDIT FROM M/S. JAIDEEP TRADING COMPANY AND PAYMENTS WERE MADE FROM TIME TO TIME . SUCH PAYMENTS WERE MADE WITHIN FIFTEEN DAYS HENCE PURCHASES CANNOT BE DOUBTED UPON SPECIALLY WHEN THE GOODS WERE SOLD AND QUANTITATIVE RECORDS WERE MAINTAINED. AS REGARDS, DEPARTMENTAL APPEAL, IT IS SUBMITTED THAT THE THEORY OF PEAK CREDIT APPLIED BY THE LEARNED CIT(APPEALS) IS WELL RECOGNIZED IN THE PROCEEDINGS UNDER INCOME TAX ACT BECAUSE THE PURCHASES WERE SOLD AND PAYMENTS WERE MADE FROM TIME TO TIME THROUGH BANKING CHANNELS ONLY. I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 17 17 THE PURCHASES EFFECTED WERE ALSO SOLD DURING THE YEAR ITSELF. RELIANCE IS PLACED ON FOLLOWING JUDGMENTS. A) VIJAY PROTEINS LTD VS. ACIT (1996) 56 TTJ (AHD.) 76/58 I TD 428 (AHD.) B) CIT-VI VS. PURUSHOTTAM JHAWAR (2013) 40 TAXMANN 533 (AP) C) RAJESH KUMAR AGRAWAL VS. DEPARTMENT OF INCOME TAX - ITA NO.1514IKOL/2011 ORDER DATED 25.06.2013 (KOLKATA BENCH-C) D) INCOME TAX OFFICER VS. MAHESHKUMAR JAYANTILAL VORA (2004) 3 SOT 96 E) ITO VS. PAWAN KUMAR (2015) 153 ITD 448 (DEL. BENCH-F) IT IS SUBMITTED THAT THE APPELLANT HAD PURCHASED COTTON ON CREDIT FROM TWO PARTIES AND SOLD THE SAME WHICH IS PROVED FROM THE QUANTITATIVE RECORDS ACCOMPANIED BY AUDIT REPORT. HENCE EVEN IF THE PURCHASES ARE FOUND TO HAVE BEEN EFFECTED FROM I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 18 18 BOGUS SUPPLIERS, ENTIRE ADDITION CANNOT BE MADE UNLESS THERE IS SOME EVIDENCE IN SUPPORT OF THE CLAIM THAT THE MONEY REACHED BACK TO THE ASSESSEE. SUSPICION ALONE HOWEVER STRONG IS NOT SUFFICIENT. ADDITIONAL PROFIT CAN BE ASSESSED TO TAX AS HELD IN FOLLOWING CASES :- A) SANJAY OIL CAKES INDUSTRIES VS. CIT (2009) 316 ITR 274 (GUJ.) B) G.G DIAMOND INTERNATIONAL VS. DCIT (2006) 104 TTJ 809 (MUMBAI) C) DCIT VS. NARENDRA KUMAR LUNAWAT(2004) 90 TTJ 467 (JAIPUR). 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED BEFO RE US THAT IN THIS CASE THE ASSESSEE HAS MADE PURCHASE S FROM JAIDEEP TRADING COMPANY AND THE ASSESSEE WAS ASKED T O PROVE THE PURCHASES MADE FROM JAIDEEP TRADING COMPA NY. THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY TO CR OSS- EXAMINE THE SELLER, BUT THE ASSESSEE DID NOT OBTAIN THE OPPORTUNITY AND WHEN THE ASSESSEE DID NOT AVAIL THE OPPORTUNITY OF THE CROSS EXAMINATION, THE ENTIRE BO GUS I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 19 19 PURCHASE HAS TO BE TREATED AS INCOME OF THE ASSESSE E AS PER THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS. LA MEDICA, (2001) 117 TAXMAN 628 (DEL), WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT WHEN THE ASSESSEE DID NOT P RODUCE THE SELLER, IT WOULD BE THE BASIS OF DOUBTING THE GE NUINENESS OF THE PURCHASES AND IT WAS FICTITIOUS PURCHASE. IN THAT CASE, THE ASSESSEE WAS MANUFACTURING ALLOPATHIC MEDICINE S AND CLAIMED TO HAVE PURCHASED RAW MATERIAL FROM KE ON CREDIT. THE ITO FOUND THAT PURCHASES WERE MADE WAS HIGH. THE SE PURCHASES WERE ONLY PURCHASES FROM THE SAID SELLER. THE ITO ASKED THE ASSESSEE TO PRODUCE THE SELLER ALONGWITH T HE BOOKS OF ACCOUNTS. DESPITE A NUMBER OF OPP0ORTUNITY GIVEN TO THE ASSESSEE, SELLER COULD NOT BE PRODUCED. THEREFORE, ITO TREATED THE VALUE OF THE RAW MATERIAL AS INCOME FROM UNDISCL OSED SOURCES. THE HON'BLE HIGH COURT HELD THAT THE WHOLE PURCHASE IS UNDISCLOSED INCOME OF THE ASSESSEE. SIMILARLY, I N THIS CASE, THE ASSESSEE HAS NOT PRODUCED THE PURCHASER AND IT IS ADMITTED THAT ONLY BILLS WERE PRODUCED. THEREFORE, I N THIS CASE, THE FACTS ARE SIMILAR. THEREFORE, THE LD. CIT(A) IS NOT JUSTIFIED IN HIS ACTION TO SUSTAIN THE ADDITION OF PEAK CREDIT O NLY. I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 20 20 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE IS A DEALER IN COTTON AND E FFECTED SALES DURING THE YEAR WORTH RS. 84.63 CRORES. THE QUANTITA TIVE DETAILS OF COTTON PURCHASED AND SOLD WERE MAINTAINE D AND BOOKS OF ACCOUNTS ARE AUDITED U/S 44AB OF THE ACT. THE AUDIT REPORT WAS FURNISHED ALONGWITH THE RETURN OF INCOME. THE GROSS PROFIT EARNED WAS 5.12 % ON TOTAL TURNOVER WHER EAS THE NET PROFIT DISCLOSED WAS 3.05%. THE SEARCH PROCEEDIN G WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE AND HE HAS SURRENDERED ADDITIONAL INCOME OF RS. 40,41,072/ - REPRESENTS PURCHASES EFFECTED FROM SHREE KRISHNA TR ADING COMPANY, PROPRIETOR SHRI DHARMESH PUROHIT, WHICH WERE TREATED AS BOGUS. DURING THE YEAR, THE ASSESSEE HAS PURCHASED 3896 COTTON BALES FROM JAIDEEP TRADING COMPANY, SHR I PARAMJEET SINGH RAJPAL, PROPRIETOR WORTH RS. 3,11,72 ,462/-. SHRI DHARMESH PUROHIT , PROPRIETOR OF SHREE KRISHNA TRADING HAS FILED THE AFFIDAVIT THAT SHRI RINKI RAJPAL HAS USED THE BILLS IN THE NAME OF SHREE KRISHNA TRADING COMPANY. THERE FORE, I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 21 21 THE AO HAS TREATED THE ENTIRE PURCHASE EFFECTED FRO M M/S. JAIDEEP TRADING COMPANY AS BOGUS. 9. DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. DEPARTMENTAL REPRESENTATIVE HAS PRODUCED THE CASE RECORDS OF THE ASSESSEE AND SUBMITTED BEFORE US THE COPY OF AFFIDAVIT OF SHRI DHARMESH PUROHIT WHICH WAS GIVEN TO THE ASSESSEE AND THE ASSESSEE IN HIS REPLY ON PAGE 6 STATED THAT SHR I DHARMESH PUROHIT IN HIS AFFIDAVIT STATED THAT IN JAIDEEP TRA DING COMPANY, ONE MR. RINKY RAJPAL HAS CARRIED OUT THE B USINESS, BUT BILLS GIVEN BY HIM WERE BLANK AND CHEQUES AND OU T OF ENTRY SHRI RAJPAL HAS USED FOR WHICH COMPANY, HE DO ES NOT KNOW. THE LD. DEPARTMENTAL REPRESENTATIVE HAS HEAVI LY RELIED UPON THE STATEMENT AND AFFIDAVIT OF SHRI DHARMESH P UROHIT WAS PROVIDED TO THE ASSESSEE ON 16.11.2009. ON 21.12 .2009, THE AO HAS VERIFIED THE BOOKS OF ACCOUNTS AND THE A SSESSEE WAS GIVEN LAST OPPORTUNITY FOR FILING THE REPLY AND ON 23.12.2009, THE ASSESSEE HAS SUBMITTED BEFORE THE A O THAT AS PER THE REVISED RETURN FILED BY PARAMJEET SINGH RAJ PAL, PROPRIETOR OF JAIDEEP TRADING, WHEREIN STATED THAT H E HAS DEALT WITH THE ASSESSEE DURING THE FINANCIAL YEAR 2006-07, BUT THE I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 22 22 PURCHASES WERE MADE BY RAJENDRA SINGH DHARAMPAL SIN GH FROM SOMEWHERE ELSE AND PURCHASE BILLS OF JAIDEEP TR ADING WERE USED TO RECORD THE PURCHASES AND BOOKS OF ACCOU NTS AND HE HAS SIMPLY ALLOWED THE ASSESSEE TO ROUTE TRANSAC TION THROUGH BOOKS OF ACCOUNTS OF M/S. JAIDEEP TRADING C OMPANY. SHRI PARAMJEET SINGH RAJPAL IS DEALING IN PURCHASIN G AND SELLING OF COTTON. PARAMJEET SINGH RAJPAL HAS EXCLU DED THE TRANSACTION WITH THE ASSESSEE OF RS. 3.11 CRORES. TH E ASSESSEE HAS ALSO TAKEN THE CONTENTION THAT LOTS OF READY CO TTON BALES WHICH CONTAINS LOT NO., P.R.NOS. DULY MENTIONED IN S UPPLY BILL, WHICH CAN BE VERIFIED FROM THE CHART OF PURCHASING T HE GOODS FROM JAI DEEP TRADING COMPANY. THEY HAVE SUPPLIED T O OLAM EXPORTS INDIA LIMITED, I. C. TEXTILES , LAXMI VISHN U TEXTILES & OTHERS. THE ENCLOSED CHART SHOWS THAT P. R. NO. OF T HE BALES WHICH IS MENTIONED IN THE BALES SUPPLIED BY THE JAI DEEP TRADING COMPANY AND WEIGHT OF LOT AND LOT NOS. ARE S AME. THE MATERIAL WAS ALSO TRANSPORTED THROUGH VIDARBH QUEEN TRANSPORT COMPANY AND THEY HAVE DEDUCTED THE TDS O N FREIGHT PAYMENTS TO THEM. THE ASSESSEE HAS ALSO RE PORTED THESE SALES TO THE SALES TAX DEPARTMENT AND TDS DED UCTED I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 23 23 WAS ALSO DEPOSITED IN INCOME TAX DEPARTMENT. THEREFO RE, SIMPLY ON THE BASIS OF REVISED RETURN FILED BY PARA MJEET SINGH CANNOT BE SAID AS BOGUS, AS FACTUAL POSITION OF THE TRANSACTION IS VERIFIED FROM SALES TAX, INCOME TAX AND MANDI TA X DEPARTMENTS AND ALSO BANK STATEMENTS. SHRI PARAMJEE T SINGH IS TRYING TO SHIFT HIS RESPONSIBILITIES OF EXPLAINI NG THE SOURCE OF PURCHASES OF THE MATERIAL BY HIM. THE ASSESSEE IS N OT RESPONSIBLE TO EXPLAIN THE SOURCE OF SOURCE AS THE PAYMENTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE BEING N ORMAL BUSINESS TRANSACTION. THE ASSESSEE DOES NOT HOLD AN Y CONTROL OVER THE BUSINESS DONE BY SHRI PARAMJEET SINGH RAJ PAL. SHRI PARAMJEET SINGH HAS ORIGINALLY FILED THE RETURN, WHE REIN HE HAS SHOWN THIS TRANSACTION AND AFTER FILING THE REVISED RETURN, HE HAS OMITTED THIS TRANSACTION, WHICH CANNOT BE FASTEN ED THE LIABILITY OF THE ASSESSEE. 10. FROM THE ABOVE REPLY OF THE ASSESSEE AND AFTER CONSIDERING THE REPLY, IT BECOMES A DUTY OF THE AO TO MAKE THE ENQUIRY FROM THE BANK THAT THE PAYMENT GIVEN BY SHR EE PARAMJEET SINGH RAJPAL WAS GIVEN BACK TO THE ASSESSE E. THE AO HAS RELIED UPON THE AFFIDAVIT OF SHRI DHARMESH P UROHIT AND I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 24 24 HE HAS JUMPED TO THE CONCLUSION THAT SHRI RINKY RAJ PAL HAS USED THE BILLS OF SHREE KRISHNA TRADING COMPANY AND AMOUNT HAS GONE BACK TO THE ASSESSEE. BEFORE FRAMING THE A SSESSMENT, THE ASSESSEE ON 23.12.2009 HAS DENIED THAT HE HAS M ADE BOGUS PURCHASES FROM JAIDEEP TRADING COMPANY AND HE HAS CATEGORICALLY STATED BEFORE THE AO THAT SHRI RINKY RAJPAL HAS USED BILLS OF SHREE KRISHNA TRADING COMPANY AND HE HAS EXCLUDED THE PURCHASES OF RS. 3,11,72,462/- FROM HI S TURNOVER AND RETURN OF INCOME. THEREFORE, WHEN THE ASSESSEE D ENIED THAT HE HAS PURCHASED THE GOODS FROM JAIDEEP TRADIN G COMPANY, IS BOGUS, IT WAS CLEAR THAT BILLS OF JAIDEE P TRADING COMPANY WAS USED BY THE ASSESSEE. M/S. JAI DEEP TRAD ING COMPANY WAS CARRYING OUT THE BUSINESS IN UNITED WEST ERN BANK BY TAKING BLANK CHEQUES SIGNED BY HIM AND WITH A PROMISE THAT THE COMMISSION WILL BE PAID TO HIM. WE FIND THAT THAT WAS A CRUCIAL EVIDENCE, WHICH THE AO DID NOT AVA IL THE OPPORTUNITY. SHRI PARAMJEET SINGH RAJPAL HAS RECEIV ED THE PAYMENT THROUGH BANK THAT IS ALSO ADMITTED. THE ONL Y EVIDENCE THE AO IS REQUIRED TO COLLECT IS THAT THE MONEY GIVEN BY THE ASSESSEE HAD COME BACK TO THE ASSESSEE. IN T HIS CASE, I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 25 25 THE AO HAS NOT CARRIED OUT ANY EXERCISE. SIMILARLY, THE LD. CIT(A) IN HIS ORDER HAS ALSO NOT CARRIED OUT ANY EX ERCISE FOR CARRYING OUT SUCH ENQUIRY. WE FIND THAT THE LD. CIT (A) HAS RELIED UPON THE DECISION OF HON'BLE GUJARAT HIGH CO URT IN THE CASE OF SANJAY OIL CAKE INDUSTRIES VS. CIT, 316 ITR 274 (GUJ),WHEREIN IT WAS HELD THAT 25% OF SUCH BOGUS PURC HASES WAS CONFIRMED. THE LD. CIT(A) HAS ALSO ADDED THE PEA K AMOUNT IN HIS ORDER IN PARA 4.2. 11. WE HAVE ALSO CONSIDERED THE DECISION OF JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. JAGDISHCHANDRA VISHWAKARMA, (2011) 059 DTR 0415, WHEREIN THE JURISDICTIONAL HIGH COURT HAS HELD THAT THE GENUINE NESS OF THE PURCHASE HAS TO BE EXAMINED AT THE TIME OF PURCHASE AND NOT YEARS THEREAFTER. WHEN THE TRIBUNAL HAS RECORDED A CATEGORICAL FINDING THAT THE ASSESSEE HAS SATISFACTORILY EXPLAI NED THE DETAILS AND MODE OF PAYMENT OF RAW MATERIAL, THEN IT CANNOT BE TAKEN AS BOGUS PURCHASES. HON'BLE HIGH COURT HAS AL SO OBSERVED THAT THE TRANSACTION OF PURCHASE BY WAY OF REGULAR SALE BILLS AND SUBSEQUENT PAYMENT DISCHARGE THE ONU S OF GENUINENESS OF PURCHASE AS FAR AS ASSESSEE IS CONCE RNED. AN I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 26 26 INVESTIGATION BY THE PURCHASER AS TO WHO OPERATES TH E BANK ACCOUNT OF THE SELLER OR THE GROUP OF SELLERS IS NO T IN THE DOMAIN OF THE PURCHASERS. THE RULES REGARDING ONUS OF PROOF AS LAID DOWN BY THE COURTS ARE QUITE FLEXIBLE. THE P AYMENT THROUGH BANKING CHANNEL IS THE ESSENCE OF TRANSACTI ON SO AS TO DECIDE GENUINENESS WHILE DECIDING UPON THE QUESTION OF ONUS OF PROOF. IN THE INSTANT CASE, THE ASSESSEE HAS SHO WN THAT HE HAS MADE PURCHASE FROM JAIDEEP TRADING COMPANY AND HE HAS MADE PAYMENT THROUGH ACCOUNT PAYEE CHEQUE AND T HE PHYSICAL DELIVERY IS ALSO TAKEN. THE ASSESSEE HAS A LSO DEDUCTED THE TDS FOR VARIOUS SERVICES RENDERED BY TRANSPORTE RS. WE FIND THAT IN THIS CASE THE AO HAS TO VERIFY WHETHER THE P AYMENT MADE BY THE ASSESSEE HAD COME BACK TO THE ASSESSEE OR NOT. WHEN THE ASSESSEE AND JAIDEEP TRADING COMPANY HAVE STATED BEFORE AO THAT THEY HAVE ROUTED THIS THROUGH BANK A CCOUNT, THEN THE AO SHOULD HAVE MADE ENQUIRY IN THE BANK AC COUNT AND IF IN THE BANK ACCOUNT THE MONEY WOULD HAVE BEE N RETURNED BACK TO THE ASSESSEE, THEN ONLY IT COULD H AVE BEEN TREATED AS BOGUS, WHICH IS NOT IN THIS CASE. THEREF ORE, IT CANNOT BE TREATED AS BOGUS PURCHASES. WE FIND THAT IN THIS I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 27 27 CASE AS STATED ABOVE ALL THE TRANSACTIONS ARE MADE THROUGH VARIOUS BANKS AND ALL THE TRANSACTIONS WERE REPORTE D TO SALES TAX DEPARTMENT AND INCOME TAX DEPARTMENT. THEREFORE , WE ARE OF THE VIEW THAT WHEN THE ASSESSEE HAS PURCHASED THE GOODS FROM M/S. JAIDEEP TRADING COMPANY AND PAYMENT S HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES. MOREO VER, THE SAME GOODS HAVE BEEN SOLD TO OTHER PARTY BY THE ASSESSEE IN HIS NORMAL BUSINESS TRANSACTION AND ASSESSEE HAS SOLD THE SAME GOODS TO THIRD PARTY. THEREFORE, THESE PURCHAS ES CANNOT BE TERMED AS BOGUS PURCHASES. WE ARE OF THE VIEW THA T THE ASSESSEE HAS SOLD THESE GOODS AND WHEN THE ASSESSEE HAS SOLD THESE GOODS, PURCHASE HAS BEEN MADE FROM JAIDEEP TR ADING COMPANY, BUT THE AO HAS NOT POINTED OUT ANY DEFECTS . THEREFORE, WE ARE OF THE VIEW THAT THE LD. CIT(A) IS NOT JUSTIFIED IN TREATING THE SAME AS BOGUS PURCHASES AND CONFIRM ED THE ADDITION @ 25% ON THE SAID PURCHASES. WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS APPLIED GROSS PROFIT @ 25% ON AL L SUCH BOGUS PURCHASES BY APPLYING THE DECISION OF HON'BLE GUJAR AT HIGH COURT IN THE CASE OF SANJAY OIL CAKE INDUSTRIES VS. CIT, 316 ITR 274, BUT IN THIS CASE, FACTS ARE THAT THE ASSES SEE HAS MADE I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 28 28 PURCHASES, BUT THE AO COULD NOT PROVE THAT THE MONE Y, WHICH WAS PAID BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQU E HAD COME UP TO THE ASSESSEE, BUT IN THE INTEREST OF JUS TICE AND FAIR PLAY, WE ARE OF THE VIEW THAT IF THE GROSS PROFIT @ 10% IS APPLIED ON THESE BOGUS PURCHASES, IT IS A SUFFICIEN T PUNISHMENT FOR THE ASSESSEE TO PURCHASES MADE FROM JAIDEEP TRADING COMPANY. THEREFORE, WE MODIFY THE ORDER OF LD. CIT(A) AND WE DIRECT THE AO TO APPLY THE GROSS PROFIT @ 10 % ON SUCH BOGUS PURCHASES. AS PER THE DECISION OF JURISDICTIO NAL HIGH COURT, EVEN WHEN THE AO COULD NOT PROVE THAT THE ASS ESSEE HAS MADE THE BOGUS PURCHASES AND THE PAYMENT MADE THROUGH ACCOUNT PAYEE CHEQUES AS RETURNED BACK TO T HE ASSESSEE, IT CANNOT BE TERMED AS BOGUS PURCHASES AS PER THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. JAGDISH CHANDRA VISHWAKARMA. THEREFORE, WE DELETE TH E ADDITION ON ACCOUNT OF THE PEAK CREDIT. WE ARE OF THE VIEW THAT THE AO AND LD. CIT(A) IS NOT JUSTIFIED IN TREA TING THIS AS BOGUS PURCHASES. WE MODIFY THE ORDER OF CIT(A) AND DIRECT THE AO TO APPLY GROSS PROFIT @ 10% ON PURCHASES OF RS. 3,11,72,462/-. I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 29 29 12. DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE DE CISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LA MEDICA, (2001) 117 TAXMAN 628 (DEL). IN THAT CASE, THE ASSE SSEE WAS MANUFACTURING ALLOPATHIC MEDICINES AND HE WAS ASKED TO PRODUCE THE SELLER FROM WHOM HE HAS MADE THE PURCHAS E DESPITE THE NUMBER OF OPPORTUNITIES GIVEN TO THE AS SESSEE, SELLER COULD NOT BE PRODUCED. THEREFORE, IN THAT CA SE, ENTIRE PURCHASE WAS TREATED AS BOGUS. IN THE INSTANT CASE, THE FACTS ARE ENTIRELY DIFFERENT AS DISCUSSED ABOVE. THEREFOR E, THIS WILL NOT BE HELPFUL TO THE REVENUE. WE HAVE ALSO GONE TH ROUGH THE ORDER OF JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. JAGDISHCHANDRA VISHWAKARMA (SUPRA), WHEREIN THE FACTS ARE THAT ALL THE PAYMENTS WERE MADE THROUGH ACCOUNT PAY EE CHEQUES, BUT ASSESSEE COULD NOT PRODUCE THE SELLER. THEREFORE, IN THAT CASE, THE TRIBUNAL HAD HELD THAT IF ALL THE PAYMENTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES, THE P URCHASE CANNOT BE TERMED AS BOGUS. IN THE INSTANT CASE, THE FACTS ARE NOT IDENTICAL BUT IN THIS CASE, THE AO HAS NOT MADE ANY ENQUIRY TO PROVE THAT THE MONEY GIVEN BY THE ASSESS EE TO JAI I.T.A.NO. 497 /IND/2010 A.Y. 2007-08 & 501/IND/20 10 SHRI RAJENDRASINGH DHARAMSINGH RAJPAL VS. DY. CIT, KHANDWA AND ACIT, KHANDWA VS. SHRI RAJENDRA SINGH DHARAMSINGH RAJPAL. 30 30 DEEP TRADING COMPANY HAS RETURNED BACK TO THE ASSES SEE, THOUGH THE ASSESSEE HAS DENIED TO MAKE ANY BOGUS PU RCHASES FROM THE ABOVE PARTY. THEREFORE, WE ARE OF THE VIEW THAT THE AO AND LD. CIT(A) IS NOT JUSTIFIED IN HIS ACTION. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND WE REVE RSE THE FINDING OF THE LD. CIT(A) AND WE DELETE THE ADDITIO N ON ACCOUNT OF PEAK CREDIT. WE ALSO DIRECT THE AO TO APPLY GROS S PROFIT @ 10%. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND REVENUES APPEAL IS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE O PEN COURT ON 17 TH MAY, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 17 TH MAY, 2016. CPU*