ITO WD 1(5), KALYAN V. GOPAL RAMSHISH TRIPATHI, BHIWANDI

ITA 6559/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1332 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 09-11-2016
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Keywords: Bogus purchase; Business income; Maximum Marginal Rate; Permanent establishment
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMS , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 6559 / MUM/20 1 6 ( ASSESSMENT YEAR : 2011 - 12 ) ITA NO.6561/MUM/2016 ( ASSESSMENT YEAR : 2009 - 10 ) ITO WD 1(5), KALYAN VS. SHRI GOPAL RAMASHISH TRIPATHI, PROP. GMD DY E CHEMICAL, 279,1 NAIGAON II, NEAR MARATHI VIDYALAYA, BHIWANDI 421 302 PAN/GIR NO. AAHPT7617B APPELLANT ) .. RESPONDENT ) CO NO. 62/ MUM/20 1 7 ( ASSESSMENT YEAR : 2011 - 12 ) CO. NO.61/MUM/2017 ( ASSESSMENT YEAR : 2009 - 10 ) SHRI GOPAL R AMASHISH TRIPATHI, PROP. GMD DYE CHEMICAL, 279,1 NAIGAON II, NEAR MARATHI VIDYALAYA, BHIWANDI 421 302 VS. ITO WD 1(5), KALYAN PAN/GIR NO. AAHPT7617B APPELLANT ) .. RESPONDENT ) REVENUE BY MS. BEENA SANTOSH ASSESSEE BY NONE D ATE OF HEARING 18 / 04 /201 7 DATE OF PRONOUNCEME NT 18 / 04 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY THE REVENUE AND CROSS OBJECTION S BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 2 THANE, DATED 26/08/2016 ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 2 FOR THE A.Y. 2009 - 10 AND 2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S . 147 OF THE IT ACT. 2. COMMON GRIEVANCE OF REVENUE AND ASSESSEE BOTH PERTAINS TO ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES. 3. NOBODY APPEARED ON BEHALF OF ASSESSEE INSPITE OF SERVICE OF NOTICES, BENCH, THEREFORE DECIDED TO DISPOSE THE APPEAL AFTER HEA RING LEARNED DR AND CONSIDERING THE MATERIAL PLACED ON RECORD. FACTS IN BRIEF ARE THAT ON THE BASIS OF INFORMATION FROM SALES TAX DEPARTMENT REGARDING PERSONS PROVIDING BOGUS PURCHASE BILLS, THE AO RE OPE NED THE ASSESSMENT BY ISSUE OF NOTICES U/S.148. IN TH E ASSESSMENT SO FRAMED, AO ADDED ENTIRE AMOUNT OF BOGUS PURCHASES AS ASSESSEES INCOME. IN THE ASSESSMENT YEAR 2009 - 10, ADDITION WAS MADE TO THE TUNE OF RS.16,05,936/ - WHEREAS IN THE ASSESS MENT YEAR 2011 - 12 ADDITION WAS MADE TO THE TUNE OF RS.24,90,080/ - U /S. 6 9 C OF THE INCOME TAX ACT. 4. BY THE IMPUGNED ORDER, CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF SUCH PURCHASES AFTER OBSERVING AS UNDER: - 10. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO, SUBMISSIONS OF THE LD AR AND MATERIAL PLACED ON RECORD. THE LD. A.R, INSTEAD OF JUSTIFYING THE GENUINENESS OF PURCHASES MADE FROM HAWALA PARTIES, BY FILING CONFIRMATION, OTHER RELATED DETAILS ETC ., HE HAS MERELY REITERATED THE FACT THAT THE PAYMENTS HAVE BEEN MADE THROUGH BANKIN G CHANNELS AND AGAINST PURCHASES, THE CORRESPONDING SALES HAVE BEEN MADE. IN ORDER TO ARRIVE AT LOGICAL CONCLUSION, THE UNDERSIGNED TRY TO COLLECT THE RELEVANT INFORMATION FROM THE APPELLANT, IN THE LIGHT OF DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VIS JANSAMPARK ADVERTISING AND MARKETING (P) LTD, WHEREIN, THE HON'BLE COURT, INTER - ALIA, HELD AS UNDER: - ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 3 THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS OBLIGATION TO CONDUCT A PROPER INQUIRY TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT(AP PEALS), HAVING NOTICED WANT OF PROPER INQUIRY, COULD 110T HAVE CLOSED THE CHAPTER SIMPLY BY ALLOWING THE APPEAL AND DELETING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE FIRST APPELLATE AUTHORITY, AS INDEED OF ITAT, TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED.. 10.1 KEEPING IN VIEW THE ABOVE FACTS AND SUBMISSIONS OF THE LD. AR, THE APPELLANT WAS REQUESTED TO RECONCILE THE QUANTITATIVE/ QUALITATIVE DETAILS, ITEM - WISE MONTH TO MONTH - OP. STOCK, PURCHASES, CONSUMED, FINISHED GOODS PRODUCED A ND SALES AFFECTED PARTY - WISE, IN COMPLIANCE, THE APPELLANT HAS FURNISHED ITEM - WISE DETAILS IN RESPECT OF VARIOUS ITEMS TRADED. THE LD AR HOWEVER, COULD NOT FURNISH THESE DETAILS IN PRESCRIBED FORMAT, 'ITEM - WISE/ PARTY- WISE WITH THE PLEA THAT THE REQUIRED I NFORMATION ARE NOT MAINTAINED IN THE PRESCRIBED FORMAT. IN THE ABSENCE OF THESE DETAILS, IT IS NOT POSSIBLE FOR THE DEPARTMENT TO ASCERTAIN THE CORRECT AMOUNT OF THE INCOME, FROM THE RECORDS / BOOKS MAINTAINED BY THE APPELLANT, HENCE, BOOKS ARE NOT COMPLET E IN EVERY RESPECT AND NOT TENABLE, AS PER THE PROVISIONS OF SECTION 145(3) OF THE I T. ACT, 1961, THEREFORE, REJECTED. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. AR OF THE APPELLANT, HAS SHOWN HIS INABILITY TO FILE THE COPIES OF CONFIRMED LEDGER A CCOUNTS, THEIR MAILING ADDRESSES AND ALSO REFUSED TO PRODUCE HAWALA PARTIES, FOR EXAMINATION IN PERSON. CONSIDERING THESE FACTS, THE CONTENTION OF THE LD. AR, IS NOT TENABLE, HENCE REJECTED IN VIEW OF THE FOLLOWING REASONS/ FACTS/DEFECTS: A. THE APPELLANT 'S CLAIM THAT THE PAYMENTS TO THE HAWALA PARTIES HAVE BEEN MADE THROUGH BANKING CHANNELS, IS NOT TENABLE AS HAWALA PARTIES HAVE DULY ADMITTED IN THEIR STATEMENT / AFFIDAVIT THAT AFTER DEDUCTING THEIR DUE COMMISSION I.E. APPROXIMATELY 1 %, THEY HAVE REFUNDE D BACK THE BALANCE CASH TO THE BUYERS. B. IT IS THE DUTY OF THE APPELLANT TO JUSTIFY THE GENUINENESS OF PURCHASES, BY FURNISHING NECESSARY SUPPORTING DOCUMENTS, BANK STATEMENT, CONFIRMATION, DELIVERY CHALLAN, TRANSPORT RECEIPTS ETC. AND PRODUCE THE PARTIE S FOR EXAMINATION. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT, NUMBER OF TIMES, WAS ASKED TO FILE ABOVE DETAILS AND PRODUCE PARTIES FOR EXAMINATION, BUT FAILED TO DO SO. NO TRANSPORT / OCTROI RECEIPTS WERE FILED TO JUSTIFY GENUINENESS O F PURCHASES. C. AS REGARDS THE APPELLANT'S CLAIM THAT THERE CANNOT BE ANY SALES WITHOUT THERE BEING CORRESPONDING PURCHASES, IS ALSO NOT TENABLE AS THE APPELLANT COULD NOT RECONCILE THE QUANTITY WISE DETAILS OF PURCHASES FROM THESE HAWALA PARTIES VIS. A V IS. SALES THEREOF. D. THE APPELLANT COULD NOT PRODUCE PROPER VERIFIABLE DOCUMENTS WHICH COULD PROVE PHYSICAL DELIVERY OF GOODS VIS. A VIS. ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 4 CORRESPONDING CONSUMPTION / SALES THEREOF. ON THE OTHER HAND, IN THE CASE OF REGULAR PURCHASES, ON THE SAME SET OF C IRCUMSTANCES, THE DEPARTMENT HAD ACCEPTED SUCH PURCHASES WITHOUT QUESTIONING THEIR GENUINENESS, AS ALL RELEVANT DOCUMENTS / RECORDS HAVE DULY BEEN MAINTAINED BY THE APPELLANT. E. IF, THE PRACTICE OF BOOKING OF BOGUS BILLS IS LEGALIZED, BY DISALLOWING NO MINAL PERCENTAGE OR ESTIMATING NOMINAL RATE OF GP / NP OF A PARTICULAR TRADE, THEN THIS MAY LEAD TO PROVIDE AN EASY WEAPON IN THE HANDS OF THE MANIPULATIVE ASSESSEE TO SUPPRESS / MANIPULATE THEIR PROFIT, AS AND WHEN SO WARRANTED. F. THE PRACTICE OF OBTAINI NG OF FAKE BILLS TO SUPPORT THE CLAIM OF BOGUS / UNVERIFIED PURCHASE BEING FOLLOWED BY THE LARGE NUMBER OF ASSESSES. THIS MALPRACTICE IS IN THE OPERATION FOR QUITE SOME TIME AND IS USED BRAZENLY TO SUPPRESS THE PROFITS BY OBTA I NING BOGUS / PAPER PURCHASE B ILLS (WITHOUT MAKING ACTUAL PURCHASE OF GOODS) AND THEREBY EVADING PAYMENT OF LEGITIMATE TAXES TO GOVERNMENT EXCHEQUER. THERE EXISTS A N UNHOLY NEXUS BETWEEN THE BOGUS BILL PROVIDERS AND BUSINESSMEN ENGAGED IN THE VARIOUS T RADES. THE E FF E CT OF THIS MALPRAC TIC E IS NOT ONLY OF V E RY SERIOUS NATURE BUT ALSO MULTI - DIM ENSIONAL. ON ONE SIDE, IT DISHEARTENS THE HONEST TAX PAYE RS WHO DO NOT RESORT TO SUCH MALPRACTICE AND PAY THEIR LEGITIMATE TAX E S HONESTLY. ON THE OTHER SIDE, IT E MBOLDENS THE DISHONEST TAX PAYERS WH O RESORT TO SUCH PRACTICE. RESULTANTLY, THE LEAKAGE OF THE REVENUE TURNS OUT TO A NATURAL CASUALTY. ANY LENIENT APPROACH IN THE MATT E R WILL NOT SERVE TH E CAUSE OF JUSTICE AND GUILTY WILL NEITHER DET E R NOR MEND TH E IR U NE THICAL, SPURIOUS AND OBJECTIONABLE WA YS IN FUTURE AS W E LL. G. ONUS ON THE ASSESSEE TO PROVE THE CLAIM OF EXPENSES THE ASSESSEE HAS DEBITED THE PURCHASES IN TRADING ACCOUNT (INCLUDING THE BOGUS/ UNVERIFIED PURCHASES) AND CLAIMED THE DEDUCTION FOR EXPENSES. SINCE THE EXPENDITURE HAS BEEN CLA IMED BY THE ASSESSEE AND THE PRIMARY FACTS ARE IN APPELLANT'S KNOWLEDGE, THE 'PRIMARY ONUS' LIES ON THE ASSESSEE TO PROVE THAT THE PURCHASES CLAIMED BY HIM ARE GENUINE AND WHOLLY & EXCLUSIVELY FOR THE PURPOSE OR BUSINESS. FOR THIS PURPOSE, THE ASSESSEE HA S TO LEAD THE EVIDENCE TO SHOW THAT THE EXPENDITURE HAS ACTUALLY BEEN INCURRED BY IT AND THE SAME IS FOR GENUINE BUSINESS NEEDS. HERE, IF THE ASSESSEE CLAIMS THAT PURCHASES ARE MADE FROM THE ALLEGED BOGUS PARTY THEN IT IS THE RESPONSIBILITY OF THE ASSESSEE TO ESTABLISH THAT CA) PARTY IS IN EXISTENCE CB) PARTY IS CAPABLE OF SUPPLY OF GOODS AND CC) PARTY HAS ACTUALLY SUPPLIED THE GOODS (D) GOODS SO RECEIVED HAD ACTUALLY BEEN USED FOR BUSINESS AND D E CLARED AS PART OF SALE FOR THE YEAR. IF THE ASSESSEE IS ASKED TO PRODUCE THE PARTIES FOR VERIFICATION, THEN IT IS THE DUTY OF THE ASSESSEE TO DO SO TO ESTABLISH THE GENUINENESS OF THE CLAIM OF THE EXPENSE. ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 5 IN THESE CASES, THE ASSESSEE HAS TRIED TO CLAIM THAT THEY HAVE DISCHARGED THEIR ONUS BY DOING THE FOLLOWING: (I) BY SUBMITTING THE NAME, ADDRESS, PAN (II) BY CLAIMING THAT PAYMENTS WERE THROUGH BANKING CHANNELS (III) BY CLAIMING THAT THE PURCHASES ARE REFLECTED IN THE BOOKS OF ACCOUNTS. CONSIDERING THE FACTS OF THE CASES UNDER CONSIDERATION, IT CAN SAFELY BE CONCLUDED T HAT ASSESSEE HAD FAILED IN THEIR EFFORTS IN DISCHARGING THE ONUS CAST UPON THEM. MERELY FILING NAME, ADDRESS, PAN & PAYMENTS BY CHEQUE WILL NOT DISCHARGE HIM FROM THE ONUS E SPECIALLY WHEN THE DEPARTMENT HAD RECEIVED SPECIFIC MATERIAL/INFORMATION FROM THE S ALES - TAX / VAT D EPARTMENT, W H ERE IN THESE SUPP L IERS, ON OAT H HAD ADMITTED THE FACT THAT THEY HAVE MERELY PROVIDED ENTRY I ISSUED BILLS WITHOUT PHYSICALLY DELIVERING ANY GOODS. IN THE CASE OF CIT VIS GOLCHA PROPERTIES (PVT.) LTD. 227 ITR 39] (RAJ) IT WAS H ELD THAT THE GENUINENESS OF TRANSACTION COULD BE DECIDED ON THE BASIS OF PRIMARY FACTS ON RECORDS. THE DEPARTMENT IS NOT REQUIRED TO LEAD A CLINCHING EVIDENCE TO PROVE THAT PURCHASES ARE BOGUS . IN THE CASE OF CIT VS MOTOR GENERAL FINANCE LTD. 254 ITR 44 9 (DEL), IT WAS HELD THAT SINCE THE ASSESSEE, DESPITE SEVERAL OPPORTUNITIES GRANTED, DID NOT PRODUCE THE RELEVANT DOCUMENTS, AN ADVERSE INFERENCE HAD TO BE DRAWN AGAINST T H E ASSESSEE. AS THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENT, AN ADVERSE INFERENCE IN TERMS OF SECTION 114 OF THE EVIDENCE ACT, 1872, HAD TO BE DRAWN TO THE EFFECT THAT, HAD THOSE DOCUMENTS BEEN PRODUCED, THEY WOULD HAVE GONE AGAINST THE INTEREST OF THE ASSESSEE. THE ONUS OF PROOF AT ALL RELEVANT TIMES RESTS UPON THE ASSESSEE. I: IS FOR T HE ASSESSEE TO ESTABLISH BY EVIDENCE THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. THE LAW DOES NOT PRESCRIBE ANY QUANTITATIVE TEST TO FIND OUT WHETHER THE ONUS IN A PARTICULAR CASE HAS BEEN DULY DISCHARGED. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES I SITU ATIONS OF THE CASE [ASSAM PESTICIDES & AGRO CHEMICALS V. CIT (1997) 227 ITR 846, 851, 852 (GAUH). - MERE PAYMENT BY A/ C PAYEE CHEQUE IS NOT SACROSANCT IT WOULD ROOT MAKE OTHERWISE NON - GENUINE TRANSACTION GENUINE. CIT VIS. PRECISION FINANCE PVT. LTD. 208 ITR 465 (CAL). ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 6 - EVEN IN THE CASE OF M/S. KANCHWALA GEMS VIS JCIT UPHELD BY SC 288 ITR 10 (SC), HON'BLE ITA T HAD HELD THAT EVEN ACCOUNT PAYEE CHEQUE IS NOT SUFFICIENT TO ESTABLISH THE GENUINENESS OF THE PURCHASES. IN THE CASE OF CIT VS MOTOR GENERAL FINANCE LTD. 254 ITR 449 (DEL), IT WAS HELD THAT SINCE THE ASSESSEE, DESPITE SEVERAL OPPORTUNITIES GRANTED, DID NOT PRODUCE THE RELEVANT DOCUMENTS, AN ADVERSE INFE RENCE HAD TO BE DRAWN AGAINST TH E ASSESSEE. AS THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENT, A N ADVERSE INFERENCE IN TERMS OF SECTION 114 OF THE EVIDENCE ACT, 1872, HAD TO BE DRAWN TO THE EFFECT THAT, HAD THOSE DOCUMENTS BEEN PRODUCED, THEY WOULD HAVE GONE AGAINST THE INTEREST OF THE ASSESSEE. H. DEFECTS IN MAINTAINING BOOKS OF ACCOUNT LED TO REJE CTION U/S. 145(3) NO QUANTITATIVE DAY TO DAY / INWARD / OUTWARD STOCK REGISTER, IS MAINTAINED WITH ITEM WISE SPECIFICATION, QUALITY AND THEIR VALUES, OR NOT FURNISHED IN THE MANNER IN WHICH CALLED FOR. BOGUS BILL PROVIDER EITHER NOT PRODUCED, OR NO T FOUND EXISTENT AT THE ADDRESS PROVIDED BY THE ASSESSEE OR THEY ADMITTED TO THE FACT OF ISSUANCE OF BOGUS BILLS AGAINST CHARGING SOME NOMINAL COMMISSION, WITHOUT ACTUALLY SUPPLYING ANY GOODS. PAYMENTS MADE BY A / C PAYEE CHEQUES - THE HAWALA PARTIES ACC EPT THAT AFTER DEDUCTING THEIR NOMINAL COMMISSION, THE BALANCE AMOUNT WAS REFUNDED BY CASH. N AME, ADDRESS & PAN OF PARTIES GIVEN - ASSESSEE CLAIMED IT AS SUFFICIENT COMPLIANCE & DISCHARGE OF ONUS OF PROVING THE EXPENDITURE, IS NOT ACCEPTABLE AS THESE P ARTIES WERE NOT FOUND ON GIVEN ADDRESSES / NOT TRACEABLE, HENCE PURCHASES NOT PROVED. IN THE ABSENCE OF THE REQ UIRED DETAILS , THE AO COULD NOT VERIFY THE G ENUINENESS OF PURCHASES. ASSESSEE WAS ASKED TO PRODUCE THE SO - CALLED HAWALA PARTIES FROM WHOM BIL LS WERE OBTAINED - HOWEVER FAILED TO DO SO - SUFFICIENT OPPORTUNITIES WERE GIVEN DURING ASSESSMENT PROCEEDINGS AS WELL AS DURING APPEAL. NOTICES ISSUED U/S. 133(6) - NONE APPEARED OR COULD NOT BE SERVED BECAUSE OF DEFECTIVE ADDRESS. THE ASSESSEE COULD NO T FURNISH CURRENT MAILING ADDRESSES NOR PRODUCE ANY PARTY FOR EXAMINATION. ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 7 I. ESTIMATION OF INCOME - BEST JUDGEMENT ASSESSMENT - IT IS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF H M E SUFALI H ABDULLA 90 ITR 271 (SC ) :HAT IF THE ESTIMATION MADE B Y THE ASSESSING AUTHORITY IS A BONAFIDE ESTIMATE AND BASED ON A RATIONABLE BASIS, THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. APEX COURT HAS FURTHER HELD IN THE CASE OF M/S. KANCHWALA GEMS PVT, LTD. VS J CIT 288 ITR 10 (S E) THAT IT IS WELL SETTLED THAT IN A BEST JUDGMENT ASSESSMENT, THERE IS ALWAYS A CERTAIN AMOUNT OF 'GUESS WORK'. THERE ARE NUMBER OF DECISIONS BY THE VARIOUS COURTS, WHERE 25% TO 100% DISALLOWANCE OF BOGUS PURCHASES, HAVE BEEN UPHELD. SOME OF THEM ARE LI STED, HERE AS UNDER: 100% DISALLOWANCE OF BOGUS I UNVERIFIABLE PURCHASES WAS UPHELD, IN FOLLOWING CASES: (I) CIT VS LA MEDICA (2001) 250 ITR 575 (DEL) (II) SRI GANESH RICE MILLS VS CIT (2007) 294 ITR 316 (ALL) (III) KHANDELWAL TRADING CO. VS ACIT ( 1996) 55 TTJ (JP) 261 (IV) SWETAMBAR STEELS LTD. VS. ITO 707 I 1075 I 1262 I 1263 I JD (2002) ITAT (AHD) IN THE CASE OF SWETAMBAR STEELS LTD., THE HON 'BLE ITAT HAS CONFIRMED THE DISALLOWANCE OF THE BOGUS PURCHASE IN ENTIRETY STATING THAT THE PURCHASE SHOWN FROM THE RESPECTIVE PARTIES WERE FOUND IN - GENUINE. IT IS NOT A MATTER TO BE LOOKED INTO WHETHER THE ASSESSEE HAS MADE PURCHASES FROM DIFFERENT PARTIES OTHER THAN THE ALLEGED ONES. IT IS ALSO WORTH TO MENTION THAT THE APPEAL AGAINST THE DECISION OF HON 'BLE ITAT HAS NOT BEEN ADMITTED BY THE HONBL E GUJARAT HIGH COURT AND THE ASSESS EE HAS ALSO LOST BEFORE THE HON 'BLE SUPREME COURT. SO, THE DECISION OVER THE ISSUE BECAME FINAL AND THE SAME IS THEREFORE , VERY MUCH APPLICABLE OVER THE FACTS OF THE CASE. 10.2 THERE ARE JUDICIAL DECISIONS WHERE THE WHOLE AMOUNT OF BOGUS PURCHASES WAS DISALLOWED AND THE ORDER WAS CONFIRMED BY HIGH COURTS. IT HAS BEEN HELD THAT AFTER INVOCATION OF PROVISIONS OF SECTION 145(3), THE ASSESSING OFFICER ACQUIRES THE MANDA TE EVEN TO ADD THE WHOLE AMOUNT OF PURCHASES FOUND AS BOGUS TO THE TOTAL INCOME OF THE ASSESSEE. ONE SUCH CASE IS SRI GANESH RICE MILLS VS. C I 'T 294 ITR 316 (ALL) WHERE THE ENTIRE AMOUNT OF BOGUS PURCHASES, FROM 5 PARTIES, WAS DISALLOWED AND WAS UPHELD. TH E RELEVANT PORTION OF THE ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 8 OR DER OF THE TRIBUNAL AS CONFIRMED BY HIGH COURT OF ALLAHABAD IS REPRODUCED, HERE AS ' ONCE IT IS FOUND THAT THE PURCHASES WERE BOGUS, ADDITION HAS TO BE MADE TO THE EXTENT OF THE PURCHASES FOUND TO BE FICTITIOUS. THE CONSIDERAT ION THAT THE GROSS PROFIT DISCLOSED BY THE ASSESSEE COMPARES FAVOURABLY AS COMPARED TO THE EARLIER YEARS IS WHOLLY IRRELEVANT. TO NEUTRALIZE THE EFFECT OF INFLATION IN PURCHASES, THE ONLY COURSE OPEN TO THE INCOME - TAX OFFICER IS TO ADD BACK THAT AMOUNT TO THE INCOME IRRESPECTIVE OF THE FACT WHETHER THE RATE OF GROSS PROFIT GOES UP AND WHETHER THE RESULTANT GROSS PROFIT IS HIGHER THAN THE GROSS PROFIT NORMALLY SHOWN IN THE EARLIER YEARS.' 25% DISALLOWANCE OF BOGUS I UNVERIFIABLE PURCHASES HAD BEEN UPHELD IN FOLLOWING CASES (1) SANJAY OIL CAKE INDUSTRIES VS CIT (2008) 316 ITR 274 (GUJ) (2) VIJAY PROTEINS LTD VS ACIT 58 ITD 428 (ABAD) (3) M/S NAND KISHORE MEGHRAJ JEWELLERS, JAIPUR CO. NO. LOSIJP/09 ARISING OUT OF ITA NO. 433/JP/2009 BY ITAT JAIPUR (4) M /S. TRIDENT JEWELLERS ITAT JAIPUR ITA NO. 552/JP/2013. DISALLOWANCE @ 25% OUT OF BOGUS PURCHASES, HELD AS A REASONABLE IN THE CASE OF VIJAY PROTEINS LTD., IN VIEW OF THE FACT THAT THE SAVINGS OCCURRED TO THE SUPPLIERS ON ACCOUNT OF SALES TAX, DUTIES AND INCOME - TAX (HAVING MMR OF 30%), BY BUYING THE GOODS FROM GREY MARKET AT LOWER RATES AND BOOKING THE PURCHASES AT NORMAL RATE. THE ASSESSEE GOT THE BENEFIT OF THIS PROPORTION. IN VIEW OF THIS, THE DISALLOWANCE @ 25% IS FULLY JUSTIFIED. FURTHER IN THE CASE OF M/S. TRIDENT JEWELLERS VS. ITO, ITA O. 552IJP/2013, ON ACCOUNT OF BOGUS PURCHASES, AN ADDITION OF 25% OF SUCH PURCHASES WAS CONFIRMED BY THE HON'BLE ITAT, JAIPUR BENCH. 10.3 AS REGARDS, THE CASE LAWS CITED BY THE LD. AR, IT IS NOTICED THAT THE FACTS OF THE EACH CASE ARE NOT IDENTICAL AND ALSO NOT SIMILAR TO THE FACTS OF THE CASE UNDER APPEAL, THE DECISIONS IN THESE CASES, ARE BASED ON THE FACTS OF E ACH CASE, HENCE, CANNOT BE APPL IED TO THE FACTS OF THE CASE UNDER APPEAL. THE RATIO OF DECISIONS IN THE CASES OF R.W. PROMOTIONS PVT. LTD. VS. ACIT 9(3), MUMBAI, DCIT VIS SHRI RAJEEV G. KALATHIL IN INCOME TAX APPELLATE TRIBUNAL,MUMBAI - 'D' BENCH .ITA NO.6727/MUM/20 12, ETC, ARE NOT APPLICABLE IN THE CASE OF THE APPELLANT, AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS, THE LD. AR, TIME AND AGAIN, WAS ASKED TO EXPLAIN I JUSTIFY THE GENUINENESS OF PURCHASES MADE FROM HAWALA PARTIES, BY FILING THEIR CURRENT CONFIRMATION, ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 9 CURRENT MAILING ADDRESSES, THEIR BANK STATEMENTS AND PRODU CE HAWALA PARTIES FOR EXAMINATIO N ETC., BUT FAILED TO DO SO. IN THE ABSENCE OF THESE DETAILS THE DEPARTMENT COULD NOT EXAMINE THE CORRECTNESS , REASONABLENESS AND GENUINENESS OF THESE PURCHASES. 10.4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS, THE LD. AR, TIME AND AGAIN, WAS ASKED TO EXPLAIN / JUSTIFY THE GENUINENESS OF PURCHASES MADE FROM HAWALA PARTIES, BY FILING THEIR CURRENT CONFIRMATION, CURRENT MAILING ADDRESSES. THEIR BANK STATEMENTS AND PRODUCE HAWALA PARTIES FOR EXAMINATION ETC., BUT FAILED TO DO SO. IN THE ABSENCE OF THESE DETAILS THE DEPARTMENT COULD NOT EXAMINE THE CORRECTNESS, REASONABLENESS AND GENUINENESS OF THESE PURCHASES. 10.5. SINCE THE HAWALA PARTIES HAVE RUN AWAY FROM THEIR ORIGINAL ADDRESSES AND THE APPELLANT IS NOT IN A POSITION TO FURNISH THE CURRENT VERIFIABLE ADDRESSES, THEREFORE, THE DEPARTMENT IS ALSO NOT IN A POSITION TO ENQUIRE THE GENUINENESS OF THESE PURCHASES, MAINLY DUE TO FAILURE ON THE PART OF THE APPELLANT. THERE ARE A NUMBER OF COURT DECISIONS, AS REFERRED ABOVE, WHEREIN THE 100% DISALLOWANCE OF BOGUS PURCHASES, HAVE BEEN UPHELD. 10.6. AS REGARDS OTHER ASPECTS SUCH AS PAYMENT THROUGH BANKING CHANNELS, JUSTIFICATION FOR PURCHASES MADE FROM HAWALA PARTIES AS GENUINE, SALES MADE AGAINST SUCH PURCHASES, ETC., I WOULD LIKE TO PLACE THE RELIANCE ON FINDING OF THE HON'BLE SUPREME COURT, IN THE CASE OF LACHMINARAYAN MADAN LAL V. CIT (1972) 86 ITR 439 (SC), WHEREIN IT IS HELD THAT EVEN IF THERE IS AN AGREEMENT, BETWEEN THE ASSESSEE AND ITS AGE NTS FOR PAYMENTS OF CERTAIN AMOUNTS AS COMMISSION, ASSUMING THERE WAS SUCH PAYMENT, THAT DOES NOT BIND THE INCOME - TAX OFFICER TO HOLD THAT THE PAYMENT WAS MADE EXCLUSIVELY AND WHOLLY FOR THE PURPOSES OF THE ASSESSEE'S BUSINESS. IN THIS CASE, THE SUPREME CO URT OBSERVED AS UNDER : - 'ALTHOUGH THERE MIGHT BE SUCH AN AGREEMENT IN EXISTENCE AND THE PAYMENTS MIGHT HAVE BEEN MADE. IT IS STILL OPEN TO THE INCOME - TAX OFFICER TO CONSIDER THE RELEVANT FACTORS AND DETERMINE FOR HIMSELF WHETHER THE COMMISSION SAID 10 HA VE BEEN PAID IS PROPERLY DEDUCTIBLE. IN THIS CASE ABSOLUTELY NO MATERIAL ON RECORD HAS BEEN BROUGHT BY THE ASSESSEE TO SUGGEST THAT THE COMMISSION AGENTS HAD PROCURED ANY ORDERS FOR THE ASSESSEE. THE PRODUCTION OF BILLS OR PAYMENTS HAVING BEEN MADE BY AC COUNT - PAYEE CHEQUES CANNOT BY ITSELF SHOW THAT (HE COMMISSION AGENTS HAD PROCURED ANY ORDER FOR THE ASSESSEE. NO CORRESPONDENCE ' ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 10 10.7 IN THE ABOVE CASE, THE HON 'BLE SUPREME COURT HAS MADE IT VERY CLEAR THAT BY CREATING DOCUMENTS AND MAKING PAYMENT THROU GH BANKING CHANNEL TO GI VE COLOUR, DOES NOT SACROSANCT/ ESTABLISHES THE G ENUINENESS OF THE TRANSACTION. FROM THE ABOVE DISCUSSION, IT IS SEEN THAT THE VARIOUS COURTS H AVE UP HELD THE DISALLOWANCES OF BOGUS PURCH ASES, RANG IN G F ROM 12.5% TO 100%, BASED ON THE FACTS OF EACH CASE. IN VIEW OF THE FOREGOING DISCUSSION, THE PERCENTAGE OF DISALLOWANCE OF BOGUS PURCHASES, HAS TO BE BASED ON THE FACTS OF EACH CASE, HENCE THE SAME CANNOT BE GENERALIZED IN EVERY CASE. 10.8 BEFORE THE S T DEPARTMENT, THESE SO CALLED HAW ALA DEALERS, HAVE, INTER - ALIA. STATED AS UNDER: 1. . DO NOT HAVE ANY GO - DOWNS / STORAGE OF GOODS. 2. HAVE NOT ACTUALLY PURCHASED/SOLD ANY GOODS. ONLY PAPER BILLS ISSUED THAT TOO WITHOUT PHYSICALLY DELIVERY OF GOODS. 3. DO NOT MAINTAIN ANY BOOKS OF ACC OUNTS IN RESPECT OF ABOVE CONCERN. 4. HAVE GIVEN BLANK SIGNED CHEQUE BOOK, BLANK BILLS AR:D BLANK CHALLAN ETC. 5.. HAVE SIGNED ON BLANK ACCOUNT OPENING FORM OF THE BANK, AS PER DIRECTION.' FOR WHICH I AM BEING PAID VERY NOMINAL AMOUNT! CHARGED NOMINAL COMMISSION AND SO ON . 10.9 IT IS IMPORTANT TO MENTION THAT ON ACCOUNT OF SURVEY / ENQUIRY ACTION OF THE S T DEPARTMENT, GENERALLY GENUINE PARTIES WILL NEVER RUN AWAY FROM THEIR LOCATIONS, BY LEAVING ASIDE THEIR BUSINESS SET - UP AND OTHER TRADING ITEMS. I T IS PERTINENT TO MENTION HERE THAT ON ACCOUNT OF ABOVE ACTION OF THE S T DEPARTMENT; ALL SUCH BOGUS PARTIES HAVE RUN AWAY FROM THEIR SITES. IT IS SURPRISE TO NOTE THAT OUT OF THOUSANDS OF SUCH HAWALA PAR.IES, NOT EVEN A SINGLE HAWALA PARTY, COULD BE LOCAT ED, AFTER ACTION OF THE S T DEPARTMENT AND IN OTHER CASES ALSO NEITHER OF THE APPELLANT COULD FURNISH THE VERIFIABLE ADDRESSES OF THESE HAWALA PARTIES. NOT EVEN SINGLY ENTITY WAS FOUND HAVING ANY TRADING STOCK AS THEIR SITES, DURING THE COURSE OF CLOSURE O F THE BUSINESS. THIS CLEARLY ESTABLISH THE FACT THAT IN THE MARKET, THE SCAM OF HAWALA BILLING WAS GOING ON, IN A SYSTEMATIC MANNER, TO GENERATE THE CASH. FOR THE PURPOSE, WHICH IS WELL KNOWN IN THE TRADE, IN THE FORM OF PARALLEL ECONOMY/ FOR ILLEGAL ACTIV ITIES. THIS SEAM WAS GOING ON IN THE MARKET, IN THE NAME OF PERSONS / EMPLOYEES (WHO ARE NOT MAN OF MEANS), WHO DO NOT HAVE THEIR PERMANENT ESTABLISHMENT IN THE CITY/OPERATING FROM RENTED PREMISES, THEREFORE, RUN AWAY FROM THE SCENE, HENCE NOT TRACEABLE. IN VIEW OF THESE FACTS, IN MY CONSIDERED OPINION, THIS TYPE OF SEAM SHOULD NOT BE LEGALIZED, BY ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 11 RESTRICTING THE DISALLOWANCE OF BOGUS PURCHASES TO A CERTAIN PERCENTAGE, UNLESS AND UNTIL IT IS PROVED THAT THE APPELLANT HAD AFFECTED, THE CERTAIN PURCHASES FR OM GREY MARKETS DUE TO COMPELLING CIRCUMSTANCES, AS THE SAME WERE NOT AVAILABLE IN THE REGULAR MARKET, AS HAS BEEN HELD IN THE CASE OF M/S. KANCHWALA GEMS PVT. LTD. VS . .FCIT 288 ITR 10 (SC). 10.10 CONSIDERING THE ABOVE FACTS AND IN VIEW OF THE DECISION OF THE HON. DELHI HIGH COURT IN THE CASE OF CIT VS. JANSAMPARK ADVERTISING AND MARKETING (P) LTD, IT IS ALSO AN OBLIGATION ON THE PART OF THE FIRST APPELLATE AUTHORITY TO ENSURE THAT THE EFFECTIVE ENQUIRY IS CARRIED OUT, TO ARRIVE AT LOGICAL CONCLUSION. THEREFORE, THE LD AR WAS REQUIRED TO FURNISH THE COMPARATIVE DETAILS OF GP / NP AND GP / NP RATES FOR HAWALA YEARS, PRECEDING TWO YEARS AND SUBSEQUENT TWO YEARS. IN COMPLIANCE, THE APPELLANT HAS SUBMITTED THE DETAILS, WHICH ARE TABULATED, HERE, AS UNDER: - 10.11 FROM THE ABOVE CHART, IT IS N OTICED THAT THE GROSS PROFIT RATE HAS ALSO GONE DOWN FROM 15.11 % .N A YR 2007 - 08(NON - HAWALA PURCHASE YEAR) TO 9.32%, 9.91 %% AND 13.50%, IN A YR 2009 - .0, A YR 2010 - 11 AND A YR 2011 - 12, RESPECTIVELY, THE YEARS IN WHICH THE ALLEGED HAWALA PURCHASES, WERE BO OKED, FOR WHICH THE APPELLANT COULD NOT OFFER ANY VALID EXPLANATION. HOWEVER, AFTER DISALLOWANCE OF BOGUS PURCHASES, THE GP IN THESE YEARS, HAVE GONE ABNORMALLY HIGH I.E. RANGING FROM 25% TO 50%, AS AGAINST HIGHEST GP OF 15.11 %, DECLARED IN A.Y.07 - 08. THE REFORE, THIS IS NOT A CASE WHERE THE ENTIRE CASH HAS BEEN SIPHONED OFF BY BOOKING THE HAWALA PURCHASES. AT THE MOST IT IS A CASE OF SUPPRESSION OF PROFIT BY BOOKING OF HAWALA PUR CHASES. THESE FACTS CLEARLY ESTABLISHED FROM THE FACT THAT THE APPELLANT HAD S UPPRESSED ITS PROFITS BY BOOKING ALLEGED HAWALA PURCHASES, IN ALL THREE YEARS I.E. 5.79% (15.11 - 9.32) IN A Y 2009 - 10, AY 07 - 08 AY 08 - 09 AY 09 - 10 AY 10 - 11 AY 11 - 12 AY 12 - 13 AY 13 - 14 SALES 38 , 04 , 061 57 , 11 , 72 3 1 , 02 , 43 , 322 1 , 31 , 49 , 623 1 , 22 , 55 , 601 1 , 16 , 48 , 332 1 , 55 , 85 , 100 PURCHASES 16 , 83 , 681 44 , 48 , 30 1 99 , 45 , 081 1 , 14 , 34 , 317 97 , 92 , 372 78 , 11 , 259 80 , 47 , 383 GROSS PROFIT 5 , 74 , 867 6 , 58 , 201 9 , 54 , 831 13 , 03 , 045 15 , 18 , 970 15 , 03 , 061 16 , 55 , 723 % OF GP TO SALES 15.11% 11.52% 9.32% 9.92% 13.50% 12.90% 10.62% ADD: BOGUS PURCHASE 0 0 16 , 05 , 936 53 , 42 , 540 24 , 90 , 080 0 0 GP INCLUDING BOGUS PURCHASE 5 , 74 , 867 6 , 58 , 201 25 , 60 , 767 66 , 45 , 585 40 , 09 , 050 15 , 03 , 061 16,55,723 % OF GP TO SALES 15.11% 11.52 % 25% 50.54% 35.62% 12.90% 10.62% NP 2 , 02 , 658 2 , 31 , 666 3 , 32 , 105 4 , 15 , 272 3 , 84 , 997 3 , 46 , 715 4,22,408 % OF NP TO SALES 5.33% 4.06% 3.24% 3.16% 3.42% 2.98% 2.71% ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 12 5.20% (15.11 - 9.91) IN A YR 2010 - 11 AND 1.60% (15.1 1 13.50 ] IN A YR 2011 - 12, AS COMPARED TO GP OF A YR 2007 - 08. THIS HAS RESULTED INTO SU PPRESSION OF GROSS PROFIT BY RS 5,93,088/ - , RS 6,83,780/ - AND RS 1,81,215/ - , RESPECTIVELY. IN VIEW OF THESE FACTS, THE LD AR REQUESTED THAT APPELLANT BEING WHOLESALE TRADER, THE DISALLOWANCE, AT THE MOST MAY BE RESTRICTED @ 12.5% OF THE HAWALA PURCHASES /SUPPRESSED GP, IN THE LIGHT OF DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P SETH, 356 ITR 451. 10.12 IN ORDER TO ASCERTAIN THE IMPACT OF BOGUS PURCHASES ON GP RATE, THE APPELLANT WAS REQUIRED TO FURNISH THE COMPARATIVE TRADING DETAI LS - SALES GP, GP RATE IN RESPECT OF REGULAR PARTIES VIS - A - VIS ALLEGED HAWALA PARTIES. IN COMPLIANCE, THE APPELLANT HAS SUBMITTED AS UNDER: A. Y .09 - 10 PARTICULARS TOTAL SALES AFFECTED GR. PROFIT GP RATIO (%) SALES AGAINST PURCHASES FROM REGULAR PARTIES 84,47,322 21,13,640 25.02 SALES AGAINST PURCHASES FROM ALLEGED PARTIES 17,96,000 3,73,780 20.81 TOTAL SALES 1,02,43,322 24,87,420 24.28 SUPPRESSED GP=17,96,OOO X 25.02/100 - GP DECLARED (3,73,780)=RS.75,579/ - A. Y .10 - 11 PARTICULARS TOTAL SALES AFFE CTED GR. PROFIT GP RATIO (%) SALES AGAINST PURCHASES FROM REGULAR PARTIES 72,85,112 17,84,134 24.49 SALES AGAINST PURCHASES FROM ALLEGED PARTIES 58,64,511 11,01,482 18.78 TOTAL SALES 1,31,49,623 28,85,616 21.94 SUPPRESSED GP=58,64,511 X24.49/100 - GP D ECLARED (L1, 0 L,482)=RS.3,34,737/- A.Y.11 - 12 PARTICULARS TOTAL SALES GR. PROFIT GP RATIO ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 13 AFFECTED (%) SALES AGAINST PURCHASES FROM REGULAR PARTIES 72,79,966 22,77,241 31.28 SALES AGAINST PURCHASES FROM ALLEGED PARTIES 39,75,635 10,25,148 25.79 TOTAL SALES 1,12,55,601 33,02,389 29.34 SUPPRESSED GP=39,75,635 X 31.28/100=GP DECLARED (10,25,148)=RS.2,18,431/ - 10.13 FROM THE ABOVE CHART IT IS SEEN THAT THE APPELLANT HAD DECLARED THE GP @ 20.81 %, 18.78% AND 25.79%, IN RESPECT OF GOODS TRADED FROM ALLE GED HAWALA PARTIES, AS AGAINST GP RATE OF 25.02%,24.49% AND 31.28% IN RESPECT OF GOODS TRADED FROM REGULAR PARTIES, IN A YR 2009 - 10, 10 - 11 AND 2011 - 12, RESPECTIVELY. IN COMPLIANCE, THE LD AR COULD NOT OFFER ANY VALID EXPLANATION. THESE FACTS CLEARLY ESTAB LISH THE FACT THAT APPELLANT HAD SUP PRESSED ITS PROFITS BY INFLATING ITS PURCHASES THROUGH ALLEGED HAWALA DEALERS WHICH ARE NOT OPEN FOR VERIFICATION. FROM THE FACTS OF THE CASE. IT IS NOTICED THAT THE APPELLANT HAD AFFECTED THE PURCHASES OF RS 16,05,936/ - , 49,64,362/ - AND 53,42,5401, AS AGAINST TOTAL TURNOVER OF RS 1,02,43,322/ - , RS 1,31,49,623/ - AND RS 1,12,55,6011 - , IN A YR 2009 - 10,2010 - 11 AND 2011 - 12, RESPECTIVELY. THESE FACTS CLEARLY ESTABLISH THE FACT THAT THIS IS NOT A CASE WHERE THE ENTIRE CASH HAS BEEN SIPHONED OFF BY DEBITING THE ABOVE BOGUS PURCHASES RATHER IT IS A CASE WHERE THE APPELLANT HAS SUPPRESSED ITS PROFIT BY AFFECTING INFLATED PURCHASES THROUGH ALLEGED HAWALA PARTIES, WHICH ARE NOT OPEN FOR VERIFICATION. 10.14 IT IS PERTINENT TO MENTI ON HERE THAT THE APPELLANT WAS ABLE TO HARVEST GP @ 15.11 % IN A YR 2007 - 08, FROM SAME BUSINESS, BY SAME MANAGEMENT, AS AGAINST GP OF 9.32%, 9.91 % AND 13.50% DECLARED IN A YR 2009 - 10,2010 - 11 AND 2011 - 12, RESPECTIVELY. IN THE ABSENCE OF ANY VALID EXPLANATI ON, ALONG WITH CREDIBLE DOCUMENTS, THE CONTENTION OF THE APPELLANT IS NOT TENABLE, THEREFORE REJECTED AND GP DECLARED IN A Y 2007 - 08, I.E. 15.11% IS LIABLE TO BE ADOPTED I ESTIMATED IN THE HAWALA YEARS AS WELL, IN THE LIGHT OF DECISION OF THE HON 'BLE S.C. IN THE CASE OF M / S KANCHWALA GEM 288ITRI0. IN VIEW F THESE FACTS, THE LD. AR, VIDE LETTER DATED NIL, HAS REQUESTED TO RESTRICT THE DISALLOWANCE AT THE MOST 12.5% OF THE TOTAL ALLEGED BOGUS PURCHASE OR TO THE EXTENT THE GP FALL. THE CONTENTION OF THE LD. AR HAS BEEN CONSIDERED AND ACCORDINGLY THE YEAR WISE APPEALS OF THE APPELLANT ARE DECIDED AS UNDER: - A YR 2009 - 10 BY BOOKING ALLEGED BOGUS PURCHASES, AS COMPARED TO THE A.Y. 2007 - 08, THE APPELLANT HAS SUPPRESSED ITS PROFIT BY RS 5,93,088/ - ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 14 ( 1,02,43,322 X 5.79%). IN COMPLIANCE, THE LD. AR COULD NOT OFFER ANY VALID REASONS FOR FALL IN THE GP RATE. CONSIDERING THE FACTS IN ENTIRETY / THE APPELLANT BEING WHOLESALE TRADER AND RELYING ON DECISIONS IN THE CASE OF M/S. KANCHWALA GEMS PVT. LT D. VIS JCIT 288 ITR 10 (SC), ETC, AS QUOTED ABOVE, IN MY CONSIDERED OPINION, THE ESTIMATION OF GP@15.11% WILL BE REASONABLE. THE DISALLOWANCE @ 12.5% OF BOGUS PURCHASES, AS REQUESTED BY THE LD. AR, IS WORKED OUT AT RS 2,00,742/ - (16,05,936 X 12.5 / 100), WHI CH IS LE SS THA N SUPPRESSED GP OF RS 5,93,088/ - , THEREFORE, THE DISALLOWANCE TO THE EXTENT OF RS 5,93,088/ - ( S UPPRESSED GP), OUT OF HAWALA PURCHASES OF RS 16,05,936/ - , IS SUSTAINED, AND BALANCE AMOUNT OF RS 10,12,8481 - (RS 16,05,936/ - ., LES S RS 5,93,088/ - ), I S HEREBY DELETED. ACCORDINGLY, ALL THE GROUNDS OF APPEAL, ARE PARTLY ALLOWED. A YR 2010 - 11 BY BOOKING ALLEGED BOGUS PURCHASES, AS COMPARED TO THE A.Y. 2007 - 08, THE APPELLANT HAS SUPP RESSED ITS PROFIT BY RS 6,83,7801 - ( 1,31,49,623 X 5. 20%). IN COMPLIANCE, THE LD. AR COULD NOT O FFER ANY VALID REASONS FOR FALL IN THE GP RATE. CON SIDERING THE FACTS IN ENTIRETY / THE APPEL LANT BEING WHOLESALE TRADER AND RELYING ON DECISIONS IN THE CASE OF M/S. KANCHWALA MS PVT. LTD. VIS JCIT 288 ITR 10 (SC) , ETC, AS QUOTED ABOVE, IN MY CONSIDERED OPINION, THE . ESTIMATION OF GP@15.11% WILL BE REASONABLE. THE DISALLOWANCE @ 12.5% OF BOGUS PU RCHASES, AS REQUESTED BY THE LD. AR, IS WORKED OUT AT RS 6,67,817/ - (53,42,5401 - X 12.5/100), WHICH IS LESS THAN SUPPRESS ED GP OF RS 6,83,7801 - , THEREFORE, THE DISALLOWANCE TO THE EXTENT OF RS 6,83,780/ - (SUPPRESSED GP), OUT OF HAWALA PURCHASES OF RS 53,42,540/ - , IS SUSTAINED, AND BALANCE AMOUNT OF RS 46,58,760/ - (RS 53,42,540/ - LESS RS 6,83,7801 - ), IS HEREBY DELETED. ACCORDIN GLY, ALL THE GROUNDS OF APPEAL, ARE PARTLY ALLOWED. A YR 2011 - 12 BY BOOKING ALLEGED BOGUS PURCHASES, AS COMPARED TO THE A.Y. 2007 - 08, THE APPELLANT HAS SUPPRESSED ITS PROFIT BY RS 1,81,215/ - ( 1,12,55,601 X 1.615%). IT IS FURTHER NOTICED THAT THE APPELL ANT HAD SHOWN LESS G.P.(@ 25.79%) OF RS. 2,18,4311 - FROM HAWALA TRADING, AS COMPARED TO G.P.(@ 31.28%) FROM TRADING AGAINST REGULAR PARTIES. IN COMPLIANCE, THE LD. AR COULD NOT OFFER ANY VALID REASONS FOR FALL IN THE GP RATE. CON SIDERING THE FACTS IN ENTIR ETY / THE APPELLANT BEING WHOLESALE TRADER AND RELYING ON DECISIONS IN THE CASE OF SIMIT P SETH, 356 ITR 451, IN MY CONSIDERED OPINION, DISALLOWANCE @ 12.5% WILL BE REASONABLE. THE DISALLOWANCE @ 12.5% OF BOGUS PURCHASES IS WORKED OUT AT RS 3,11,2601 - (24, 90,080 X 12.5/100). WHICH IS MORE THAN SUPPRESSED GP OF RS 1,81,215/ - , THEREFORE, THE DISALLOWANCE TO THE EXTENT OF RS 3,11,260/ - , OUT OF HAWALA PURCHASES OF RS 24,90,080/ - , IS SUSTAINED, AS REQUESTED BY ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 15 THE LD. AR AND BALANCE AMOUNT OF RS 21,78,820/ - (RS 24,90,080/ - LESS RS 3,11,260/ - ), IS HEREBY DELETED. ACCORDINGLY, ALL THE GROUNDS OF APPEAL, ARE PARTLY ALLOWED. IN THE RES U LT, THE APPEAL FOR ALL T HREE YEARS, ARE PARTLY ALLOWED. 5. AGAINST THE ABOVE ORDER OF CIT(A), REVENUE IS IN FURTHER APPEAL BEFORE US AND ASSESSEE HAS ALSO FILED CROSS OBJECTION OBJECTING ADDITION OF 12.5% RETAINED BY THE CIT(A). 6. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND PERUSE D THE MATERIAL PLACED ON RECORD. FROM THE REC ORD, I FOUND THAT AFTER CONSIDERING THE PROFIT RATE DECLARED BY THE ASSESSEE IN EARLIER YEARS AND SUBSEQUENT YEARS, THE CIT(A) AFTER RECORDING DETAILED FINDING AT PARA 10 10.31 AS REPRODUCED ABOVE , REACHED TO THE CONCLUSION THAT ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASE WILL SERVE THE PURPOSE OF REVENUE LEAKAGE . I FOUND THAT CIT(A) HAD APPLIED VARIOUS JUDICIAL PRONOUNCEMENTS TO THE FACTS OF THE INSTANT CASE AND ALSO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF H M E SUFALI H ABDULLA 90 ITR 271, LAXMINARAYAN MADAN LAL 86 ITR 439 AND KANCHANWALA GEMS 288 ITR 10, ACCORDINGLY REACHED TO THE CONCLUSION THAT DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASES WILL COMPENSATE FOR THE PROFIT SO SUPPRESSED BY THE ASSESSEE. THE DETAILED FINDING SO RE CORDED BY THE CIT(A) HAS NOT BEEN CONTROVERTED, ACCORDINGLY, I DO NOT FIND ANY VALID REASON TO INTERFERE IN THE FINDING SO RECORDED BY THE CIT(A) UPHOLDING THE ADDITION TO THE EXTENT OF 12.5% OF BOGUS PURCHASES. ITA NO.6559 & 6561/MUM/2016 CO NO.61 & 62/MUM/2017 GOPAL RAMSHISH TRIPATHI 16 7 . IN THE RESULT BOTH APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 18 / 04 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 18 / 04 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//