Dy. Commissioner of Income Tax, Amritsar. V. Sh. Sunil Kumar, Amritsar.

ITA 563/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7849 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 11-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANANYA KAPOOR LD ADVS
• Assessee Lawyers: RAHUL DHAWANLD
• Keywords: Bogus purchase; Opportunity of cross examination; Tangible material; Third party statement; Accommodation entries; Right to appeal; Onus to prove; Reassessment proceedings
• Section: 143(3); 133(6); 147; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A. NOS.563, 564, 565,567 & 343 (ASR)/2016 ASST. YEAR:2008-09, 2009-10, 2010-11 & 2011- 12, 2012-13 DY.CIT. CIRCLE-2, AMRITSAR. VS. SH. SUNIL KUMAR, PROP. SUNIL JEWELLERS, S/O SATISH KUMAR, 15, ROSE AVENUE, MAQBOOL ROAD, AMRITSAR. PAN:AIBPK-0368E (APPELLANT) (RESPONDENT) I.T.A. NOS.571, 572, 573 , 574 & 232(ASR)/2016 ASST. YEAR: 2008-09, 2009-10, 2010-11, 2011-1 2 & 2012-13 SH. SUNIL KUMAR, PROP. SUNIL JEWELLERS, S/O SATISH KUMAR, 15, ROSE AVENUE, MAQBOOL ROAD, AMRITSAR. PAN:AIBPK-0368E VS. ASST. CIT, CIRCLE-II, AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SALIL KAPOOR & SH. ANANYA KAPOOR (LD. ADVS.) RESPONDENT BY: SH. RAHUL DHAWAN (LD. DR) DATE OF HEARING: 21.08.2017 DATE OF PRONO UNCEMENT: 30.08.2017 ORDER PER BENCH: THESE ARE TEN CROSS APPEALS HAVE BEEN FILED BY THE REVE NUE DEPARTMENT AS WELL AS ASSESSEE, BY FEELING AGGRIEVED AGAI NST THE DIFFERENT ORDERS PASSED BY THE LD. CIT(A)-1, AMRITSAR, IN RESPECT OF ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 2 SAID APPEALS NOS. AND SEPARATE DATES. BECAUSE , IN ALL THE APPEALS FILED BY THE REVENUE/ DEPARTMENT AND ASSESSEE, THE ISSUES INVOL VED ARE IDENTICAL AND SIMILAR CHALLENGING THE IDENTICAL ORDER, THEREFORE, FOR THE SAKE OF CONVENIENCE AND BREVITY GROUNDS OF APPEAL NO.56 3(ASR)/2016 FOR ASS. YEAR:2008-09 FILED BY THE REVENUE DEPARTMENT AND ITA NO.571(ASR)/2016 FOR ASST. YEAR 2008-09 FILED BY THE A SSESSEE HAS BEEN TAKEN UP FOR CONSIDERATION AND RESULTS OF THE SA ME WOULD ALSO BE APPLICABLE TO THE CONNECTED APPEALS. 2. GROUNDS OF APPEAL IN ITA NO.563(ASR)/2016 FOR A.Y.2 008-09 FILED BY THE REVENUE DEPARTMENT ARE REPRODUCED AS UND ER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE & IN LAW, CIT(A) IS JUSTIFIED IN RESTRICTING THE ADDITIO N OF RS.82,01,493/- MADE BY THE AO ON ACCOUNT OF BOGUS/FICTITIOUS PURCH ASES MADE BY THE ASSESSEE TO RS.4,10,074/-, BEING PROFIT AT RATE OF 5% OF THE BOGUS/FICTITIOUS PURCHASES MADE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & LAW CIT(A) IS JUSTIFIED IN RESTRICTING THE ADDITION OF RS.82,01,493/- MADE BY THE AO ON ACCOUNT OF BOGUS/FICTITIOUS PURCH ASES MADE BY THE ASSESSEE TO RS.4,10,074/-, IGNORING THE DECISIO N OF ITAT BENCH, MUMBAI IN THE CASE OF M/S LIFELINE DRUGS AND INTERM EDIATES AS PER WHICH THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE PURCHASES DEBITED TO TRADING ACCOUNT ARE GENUINE AND CORRECT IN NATURE, AND IF THE ASSESSEE FAILS TO DISCHARGE THE ONUS, THE AO IS CORRECT IN MAKING THE ADDITION OF ENTIRE BOGUS/FICTITIOUS PURCHASES. AND GROUNDS OF APPEAL OF ITA NO.571(ASR)/2016 FOR A.Y .2008-09 FILED BY THE ASSESSEE ARE REPRODUCED AS UNDER: 1 . THAT THE NOTICE U/S 148 AND THE REASSESSMENT ORDER PASSED U/S 147 READ WITH SECTION 143(3) OF THE INCOME TAX ACT, 1961 ARE ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. (NOT PRESSED) 2. THAT THE NOTICE U/S 148 HAS BEEN ISSUED MER ELY ON THE BASIS OF THE REPORT OF INVESTIGATION WING AND THERE IS NO APPLICATION OF MIND BY THE ASSESSING OFFICER. IT IS A CLEAR CASE O F BORROWED REASONS HENCE THE NOTICE U/S 148 IS ILLEGAL. (NOT PRESSED) 3. THAT THE NOTICE U/S 148 IS ISSUED WITHOUT A NY VALID APPROVAL FROM THE HIGHER AUTHORITIES AND WITHOUT ANY APPLICA TION OF MIND. HENCE THE SAME IS LIABLE TO BE QUASHED. (NOT PRESSED) ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 3 4. THAT IN VIEW OF FACTS AND CIRCUMSTANCES OF T HE CASE, THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN SUSTAINING THE ADD ITION OF 5% ON ACCOUNT OF ALLEGED BOGUS PURCHASES. 5. THAT THE ADDITIONS MADE ARE ILLEGAL, UNJUST AND ARBITRARY AND THE CIT(A) HAS ERRED IN SUSTAINING PART OF THE ADDI TION. 6. THAT THE CIT(A) HAS FAILED TO APPRECIATE THAT I N VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE, NO ADDITION IS CALLED FO R AND HE HAS ERRED IN SUSTAINING 5% OF THE ADDITIONS MADE BY THE AO. 7. THAT THE EXPLANATIONS GIVEN, EVIDENCE PRODUC ED, MATERIAL PLACED AND AVAILABLE ON RECORD HAS NOT BEEN PROPERL Y CONSIDERED AND JUDICIALLY INTERPRETED AND SAME DO NOT JUSTIFY ANY ADDITION. THE CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF 5% O N THE ALLEGED BOGUS PURCHASES. 3. THE BRIEF FACTS OF THE CASE (ITA NO. 563/ASR/2016) , A S EMERGED FROM THE ORDER PASSED BY THE AUTHORITIES BELOW THAT THE ASSESSEE DECLARED INCOME OF RS.6,81,840/- ON 30.09.2008 BY FILING ITS RETURN AND THE SAME WAS PROCESSED U/S 143(1). LATER ON, T HE CASE WAS REOPENED U/S 147 OF THE I.T. ACT,1961 AFTER RECODING T HE REASONS FOR THE SAME. SUBSEQUENTLY, STATUTORY NOTICE U/S 148 WAS ISSUE D ON 26.03.2015 WHICH WAS DULY SERVED UPON THE ASSESSEE ON 26.0 3.2015. THEREAFTER, REASSESSMENT PROCEEDINGS WERE STARTED ON THE BASIS OF INFORMATION RECEIVED THAT THE APPELLANT HAD MADE PUR CHASE OF LOOSE DIAMONDS FROM TWO PARTIES AT SURAT THROUGH BROKER S H. PARESH BHAI (WHICH ACCORDING TO THE ASSESSING OFFICER WERE BOGUS AND AS SU CH WERE UNDER DISPUTE). THE DETAILS OF SUCH PURCHASES ARE AS F OLLOWS. SR. NO. NAME PAN GST NO. STATUTE WEIGHT IN CTS AMOUNT I. JEWEL DIAM ABPUV3494J 24220900821 FIRM 720.69 3 601143 II ROSE IMPLEX AAMFR1123K 24220400622 FIRM 920.07 4 600350 TOTAL 1640.76 8201493 TO VERIFY THE ABOVE SAID PURCHASES, INFORMATION WAS CALLE D U/S 133(6) OF THE ACT FROM THE AFORESAID PARTIES AND THERE AFTER, TO VERIFY THE ACTUAL EXISTENCE OF THE PARTIES. ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 4 IN RESPONSE, THE REPLY WAS RECEIVED BY THE LD. ASSESSING O FFICER AND THEREAFTER TO VERIFY THE ACTUAL EXISTENCE OF THE PARTIES COMMISSION WAS SENT U/S 131(1)(D) OF THE ACT TO THE ITO, WARD-2(3 )(7), SURAT IN PURSUANCE TO WHICH, A FIELD ENQUIRY WAS CONDUCTED BY INSP ECTOR SH. JADGISH PARMAR ON DATED 03.02.2016 AND HE HAD REPOR TED THAT THE PREMISES IS FOUND TO BE OPEN ONCE IN A TWO AND THREE MO NTHS ONLY FOR CLEANING PURPOSES AND NO BUSINESS OR OTHER ACTIVITIES HAV E BEEN CARRIED OUR FROM THE SAID PREMISES AND THEREAFTER, SHOW CAUSE NOTICE WAS ALSO ISSUED TO THE ASSESSEE ON 14.03.2016 REQUIRING HIM TO PROVE THAT PURCHASES MADE BY HIM FROM THE ABOVE PARTIES ARE N OT BOGUS AND FURTHER TO VERIFY THE SAME AND TO PROVE THE IDENTITY OF THE BROKER AND GENUINENESS OF THE TRANSACTION. IN RESPONSE, THE ASSESSEE HAD SUBMITTED HIS REPLY DATED 16.03.2016 BY MENTIONING THAT HE HAS FURNISHED COMPLET E STOCK TALLY TO PROVE THAT WITHOUT THERE BEING PURCHASED GOODS COULD NOT HAVE BEEN SOLD. HE ALSO CONFIRMED COPIES OF ACCOUNT VIDE REPLY D ATED 29.02.2016 AND FURTHER SUBMITTED THAT HE HAS ALREADY FURNISHED COPIES OF THE BANK ACCOUNTS TO PROVE THAT ALL THE PAYMENTS ARE BY RTGS/CHEQUES, HOWEVER, CONSIDERING THE FACTS AND CIRCUMSTA NCES OF THE CASE THE ASSESSING OFFICER PEUSED THE INFORMATION OF THE DEPARTMENT RECEIVED FROM DIT (INV.), AMRITSAR VIDE LE TTER DATED 16.07.2014 THAT THE ABOVE MENTIONED ASSESSEE HAS TAKEN ACCOMMODATION ENTRY FROM BHANWARLAL JAIN GROUP (A LEADING ENTRY PROVIDER OF MUMBAI) BY SHOWING BOGUS PURCHASES AND MAKI NG PAYMENT THROUGH RTGS. HE GOT THE BOGUS BILLS FOR BOGUS PURCHASED AND RECEIVED THE PAYMENT BACK IN THE FORM OF CASH. DUR ING THE ASSESSMENT YEAR: 2008-09, HE INFLATED THE PURCHASES AND DE CREASED THE PROFITS AMOUNTING TO RS.36,01,143/- AND FINALLY T HE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED T O PROVE THE IDENTITY OF THE BROKER AND GENUINENESS OF THE TRA NSACTIONS AND IN VIEW OF THE COMMISSION REPORT RECEIVED, THE PARTY NAME LY JEWEL DIAM ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 5 AND ROSE IMPEX FROM WHOM THE ASSESSEE HAD MADE PURCHASES AR E FICTITIOUS. HENCE, IT IS HELD THAT ALL THE ABOVE MENTIO NED PURCHASES AMOUNTING TO RS.82,01,493/- HAVE BEEN PROVED FICTITIO US AND ARE BOGUS/FICTITIOUS EXPENDITURE AND ADDED BACK TO THE TOT AL INCOME OF THE ASSESSEE. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEE DINGS U/S 271(1) (C) OF THE I.T. ACT. FOR FURNISHING INACCURATE PA RTICULARS OF INCOME. 4. FEELING AGGRIEVED AGAINST THE ASSESSMENT ORDER DATE D 31.03.2016, THE ASSESSEE PREFERRED THE FIRST APPEAL BEF ORE THE LD. CIT(A) AND THE LD. CIT(A) WHILE CONSIDERING THE FACTUA L MATRIX OF THE CASE AND RIVAL SUBMISSIONS OF THE PARTIES, PARTLY ALLOWE D THE APPEAL OF THE ASSESSEE BY DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER BY RESTRICTING TO 5% OF THE BOGUS PURCHASES BY HOLDING AS UNDER: 6. I HAVE GONE THROUGH THE GROUNDS OF APPEAL, SUBM ISSION AND THE ASSESSMENT ORDER. GROUND NO.1 & 2. THE CASE WAS REOPENED ON THE INFORMATION THAT THE ASSESSEE HAS OBTAINED THE BOGUS ENTRIES BHANWARLAL JAIN GROUP (A LEADING ENTRY PROVIDER OF MUMBAI) AND THAT THE ASSESSEE HAS MADE BOGUS PURCHASES TO THE T UNE OF RS.82,01,493/-. THUS THERE WAS TANGIBLE MATERIAL WITH THE ASSESSING OFFIC ER WHICH HAS LIVE LINK THAT THE INCOME HAS ESCAPED ASSESSMENT. THUS, THE ACTION OF AO IN REOPENING THE CASE WAS JUSTIFIED AND THE GROUNDS OF APPEAL ARE DISMISS ED. GROUND NO. 3 THE SECOND LEGAL ISSUE RAISED BY THE APPELLANT IS T HAT SPEAKING ORDER HAS NOT BEEN PASSED TO DISPOSE OFF THE OBJECTIONS. HOWEVER ON GO ING THROUGH THE ORDER OF THE AO IT IS CLEAR THAT THE SPEAKING ORDER WAS PASSED ON 0 4.01.2016. THUS THIS GROUND OF ASSESSEE IS DISMISSED AS WELL. GROUND NO.8, 9 & 10 THE AO HAS MADE ADDITION OF BOGUS PURCHASES OF RS82,0 1,493/- WITHOUT REJECTING THE BOOKS OF ACCOUNTS OF ASSESSEE. SIMILAR ADDITION WAS MADE BY THE AO IN A.Y 2012-13 IN THE CASE OF ASSESSEE WHICH WAS DECIDED B Y CIT(A)-1, AMRITSAR AS UNDER : THE AO HAS MADE AN ADDITION ON ACCOUNT OF BOGUS PUR CHASES TO THE TUNE OF RS. 1,59,67,475/- WITHOUT REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. FURTHER THE SALES OF THE ASSESSEE HAVE NO T BEEN DOUBTED. THE SALES OF THE APPELLANT HAVE BEEN ACCEPTED AS IT IS. PURCHASES CANNOT BE HELD TO BE BOGUS WITHOUT DOUBTING THE SALES AS HELD BY BOMBAY HIGH COURT IN THE CASE OF C1T VS NIKUNJ EXIM ENTERPRISES PVT. LTD. ASSESSEE HAS ALSO PROVIDED COMPLETE QUANTITATIVE DETAILS. THE GUJARAT HIGH COURT IN THE CASE ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 6 OF CIT VS BHOLA NATH POLY FAB (P) LTD. (2013) 355 I TR 290 HELD AS UNDER, ASSESSEE IS ENGAGED IN BUSINESS OF TRADING IN FURNI SHED FABRICS. ASSESSEE OFFICER DISALLOWED THE PURCHASES ON ACCOUNT THAT PA RTIES FROM WHOM PURCHASES HAVE BEEN MADE WERE NOT FOUND AT THE ADDR ESS GIVEN. CIT (APPEAL) CONFIRMED THE ASSESSMENT ORDER. ITAT HELD T HAT PURCHASES WERE MADE FROM BOGUS PARTIES, BUT THE PURCHASES THEMSELV ES WERE NOT BOGUS AS THE ENTIRE QUANTITY OF OPENING STOCK, PURCHASES AND THE QUANTITY MANUFACTURED DURING THE YEAR UNDER CONSIDERATION WE RE SOLD BY THE ASSESSEE. THEREFORE THE ITAT HELD THAT ADDITION SHOU LD NOT BE THE ENTIRE PURCHASES BUT THE PROFIT MARGIN EMBEDDED ON SUCH PU RCHASES WOULD BE SUBJECT TO TAX. ON APPEAL BY REVENUE HIGH COURT UPH ELD THE ORDER OF ITAT. IN SIMILAR FACTS MUMBAI ITAT HAS ALSO DECIDED IN SHI V MADHUKANT BHANDHI VS. ITO, WHERE ADDITION WAS RESTRICTED TO 5 % OF BOGUS PURCHASES. IN THE LIGHT OF ABOVE ADDITION IS RESTRICTED TO 5% OF THE BOGUS PURCHASES. SIMILAR THE ADDITION IS RESTRICTED TO 5% OF BOGUS P URCHASES IN THE CURRENT YEAR AS WELL. 5. FEELING AGGRIEVED BY THE SAID ORDERS PASSED BY THE LD. CIT(A), THE REVENUE AS WELL AS ASSESSEE PREFERRED THE AFORESAID AP PEALS ON DIFFERENT GROUNDS. 6. FIRST, WE WILL DECIDE THE APPEAL FILED BY THE REVENUE DEPARTMENT. IN SUPPORT OF ITS APPEAL, THE LD. DR SUBMITTED THAT IN THE INSTANT CASES, BROADER VIEW/COMPLETE OUTLOOK/ OVER ALL CIRCUMSTANCE S ARE REQUIRES TO BE CONSIDERED BECAUSE ALL INDIA BASIS INVEST IGATIONS WERE CONDUCTED IN WHICH A LEADING BOGUS ENTRY PROVIDER OF MU MBAI WAS FOUND WHO WAS OPERATING, SPECIFICALLY THROUGH BHANWARLA L JAIN GROUP (MUMBAI) , PROVIDING ENTRY BY SHOWING BOGUS PURCHASES AND GETTING PAYMENT THROUGH RTGS AND IN RETURN PAYING THE AMOUN T BACK IN THE FORM OF CASH. FURTHER IT WAS ALSO REVEALED THE REVENUE DEPARTMENT THAT THE ASSESSEE IS INVOLVED IN THE BOGUS ENTRY IN TAKIN G ACCOMMODATION ENTRY BY SHOWING BOGUS PURCHASES AND MAKING PAYMENT THROUGH RTGS GOT THE BOGUS BILLS FOR BOGUS PU RCHASES AND RECEIVED THE PAYMENT BACK IN THE FORM OF CASH. IN THE INSTANT CASE, THE COMMISSION WAS APPOINTED U/S 131 OF THE ACT TO ENQUIRE A BOUT THE DEALERS OF THE ASSESSEE IN SURAT AND IN PURSUANCE TO THAT INSPECTOR MR. PARMAR , VISITED THE SAID PREMISES BUT FOUND THE PREMISE S LOCKED. IT IS ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 7 CLEAR MENTIONED IN THAT REPORT THAT NO BUSINESS OR OTHE R ACTIVITIES HAVE BEEN CARRIED OUT FROM THE SAID PREMISES WHICH CLEAR LY PROVES THAT NO SUCH PARTIES FROM WHOM THE ASSESSEE HAS MADE THE PURCHASES, EXISTS AT THE GIVEN ADDRESSEE AND IN FACT, THESE CONCERNS A RE ACTUALLY NOT ENGAGED IN THE BUSINESS OF DIAMOND. THESE ARE BOGUS /FICTITIOUS CONCERNS AND AN AGENT IN SENDING REPLIES U/S 133(6) OF TH E ACT ON BEHALF OF ALL THE BOGUS /FICTITIOUS CONCERN. FURTHER TH E LD. AO TRIED TO CONFIRM THE GENUINENESS OF THE PARTIES FROM WHOM THE AL LEGED BOGUS PURCHASES WERE MADE. IN RESPONSE THE ASSESSEE HAS PROVIDED DE ATH CERTIFICATE OF SH. PARESH BHAI AND PURCHASE BILLS FROM TH E ABOVE MENTIONED PARTIES. BUT MERELY PRODUCTION OF THE DEATH CERTIFICATE OF THE BROKER (SH. PARESH BHAI) DOES NOT PROVE THE IDENT ITY OF THE PERSON WHOM HE IS REFERRING TO. ALTHOUGH THE ASSESSEE HAS PRODUCE D PURCHASE BILLS BUT THIS DOES NOT PROVE THE GENUINENESS OF THE TRA NSACTIONS AS ASSESSEE HIMSELF NEVER VISITED THESE PARTIES PERSONALLY AND MOREOVER, AS PER INFORMATION AVAILABLE WITH THE DEPARTMENT, TH E ASSESSEE GOT BOGUS PURCHASE BILLS THROUGH ACCOMMODATION ENTRIES. IN REA L FACT THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS TO PROVE THE GENU INENESS OF THE PARTIES ALTHOUGH PRODUCED HIS BANK ACCOUNT STATEMENT S AND ON PERUSAL OF THE BANK STATEMENT IT HAS BEEN FOUND THAT THE PAYMENTS WERE MADE TO THE AFORESAID PARTIES THROUGH RTGS/CHEQU ES AND ON ENQUIRY FROM THE BANKS IT IS CLEAR THAT PAYMENTS WERE M ADE TO THE ROSE IMPEX THROUGH RTGS BUT THE SAME AMOUNTS WERE TRAN SFERRED TO SOME OTHER EXPORTERS ON THE VERY SAME/NEXT DAY AND AS P ER DIT(INV.) INFORMATION ALSO, ALL THE PAYMENTS WERE MADE BY THE P ARTIES WHO NEED ACCOMMODATION ENTRIES THROUGH RTGS THEN CONCERNS WHO RECEI VED RTGS, TRANSFER THE AMOUNT TO SOME OTHER CONCERN/EXPORTE R THROUGH CHEQUE. THE THIRD CONCERN TRANSFERRED THAT AMOUNT TO SO ME FOREIGN PARTY AND FROM THE FOREIGN, THESE AMOUNTS ENTER INTO INDIA IN THE FORM OF CASH AND PARTIES WHO NEED BOGUS ENTRIES GETS THE MONE Y BACK IN ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 8 THE FORM OF CASH AND IT IS A NETWORK OF ABOUT 200 CONCE RNS THROUGH WHICH TRANSACTIONS ROTATE. FROM THE RECORDS, IT IS CLEARLY REFLECTS THAT THE ASSESSEE W AS ASKED TO PRODUCE THE PARTIES CONCERNED BY SHOW CAUSE NOTICE DATED 14.03.2016 BUT THE ASSESSEE FAILED TO PRODUCE THE PARTIE S BEFORE THE ASSESSING OFFICER AND ALTHOUGH THE ASSESSING OFFICER HAS RECEIV ED REPLIES FROM THE PARTIES IN RESPONSE TO THE INFORMATION CALLED FOR U/S 136(6) OF THE ACT, BUT THE RESULTS OF THE FIELD ENQUIR Y, CONDUCTED BY THE INSPECTOR OF THE DEPARTMENT DOES NOT SUPPORT THE ACT UAL EXISTENCE OF THE PARTIES AT THE AVAILABLE ADDRESSES , THEREFORE, ALL THESE ACTS OF THE ASSESSEE CONFIRMS THAT AN AGENT IS ACTING ON BEHALF OF ALL ABOVE MENTIONED CONCERNED PERSONS AND ACTUALLY ALL ARE BOGUS/F ICTITIOUS AND ONLY INVOLVED IN PROVIDING ACCOMMODATION ENTRIES TO TH E PERSONS WHO ARE IN NEED. THE LD. DR ALSO RELIED UPON THE JUDGMENTS PASSED BY THE GUJRAT HIGH COURT IN THE CASE N. K. INDUSTRIES LTD. VS. DCIT, 2016-TIOL- 3165-HC-AHM-IT WHICH WAS AFFIRMED BY THE SUPREME COURT ON INDIA IN SPECIAL TO LEAVE (C)...CC NO.769/2017 AND SUBMITT ED THAT THE ENTIRE UNDISCLOSED INCOME GENERATED OUT OF BOGUS TRANSACTI ONS, DESERVES TO ADDED TO TOTAL INCOME. FURTHER THE LD. DR RELIED UPON A JUDGMENT PASSED BY THE KOLKATA HIGH COURT IN THE CASE OF KALYANI MEDICAL STORES VS. CIT, BURDWAN & ANOTHER AND SUBMITTE D THAT IN VIEW OF THE JUDGMENT WHERE THE ASSESSEE CHOOSES TO WITHH OLD THE BEST EVIDENCE AND RELIES ON THE SECONDARY EVIDENCE ASSUMING TH AT ANY SECONDARY PIECE OF EVIDENCE WAS ADDUCED, THEN THE PRESUMP TION IN LAW SHALL BE AGAINST THE ASSESSEE AND WHEN THE ASSESSEE HAS REDUCED ITS PROFIT BY SHOWING ARTIFICIAL OR BOGUS PURCHASES, THE SAME IS LIABLE TO BE ADDED TO ITS TOTAL INCOME, IF THE ASSESSEE IS UNABLE TO SH OW GENUINENESS OF THOSE PURCHASES. ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 9 FINALLY THE LD. CIT(A) WAS NOT RIGHT TO GRANT RELIEF TO THE ASSESSEE IN VIEW OF THE ABOVE FACTUAL MATRIX AND HENCE, T HE ORDER PASSED BY THE CIT(A) IS LIABLE TO THE SET ASIDE TO THE E XTENT AS CHALLENGED BY THE REVENUE DEPARTMENT. 7. ON THE CONTRARY, THE LD. AR SUBMITTED THAT ALL THE TR ANSACTIONS HAVE BEEN MADE THROUGH RTGS/CHEQUES AND THE SAME HAVE BEEN CONFIRMED BY THE ASSESSING OFFICER AND IT WAS RIGHTLY SUBM ITTED BEFORE THE ASSESSING OFFICER THAT THE BROKER NAMELY SH. PARESH BHAI THROUGH WHOM THE ASSESSEE HAD MADE THE PURCHASES, HAD DIED AND ONCE THE ASSESSEE DULY PRODUCED THE DEATH CERTIFICATE, THEREFORE I T WAS UPON THE REVENUE AUTHORITIES TO FIND OUT WHERE ABOUTS , BU SINESS ACTIVITY AND/OR OCCUPATION OF THE SAID PERSON BY HOLDING ENQUIR Y WHICH CERTAINLY THE REVENUE AUTHORITIES FAILED TO DO SO. THE LD. AR URTHER SUBMITTED THAT THE ASSESSEE WAS MAINTAINING THE COMPLETE B OOKS OF ACCOUNTS AND VERIFIED THE SAID PURCHASES UNDER CHALLENGE TH ROUGH VOUCHERS AND THERE WAS COMPLETE TALLY OF EACH AND EVERY GRAMS, ITEMS AND PIECES AND EVEN OTHERWISE PRODUCED THE ORIGINAL VOU CHERS WITH ACKNOWLEDGEMENT OF RECEIVING GOODS AND ALL THE PURCHASES HAVE BEEN CONFIRMED AND THE STATEMENT OF A PERSON ON WHOM THE ASSE SSING OFFICER RELIED WAS NEVER BEEN CONFRONTED BY THE ASSESSEE B ECAUSE NO OPPORTUNITY WAS AFFORDED TO THE ASSESSEE TO CROSS EXAMINAT ION THE SAID PERSON AND EVEN OTHERWISE THE ASSESSEE HAS ALREADY SHOW N THE PROFIT FROM HIS BUSINESS AND PAID THE RELEVANT TAXES AS W ELL AND THE CLOSING STOCKS AND VALUATION ALSO BEEN ACCEPTED AND ENTIRE SALE PROVED, HENCE, THE ORDER PASSED BY THE CIT(A) DOES NOT DESERVES TO BE INTERFERED WITH EXCEPT UNDER CHALLENGED BY THE ASSESSE E. ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 10 FURTHER THE ASSESSEE RELIED UPON THE VARIOUS JUDGMENTS, HOWEVER, FOCUSED ON BELOW MENTIONED JUDGMENTS , (I) CIT-1, MUMBAI VS. NIKUNJ EXIMP ENTERPRISES (P.) LTD. [2013] 35 TAXMAN.COM 384 (II) CIT VS. BHOLANATH POLY FAB PVT. LTD. [2013] 40 TAXMAN.494, (GUJRAT) AND SUBMITTED THAT ONCE THE ASSESSEE FILED LETTER OF CONFI RMATION OF SUPPLIERS, COPIES OF BANK STATEMENT SHOWING ENTRIES OF PA YMENT THROUGH ACCOUNT PAYEE CHEQUES TO SUPPLIER AND STOCK /SALE STATEMENT, THEREFORE, MERELY BECAUSE SUPPLIERS DID NOT APPEAR BEFO RE THE A.O DOES NOT MEAN THAT THE PURCHASES WERE NOT MADE BY THE A SSESSEE. FURTHER SIMPLY BY NOT FINDING THE CONCERNED PARTIES AT THEIR RESPECTIVE ADDRESSE, PURCHASES CANNOT BE MADE AS BOGUS BECAUSE ENTIRE QUANTITY OF STOCK WAS SOLD BY THE ASSESSEE THEREFORE ONLY PROFIT MAR GIN EMBEDDED IN SUCH PURCHASES WOULD BE SUBJECT TO TAX AND NO T ENTIRE PURCHASES, AND FINALLY, IT WAS SUBMITTED BY THE LD. AR THAT EVEN OTHERWISE IN THE INSTANT CASE BOOKS OF ACCOUNTS HAVE NOT BE EN REJECTED, THEREFORE, THE PURCHASES CANNOT BE HELD AS BOGU S IN ITS GERMANE. IN REJOINDER, THE LD. AR ALSO RELIED UPON THE JUDGME NT PASSED IN THE CASE OF KUNHAYAMMED AND ORS. VS. STATE OF KERALA & ORS. (245 ITR 360) AND SUBMITTED THAT IN VIEW OF THE JUDGEMENT PASSED B Y APEX COURT, AN ORDER REFUSING SPECIAL LEAVE TO APPEAL DOES NOT ATTRACT THE DOCTRINE OF MERGER AND HAVING NO BINDING FORCE UNTIL AND UNLESS THE ORDER REFUSING TO SPECIAL LEAVE TO APPEAL IS A SPEAKING ORDER ETC. GIVE REASONS FOR REFUSING THE GRANT OF LEAVE, THEN THE ORDE R AS TO IMPLICATIONS. HENCE THE JUDGMENT (N. K. INDUSTRIES LTD. VS. DCIT, 2016-TIOL-3165-HC-AHM-IT) RELIED UPON BY THE LD. D R HAS NO BINDING EFFECT BECAUSE THAT IS A SIMPLE DISMISSAL OF SLP AN D NOT A SPEAKING ORDER. ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 11 8 . WE HEARD THE PARTIES AND HAVE GONE THROUGH WI TH THE FACTS AND CIRCUMSTANCES OF THE CASE AND RIVAL SUBMISSION OF THE PARTIES AND JUDGMENTS RELIED UPON. LET US TO FIRST DISCUSS THE RATIO LAID DOWN THAT THE ENT IRE UNDISCLOSED INCOME GENERATED OUT OF BOGUS TRANSACTIONS, DESERVES TO BE ADDED TO TOTAL INCOME, AS HELD BY AHMEDABAD HIGH COURT AND FURTHER AFFIRMED BY THE APEX COURT IN N. K. INDUSTRIES LTD. VS. DCIT, 2016-TIOL-3165-HC-AHM-IT , AS RELIED UPON BY LD. D.R. IT WAS STRESSED UPON BY THE LD D.R. THAT NOW IT IS NOT R ES- INTEGRA THAT THE ENTIRE UNDISCLOSED INCOME GENERATED O UT OF BOGUS TRANSACTIONS , DESERVES TO BE ADDED IN TOTAL INCOME IN V IEW OF DECISION OF APEX COURT IN THE AFORESAID CASE AND THE JUDGMENT PASSED BY APEX COURT HAS BINDING EFFECT . WE FEEL IT APPROPRIATE TO CONSIDER THE ISSUE RAISED BY THE LD. D.R. THAT WHETHER DISMISSAL OF SLP, H AS BINDING EFFECT OR NOT. IN OUR CONSIDERED VIEW AS RELIED UPON BY MR SALIL KAP OOR, LD ADVOCTATE, THE JUDGMENT PASSED IN THE CASE OF KUNHAYAMMED AND ORS. VS. STATE OF KERALA & ORS. (245 ITR 360) SQUARELY DEALT WITH THE AFORESAID SITUATION AND LAID DOWN THE RATIO QUA DISMI SSAL OF SLP. RELEVANT PART OF JUDGMENT IS REPRODUCED HEREIN BELOW FOR THE SAKE OF BREVITY AND CONVENIENCE:- THUS, A PETITION SEEKING GRANT OF SPECIAL LEAVE TO APPEAL AND THE APPEAL ITSELF, THOUGH BOTH DEALT WITH BY ARTICL E 136 OF THE CONSTITUTION, ARE TWO CLEARLY DISTINCT STAGES. IN O UR OPINION, THE LEGAL POSITION WHICH EMERGES IS AS UNDER:- ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 12 1. WHILE HEARING THE PETITION FOR SPECIAL LEAVE TO APPEAL, THE COURT IS CALLED UPON TO SEE WHETHER THE PETITIONER SHOULD BE GRANTED SUCH LEAVE OR NOT. WHILE HEARING SUCH PETITION, THE COUR T IS NOT EXERCISING ITS APPELLATE JURISDICTION; IT IS MERELY EXERCISING ITS DISCRETIONARY JURISDICTION TO GRANT OR NOT TO GRANT LEAVE TO APPE AL. THE PETITIONER IS STILL OUTSIDE THE GATE OF ENTRY THOUGH ASPIRING TO ENTER THE APPELLATE ARENA OF SUPREME COURT. WHETHER HE ENTERS OR NOT WO ULD DEPEND ON THE FATE OF HIS PETITION FOR SPECIAL LEAVE; 2. IF THE PETITION SEEKING GRANT OF LEAVE TO APPEAL IS DISMISSED, IT IS AN EXPRESSION OF OPINION BY THE COURT THAT A CASE FOR INVOKING APPELLATE JURISDICTION OF THE COURT WAS NO T MADE OUT; 3. IF LEAVE TO APPEAL IS GRANTED THE APPELLATE JURI SDICTION OF THE COURT STANDS INVOKED; THE GATE FOR ENTRY IN APPELLATE ARE NA IS OPENED. THE PETITIONER IS IN AND THE RESPONDENT MAY ALSO BE JJ CALLED UPON TO FACE HIM, THOUGH IN AN APPROPRIATE CASE, IN SPITE OF HAV ING GRANTED LEAVE TO APPEAL, THE COURT MAY DISMISS THE APPEAL WITHOUT NOTICING THE RESPONDENT. 4. IN SPITE OF A PETITION FOR SPECIAL LEAVE TO APPE AL HAVING BEEN FILED, THE JUDGMENT, DECREE OR ORDER AGAINST WHICH LEAVE T O APPEAL HAS BEEN SOUGHT FOR, CONTINUES TO BE FINAL, EFFECTIVE A ND BINDING AS BETWEEN THE PARTIES. ONCE LEAVE TO APPEAL HAS BEEN GRANTED, THE FINALITY OF THE JUDGMENT, DECREE OR ORDER APPEALED AGAINST IS PUT IN JEOPARDY THOUGH IT CONTINUES TO BE BINDING AND EFFE CTIVE BETWEEN THE PARTIES UNLESS IT IS A NULLITY OR UNLESS THE COURT MAY PASS A SPECIFIC ORDER STAYING OR SUSPENDING THE OPERATION OR EXECUT ION OF THE JUDGMENT, DECREE OR ORDER UNDER CHALLENGE. DISMISSAL AT STAGE OF SPECIAL LEAVE - WITHOUT REASONS - NO RES JUDICATA, NO MERGER HAVING SO ANALYSED AND DEFINED THE TWO STAGES OF THE JURISDICTION CONFERRED BY ARTICLE 136 , NOW WE PROCEED TO DEAL WITH A NUMBER OF DECISIONS CITED AT THE BAR DURING THE COURSE OF HEARING AND DEALING WITH THE LEGAL TE NOR OF AN ORDER OF SUPREME COURT DISMISSING A SPECIAL LEAVE PETITION. IN WORKMEN OF COCHIN PORT TRUST VS. BOARD OF TRUSTEES OF THE COCH IN PORT TRUST AND ANOTHER 1978 (3) SCC 119, A THREE-JUDGES BENCH OF T HIS COURT HAS HELD THAT DISMISSAL OF SPECIAL LEAVE PETITION BY TH E SUPREME COURT BY A NON-SPEAKING ORDER OF DISMISSAL WHERE NO REASONS WERE GIVEN DOES NOT CONSTITUTE RES JUDICATA. ALL THAT CAN BE SAID T O HAVE BEEN DECIDED BY THE COURT IS THAT IT WAS NOT A FIT CASE WHERE SP ECIAL LEAVE SHOULD BE GRANTED. THAT MAY BE DUE TO VARIOUS REASONS. DUR ING THE COURSE OF THE JUDGEMENT, THEIR LORDSHIPS HAVE OBSERVED THAT D ISMISSAL OF A SPECIAL LEAVE PETITION UNDER ARTICLE 136 AGAINST TH E ORDER OF A TRIBUNAL DID NOT NECESSARILY BAR THE ENTERTAINMENT OF A WRIT PETITION UNDER ARTICLE 226 AGAINST THE ORDER OF THE TRIBUNAL . THE DECISION OF ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 13 MADRAS HIGH COURT IN THE MANAGEMENT OF W. INDIA MAT CH CO. LTD. VS. INDUSTRIAL TRIBUNAL, AIR 1958 MAD 398, 403 WAS CITED BEFORE THEIR LORDSHIPS. THE HIGH COURT HAD TAKEN THE VIEW THAT THE RIGHT TO APPLY FOR LEAVE TO APPEAL TO SUPREME COURT UNDER AR TICLE 136, IF IT COULD BE CALLED A RIGHT AT ALL, CANNOT BE EQUATED T O A RIGHT TO APPEAL AND THAT A HIGH COURT COULD NOT REFUSE TO ENTERTAIN AN APPLICATION UNDER ARTICLE 226 OF THE CONSTITUTION ON THE GROUND THAT THE AGGRIEVED PARTY COULD MOVE SUPREME COURT UNDER ARTICLE 136 OF THE CONSTITUTION. THEIR LORDSHIPS OBSERVED THAT SUCH A BROAD STATEMENT OF LAW IS NOT QUITE ACCURATE, ALTHOUGH SUBSTANTIALL Y IT IS CORRECT. TO SUM UP OUR CONCLUSIONS ARE :- (I) WHERE AN APPEAL OR REVISION IS PROVIDED AGAINST AN ORDER PASSED BY A COURT, TRIBUNAL OR ANY OTHER AUTHORITY BEFORE SUPERIOR FORUM AND SUCH SUPERIOR FORUM MODIFIES, REVERSES OR AFFIRMS T HE DECISION PUT IN ISSUE BEFORE IT, THE DECISION BY THE SUBORDINATE FO RUM MERGES IN THE DECISION BY THE SUPERIOR FORUM AND IT IS THE LATTER WHICH SUBSISTS, REMAINS OPERATIVE AND IS CAPABLE OF ENFORCEMENT IN THE EYE OF LAW. II) THE JURISDICTION CONFERRED BY ARTICLE 136 OF TH E CONSTITUTION IS DIVISIBLE INTO TWO STAGES. FIRST STAGE IS UPTO THE DISPOSAL OF PRAYER FOR SPECIAL LEAVE TO FILE AN APPEAL. THE SECOND STAGE C OMMENCES IF AND WHEN THE LEAVE TO APPEAL IS GRANTED AND SPECIAL LEA VE PETITION IS CONVERTED INTO AN APPEAL. (III) DOCTRINE OF MERGER IS NOT A DOCTRINE OF UNIVE RSAL OR UNLIMITE APPLICATION. IT WILL DEPEND ON THE NATURE OF JURISD ICTION EXERCISED BY THE SUPERIOR FORUM AND THE CONTENT OR SUBJECT-MATTE R OF CHALLENGE LAID OR CAPABLE OF BEING LAID SHALL BE DETERMINATIVE OF THE APPLICABILITY OF MERGER. THE SUPERIOR JURISDICTION SHOULD BE CAPABLE OF REVERSING, MODIFYING OR AFFIRMING THE ORDER PUT IN ISSUE BEFOR E IT. UNDER ARTICLE 136 OF THE CONSTITUTION THE SUPREME COURT MAY REVER SE, MODIFY OR AFFIRM THE JUDGMENT-DECREE OR ORDER APPEALED AGAINS T WHILE EXERCISING ITS APPELLATE JURISDICTION AND NOT WHILE EXERCISING THE DISCRETIONARY JURISDICTION DISPOSING OF PETITION FO R SPECIAL LEAVE TO APPEAL. THE DOCTRINE OF MERGER CAN THEREFORE BE APP LIED TO THE FORMER AND NOT TO THE LATTER. IV) AN ORDER REFUSING SPECIAL LEAVE TO APPEAL MAY B E A NON- SPEAKING ORDER OR A SPEAKING ONE. IN EITHER CASE IT DOES NOT ATTRACT THE DOCTRINE OF MERGER. AN ORDER REFUSING SPECIAL LEAVE TO APPEA L DOES NOT STAND SUBSTITUTED IN PLACE OF THE ORDER UNDER CHALLENGE. ALL THAT IT MEANS IS THAT THE COURT WAS NOT INCLINED TO EXERCISE ITS DIS CRETION SO AS TO ALLOW THE APPEAL BEING FILED. ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 14 V) IF THE ORDER REFUSING LEAVE TO APPEAL IS A SPEAK ING ORDER, I.E. GIVES REASONS FOR REFUSING THE GRANT OF LEAVE, THEN THE O RDER HAS TWO IMPLICATIONS. FIRSTLY, THE STATEMENT OF LAW CONTAIN ED IN THE ORDER IS A DECLARATION OF LAW BY THE SUPREME COURT WITHIN THE MEANING OF ARTICLE 141 OF THE CONSTITUTION. SECONDLY, OTHER TH AN THE DECLARATION OF LAW, WHATEVER IS STATED IN THE ORDER ARE THE FINDIN GS RECORDED BY THE SUPREME COURT WHICH WOULD BIND THE PARTIES THERETO AND ALSO THE COURT, TRIBUNAL OR AUTHORITY IN ANY PROCEEDINGS SUB SEQUENT THERETO BY WAY OF JUDICIAL DISCIPLINE, THE SUPREME COURT BEING THE APEX COURT OF THE COUNTRY. BUT, THIS DOES NOT AMOUNT TO SAYING TH AT THE ORDER OF THE COURT, TRIBUNAL OR AUTHORITY BELOW HAS STOOD MERGED IN THE ORDER OF THE SUPREME COURT REJECTING SPECIAL LEAVE PETITION OR THAT THE ORDER OF THE SUPREME COURT IS THE ONLY ORDER BINDING AS RES JUDICATA IN SUBSEQUENT PROCEEDINGS BETWEEN THE PARTIES. (VI) ONCE LEAVE TO APPEAL HAS BEEN GRANTED AND APPE LLATE JURISDICTION OF SUPREME COURT HAS BEEN INVOKED THE ORDER PASSED IN APPEAL WOULD ATTRACT THE DOCTRINE OF MERGER; THE ORDER MAY BE OF REVERSAL, MODIFICATION OR MERELY AFFIRMATION. (VII) ON AN APPEAL HAVING BEEN PREFERRED OR A PETIT ION SEEKING LEAVE TO APPEAL HAVING BEEN CONVERTED INTO AN APPEAL BEFORE SUPREME COURT THE JURISDICTION OF HIGH COURT TO ENTERTAIN A REVEW PETITION IS LOST THEREAFTER AS PROVIDED BY SUB-RULE (1) OF RULE (1) OF ORDER 47 OF THE C.P.C. FROM THE PERUSAL OF THE AFORESAID JUDGMENT WE FEEL TH AT CONTENTION OF LD. D R TO THE EFFECT THAT CONTROVERSY HA S BEEN SETTLED BY APEX COURT IN THE CASE OF N. K. INDUSTRIES LTD. VS. DCIT, 2016- TIOL-3165-HC-AHM-IT , THAT THE ENTIRE UNDISCLOSED INCOME GENERATED OUT OF BOGUS TRANSACTIONS, DESERVES TO ADDED TO TOTAL INCOME, DOES NOT SOUND GOOD BECAUSE IN THE SAID CASE , THE APEX COURT SIMPLY REJECTED THE SPECIAL LEAVE TO PETITION WI THOUT LAYING ANY RATIO AS IT IS CLEAR FROM THE JUDGMENT { KUNHAYAMMED AND ORS. VS. STATE OF KERALA & ORS. (SUPRA)} OF APEX COURT THAT AN ORDER REFUSING SPECIAL LEAVE TO APPEAL DOES NOT STAND SUBSTITUTED IN PL ACE OF THE ORDER UNDER CHALLENGE. ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 15 NOW LET US TO CONSIDER OTHER ASPECTS OF THE CASE :- IN THE INSTANT CASE BOOKS OF ACCOUNTS HAVE NOT BEEN REJE CTED, THEREFORE, THE PURCHASES CANNOT BE HELD AS BOGUS IN ITS GE RMANE BECAUSE IT IS NOT IN CONTROVERSY THAT ENTIRE PAYMENT QUA PURCHASED ITEMS HAVE BEEN MADE THROUGH RTGS/CHEQUES ONLY AND TH E SAME HAS BEEN VERIFIED AND CONFIRMED FROM THE BANK STATEMENTS O F ASSESSEE AS WELL AS OF THE SELLERS AND ENTIRE SALE HAS ALSO BEEN PR OVED BY FURTHER TALLYING THE SOLD ITEMS WITH PURCHASED ITEMS AND EVEN O THERWISE FROM THE AFORESAID BUSINESS , THE ASSESSEE ALSO EARNED GROSS PROF IT OF RS.203205/- ON SALE OF ALLEGED BOGUS PURCHASE OF DIAMON DS AND THE RESULTS ALSO WERE DULY SUPPORTED BY THE QUANTITATIVE D ETAILS AND IN VIEW OF THE JUDGMENTS OF VARIOUS COURTS EVEN OTHERWISE IN THE CASE OF BOGUS PURCHASES, THE INCOME HAS TO ARRIVE AT BY APPLYING SOME PERCENTAGE OF PROFIT AND THE ENTIRE PURCHASES CANNOT BE ADDED AS PROFIT. AS WE FIND SUPPORT FROM JUDGMENT OF HONBLE HI GH COURT OF MADHYA PRADESH IN THE CASE OF MAN MOHAN SADANI VS. 304 ITR 52 (MP). EVEN OTHERWISE THE HONBLE HIGH COURT OF MUMBAI IN THE COMMISSIONER OF INCOME TAX -1, VS. NIKUNJ EXIMP ENTERPR ISES PVT. LTD. DEALT WITH THE SAME SITUATION AND WAS PLEASED TO HELD A S UNDER: 7. WE HAVE CONSIDERED THE SUBMISSION ON BEHALF OF THE REVENUE. HOWEVER, FROM THE ORDER OF THE TRIBUNAL DATED 30-04 -2010, WE FIND THAT THE TRIBUNAL HAS DELETED THE ADDITIONS ON ACCO UNT OF BOGUS PURCHASE NOT ONLY ON THE BASIS OF STOCK STATEMENT I .E. RECONCILIATION STATEMENT, BUT ALSO IN VIEW OF THE OTHER FACTS. THE TRIBUNAL RECORDS ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 16 THAT THE BOOKS OF ACCOUNTS OF THE RESPONDENT-ASSESS EE HAVE NOT BEEN REJECTED. SIMILARLY, THE SALES HAVE NOT BEEN D OUBTED AND IT IS AN ADMITTED POSITION THAT SUBSTANTIAL AMOUNT OF SAL ES HAVE BEEN MADE TO THE GOVT. DEPARTMENT. I.E., DEFENCE, RESEAR CH AND DEVELOPMENT LABORATORY, HYDERABAD. FURTHER, THERE W ERE CONFIRMATION LETTERS FILED BY THE SUPPLIERS, COPIES OF INVOICES FOR PURCHASES AS WELL AS COPIES OF BANK STATEMENT ALL O F WHICH WOULD INDICATE THAT THE PURCHASES WERE INFACT MADE. IN OU R VIEW, MERELY BECAUSE THE SUPPLIERS HAVE NOT APPEARED BEFORE THE ASSESSING OFFICER OR THE CIT(A), ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT-ASSESSEE. THE ASSESSING OFFICER AS WELL AS CIT(A) HAVE DISALLOWED THE DEDUCTION OF RS.1.33 CRORES ON ACCOUNT OF PURCHASES MERELY ON THE BASIS OF SUSPICI ON BECAUSE THE SELLERS AND THE CANVASSING AGENTS HAVE NOT BEEN PRO DUCED BEFORE THEM. WE FIND THAT THE ORDER OF THE TRIBUNAL IS WEL L 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 30-04-2010 OF THE TRIBUNAL. FURTHER IN THE CASE OF CIT VS. BHOLANATH POLY FAB.(P VT.) LTD. (2013) 40 TAXMAN 494 (GUJ), THE HONBLE HIGH COURT OF GUJRAT WHILE DEALING WITH THE SAME AND IDENTICAL ISSUE HELD AS UNDER : 5. HAVING COME TO SUCH A CONCLUSION, HOWEVER, THE TRIBUNAL WAS OF THE OPINION THAT THE PURCHASES MAY HAVE BEEN MADE FROM THE BOGUS PARTIES, NEVERTHELESS, THE PURCHASE THEMSELVES WERE NOT BOGU S. THE TRIBUNAL ADVERTED TO THE FACT 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 WE RE SOLD BY THE ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 17 ASSESSEE. THEREFORE, THE PURCHASES OF THE ENTIRE 1, 02,514/- METERS OF CLOTH WERE SOLD DURING THE YEAR UNDER CONSIDERATION. THE TRIBUNAL, THEREFORE, ACCEPTED THE ASSESSEES CONTENTION THAT THE FINISHE D GOODS WERE PURCHASED BY THE ASSESSEE, MAY BE NOT FROM THE PART IES SHOWN IN THE ACCOUNTS, BUT FROM OTHER SOURCES. IN THAT VIEW OF T HE MATTER, THE TRIBUNAL WAS OF THE OPINION, THAT NOT THE ENTIRE AMOUNTS, BU T FROM OTHER SOURCES. IN THAT VIEW OF THE MATTER, THE TRIBUNAL WAS OF THE OP INION THAT NOT THE ENTIRE AMOUNT, BUT THE PROFIT MARGIN EMBEDDED IN SUCH AMOU NT WOULD BE SUBJECTED TO TAX. THE TRIBUNAL RELIED ON ITS EARLIE R DECISION IN THE CASE SANKET STTEL TRADERS VS. ITO [IT APPEAL NOS. 2801 & 2937 (AHD.) OF 2008, DATED 20-05-2011] AND ALSO MADE REFERENCE TO THE TR IBUNALS DECISION IN THE CASE OF VIJAY PROTEINS LTD. VS. ASST. CIT[1996] 58 ITD 428(AHD.) 6. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTE D NO ERROR. WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS IS ES SENTIALLY 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 NATURAL COROLLARY, NOT T HE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT EMBEDDED THEREI N 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 A LSO FOLLOWED BY THIS COURT IN A JUDGMENT DATED AUGUST 16, 2011, IN TAX A PPEAL NO. 679 OF 2010 IN THE CASE OF CIT V. KISHORE AMRUTLAL PATEL. IN T HE RESULT, TAX APPEAL IS DISMISSED. ON PERUSAL OF THE AFORESAID JUDGMENTS AS WELL INDEPEN DENTLY APPLYING OUR MIND TO THE FACTS OF THE CASE, WE ARE OF T HE CONSIDERED OPINION THAT THE PURCHASES BY THE ASSESSEE CANNOT BE TERMED AS BOGUS PURCHASES, ONCE THE COMPLETE SALE OF THE ASSESSEE IS NO T DOUBTED AND THE ADDITION HAS BEEN MADE WITHOUT REJECT ING THE BOOKS OF ACCOUNTS AND EVEN OTHERWISE THE ASSESSEE HAS EARNED THE PROFIT AND ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 18 ALREADY PAID THE RELEVANT TAXES AND EVEN OTHERWISE ON THE CONSIDERATION OF AFORESAID JUDGMENTS IT IS CLEAR THAT EN TIRE AMOUNT COVERED UNDER SUCH PURCHASES CANNOT BE SUBJECTED TO THE TAX BUT THE PROFIT ELEMENT OR EMBEDDED THEREIN WOULD ONLY SUBJECT TO TAX WHICH HAS ALREADY BEEN DONE IN THE INSTANT CASE. THE JUDGMENTS RELIED UPON BY THE LD. DR DOES NOT SUP PORT THE CASE OF THE REVENUE, BECAUSE OF THE AFORESAID JUDGMENTS A ND CONSIDERATION OF FACTS AND CIRCUMSTANCES DISCUSSED ABOVE. THE APPREHENSION /SUSPICION OF THE LD. ASSESSING OFFICER AS WELL AS LD. DR IS NOT CORRECT THAT AFTER MAKING PURCHASE, THE ASSESSEE TRANSFERRED THE AMOUNT THROUGH RTGS THEREAFTER, THE SAID AMOUNT WAS TRANSFERRED TO OUTSIDE/ THREE PARTIES AND THEREAFTER, IN LIEU OF THE BOGUS PURCHASES, THE CASH HAS BEEN RECEIVED BY THE ASSESSEE. IT IS NOT IN CONTROVERSY THAT THE DEPARTMENT HAS NOT PRODUCED AN Y EVIDENCE BY WHICH IT CAN BE SAID THAT THE ASSESSEE GOT THE BENEFIT OF CASH WHILE EN- ROUTING THE PURCHASE PRICE OF THE ALLEGED BOGUS PURCHASE . EVEN OTHERWISE IT IS SETTLED LAW THAT NO ADDITION CAN BE MADE ON THE BASIS OF THIRD PARTY STATEMENT UNTIL AND UNLESS OPPO RTUNITY OF CROSS EXAMINATION GIVEN TO THE ASSESSEE AS IN THE INSTANT CASE , THE ASSESSING OFFICER RELIED UPON THE STATEMENT OF SH. LANKA RAN PARASMAL KOTHARI , HOWEVER REASON BEST KNOWN TO THE LD. ASSESSING OFFICER , NO OPPORTUNITY OF CROSS EXAMINATION OF THE SAME WAS AFFORDE D TO THE ASSESSEE WHICH AMOUNTS TO DENIAL OF JUSTICE AND VIOLATION OF RULE OF AUDIATUR ET ALTERA PARS . WE FOUND FORCE IN THE SUBMISSI ON OF THE LD. A.R. THAT BECAUSE THE ASSESSEE WAS MAINTAINING THE COMPLETE BOOKS OF ACCOUNTS AND THE SAME WAS VERIFIED THROUGH ORIGINAL VOUCH ERS WITH ACKNOWLEDGEMENT OF RECEIVING ITEMS AND COMPLETE TALLY O F EACH AND EVERY GRAMS, ITEMS AND PIECES AND THE CLOSING STOCKS AND VA LUATION ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 19 ALSO ACCEPTED AND ENTIRE SALE ALSO BEEN PROVED, HENCE, THE ORDER PASSED BY THE CIT (A) DOES NOT DESERVES TO BE INTERFERE D ON THE GROUNDS RAISED BY THE REVENUE DEPARTMENT. IN OUR CONSI DERED VIEW, IN CUMULATIVE EFFECTS OF THE AFORESAID REASONS, THE APPEALS FILED BY THE REVENUE IS LIABLE TO BE DISMISSED AND HENCE STANDS DISMISSED . 9. NOW COMING TO THE APPEALS OF THE ASSESSEE AS SUCH BEFORE THE OPENING THE CASES ITSELF, THE LD. AR DID NOT PRESS THE GROUND 1 TO 3 BEING LEGAL GROUNDS AND INTENDED TO ARGUE ON THE OTHER RELEVANT GROUNDS NO.4 TO 7 AS MENTIONED IN PARA NO.2 OF THIS ORDER AND SUBMITTED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE S, THE CIT(A) HAS ERRED ON FACTS AND IN LAW, IN SUSTAINING THE ADDITION TO THE TUNE OF 5% ON ACCOUNT OF ALLEGED BOGUS PURCHASES WHICH IS NOT ONLY ILLEGAL, UNJUST AND ARBITRARY TO SUSTAIN AND WHILE SUS TAINING ADDITION @ 5% , THE LD. CIT(A) HAS NOT CONSIDERED THE EXPLANATION GI VEN, EVIDENCE PRODUCED, MATERIAL PLACED AND AVAILABLE ON RECORD AND JUDICIAL INTERPRETATION, THEREFORE, THE SAME DO NOT JUSTIFY A NY ADDITION. THE LD. AR INTENSELY SUBMITTED THAT CONFIRMING 5% OF THE BOGUS PURCHASES, THE LD. CIT(A) SIMPLY RELIED UPON THE JUDGMENT PASSED BY THE MUMBAI ITAT, IN THE CASE OF SH. MADHUKANT B GANDHI. VS. ITA WHERE NET PROFIT RATE WAS APPLIED @ 5% OF THE GOODS SUPPLIED AND THE LD . A.R. VEHEMENTLY SUBMITTED THAT ONCE THE ENTIRE SALE PROCEED HAVE PROVED AND NOT DOUBTED BY REVENUE DEPARTMENT AND NO BOOKS O F ACCOUNT HAVE BEEN REJECTED HENCE THE ADDITION @ 5% DESERVES TO BE SET ASIDE. 10. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE LD. C IT(A) RIGHTLY CONCLUDED BY REFERRING THE JUDGMENT PASSED BY THE ITAT , MUMBAI BENCH AND OBSERVING THE SIMILAR AND FACTUAL CIRCUMSTANCES RESTRICTED THE ADDITION @ 5% OF THE BOGUS PURCHASES, THEREFORE, THE SAME DOES NOT DESERVE TO BE INTERFERED WITH AT LEAST. ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 20 11. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTAN CES OF THE CASE AS IN THE INSTANT CASE, THE LD. CIT(A) ALTHOUGH GIVE N SUBSTANTIAL RELIEF TO THE ASSESSEE, HOWEVER, SUSTAINED THE ADDITION B Y RESTRICTING IT TO @ 5% OF THE BOGUS PURCHASE BY REFERRING THE JUDGMEN T DELIVERED BY THE MUMBAI, ITAT BENCH WITHOUT ANALYZING THE ENTI RE FACTS AND CIRCUMSTANCES OF THE CASE AND EVEN OTHERWISE THE SAID ADDITI ON IS UNREASONED BECAUSE IF WE CONSIDER THE SAID CASE WITH THE IN STANT CASE THEN WILL MANY DISSIMILARITIES BECAUSE IN THE REFERRED CASE , THE ASSESSEE CLAIM WAS THAT HE MADE THE PAYMENT THROUGH THE CH EQUE HOWEVER, THE RESPECTIVE PARTY DENIED TO HAVE RECEIVED ANY CHEQUE AND ALSO SUBMITTED THAT HE HAD ALREADY FILED COMPLAINT QUA BILLS ON 6 MARCH, 2007 AGAINST THE ASSESSEE AND ALLEGED TO HAVE BEE N FORGED HIS NAME AND FURTHER THE A.O. ISSUED NOTICES TO THE OTHER TWO PARTIES FROM WHOM THE ASSESSEE HAD SHOWN PURCHASES WHICH WERE ALSO RETURN ED BY POSTAL AUTHORITIES WITH THE REMARKS NOT KNOWN AND CON SIDERING THE FACTS IN TOTALITY , THE ASSESSING OFFICER HELD THAT THE A SSESSEE HAD NOT MADE ANY PURCHASES FROM THESE PARTIES AND THEREFORE, THE TRANSACTIONS WERE BOGUS, AND EVEN OTHERWISE THE BENCH OF THE ITAT, PRIMA FACIE FOUND THAT PURCHASE RECORD IN THE BOOKS OF ACCOUNTS WERE BOGUS WITH A VIEW TO SUPPRESS THE PROFIT AND THEREFORE, WHILE CONSID ERING THEIR OPINION AS THE SAME WOULD BE JUST AND PROPER TO APPLY NET PROFIT RATE OF 5% ON THE GOODS SOLD BUT WHILE COMING TO THE INSTAN T CASE IT IS CLEAR THAT IN THE INSTANT CASE THE PURCHASES HAVE BEEN CONFIRME D THROUGH VOUCHERS AND STOCK TALLIED PROPERLY AND SALE OF THE ASSESS EE ALSO NOT BEEN DOUBTED AND EVEN OTHERWISE THE PROFIT EARNED BY THE ASSESSEE HAS ALREADY BEEN SUBJECTED TO THE TAX, AND THE REVENU E DEPARTMENT FAILED TO BRING ANY CIRCUMSTANCE/MATERIAL TO ESTABLISH T HAT THE ADDITION CAN BE RESTRICTED TO 5% OF THE BOGUS PURCHASES AND/OR EVEN OTHERWISE THE TRANSACTIONS CARRIED BY THE ASSESSEE ARE BOGUS PURCHASES, HENCE, IN OUR CONSIDERED OPINION WE DO NOT FOUND ANY SUBSTANTI VE REASON ITA NOS.563 TO 565, 567 & 571 TO 57 4, 232 & 343 (ASR)/2016 ASST. YEARS: 200 8-09 TO 2012-13 21 AND LOGIC IN SUSTAINING ADDITION @ 5% ON ACCOUNT OF BOGUS PURCHASES. HENCE, THE SAME IS DELETED. 12. IN THE RESULT, THE APPEAL FIELD BY THE ASSESSEE IS PART LY ALLOWED TO THE EXTENT DELETION OF 5% ON ACCOUNT OF BOGUS PURCHASES. HENCE, IN CUMULATIVE EFFECT, ALL THE APPEALS FILED BY TH E REVENUE ARE DISMISSED AND OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.0 8.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:30.08.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER