M.R. ASSOCIATES, MUMBAI V. ITO 32(2)(3), MUMBAI

ITA 5046/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7805 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 25-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHADR
• Assessee Lawyers: BHUENDRA SHAH
• Keywords: Reopening of assessment; Bogus purchase; Capital asset; Depreciation; Question of law; Corroborative evidences; Accommodation entries; Commercial expediency
• Section: 143(3); 133(6)

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NOS.5046 & 5047/MUM/2017 ASSESSMENT YEARS: 2010-11 & 2011-12 M/S M. R. ASSOCIATES, 1, DHIRAJ VILLA, S.V. ROAD, DAULAT NAGAR, BORIVALI(E), MUMBAI-400066 / VS. INCOME TAX OFFICER-32(2)(3), MUMBAI / ASSESSEE / REVENUE P.A. NO. AAOFM3100B $ % & / ASSESSEE BY SHRI BHUENDRA SHAH $ % & / REVENUE BY MS. N. HEMALATHA-DR / DATE OF HEARING 19/12/2017 & / DATE OF ORDER: 19/12/2017 & / O R D E R THESE TWO APPEALS ARE BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 AND 2011-12 AGAINST THE IMPUGNED ORDERS BOTH DATED 09/06/2017 OF THE LD. FI RST APPELLATE AUTHORITY, MUMBAI. THE FIRST COMMON GROUN D ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 2 RAISED BY THE ASSESSEE PERTAINS TO REOPENING OF ASSESSMENT AND PASSING THE ORDER U/S 143(3) R.W.S 1 47 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) IGNO RING THE WRITTEN SUBMISSIONS AND CASE LAWS SUBMITTED BY THE ASSESSEE. DURING HEARING, THE LD. COUNSEL FOR THE A SSESSEE, SHRI BHUPENDRA SHAH, DID NOT PRESS THIS GROUND, THEREFORE, DISMISSED AS NOT PRESSED. 2. GROUND NO.4 WITH RESPECT TO LEVYING PENALTY U/S 271(1)(C) AND CHARGING OF INTEREST U/S 234A, B & C WAS ALSO NOT PRESSED, THEREFORE, THIS GROUND IS ALSO DI SMISSED AS NOT PRESSED. 3. THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.20,92,485/- AS ALLEGED BOGUS PURCHASES, BEING 17 % OF THE TOTAL BOGUS PURCHASES OF RS.1,23,08,736/- FOR ASSESSMENT YEAR 2010-11 AND RS. 18,15,870/- OUT OF TOTAL BOGUS PURCHASES OF RS.1,06,81,588/- FOR ASSESSMEN T YEAR 2011-12. 3.1 DURING HEARING, LD. COUNSEL FOR THE ASSESSEE, EXPLAINED THAT THE ASSESSEE IS A TRADER OF BUILDING MATERIAL, DECLARED NET PROFIT AT THE RATE OF 5% AND THE ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 3 GROSS PROFIT IS MORE THAN 12.5%. THE BOOKS OF ACCOU NT OF THE ASSESSEE WERE CLAIMED TO BE NOT REJECTED AND TH ERE IS NO LOSS OF VAT. PLEA WAS ALSO RAISED THAT PURCHASES WERE NOT OUT OF BOOKS AND THE SALES AND PURCHASES ARE NO T DISPUTED. ON THE OTHER HAND, LD. DR, STRONGLY DEFEN DED THE IMPUGNED ORDERS BY CONTENDING THAT THE PURCHASE S ARE OUT OF BOOKS AND CERTAINLY BOGUS PURCHASES, THE REFORE, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS ALR EADY TAKEN A LENIENT VIEW. IT WAS PLEADED THAT THERE WAS DEFINITE INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE MADE PURCHASES FROM THE HAWALA PARTIES. 3.2. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE DECLARED INCOME OF RS.8,70,830/- IN ITS RETURN FILED ON 06/10/2010 (ASSESSMENT YEAR 2010-11) AND RS.13,64,450/- ON 29/09/2011 (ASSESSMENT YEAR 2011-12), WHICH WERE PROCESSED U/S 143(1) OF THE ACT. THERE WAS INFORMAT ION FROM THE SALES TAX DEPARTMENT/ INVESTIGATION WING T HAT THE ASSESSEE OBTAINED ACCOMMODATION ENTRIES IN THE FORM ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 4 OF BOGUS PURCHASES FROM THE PARTIES, WHICH ARE ENGA GED IN PROVIDING BILLS WITHOUT ACTUAL DELIVERY OF GOODS IN EXCHANGE OF CASH ON COMMISSION BASIS. THUS, THE TRU E FACTS WERE NOT DISCLOSED BY THE ASSESSEE FOR MAKING THE NECESSARY ASSESSMENT. THE LD. ASSESSING OFFICER, W ITHIN THE MEANING OF SECTION 147 OF THE ACT, CONCLUDED TH AT INCOME CHARGEABLE TO TAX TO THE TUNE OF RS.1,23,08, 736/- ESCAPED ASSESSMENT. THE LD. ASSESSING OFFICER ISSUE D STATUTORY NOTICES ON VARIOUS DATES AS HAS BEEN MENT IONED IN PARA 2 ONWARDS OF THE ASSESSMENT ORDER. THE ASSE SSEE ATTENDED THE PROCEEDINGS. THERE WAS INFORMATION FR OM THE OFFICE OF INVESTIGATION WING THAT THE ASSESSEE MADE BOGUS PURCHASES FROM TWELVE PARTIES AS MENTIONED IN PARA- 4 OF THE ASSESSMENT ORDER WITHOUT ACTUAL DELIVERY OF GOO DS. THE SALES TAX DEPARTMENT RECORDED THE STATEMENTS OF SOM E KEY PERSONS, WHEREIN, THEY DEPOSED THAT THEY HAVE N OT CARRIED OUT ANY BUSINESS DURING THE YEAR. TO VERIFY THE GENUINENESS OF THE PURCHASES, NOTICES U/S 133(6) OF THE ACT WERE ISSUED TO THE AFOREMENTIONED PARTIES, WHIC H WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES. THE AS SESSEE WAS ASKED TO FURNISH SUPPORTING EVIDENCE WITH RESPE CT TO ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 5 PURCHASES MADE FROM THE AFOREMENTIONED PARTIES. THE ASSESSEE CLAIMED THAT THE PURCHASES ARE GENUINE AND MADE THROUGH BANKING CHANNEL. AS PER LD. ASSESSING OFFICER AND ALSO CANVASSED BY LD. DR, THE ASSESSEE DID NOT FILE ANY DETAILS WITH RESPECT OF THE GENUINENESS OF THE TRANSACTIONS. AS PER THE REVENUE, THE ASSESSEE DID NOT FURNISH THE NECESSARY DETAILS (PARA-4.4 OF THE ASSE SSMENT ORDER ) AND INDEPENDENT ENQUIRIES WERE MADE BY THE ASSESSING OFFICER TO EXAMINE THE TRANSACTIONS AND I T WAS CONCLUDED THAT THE PURCHASES MADE BY THE ASSESSEE A RE NOT GENUINE. A SHOW CAUSE NOTICE DATED 20/01/2016 W AS ISSUED TO THE ASSESSEE WITH A REQUEST TO PRODUCE TH E PARTIES FROM WHOM PURCHASES WERE MADE AND FURTHER A S TO WHY THE PURCHASES SHOULD NOT BE TREATED AS NON- GENUINE AND ADDED TO THE TOTAL INCOME. THE ASSESSEE DID NOT PRODUCE THE PARTIES AND AS PER THE REVENUE THE ONUS CASTE UPON THE ASSESSEE IS NOT DISCHARGED. THE FACT UAL FINDING RECORDED IN PARA 4.8 OF THE ASSESSMENT ORDE R WAS ALSO NOT CONTRADICTED BY THE ASSESSEE. BEFORE THIS TRIBUNAL, THE ASSESSEE CLAIMED THAT G.P. OF MORE TH AN 12.5% WAS SHOWN BY THE ASSESSEE IN EARLIER ASSESSME NT ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 6 YEARS. HOWEVER, THE LD. DR INVITED MY ATTENTION TO PARA- 4.9 OF THE ASSESSMENT ORDER WHERE THE G.P. HAS BEEN SHOWN AT 7%. IT WAS ALSO CONTENDED THAT IN SIMILAR KIND OF CASES, THE G.P. HAS BEEN SHOWN BY OTHER ASSESSEE FROM 15 TO 18%, THEREFORE LOW G.P. HAS BEEN SHOWN BY THE ASSESSEE. AS PER THE REVENUE, THE TOTAL TURNOVER OF THE ASSESSEE IS RS.3,94,66,307/- OUT OF WHICH THE ACCOMMODATION ENTRIES ARE TO THE TUNE OF RS.1,23,08,736/- (ASSESSMENT YEAR 2010-11). THERE I S FINDING IN PARA-4.10 OF THE ASSESSMENT ORDER THAT A SSESSEE DID NOT MAINTAINED THE STOCK REGISTER. CONSIDERING THE TOTALITY OF FACTS, I AM OF THE VIEW THAT THE ONUS C ASTE UPON THE ASSESSEE HAS NOT BEEN DISCHARGED. IN PARA 4.13 OF THE ASSESSMENT ORDER, IT HAS BEEN OBSERVED THAT THE PURCHASES WERE MADE BY THE ASSESSEE BUT NOT FROM TH E GENUINE PARTIES AND THE ONUS OF GENUINE PURCHASES/EXPENDITURE WAS NOT DISCHARGED. 3.3. BEFORE ADVERTING FURTHER, IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION M ADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 7 ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MAD E BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITIO N AND ANALYZED, I DEEM IT APPROPRIATE TO CONSIDER VARIOUS DECISIONS FROM HON'BLE HIGH COURTS/HON'BLE APEX COU RT, SO THAT I CAN REACH TO A PROPER CONCLUSION. THE HON 'BLE GUJARAT HIGH COURT IN SANJAY OILCAKES INDUSTRIES VS CIT (2009) 316 ITR 274 (GUJ.) HELD AS UNDER:- 11. HAVING HEARD THE LEARNED ADVOCATES APPEARING FOR THE RESPECTIVE PARTIES, IT IS APPARENT THAT NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER OF THE TRIBUNAL DATED APRIL 29, 1994, READ WITH THE ORDER DATED SEPTEMBER 29, 1994, MADE IN MISCELLANEOUS APPLICATION. IN THE PRINCIPAL ORDER THE TRIBUNAL HAS RECORDED THE FOLLOWING FINDINGS : '8.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE FACTS ON RECORD. IN OUR OPINION, THE ACTION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) CONFIRMING 25 PER CENT. OF THE AMOUNTS CLAIMED IS FAIR AND REASONABLE AND NO INTERFERENCE IS CALLED FOR. THE COMMIS SIONER OF INCOME-TAX (APPEALS) HAS GONE THROUGH THE PURCHASE PRICES OF THE RAW MATERIAL PREVALENT AT THE TIME AND RIGHTLY CAME TO THE CON CLUSION THAT THE DISALLOWANCE TO THE EXTENT OF 25 PER CENT. WAS CALLED FOR. IT IS ESTABLISHED THAT THE PARTIES WERE NOT TRACEABLE ; THEY OPENED THE BANK ACCOUNTS IN WHICH THE CHEQUES WERE CREDITED BUT SOON THEREAFTER THE AMOUNTS WERE WITHDRAWN BY BEARER CHEQUES. THAT FAIRLY LEADS TO THE CONCLUSION THAT THESE PARTIES WERE PERHAPS CREATION OF THE ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 8 ASSESSEE ITSELF FOR THE PURPOSE OF BANKING PURCHASES INTO BOOKS OF ACCOUNT BECAUSE THE PURCHASES WITH BILLS WERE NOT FEASIBLE. THUS, THE ABOVENOTED PARTIES BECOME CONDUIT PIPES BETWEEN THE ASSESSEE-FIRM AND THE SELLERS OF THE RAW MATERIALS. UNDER THE CIRCUMSTANCES, IT WAS NOT IMPOSSIBLE FOR THE ASSESSEE TO INFLATE THE PRICES OF RAW MATERIALS. ACCORDINGLY, AN ADDITION AT THE RATE OF 25 PER CENT. FOR EXTRA PRICE PAID BY THE ASSESSEE THAN OVER AND ABOVE THE PREVALENT PRICE IS FAIR AND REASONABLE AND WE ACCORDINGLY CONFIRM THE FINDING OF THE COMMIS SIONER OF INCOME-TAX (APPEALS).' 12. THUS, IT IS APPARENT THAT BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE CONCURRENTLY ACCEPTED THE FINDING OF THE ASSESSING OFFICER THAT THE APPARENT SELLERS WHO HAD ISSUED SALE BILLS WERE NOT TRACEABLE. THAT GOODS WERE RECEIVED FROM THE PARTIES OTHER THAN THE PERSONS WHO HAD ISSUED BILLS FOR SUCH GOODS. THOUGH THE PURCHASES ARE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENT THEREOF BY ACCOUNT PAYEE CHEQUES, THE CHEQUES HAVE BEEN DEPOSITED IN BANK ACCOUNTS OSTENSIBLY IN THE NAME OF THE APPARENT SELLERS, 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 ACCOUNTS. 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 (APPEALS) AND THE TRIBUNAL HAVE, THEREFORE, COME TO THE CONCLUSION THAT IN SUCH CIRCUMSTANCES, THE LIKELIHOOD OF THE PURCHASE PRICE ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 9 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 ACCOUNT MATCHES THE PURCHASE PRICE STATED TO HAVE BEEN PAID TO OTHER PERSONS. THE 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 TO 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. IN THE AFORESAID CASE, THE HON'BLE HIGH COURT ACCEP TED THAT THE APPARENT SELLERS, WHO ISSUED THE SAID BILL S WERE NOT TRACEABLE AND THE GOODS RECEIVED FROM PARTIES O THER THAN THE PERSONS, WHO HAD ISSUED THE BILLS FOR SUCH GOODS. THE PURCHASES WERE SHOWN TO HAVE BEEN MADE BY MAKIN G PAYMENTS, THROUGH BANKING CHANNEL AND THUS THE APPARENT SELLERS WERE NOT GENUINE OR WERE ACTING AS CONDUIT BETWEEN THE ASSESSEE AND THE ACTUAL SELLER. IN SUCH A SITUATION, THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AS WELL AS BY T HE TRIBUNAL WAS AFFIRMED. HON'BLE APEX COURT IN KACHW ALA ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 10 GEMS VS JCIT (2007) 158 TAXMAN 71 OBSERVED THAT AN ELEMENT OF GUESSWORK IS INEVITABLE IN CASES, WHERE ESTIMATION OF INCOME IS WARRANTED. 3.4. THE HON'BLE GUJARAT HIGH COURT IN CIT VS BHOLANATH POLY FAB. PVT. LTD. (2013) 355 ITR 290 (G UJ.) HELD/OBSERVED AS UNDER:- 5. HAVING COME TO SUCH A CONCLUSION, HOWEVER, THE TRIBUNAL WAS OF THE OPINION THAT THE PURCHASES MAY HAVE BEEN MADE FROM BOGUS PARTIES, NEVERTHELESS, THE PURCHASES THEMSELVES WERE NOT BOGUS. THE TRIBUNAL ADVERTED TO THE FACTS AND DATA ON RECORD AND CAME TO THE CONCLUSION THAT THE ENTIRE QUANTITY OF OPENING STOCK, PURCHASES AND THE QUANTITY MANUFACTURED DURING THE YEAR UNDER CONSIDERATION WERE SOLD BY THE ASSESSEE. THEREFORE, THE PURCHASES OF THE ENTIRE 1,02,514 METRES OF CLOTH WERE SOLD DURING THE YEAR UNDER CONSIDERATION. THE TRIBUNAL, THEREFORE, ACCEPTED THE ASSESSEE'S CONTENTION THAT THE FINISHED GOODS WERE PURCHASED BY THE ASSESSEE, MAY BE NOT FROM THE PARTIES SHOWN IN THE ACCOUNTS, BUT FROM OTHER SOURCES. IN THAT VIEW OF THE MATTER, THE TRIBUNAL WAS OF THE OPINION THAT NOT THE ENTIRE AMOUNT, BUT THE PROFIT MARGIN EMBEDDED IN SUCH AMOUNT WOULD BE SUBJECTED TO TAX. THE TRIBUNAL RELIED ON ITS EARLIER DECISION IN THE CASE OF SANKET STEEL TRADER S AND ALSO MADE REFERENCE TO THE TRIBUNAL'S DECISION IN THE CASE OF VIJAY PROTEINS LTD. V. ASST. CIT [1996] 58 ITD 428 (AHD). ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 11 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. 3.5. LIKEWISE, THE HON'BLE GUJARAT HIGH COURT IN C IT VS VIJAY M. MISTRY CONSTRUCTION LTD. (2013) 355 ITR 498 (GUJ.) HELD/OBSERVED AS UNDER:- 6. AS IS APPARENT FROM THE FACTS NOTED HEREINABOVE, THE COMMISSIONER (APPEALS) AFTER APPRECIATING THE EVIDENCE ON RECORD HAS FOUND THAT THE ASSESSEE HAD IN FACT MADE THE PURCHASES AND, HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE AMOUNT. HE, HOWEVER, WAS OF THE VIEW THAT THE ASSESSEE HAD INFLATED THE PURCHASES AND, ACCORDINGLY, BY PLACING RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF VIJAY PROTEINS (SUPRA) RESTRICTED THE DISALLOWANCE TO 20 PER CENT. THE TRIBUNAL IN THE IMPUGNED ORDER HAS FOLLOWED ITS EARLIER ORDER IN THE CASE OF VIJAY PROTEINS TO THE LETTER AND ENHANCED THE ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 12 DISALLOWANCE TO 25 PER CENT. THUS, IN BOTH CASES, THE DECISION OF THE COMMISSIONER (APPEALS) AS WELL AS THAT OF THE TRIBUNAL IS BASED ON ESTIMATE. THIS HIGH COURT IN THE CASE OF SANJAY OIL CAKE [2009] 316 ITR 274 (GUJ) HAS HELD THAT WHETHER AN ESTIMATE SHOULD BE AT A PARTICULAR SUM OR AT A DIFFERENT SUM CAN NEVER BE A QUESTION OF LAW. 7. THE APEX COURT IN THE CASE OF KACHWALA GEMS [2007] 288 ITR 10 (SC) HAS HELD THAT IN A BEST JUDGMENT ASSESSMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT, THE AUTHORITIES 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. 8. EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE AFORESAID DECISIONS, THE DECISION OF T HE TRIBUNAL, BEING BASED ON AN ESTIMATE, DOES NOT GIVE RISE TO ANY QUESTION OF LAW SO AS TO WARRANT INTERFERENCE. 9. IN SO FAR AS THE PROPOSED QUESTIONS (C), (D) AND (E) ARE CONCERNED, THE SAME ARE SIMILAR TO THE PROPOSED QUESTION (A) WHEREIN THE TRIBUNAL HAS RESTRICTED THE ADDITION TO 25 PER CENT. ON SIMILAR FACTS. IN THE CIRCUMSTANCES, FOR THE REASONS STATED HEREINABOVE, THE SAID GROUNDS OF APPEAL DO NOT GIVE RISE TO ANY QUESTION OF LAW. 10. AS REGARDS THE PROPOSED QUESTION (B) WHICH PERTAINS TO THE DELETION OF ADDITION OF RS. 7,88,59 0 MADE ON ACCOUNT OF INFLATION OF EXPENSES PAID TO METAL AND MACHINE TRADING CO. (MMTC), THE ASSESSING OFFICER HAS FOUND THAT MMTC WAS A PARTNERSHIP FIRM OF SHRI NITIN GAJJAR ALONG WITH HI S FATHER AND BROTHER OPERATING FROM BHAVNAGAR. A PERUSAL OF THEIR TRANSACTIONS WITH THE ASSESSEE INDICATED THAT THERE IS SOME INFLATION OF EXPENSES AS DETAILED IN PARAGRAPH 6.1 OF THE ASSESSMENT ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 13 ORDER. AFTER CONSIDERING THE EVIDENCE ON RECORD, THE ASSESSING OFFICER DISALLOWED THE AMOUNT RS. 7,88,590 ON ACCOUNT OF PAYMENT MADE TO MMTC. 11. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER (APPEALS), WHO UPON APPRECIATION OF THE EVIDENCE ON RECORD FOUND THAT THE ASSESSING OFFICER HAD NOT REJECTED THE GENUINENESS OF THE PURCHASES MADE FROM MMTC WHILE MAKING THE DISALLOWANCE. HIS OBSERVATIONS WERE BASED ON INFLATION OF RATES WHICH WERE BEING CHARGED FROM THE ASSESSEE. ACCORDING TO THE COMMISSIONER (APPEALS), THOUGH MMTC IN SOME RESPECT COULD BE ATTRIBUTED TO BE ASSOCIATED WITH THE ASSESSEE- COMPANY, STILL IT COULD NOT BE EXPECTED THAT MMTC WAS CARRYING OUT ITS BUSINESS WITHOUT ANY MOTIVE OR PROFIT. ACCORDING TO THE COMMISSIONER (APPEALS), IT WAS PROVED BY THE ASSESSEE THAT THE RATES CHARGED BY MMTC WERE COMPARABLE WITH THE PREVAILING MARKET RATES, NO SUCH ADDITION CAN STAND. THE COMMISSIONER (APPEALS) TOOK NOTE OF THE FACT THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE PURCHASES HAD BEEN DIRECTLY EFFECTED FROM THIRD PARTIES AND NOT DIRECTLY FROM MMTC ; THE DIFFERENCE COULD NOT BE THE NET PROFIT I N THE HANDS OF MMTC ; AND THAT WHILE CONDUCTING THE ENTIRE EXERCISE MMTC WOULD HAVE TO INCUR CERTAIN EXPENDITURE IN TRANSPORTATION, IN ENGAGING PERSONNEL IN THE OFFICE AND OTHER OPERATIONS AND WAS ACCORDINGLY OF THE VIEW THAT THERE WAS NO CASE OF ACTUAL INFLATION OF RATES AND DELETED THE ADDITION. 12. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS CONCURRED WITH THE FINDINGS RECORDED BY THE COMMISSIONER (APPEALS) AND HAS FOUND THAT THE ASSESSEE HAD MADE PURCHASES FROM MMTC AT THE PREVAILING MARKET RATES AND THAT MMTC HAD INCURRED CERTAIN EXPENDITURE IN ENGAGING PERSONNEL IN THE OFFICE AND OTHER OPERATIONS AND WOULD MAKE SOME INCOME FROM THE ENTIRE EXERCISE. IN THE CIRCUMSTANCES, THE PURCHASES MADE BY THE ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 14 ASSESSEE FROM MMTC WOULD NOT BE HIT BY THE PROVISIONS OF SECTION 40A(2) OF THE ACT. 13. THUS, THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS BASED ON CONCURRENT FINDINGS OF FACT RECORDED BY THE COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL. IT IS NOT THE CASE OF THE REVENUE THAT TH E TRIBUNAL HAS TAKEN INTO ACCOUNT ANY IRRELEVANT MATERIAL OR THAT ANY RELEVANT MATERIAL HAS NOT BEEN TAKEN INTO CONSIDERATION. IN THE ABSENCE OF ANY MATERIAL TO THE CONTRARY BEING POINTED OUT ON BEHALF OF THE REVENUE, THE IMPUGNED ORDER BEING BASED ON CONCURRENT FINDINGS OF FACT RECORDED BY THE TRIBUNAL UPON APPRECIATION OF THE EVIDENCE ON RECORD, DOES NOT GIVE RISE TO ANY QUESTION OF LAW I N SO FAR AS THE PRESENT GROUND OF APPEAL IS CONCERNED. 14. IN RELATION TO THE PROPOSED QUESTION (F) WHICH RELATES TO THE DELETION OF ADDITION OF RS. 44,54,42 6 MADE ON ACCOUNT OF PURCHASE OF CRANE AND ALLOWING DEPRECIATION ON THE SAME, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PURCHASED A CRAWLER CRANE FOR AN AMOUNT OF RS. 24,61,000 EXCLUDING THE COST OF SPARE PARTS OF RS. 14,98,490. THE ASSESSING OFFICER AFTER EXAMINING THE EVIDENCE ON RECORD AND CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE, MADE ADDITION OF RS. 44,54,426, RS. 39,59,490 BEING THE PURCHASE PRICE OF THE CRANE ALONG WITH ITS SPARE PARTS AND RS. 4,94,936 BEING DEPRECIATION CLAIMED BY THE ASSESSEE. THE COMMISSIONER (APPEALS), UPON APPRECIATION OF EVIDENCE ON RECORD, WAS OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACTS OF THE CASE PROPERLY AND HAD MADE DISALLOWANCE WHICH WAS NOT PERMITTED BY THE INCOME-TAX ACT. IT WAS HELD THAT DISALLOWANCE COULD ONLY HAVE BEEN MADE IN RESPECT OF EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT WHEREAS IN THE PRESENT CASE THE PURCHASE OF CRANE AND SPARE PARTS OF THE CRANE AND OTHER MACHINERIES WERE IN THE NATURE OF ACQUISITION OF CAPITAL ASSET. ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 15 ACCORDING TO THE COMMISSIONER (APPEALS), THE DISALLOWANCE COULD HAVE BEEN MADE ON DEPRECIATION ONLY IF AT ALL THE ASSESSING OFFICER CONCLUSIVELY PROVED THAT THE PURCHASES OF CRANE AND OTHER PARTS ARE BOGUS. UPON APPRECIATION OF THE MATERIAL ON RECORD THE COMMISSIONER (APPEALS) FOUND THAT THE ASSESSING OFFICER HAS SIMPLY BRUSHED ASIDE ALL THE EVIDENCE ON ACCOUNT OF TECHNICAL INFIRMITIES AND THAT THE EVIDENCE SUCH AS OCTROI RECEIPT ; HYPOTHECATION OF THE CRANE TO THE BANK; EXISTENCE OF THE CRANE EVEN TILL DATE WITH TH E ASSESSEE CONCLUSIVELY PROVED THAT THE CRANE WAS PURCHASED AND IT WAS IN USE EVEN AS ON DATE WITH THE ASSESSEE. THE COMMISSIONER (APPEALS) ACCORDINGLY FOUND THAT THERE WAS NO SCOPE FOR ANY DISALLOWANCE AND ACCORDINGLY DELETED THE DISALLOWANCE MADE ON ACCOUNT OF PURCHASE OF CRANE AND ALLOWED THE DEPRECIATION AS CLAIMED BY THE ASSESSEE. 15. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS NOTED THAT THE COST OF CRANE WAS NEVER CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. BEFORE THE TRIBUNAL, THE ASSESSEE PRODUCED THE EVIDENCE THAT THE CRANE IN QUESTION WAS REGISTERED WITH THE RTO AND THE SAME WAS WHOLLY AND EXCLUSIVELY USED FOR THE PURPOSES OF ITS BUSINESS. THE TRIBUNAL, THEREFORE, HELD THAT THE COMMISSIONER (APPEALS) WAS LEGALLY AND FACTUALLY CORRECT IN DELETING THE DISALLOWANCE OF COST OF CRANE AS WELL AS DEPRECIATION THEREON. 16. FROM THE FACTS EMERGING FROM THE RECORD, IT IS APPARENT THAT THE ASSESSEE HAD NEVER CLAIMED THE COST OF THE CRANE IN THE RETURN NOR HAD IT DEBITED THE EXPENSES TO THE PROFIT AND LOSS ACCOUNT, AND AS SUCH THE QUESTION OF DISALLOWING THE SAME AND ADDING THE SAME TO THE INCOME WOULD NOT ARISE. MOREOVER, IN THE ABSENCE OF ANY EVIDENCE TO INDICATE THAT THE PURCHASE WAS BOGUS OR THAT THE CRANE IN FACT DID NOT EXIST, THE QUESTION OF DISALLOWING THE DEPRECATION IN RESPECT OF THE SAME ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 16 ALSO WOULD NOT ARISE. WHEN THE ASSESSEE HAD CONCLUSIVELY PROVED THE PURCHASE AND EXISTENCE OF THE CRANE, AND HAD NOT DEBITED THE EXPENSES TO THE PROFIT AND LOSS ACCOUNT, NO ADDITION COULD HAVE BEEN MADE IN RESPECT OF THE PURCHASE PRICE NOR COULD HAVE DEPRECIATION BEEN DISALLOWED IN RESPECT THEREOF. THE TRIBUNAL WAS, THEREFORE, JUSTIFIED IN DELETING THE ADDITION AS WELL AS DISALLOWANCE OF DEPRECIATION. 17. IN THE LIGHT OF THE AFORESAID DISCUSSION, IT IS NOT POSSIBLE TO STATE THAT THERE IS ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER MADE BY THE TRIBUNAL SO AS TO WARRANT INTERFERENCE. IN THE ABSENCE OF ANY QUESTION OF LAW, MUCH LESS, A SUBSTANTIAL QUESTION OF LAW, THE APPEAL IS DISMISSED. 3.6. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ASHISH INTERNATIONAL LTD. (ITA NO.4299/2009) ORDER DATED 22/02/2011, OBSERVED/HELD AS UNDER:- THE QUESTION RAISED IN THIS APPEAL IS, WHETHER THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES ALLEGEDLY MADE BY THE ASSESSEE FROM M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. ACCORDING TO THE REVENUE, THE DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. IN HIS STATEMENT HAD STATED THAT THERE WERE NO SALES / PURCHASES BUT THE TRANSACTIONS WERE ONLY ACCOMMODATION BILLS NOT INVOLVING ANY TRANSACTIONS. THE TRIBUNAL HAS RECORDED A FINDING OF FACT THAT THE ASSESSEE HAD DISPUTED THE CORRECTNESS OF THE ABOVE STATEMENT AND ADMITTEDLY THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE CONCERNED DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 17 SUPPLIES P. LTD. WHO HAD MADE THE ABOVE STATEMENT. THE APPELLATE AUTHORITY HAD SOUGHT REMAND REPORT AND EVEN AT THAT STAGE THE GENUINENESS OF THE STATEMENT HAS NOT BEEN ESTABLISHED BY ALLOWING CROSS EXAMINATION OF THE PERSON WHOSE STATEMENT WAS RELIED UPON BY THE REVENUE. IN THESE CIRCUMSTANCES, THE DECISION OF THE TRIBUNAL BEING BASED ON THE FACT, NO SUBSTANTIAL QUESTION OF LAW CAN BE SAID TO ARISE FROM THE ORDER OF THE TRIBUNAL. THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 3.7. THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS NIKUNJ EXIMP ENTERPRISES PVT. LTD. (2015) 372 ITR 6 19 (BOM.) HELD/OBSERVED AS UNDER:- 7. WE HAVE CONSIDERED THE SUBMISSION ON BEHALF OF THE REVENUE. HOWEVER, FROM THE ORDER OF THE TRIBUNAL DATED APRIL 30, 2010, WE FIND THAT THE TRIBUNAL HAS DELETED THE ADDITIONS ON ACCOUNT OF BOGUS PURCHASES NOT ONLY ON THE BASIS OF STOCK STATEMENT, I.E., RECONCILIATION STATEMENT BUT ALSO IN VIEW OF THE OTHER FACTS. THE TRIBUNAL RECORDS THAT THE BOOKS OF ACCOUNT OF THE RESPONDENT-ASSESSEE HAVE NOT BEEN REJECTED. SIMILARLY, THE SALES HAVE NOT BEEN DOUBTED AND IT IS AN ADMITTED POSITION THAT SUBSTANTIAL AMOUNT OF SALES HAVE BEEN MADE TO THE GOVERNMENT DEPARTMENT, I.E., DEFENCE RESEARCH AND DEVELOPMENT LABORATORY, HYDERABAD. FURTHER, THERE WERE CONFIRMATION LETTERS FILED BY THE SUPPLIERS, COPIES OF INVOICES FOR PURCHASES AS WELL AS COPIES OF BANK STATEMENT ALL OF WHICH WOULD INDICATE THAT THE PURCHASES WERE IN FACT MADE. IN OUR VIEW, MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME-TAX (APPEALS), ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT-ASSESSEE. THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 18 INCOME-TAX (APPEALS) HAVE DISALLOWED THE DEDUCTION OF RS. 1.33 CRORES ON ACCOUNT OF PURCHASES MERELY ON THE BASIS OF SUSPICION BECAUSE THE SELLERS AND THE CANVASSING AGENTS HAVE NOT BEEN PRODUCED BEFORE THEM. WE FIND THAT THE ORDER OF THE TRIBUNAL IS WELL A REASONED ORDER TAKING INTO ACCOUNT ALL THE FACTS BEFORE CONCLUDING THAT THE PURCHASES OF RS. 1.33 CRORES WAS NOT BOGUS. NO FAULT CAN BE FOUND WITH THE ORDER DATED APRIL 30, 2010, OF THE TRIBUNAL. 3.8. THE HON'BLE GUJARAT HIGH COURT IN CIT VS M.K. BROTHERS (163 ITR 249) HELD/OBSERVED AS UNDER:- BEING AGGRIEVED BY THE AFORESAID ORDER, THE ASSESSEE WENT IN SECOND APPEAL BEFORE THE TRIBUNAL. IT WAS URGED ON BEHALF OF THE ASSESSEE THAT THE TRANSACTIONS IN QUESTION WERE NORMAL BUSINESS TRANSACTIONS AND THE ASSESSEE HAD MADE PAYMENTS BY CHEQUES. THE PARTIES DID NOT COME FORWARD AND IF THEY DID NOT COME, THE ASSESSEE SHOULD NOT SUFFER. HOWEVER, ON BEHALF OF THE REVENUE, IT WAS URGED THAT DETAILED INQUIRIES WERE MADE AND THEREAFTER TH E CONCLUSION WAS REACHED. THE TRIBUNAL FOUND THAT THERE WAS NO EVIDENCE ANYWHERE THAT THESE CONCERNS GAVE BOGUS VOUCHERS TO THE ASSESSEE. NO DOUBT, THERE WERE CERTAIN DOUBTFUL FEATURES, BUT TH E EVIDENCE WAS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE BY THE ASSESSEE FROM THE SAID PARTIES WERE BOGUS. THE TRIBUNAL ACCORDINGLY, DID NOT SUSTAIN THE ADDITION RETAINED BY THE APPELLATE ASSISTANT COMMISSIONER. HENCE, AT THE INSTANCE OF THE REVENUE, THE AFORESAID QUESTION HAS BEEN REFERRED TO THIS COURT FOR OPINION. ON A PERUSAL OF THE ORDER OF THE TRIBUNAL, IT CLEAR LY APPEARS THAT WHETHER THE SAID TRANSACTIONS WERE BOGUS OR NOT WAS A QUESTION OF FACT. THE TRIBUNAL HAS ALSO POINTED OUT THAT NOTHING IS SHOWN TO INDICATE THAT ANY PART OF THE FUND GIVEN BY THE ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 19 ASSESSEE TO THESE PARTIES CAME BACK TO THE ASSESSEE IN ANY FORM. IT IS FURTHER OBSERVED BY THE TRIBUNAL THAT THERE IS NO EVIDENCE ANYWHERE THAT THESE CONCERNS GAVE VOUCHERS TO THE ASSESSEE. EVEN THE TWO STATEMENTS DO NOT IMPLICATE THE TRANSACTIONS WITH THE ASSESSEE IN ANY WAY. WITH THESE OBSERVATIONS, THE TRIBUNAL ULTIMATELY HAS OBSERVED THAT THERE ARE CERTAIN DOUBTFUL FEATURES, BUT THE EVIDENCE IS NOT ADEQUATE TO CONCLUDE THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE PARTIES WERE BOGUS. IT MAY BE STATED THAT THE ASSESSEE WAS GIVEN CREDIT FACILITIES FOR A SHORT DURATION AND TH E PAYMENTS WERE GIVEN BY CHEQUES. WHEN THAT IS SO, IT CANNOT BE SAID THAT THE ENTRIES FOR THE PURCHASES O F THE GOODS MADE IN THE BOOKS OF ACCOUNT WERE BOGUS ENTRIES. WE, THEREFORE, DO NOT FIND THAT THE CONCLU SION ARRIVED AT BY THE TRIBUNAL IS AGAINST THE WEIGHT OF EVIDENCE. IN THAT VIEW OF THE MATTER, WE ANSWER THE QUESTION IN THE AFFIRMATIVE, THAT IS, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, THE REFERENCE STANDS DISPOSED OF WITH NO ORDER AS TO COSTS. 3.9. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS RAJEEV G. KALATHIL (2015) 67 SOT 52 (MUM . TRIB.)(URO), IDENTICALLY, HELD AS UNDER:- 2.2.AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS ARGUED THAT ASSESSEE HAD FILED COPIES OF BILLS OF PURCHASE FROM DKE AND NBE, THAT BOTH THE SUPPLIERS WERE REGISTERED DEALERS AND WERE CARRYING PROPER VAT AND REGISTRATION NO.S, THAT LEDGER ACCOUNTS OF THE PARTIES IN ASSESSEE'S BOOKS SHOWED BILLS ACCOUNTED FOR, THAT PAYMENT WAS MADE BY CHEQUES, THAT A ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 20 CERTIFICATE FROM THE BANKER GIVING DETAILS OF CHEQU E PAYMENT TO THE SAID PARTIES WAS ALSO FURNISHED. COPIES OF THE CONSIGNMENT, RECEIVED FROM THE GOVERNMENT APPROVED TRANSPORT CONTRACTORS SHOWING THAT MATERIAL PURCHASED WAS ACTUALLY DELIVERED AT THE SITE WAS FURNISHED BEFORE THE AO. IT WAS ALSO ARGUED THAT SOME OF THE MATERIAL PURCHASED FROM THE SAID PARTIES WERE LYING PART OF CLOSING STOCK AS ON 31.03.2009 AS PER THE STATEMENT SUBMITTED ON RECORD. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE ASSESSEE, FAA HELD THAT THE TRANSACTIONS WERE SUPPORTED BY PROPER DOCUMENTARY EVIDENCES, THAT THE PAYMENTS MADE TO THE PARTIES BY THE ASSESSEE WERE IN CONFIRMATION WITH BANK CERTIFICATE,T HAT THE SUPPLIERS WAS SHOWN AS DEFAULT UNDER THE MAHARASHTRA VAT ACT COULD NOT BE SUFFICIENT EVIDENCES TO HOLD THAT THE PURCHASES WERE NON-GENUINE, THAT THE AO HAD NOT BROUGHT ANY INDEPENDENT AND RELIABLE EVIDENCES AGAINST THE ASSESSEE TO PROVE THE NON-GENUINENESS OF THE PURCHASES, THAT THERE WAS NO EVIDENCE REGARDING CASH RECEIVED BACK FROM THE SUPPLIERS. FINALLY, HE DELETED THE ADDITION MADE BY THE AO . 2.3.BEFORE US, DEPARTMENTAL REPRESENTATIVE ARGUED THAT BOTH THE SUPPLIERS WERE NOT PRODUCED BEFORE THE AO BY THE ASSESSEE, THAT ONE OF THEM WAS DECLARED HAWALA DEALER BY VAT DEPARTMENT, THAT BECAUSE OF CHEQUE PAYMENT MADE TO THE SUPPLIER TRANSACTION CANNOT BE TAKEN AS GENUINE. HE RELIED UPON THE ORDER OF THE G BENCH OF MUMBAI TRIBUNAL DELIVERED IN THE CASE OF WESTERN EXTRUSION INDUSTRIES. (ITA/6579/MUM/2010-DATED 13.11.2013). AUTHRORISED REPRESENTATIVE (AR) CONTENDED THAT PAYMENTS MADE BY THE ASSESSEE WERE SUPPORTED BY THE BANKERS STATEMENT, THAT GOODS RECEIVED BY THE ASSESSEE FROM THE SUPPLIE WAS PART OF CLOSING STOCK,THAT THE TRANSPORTER HAD ADMITTED THE TRANSPORTATION OF GOODS TO THE SITE.HE RELIED UPON THE CASE OF BABULA BORANA (282 ITR251), NIKUNJ EXIMP ENTERPRISES (P) LTD. ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 21 (216TAXMAN171)DELIVERED BY THE HONBLE BOMBAY HIGH COURT. 2.4.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AO HAD MADE THE ADDITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWALA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATION AND TAKE IT TO LOGICAL END. BUT, HE LEFT THE JOB AT INITIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DETAILS OF T HE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. WE FIND THAT NO SUCH EXERCISE WAS DONE. TRANSPORTATION OF GOOD TO THE SITE IS ONE OF THE DECIDING FACTOR TO BE CONSIDERED FOR RESOLVING THE ISSUE. THE FAA HAS GIVEN A FINDING OF FACT THAT PART OF THE GOODS RECEIVED BY THE ASSESSEE WAS FORMING PART OF CLOSING STOCK. AS FAR AS THE CASE OF WESTERN EXTRUSION INDUSTRIES. (SUPRA)IS CONCERNED, WE FIND THAT IN THAT MATTER CASH WAS IMMEDIATELY WITHDRAWN BY THE SUPPLIER AND THERE WAS NO EVIDENCE OF MOVEMENT OF GOODS. BUT, IN THE CASE BEFORE US, THERE IS NOTHING, IN THE ORDER OF THE AO , ABOUT THE CASH TRAIAL. SECONDLY, PROOF OF MOVEMENT OF GOODS IS NOT IN DOUBT. THERERFORE, CONSIDERING T HE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER APPEAL, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY AND THERE ARE NOT SUFFICIENT EVIDENCE ON FILE TO ENDORS E THE VIEW TAKEN BY THE AO. SO, CONFIRMING THE ORDER OF THE FAA, WE DECIDE GROUND NO.1 AGAINST THE AO . 3.10. THE RATIO LAID DOWN IN THE CASE OF M/S NEETA TEXTILES VS INCOME TAX OFFICER 6138/MUM/2013, ORDER DATED 27/05/2013, SHRI JIGAR V. SHAH VS INCOME TAX OFFICER (ITA NO.1223/M/2014) ORDER DATED 22/01/2016 , ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 22 M/S IMPERIAL IMP. & EXP. VS INCOME TAX OFFICER ITA NO.5427/MUM/2015, ORDER DATED 18/03/2016 SUPPORTS THE CASE OF THE ASSESSEE AND THE CONCLUSION DRAWN I N THE IMPUGNED ORDER. HOWEVER, AS RELIED BY THE LD. DR, T HE HON'BLE GUJARAT HIGH COURT IN THE CASE OF N.K. INDU STRIES LTD.,ETC VS DCIT (SUPRA) CONSIDERING VARIOUS DECISI ONS DECIDED THE ISSUE IN FAVOUR OF THE REVENUE AND THE HON'BLE APEX COURT DISMISSED THE SLP VIDE ORDER DATED 16/01/2017 (SLP NO.(C) 769 OF 2017). I FIND THAT IN THAT CASE, DURING SEARCH PROCEEDINGS, CERTAIN BLANK SIGN ED CHEQUE BOOKS AND VOUCHERS WERE FOUND AND THUS THE PURCHASES MADE FROM THESE CONCERNS, WERE TREATED AS BOGUS BY THE ASSESSING OFFICER. 3.11. THE HON'BLE GUJARAT HIGH COURT IN N.K. INDUSTRIES LTD. VS DCIT (IT APPEAL NO.240, 261, 242 , 260 AND 241 OF 2003), VIDE ORDER DATED 20/06/2016 CONSIDERED THE DECISION OF THE TRIBUNAL AND VARIOUS JUDICIAL DECISIONS INCLUDING THE CASE OF VIJAY PROT EINS AND SANJAY OILCAKES INDUSTRIES LTD., M/S WOOLEN CARPET FACTORY VS ITAT (2002) 178 CTR 420 (RAJ.), THE TRIB UNAL ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 23 WAS HELD TO BE JUSTIFIED IN DECIDING THE CASE AGAIN ST THE ASSESSEE. THE HON'BLE APEX COURT CONFIRMED THE DEC ISION OF THE HIGH COURT FOR ADDING THE ENTIRE INCOME ON A CCOUNT OF BOGUS PURCHASES (SLP (C) NO.S 769 OF 2017, ORDER DATED 16/01/2017. 3.12. IN SUCH TYPE OF CASES, BROADLY, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) AS WELL AS THIS TRIBUNAL HAS FOLLOWED THE DECISIONS FROM HON'BLE GU JARAT HIGH COURT IN THE CASE OF SIMIT P. SETH (2013) 356 ITR 451 (GUJ.), CIT VS VIJAY M. MISTRY CONSTRUCTION LTD. (2 013) 355 ITR 498 (GUJ.), CIT VS BHOLA NATH POLY FAB. (P.) LT D. (2013) 355 ITR 290 (GUJ.) AND VARIOUS OTHER DECISIONS OF T HE TRIBUNAL AND THE DECISION OF M/S NIKUNJ EXIMP(SUPRA ) FROM HON'BLE JURISDICTIONAL HIGH COURT, WHEREIN, TH E AGGREGATE DISALLOWANCE WAS RESTRICTED TO 12.5%. ADMITTEDLY, THERE CANNOT BE SALE WITHOUT PURCHASES. THE CASE OF THE REVENUE IS THAT THERE IS BOGUS NATURE O F PURCHASES MADE FROM SUPPLIERS AND THE PARTIES WERE NOT FOUND EXISTING AT THE GIVEN ADDRESSES. ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 24 3.13. ADMITTEDLY, IN SUCH TYPE OF CASES, THERE IS NO OPTION BUT TO ESTIMATE THE PROFIT WHICH DEPENDS UPON THE SUBJECTIVE APPROACH OF AN INDIVIDUAL AND THE MA TERIAL FACTS AVAILABLE ON RECORD. IN THE PRESENT APPEALS, THE FACTS HAS ALREADY BEEN DISCUSSED IN EARLIER PARAS OF THIS ORDER, AS THE ADDITION WAS MADE UPON THE INFORMATION FROM THE SALES TAX DEPARTMENT/INVESTIGATION WING AND AN INDEPENDENT ENQUIRY OF THE LD. ASSESSING OFFICER. EVEN THE NOTICES ISSUED U/S 133(6) TO SUCH PARTIES WERE RETURNED UNSERVED. IN SUCH A SITUATION, CONSIDERIN G THE FACTUAL MATRIX AND THE JUDICIAL PRONOUNCEMENTS DISC USSED IN EARLIER PARAS OF THIS ORDER, I AM OF THE VIEW TH AT THE FIRST APPELLATE AUTHORITY HAS TAKEN A REASONABLE VIEW, HO WEVER, BY TAKING A LENIENT VIEW AND TO PLUG THE LEAKAGE OF REVENUE, I DEEM IT APPROPRIATE TO ESTIMATE THE GROS S PROFIT AT THE RATE OF 12.5% OF THE BOGUS PURCHASES IN PLAC E OF 17% RETAINED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL). THUS, THIS GROUND IN RESPECTIVE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 4. THE NEXT GROUND PERTAINS TO ADDING RS.1,70,400/- AS INTEREST INCOME ON LOANS ADVANCED OF ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 25 RS.14,70,000/- (ASSESSMENT YEAR 2010-11) AND RS.2,95,800/- ON LOAN ADVANCED OF RS.24,65,000/- (ASSESSMENT YEAR 2011-12). THE CRUX OF ARGUMENT ON BEHALF OF THE ASSESSEE, SINCE, ESTIMATION HAS BEEN MADE BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THERE IS NO QUESTION OF MAKING THE ADDITION ON ACCOUNT OF INTER EST BEARING FUNDS UTILIZED FOR EXTENDING INTEREST FREE LOANS. RELIANCE WAS PLACED UPON THE DECISION IN THE CASE O F S.C. BUILDERS VS CIT (288 ITR 1)(SC) THE LD. DR STRONGLY DEFENDED THE ADDITION MADE BY THE LD. ASSESSING OFF ICER. 4.1. ON CONSIDERATION OF THE ASSERTIONS MADE FROM BOTH SIDES AND ALSO OF FACTS, IT IS NOTED THAT ASSE SSEE ADVANCED LOANS OF RS.14,20,000/- TO VARIOUS PARTIES AND DID NOT CHARGE ANY INTEREST ON SUCH LOANS BUT PAID INTEREST TO ITS PARTNERS @ 12% APPROXIMATELY. THE ASSESSEE W AS ASKED FOR THE JUSTIFICATION. THE ASSESSEE MERELY CL AIMED THAT NO LOANS WERE ADVANCED OUT OF INTEREST BEARING FUNDS. BUT THE ASSESSEE DID NOT CONTRADICT THAT THE ASSESS EE WAS PAYING INTEREST TO ITS PARTNERS WHICH HAS BEEN DULY DEBITED TO THE PROFIT & LOSS ACCOUNT. SO FAR AS THE RELIANCE UPON THE DECISION IN THE CASE OF S.C. BUILDERS (SUP RA) IS ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 26 CONCERNED, NO COMMERCIAL EXPEDIENCY WAS EXPLAINED B Y THE ASSESSEE, THEREFORE, THE BENEFIT OF THIS DECISI ON CANNOT BE EXTENDED TO THE ASSESSEE AND IT IS MERELY A DEVIC E TO REDUCE THE PROFIT/TAXABILITY, WHICH THE ASSESSEE WA S LAWFULLY EXPECTED TO PAY TO STATE EX-CHEQUER. NOW , THE FACT REMAINS THAT THE ASSESSEE ON THE ONE SIDE, CLA IMING EXPENSES ON ACCOUNT OF CAPITAL AND ON THE OTHER SID E, EXTENDING INTEREST FREE LOANS WITH AN INTENTION TO REDUCE THE TRUE PROFIT. THUS, THE STAND OF THE LD. COMMI SSIONER OF INCOME TAX (APPEAL) IS AFFIRMED. THIS GROUND OF THE ASSESSEE IN BOTH THE ASSESSMENT YEAR, BEING ON IDEN TICAL FACT, IS DISMISSED. FINALLY, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 19/12/2017 SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 19/12/2017 F{X~{T? P.S / ! ITA NOS. 5046 & 5047/MUM/2017 M/S M. R. ASSOCIATES 27 & $ )!*+ ,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * / THE CIT, MUMBAI. 4. ) ) * / CIT- , MUMBAI 5. +,- ' , ) '#$ ' / , / DR, ITAT, MUMBAI 6. -0 1$ / GUARD FILE. & / BY ORDER, (+# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI