ITO 14(2)(3), MUMBAI V. K. ASHOK KUMAR & CO., MUMBAI

ITA 6665/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8048 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 26-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 14-11-2013
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH KUMAR YADAV
• Keywords: Bogus purchase; Unexplained investment; Principle of natural justice; Opportunity of cross examination; Corroborative evidences; Accommodation entries; Retraction; Reason to believe
• Section: 142(1); 133A; 147; 131; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.666 5 /MUM./2013 ( ASSESSMENT YEAR :2005 - 06) ITO 14(2) (3) EARNEST HOUSE, R. NO. 306, 3 RD FLOOR, NARIMAN POINT , MUMBAI 400 021 . APPELLANT V/S K. ASHOK KUMAR & CO. KILACHAND MANSION, 282, KALBADEVI RD., M UMBAI 400 002 PAN AAAFK2478A . RESPONDENT ITA NO.6239/MUM./2013 ( ASSESSMENT YEAR :2005 - 06) K. ASHOK KUMAR & CO. KILACHAND MANSION, 282, KALBADEVI RD., MUMBAI 400 002 PAN AAAFK2478A . APPELLANT V/S ITO 14(2) (3) EARNEST HOUSE, R. NO. 306, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400 021 . RESPONDENT K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 2 ITA NO.6240/MUM./2013 ( ASSESSMENT YEAR :2008 - 09) K. ASHOK KUMAR & CO. KILACHAND MANSION, 282, KALBADEVI RD., MUMBAI 400 002 PAN AAAFK2478A . APPELLANT V/S ITO 14(2) (3) EARNEST HOUSE, R. NO. 306, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400 021 . RESPONDENT ITA NO.6666/MUM./2013 ( ASSESSMENT YEAR :2008 - 09) ITO 14(2) (3) EARNEST HOUSE, R. NO. 306, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400 021 . APPELLANT V/S K. ASHOK KUMAR & CO. KILACHAND MANSION, 282, KALBADEVI RD., MUMBAI 400 002 PAN AAAFK2478A . RESPONDENT ITA NO.3391/MUM./2014 ( ASSESSMENT YEAR :2006 - 07) K. ASHOK KUMAR & CO. KILACHAND MANSION, 282, KALBADEVI RD., MUMBAI 400 002 PAN AAAFK2478A . APPELLANT K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 3 V/S ITO 14(2) (3) EARNEST HOUSE, R. NO. 306, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400 021 . RESPONDENT ITA NO.4630/MUM./2014 ( ASSESSMENT YEAR :2006 - 07) ITO 14(2) (3) EARNEST HOUSE, R. NO. 306, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400 021 . APPELLANT V/S K. ASHOK KUMAR & CO. KILACHAND MANSION, 282, KALBADEVI RD., MUMBAI 400 002 PAN AAAFK2478A . RESPONDENT ASSESSEE BY : SHRI. RAJESH KUMAR YADAV REVENUE BY : SHRI. DEEPAK TRALS HAWALA DATE OF HEARING 02.03.2017 DATE OF ORDER 07.03.2017 O R D E R PER: SHAMIM YAHYA THESE ARE CROSS - APPEAL BY THE REVENUE AND THE ASSESSEE ARISING OUT OF RESPECTIVE ORDERS OF THE LD. CIT - A FOR ASSESSMENT YEARS 2005 - 06, 2006 - 07, 2008 - 09. K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 4 2. SINCE THE ISSUES ARE COMMON AND CONNECTED AND THE APPEALS WERE HEARD TOGETHER THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER. 3. REVENUES APPEAL THE COMMON GROUNDS OF APPEAL AS UNDER: I) THE LD. CIT - A HAS ERRED IN LAW AS WELL AS ON FACT BY NOT SUSTAINING ADDITION U/S. 69 AFTER HAVING ACCEPTED THE FINDING IN PRINCIPLE THAT THE PURCHASES WERE MADE FROM UNDISCLOSED/UNVERIFIABLE/UNIDENTIFIABLE PARTIES IN THE GREY MARKET BY INVESTING IN CASH AND THE PURCHASES FROM THE GROUP CONCERNS OF SHRI RAKESH GUPTA & FAMILY WERE ONLY ACCOMMODATION ENTRIES AND NOT ACTUAL PU RCHASES. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT - A AFTER HAVING ACCEPTED THE FACT THAT THE PURCHASES MADE FROM OR THROUGH SHRI RAKESH GUPTA AND HIS FAMILY MEMBERS ARE BOGUS, ERRED IN LAW IN NOT CONFIRMING THE ADDITION AT LEAST TO THE EXTENT OF PEAK OF THE PURCHASES MADE FROM SUCH PARTIES ON ACCOUNT OF BOGUS PURCHASES MADE IN CASH FROM THE OPEN MARKET OUT OF UNACCOUNTED CASH, IN VIEW OF THE DECISIONS HELD BY THE HONBLE ITATS C - BENCH, AHMEDABAD, IN THE CASE OF VIJAY PROTEINS LTD. VS. ACIT (5 8 ITD 428). K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 5 III) THE APPELLANT CRAVES LEAVES TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEES APPEAL: THE COMMON GROUNDS OF APPEAL AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT - A - 25, MUMBAI, ERR ED IN DIRECTING THE AO TO MAKE AN AD HOC ADDITION REPRESENTING 10% OF THE PURCHASE S ALLEGED TO BE BOGUS BY THE AO TO COVER UP THE DIFFERENCE OF GP IN RECORDING THE SAID PURCHASES AS WELL AS TO PLUG ANY LEAKAGE OF REVENUE AND THE ADDITION RETAINED BY HIM B E DELETED IN TO. THE ASSESSEE - APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY OR DELETE THE ABOVE GROUND TAKEN. 4. AS AGREED BY BOTH THE COUNSEL SINCE FACTS ARE SIMILAR WE ARE ADJUDICATING THIS ISSUES WITH REFERENCE TO FACTS AND FIGURES FROM ASSESSMENT YEAR 2005 - 06. 5. BRIEF FACTS OF THE CASE ARE AS UNDER: I) THE REASONS RECORDED FOR REOPENING THE ASSESSMENT ARE AS UNDER: 'SURVEY ACTION U/S. 133A OF THE ACT WAS CONDUCTED BY THE ITO 14(3(2), MUMBAI IN THE FOLLOWING GROUP CONCERNS ON 13.2.2009: - K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 6 1. SHRI RAKE SH KUMAR M. GUPTA, PROP. OF M/ S MANOJ MILLS, PAN: AAJPG976JF 2. SMT. HEMA R. GUPTA, PROP. OF M/S SHREE RAM SALES & SYNTHETICS, PAN: AAKPG3030IE (WIFE OF SHRI RAKESH KURNAR GUPTA) 3. SHRI MOHIT R. GUPTA, PROP. OF M/S ASTHA SILK INDUSTRIES, PAN: AAKPG3030E ( SON OF SHRI RAKESHKUMAR GUPTA) THESE GROUP CONCERNS ARE ENGAGED IN THE ACTIVITIES OF ISSUING ACCOMMODATION BILLS FROM THE PREMISES OF SHOP NO. 4, RAM GALLY, PANKAJ MARKET, CHAM PA X - LANE, KALBADEVI, MUMBAI - 400 002 (PRESENT ADDRESS) AS WELL AS FROM THE OFF ICE - CUM - RESIDENTIAL PREMISES AT B - 3/ 702 AKHIL TOWERS, RATAN NAGAR, DAHISAR (EAST), MUMBAI - 400068. THEIR ACTIVITIES ARE ISSUING/ PROVIDING ACCOMMODATION BILLS (SALES BILLS) TO VARIOUS PAR TIES IN MUMB AI AND ALSO TO OUTSIDER MUMBAI PARTIES. AT THE TIME OF S URVEY, THE SURVEY TEAM HAS FOUND THAT THERE WAS NO TRADING ACTIVITIES (SALES/ PURCHASE) CONDUCTED BY THESE GROUP CONCERNS, AND ALSO THERE WAS NO STOCK FOUND WITH THEM. ASPER THE STATEMENT RECORDED DURING THE COURSE OF SURVEY ACTION, WHICH WAS LATER ON CONF IRMED IN THE STATEMENT RECORDED U/S 131 OF THE ACT ON 23.2.2009 OF THE MAIN PERSON, SHR I RAKESH KU MAR GUPTA, WHO IS RUNNING AND MANAGING ALL THE ACTIVITIES OF ALL THE THREE CONCERNS, HAS ADMITTED AND STATED ON OATH THAT HE AND HIS ABOVE FAMILY GROUP K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 7 CONCER NS ARE ENGAGED EXCLUSIVELY IN THE ACTIVITIES OF ISSUING ACCOMMODATION BILLS FOR THE PAST 9 YEARS AND THAT THEY DID NOT HAVE ANY TRADING ACTIVITIES FROM THE YEAR 2000 ONWARDS AND EARNING 1% AS COMMISSION ON THE AMOUNT OF THE ACCOMMODATION SALES BILLS ISSUED . THE MODUS OPERANDI OF THESE GROUP CONCERNS IS THAT THEY ISSUE SALES BILLS AS PER THE REQUIREMENTS OF THE VARIOUS PARTIES AND RECEIVE CHEQUE FOR THE AMOUNT AS PER BILLS, WHICH IS DEPOSITED IN THE BANK ACCOUNT AND THEN WITHDRAWN IN CASH AND AFTER DEDUCTING THEIR COMMISSION, THE BALANCE AMOUNT OF BILL, IN CASH, IS RETURNED TO THE SALE PARTY CONCERNED. TO CO - RELATE THE SALES, THE PURCHASE BILLS ARE PREPARED BY THEMSELVES BY GETTING THE BILL BOOKS PRINTED IN THE NAMES OF FICTITIOUS FIRMS. F ROM THE MATERIALS CO LLECTED DURING THE SURVEY ACTION FROM THE PREMISES OF THE ABOVE GROUP CONCERNS, IT WAS FOUND THAT THE ASSESSEE, M/S K. ASHOK KUM AR & CO. HAS AVAILED/ OBTAINED ACCOMMODATION (PURCHASE) BILLS, FOR THE YEAR UNDER CONSIDERATION, AS PER THE FOLLOWING DETAILS: - M/S MANOJ MILLS RS. 9,44,331/ - M/S SHREE RAM SALES & SYNTHETICS RS. 2,18,589/ - M/S ASTHA SILK INDUSTRIES RS. 18,58,845/ - ---------------- RS. 30,21,765/ - ---------------- K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 8 ON THE BASIS OF THE MATERIALS COLLECTED FROM THE SUR VEY PREMISES AND ON THE BASIS OF THE STATEMENTS RECEIVED FROM THE PROPRIETORS OF THE ABOVE GROUP CONCERNS, IT IS CLEAR THAT THE ASSESSEE, M/S K. ASHOK KUMAR & CO. HAS OBTAINED / AVAILED ACCOMMODATION BILLS AS SHOWN ABOVE IN ORDER TO INFLATE THE PURCHASES. HE NCE, THE ASSESSEE HAD INFLATED PURCHASES USING BOGUS PURCHASE BILLS TO THE EXTENT OF SUCH AMOUNTS WHICH HAS RESULTED IN ESCAPEMENT OF ASSESSMENT OF INCOME FOR A. Y. 2005 - 06. THE CASE IS PROPOSED FOR RE - OPENING U/S. 147 OF THE ACT, SO THAT THE AMOUNT OF ACC OMMODATION BILLS AVAILED FOR INFLATING THE PURCHASES, WITHOUT ACTUAL PURCHASE, CAN BE BROUGHT TO TAX. IN VIEW OF THE ABOVE, 1 HAVE REASON TO BELIEVE THAT THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR A. Y. 2005 - 06. ACCORDINGLY, SUCH INCOME AND ALSO ANY OTHER INCOME CH ARGEABLE TO TAX EXCEEDING RS. 1 LAC, HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SEC. 147 AND HENCE I PROPOSE TO RE - OPEN THE CASE O F THE ASSESSEE U/S 147 OF THE I. T. ACT FO R A. Y. 2005 - 06.' II) DURING THE ASSESSMENT PROCEEDINGS, THE AFORESAID REASONS RECORDED WERE BROUGHT TO NOTICE OF THE ASSESSEE AND IT WAS ASKED TO SUBSTANTIATE THE GENUINENESS OF SAID PURCHASES FROM THE SAID PARTIES K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 9 WITH DOCUMENTARY EVIDENCES AND WAS ASKED TO EXPLAIN AS TO WHY PURCHASES SAID TO BE MADE FROM THESE PARTIES SHOULD NOT BE TREATED AS IN GE NUINE AND ADDED TO THE TOTAL INCOME. IN RESPONSE, THE APPELLANT SUBMI TTED THAT IT HAD AFFECTED PURCHASES FROM THESE PARTIES AND MATERIALS FOR PURCHASE FROM THE M HAS BEEN FURTHER SOLD BY IT DURING THE YEAR. IN SUPPORT OF THE CLAIM, THE FOLLOWING DETAILS WERE SUBMITTED APPELLANT FOR PERUSAL AND RECORD: A) COPY OF CONFIRMATION OF ACCOUNT OF SAID PARTIES B) COPY OF BANK STATEMENT HIGHLIGHTING PAYMENT TO SAID PARTIES BY AC COUNT PAYEE CHEQUE. C) COPY OF BILLS OF SAID PARTIES IN RESPECT OF PURCHASES EFFECTED FROM THEM. D) COPY OF DAY TO DAY MOVEMENT OF THE MATERIALS (QUANTITY WISE AND QUALITY WISE) PURCHASED FROM THESE PARTIES ALONG WITH THE SALE OF THIS MATERIAL MADE TO APPELLANT'S REGULAR CUSTOMERS. E) COPY OF SALES BILLS ISSUED TO APPELLANT'S REGULAR CUSTOMERS TO WHO THIS MATERIAL HAS BEEN SOLD. HENCE, THE APPELLANT CLAIMED THAT THE PURCHASES FROM SAID PARTIES ARE FULLY EXPLAINED AND CORROBORATED WITH DOCUMENTARY EVIDENCE , AND THE SAME CANNOT BE TREATED AS IN GENUINE. III) THE AFORESAID REPLY OF THE APPELLANT DID NOT FIND FAVOUR WITH THE AO AND HE REITERATED THE BASIS OF REOPENING THE ASSESSMENT STATING K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 10 THAT THESE CONCERNS ARE EXCLUSIVELY ENGAGED IN ISSUING ACCOMMODATION ( SALES) BILLS WITHOUT AFFECTING ANY REAL PURCHASES TO THE PARTIES WHO REQUIRE THE BILLS IN ORDER TO INFLATE/ ACCOMMODATE THEIR PURCHASES MADE OUTSIDE THE BOOKS OF ACCOUNTS. THE PROPRIETORS OF SAID FIRMS HAVE ADMITTED HAWALA SALES WITHOUT AFFECTING REAL PURC HASES IN THE STATEMENT RECORDED DURING THE SURVEY ACTION U/S 133A AND ALSO REAFFIRMED THE SAID FACTS IN THE STATEMENT RECORDED ON OATH U/S 131 ON 23.02.2009 AND 03.03.2009. THE AO ASSUMED THAT THE APPELLANT HAD AVAILED SUCH ACCOMMODA TION BILLS TO THE EXTEN T OF RS. 30,21,765/ - FROM THE AFORESAID PARTIES. THE AO, BY SHOWING THE MODUS OPERANDI OF SAID GROUP CONCERNS, STATED THAT COPIES OF BILLS ARE AVAILABLE WITH ALL CUSTOMERS AND ALSO CHEQUE PAYMENT REFLECTS IN THE BANK STATEMENTS OF BOTH SIDES OF THE PARTIES , THUS APPARENTLY NOTHING WRONG IS VISIBLE. HOWEVER, DURING THE COURSE OF SURVEY AND IN STATEMENT U/S. 131, IT IS REVEALED THAT THE ABOVE CONCERNS ARE ONLY ISSUING ACCOMMODATION (SALES) BILLS, AND CORRESPONDING PURCHASE BILLS ARE PREPARED BY THEM AFTER GETT ING PRINTED BY THEMSELVES OR GENERATED FROM COMPUTER. THERE WAS NEITHER ANY REAL PURCHASES NOR SALES BUT MERELY ISSUING OF HAWALA SALES BILLS. THE AO REPRODUCED EXTRACTS OF STATEMENT RECORDED DURING THE SURVEY ACTION U/S. 133A OF THE MAIN PERSON, SHRI RAKE SH KUMAR GUPTA, ON 13/14.0202009. THE FACTS OF SAID STATEMENT WERE LATER RE - K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 11 CONFIRMED UNDER OATH U/S. 131, EXTRACTS OF WHICH WERE ALSO REPRODUCED BY THE AO. THE AO FURTHER STATED THAT THERE WERE ABSOLUTELY NO DOCUMENTS/ DETAILS IN THE POSSESSION OF THE SAI D GROUP CONCERNS TO PROVE THE 'TRADING IN CLOTH' BY THEM, SUCH AS DETAILS OF GOODS/STOCKS, PROOF FOR THE USE OF TRANSPORT FOR CARRYING GOODS, ANY DOCUMENTS WHICH SUPPORTS THE PURCHASE MADE BY SAID GROUP CONCERNS FOR THE SALE TO CUSTOMERS. IN VIEW OF ABOVE, THE AO NOTED THAT IN THE CIRCUMSTANCES, THE BILLS INTRODUCED IN THE BOOKS ARE NOTHING BUT COLOURABLE DEVICE ADOPTED TO COVER UP INVESTMENT IN PURCHASE MADE FROM OUTSIDE THE BOOKS WHICH ATTRACTS THE PROVISIONS OF SEE - 69 OF THE ACT. THE AO FOUND THAT PURCH ASES MADE FROM PARTIES ARE NOT REFLECTED IN THE STOCK REGISTER. NO HILLS/ DOCUMENTARY EVIDENCES OF TRANSPORTATION OF PURCHASES SHOWN FROM THESE PARTIES WERE PRODUCED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED DETAILS OF PURCHASES FROM THE PARTIES AS UNDER: M/S MANOJ MILLS RS. 9,44,331/ - M/S SHREE RAM SALES & SYNTHETICS RS. 7,97,473 / - M/S ASTHA SILK INDUSTRIES RS. 18,58,845/ - ---------------- RS. 36,00,649 / - ---------------- K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 12 IV) IN THE ASSESSMENT ORDER, THE AO FURTHER OBSERVED THAT THE DISCUSSIONS MADE ABOVE ESTABLISH THE FOLLOWING FACTS: (I) ASSESSEES PURCHASE FROM M/S. MANOJ MILLS AND THE GROUP CONCERNS AMOUNTING TO RS. 36,000,649 / - ARE HAWALA PURCHASES AND NOT GENUINE. (II) ASSESSEE HAS ISSUED CHEQUES TO THE EXTENT OF BILLS OBTAINED AND COLLECTED BACK THE AMOUNT IN CASH AFTER REDUCING THE COMMISSION AMOUNT AS FOUND DURIN G THE SURVEY AND AFFIRMED U/S. 1 31 BY THE SAID GROUP CONCERNS. (III) AS DISCUSSED ABOVE THE ASSESSEE COULD NOT ESTABLISH THE PURCHASES TO THE EXTENT OF BILLS OBTAINED FROM THE SAID GROUP CONCERNS WHEREAS THE DEPARTMENT FOUND THAT THE SAID PARTIES HAVE NO REAL TRADING BUSINESS OF ANY GOODS BUT ISSUING OF ACCOMMODATION ENTRIE S/ BILLS ONLY. IN THE CIRCUMSTANCES, IT IS CLEAR THAT ASSESSEE'S PURCHASES TO THE EXTENT CLAIMED TO HAVE BEEN MADE FROM ABOVE GROUP CONCERNS ARE FROM OUTSIDE THE BOOKS AND SOURCES FOR WHICH ARE NOT ESTABLISHED. TO GIVE COLOUR OF GENUINENESS ASSESSEE OBTAIN ED H AWALA SALES BILLS FROM ABOVE GROUP CONCERNS. (IV) ALSO, THE ASSESSEE COULD NOT ESTABLISH THE PURCHASES FROM THE SAID GROUP CONCERNS WITH PURCHASES ORDERS, DELIVERY CHALLAN, TRANSPORT DETAILS, AND DETAILS CORROBORATING THE SALES OF THE K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 13 GOODS PURCHASED FROM T HE SAID PARTIES AND ALSO THESE PURCHASES ARE NOT REFLECTED IN THE ASSESSES STOCK REGISTERED WHEN VERIFIED PHYSICALLY. CONSID ERING THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT WAS HELD BY AO THAT THE ASSESSEE'S PURCHASES TO THE EXTENT CLAIMED TO HAVE MADE FROM THE SAID GROUP CONCERNS ARE HAWALA PURCHASES/ ARE OUT OF THE BOOKS PURCHASES, SOURCE OF WHICH IS NOT EXPLAINED BY THE APPELLANT. HE CONCLUDED THAT THE INVESTMENTS MADE FOR THESE PURCHASES ARE NOT REFLECTED IN THE BOOKS OF ACCOUNT OF ASSESSEE AND ACCORDINGLY, THE TOTAL A CCOMMODATION BILL AMOUNT OF RS. 36,00,649/ - AVAILED BY THE ASSESSEE WAS TREATED AS BOGUS AND/ OR TO INFLATE THE PURCHASE/ ACCOMMODATE THE PURCHASES MADE OUT OF THE BOOKS, SOURCE OF WHICH IS NOT EXPLAINED. HENCE, THE ENTIRE AMOUNT OF RS. 36,00,649/ - WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT AS PER SEC. 69 OF THE I.T ACT. 6. UP ON ASSESSEES APPEAL LD. CIT - A HELD AS UNDER: I) I HAVE PERUSED THE ASSESSMENT ORDER, AND THE FACTS AND CIRCUMSTANCE OF THE CASE. ON PLAIN READING OF THE ASSES SMENT ORDER, I FIND THAT THE AO HAS BASICALLY RELIED ON THE STATEMENTS RECORDED OF SHRI RAKESH KUMAR M. GUPTA & OTHERS DURING THE COURSE OF SURVEY K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 14 ACTION U/S 133A AND SUBSEQUENTLY RE - AFFIRMED ON OATH U/S 131 OF THE ACT, T O MAKE ADDITIONS IN HANDS OF PURCHASER PARTY I.E. THE APPELLAN T IN THIS CASE. HOWEVER, THE AO DID NOT PROVIDE THE OPPORTUNITY OF CROSS EXAMINATION OF SAID PARTIES TO THE APPELLANT IN SPITE OF SPECIFIC REQUEST MADE BY THE APPELLANT. THE HON'BLE SUPREME COUR T IN THE CASE OF KISHANCHAND CHELLARAM VS. CIT [1980] 125 ITR 713 (SC) HAS HELD THAT BEFORE THE INCOME - TAX AUTHORITIES COULD RELY UPON ANY EVIDENCE, THEY ARE BOUND TO PRODUCE IT BEFORE THE ASSESSEE SO THAT THE ASSESSEE COULD CONTROVERT THE STATEMENTS CONTA INED IN IT BY ASKING FOR AN OPPORTUNITY TO CROSS EXAMINE THE PERSONS GIVING SUCH EVIDENCE. THE LAW PRONOUNCED BY HON'BLE SUPREME COURT IS THE LAW OF THE LAND AND THE HON'BLE SUPREME COURT HAS HELD THAT IF CROSS EXAMINATION IS NOT PERMITTED, IN THAT CASE TH E STATEMENT OF THIRD PARTIES CANNOT BE RELIED UPON AND USED AGAINST THE ASSESSEE. SINCE IN THE PRESENT CASE, THE CROSS EXAMINATION OF THE ALLEGED HAWALA PARTIES WAS NOT PERMITTED, THE STATEMENT OF THOSE PARTIES CANNOT BE USED AGAINST THE APPELLANT. THEREFO RE, ADDITIONS MADE MERELY ON THE BASIS OF STATEMENT OF THOSE PARTIES WITHOUT ANY CORROBORATIVE EVIDENCES CANNOT BE THE BASIS OF ADDITIONS IN THE ASSESSMENT. II) I FURTHER FIND THAT THE APPELLANT HAS SUBMITTED DURING ASSESSMENT PROCEEDINGS THE DAY - TO - DAY MO VEMENT OF THE MATERIAL PURCHASED FROM THESE PARTIES ALONG WITH THE CORRESPONDING SALES/ K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 15 INVENTORY OF STOCK AT THE YEAREND. THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AUDITED WHEREIN THE COMPLETE PURCHASE AND SA LE DETAILS ARE INCORPORATED, AND THERE IS NO C ASE OF ANY ADVERSE COMMENTS MADE BY THE AUDITORS ON THE SAME. THERE ARE NO ADVERSE COMMENTS IN THE ASSESSMENT ORDER ABOUT THE QUANTITATIVE RECONCILIATION. HENCE, IF THE SALES OF APPELLANT ARE TREATED AS GENUINE, THE CORRESPONDING PURCHASES CANNOT BE CONSID ERED AS BOGUS. III) THE AO HAS NOT DEALT WITH THE CASE LAWS RELIED UPON BY THE APPELLANT IN REACHING AT CONCLUSION AGAINST THE APPELLANT. THE RATIO OF SAID JUDGMENTS SEEMS TO BE THAT THERE CAN BE NO SALES WITHOUT CORRESPONDING PURCHASES, AND WHEN THE QUANT ITATIVE DETAILS OF PURCHASE, SALES AND CLOSING STOCK ARE AVAILABLE, THE SAME CANNOT BE COMPLETELY OVERLOOKED IN ARRIVING AT ANY ADVERSE CONCLUSION. IV) IN ABOVE CIRCUMSTANCES, EVEN ASSUMING THE PURCHASES FROM SAID PARTIES TREATED AS BOGUS FOR THE REASONS S TATED IN ASSESSMENT ORDER, THE CONTENTION OF APPELLANT THAT IT HAS SHOWN DAY TO DAY MOVEMENT OF ALLEGED MATERIAL PURCHASED CANNOT BE OVERLOOKED. A LOGICAL CONCLUSION WHICH MAY BE DRAWN IN SUCH SITUATION MAY BE THAT THE APPELLANT HAS RECORDED SOME SALES IN ITS BOOKS OF ACCOUNTS WHICH MATERIALS MIGHT HAVE BEEN PURCHASED BY IT IN GREY MARKET WITHOUT BILLS; AND TO REGULARIZE SUCH PURCHASES IN GREY MARKET, THE APPELLANT MIGHT HAVE TAKEN ACCOMMODATION BILLS FROM THE SAID PARTIES FOR K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 16 PURCHASE OF SPECIFIED MATERIAL . IN FACT, THE AO IN PARA 4.3 OF THE ASSESSMENT ORDER HAS STATED AS UNDER: 'IN THE CIRCUMSTANCES, STANCES, THE BILLS INTRODUCED IN THE BOOKS ARE NOTHING BUT COLOURABLE DEVICE ADOPTED TO COVER UP INVESTMENT IN PURCHASE MADE FROM OUTSIDE THE BOOKS WHICH ATTRACTS THE PROVISION OF SEC. 69 OF THE IT ACT.' THE AFORESAID CONCLUSION REACHED BY AO DOES NOT DENY, AND IN FACT GIVES AN ILLUSION THAT PURCHASES HAVE BEEN MADE BY THE APPELLANT FROM OUTSIDE THE BOOKS (I.E. IN CASH) AND TO COVER UP SUCH INVESTMENT IN CA SH, THE SAID BILLS ARE INTRODUCED IN THE BOOKS. ONE CANNOT DENY THE GROUND REALITY THAT GOODS MAY BE AVAILABLE IN GREY MARKET, WITHOUT BILL AND BY CASH, AT COMPARATIVELY LESSER PRICES. V) IN SUCH A SITUATION, IT WOULD NOT BE JUSTIFIED TO MAKE ADDITION OF T HE FULL AMOUNT OF PURCHASE MADE FROM SAID PARTIES. RATHER, THE CAUSE OF JUSTICE WOULD HE MET BY MAKING ADDITION OF A REASONABLE PERCENTAGE OF SUCH PURCHASES IN ORDER TO FILL IN THE GAP OF ANY REVENUE LEAKAGE IN AFORESAID CIRCUMSTANCES. I FEEL THAT ESTIMATE OF DIFFERENTIAL PROFIT @10% OF DISPUTED PURCHASES WILL BE FAIR AND REASONABLE TO COVER UP THE DIFFERENCE OF GP IN RECORDING THE SAID PURCHASES AS WELL TO PLUG ANY LEAKAGE OF REVENUE. THEREFORE, ADDITION @10% OF DISPUTED PURCHASES I.E. RS.3,60,065/ - IS CON FIRMED AND THE BALANCE K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 17 AMOUNT OF ADDITION IS DELETED. HENCE, THE APPELLANT GETS PARTIAL RELIEF OF RS.32,40,584/ - . 7. AGAINST ABOVE ORDER ASSESSEE AND REVENUE ARE IN CROSS APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. L D. DR R ELIED UPON THE ORDERS OF THE ASSESSING OFFICER. HE SUBMITTED THAT THE PURCHASES HAVE BEEN FOUND TO BE BOGUS, HENCE HE SUBMITTED THAT ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITION. HE SUBMITTED THAT DESPITE ACCEPTING T HAT THE PURCHASES ARE BOGUS THE LD. C IT - A HAS ONLY ADDED 10% THEIR OF WHICH HAS NO JUSTIFICATION. HENCE HE SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 9. PER CONTRA THE LD. C OUNSEL OF THE ASSESSEE SUBMITTED THAT ASSESSEE IS A TRADING CONCERN. ALL THE SALES MADE BY THE ASSES SEE HAVE BEEN DULY ACCEPTED AND NO - FAULT HAS BEEN FOUND IN THE SALES RECORDED. HENCE LEARNED COUNSEL SUBMITTED THAT THERE ARE A CATENA OF DECISIONS WHERE IN IT HAS BEEN HELD BY HONBLE COURT THAT PURCHASES CANNOT BE HELD TO BE BOGUS WHEN THE CORRESPONDING SALES HAS NOT BEEN DOUBTED. LEARNED COUNSEL OF THE ASSESSEE IN THIS REGARD PLACED RELIANCE UPON FOLLOWING CASE LAWS . I) JUDGEMENT OF DHAKESHWARI COTTON MILLS LTD. SUPREME COURT OF INDIA (1995) 27 ITR 0126. K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 18 II) JUDGEMENT OF NIKUNJ EXIMP ENTERPRISES PVT. LTD. BOMABY HIGH COURT INCOME TAX APPEAL NO. 5804 OF 2010 - 372 ITR 619. III) JUDGEMENT OF ADINATH INDUSTRIES GUJRAT HIGH COURT (2001) 252 ITR 0476. IV) JUDGEMENT OF ASHOK TAIREJA (HUF) ITAT A BENCH, MUMBAI. V) JUDGEMENT OF GOOLAMALLY HASANJEE ITAT G BENCH, MUMBAI. VI) JUDGEMENT OF GANPATRAJ A SANGHAVI ITAT G BENCH, MUMBAI. VII) JUDGEMENT OF ADAMJI & CO. ITAT SMC BENCH, MUMBAI. VIII) JUDGEMENT OF H.R. MEHTA BOMBAY HIGH COURT INCOME TAX APPEAL NO. 58 OF 2001 - 378 ITR 561. 10. LD. COUNSEL FOR TH E ASSESSEE FURTHER REFERR ED TO THE DECISION OF ITAT A BENCH MUMBAI IN THE CASE OF ASHOK T ALREJA SUPRA. HE SUBMITTED THAT THE ABOVE CASE RELATES TO A SISTER CONCERN OF THE ASSESSEE OPERATING FROM THE COMMON ADDRESS. THAT THE ISSUE WAS IDENTICAL AND WAS RE LATED TO SAME SEARCH WITH RELATION TO THE SUPPLIERS. HE SUBMITTED THAT ON IDENTICAL FACTS THE ITAT HAS DELETED THE ENTIRE ADDITION. 11. LD. C OUNSEL FURTHER SUBMITTED THAT ASSESSEE HAS SUBMITTED ALL THE NECESSARY DOCUMENTS AND THE PAYMENTS WERE MADE BY K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 19 CHEQUE. THAT ADDITION HAS SOLELY BEEN MADE ON THE BASIS OF A STATEMENT OF THE SUPPLIERS. HE SUBMITTED THAT DESPITE REQUEST THE ASSESSING OFFICER HAS NOT GRANTED THE ASSESSEE AN OPPORTUNITY TO CROSS EXAMINE THEM. HENCE THE LD. C OUNSEL PLEADED THAT THE ADDIT ION IN THIS CASE HAS BEEN MADE WITHOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE AS MANDATED BY HONBLE JURISDICTIONAL HIGH COURT AND HONBLE SUPREME COURT AS MENTIONED ABOVE. HENCE LD. C OUNSEL SUBMITTED THAT THERE IS NO JUSTIFICATION FOR THE ADDITION MA DE IN THIS REGARD AND THE SAME SHOULD BE TOTALLY DELETED. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. 13. WE FIND THAT IN THIS CASE ADDITIONS HAVE BEEN MADE ON THE BASIS OF A STATEMENT OF SUPPLIERS THAT THEY WERE ONLY PROVIDIN G ACCOMMODATION BILLS. DESPITE REQUEST ASSESSEE HAS NOT BEEN GRANTED AN OPPORTUNITY TO CROSS EXAMINE THE SUPPLIERS. MOREOVER, NO ADVERSE INFERENCE HAS BEEN DRAWN AS REGARDS THE SALES MADE BY THE ASSESSEE. IN SEVERAL CASES HIGHER COURTS HAVE HELD THAT IN SU CH CASES IN ABSENCE OF ANY INFIRMITY FOUND IN THE SALES MADE PURCHASE CANNOT BE DISALLOWED. 14. IN A SIMILAR CASE ITA T A BENCH IN THE CASE OF ASHOK T ALREJA SUPRA HAS NOTED THE SUBMISSIONS AND HELD AS UNDER; K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 20 1) BEFORE US, THE DR SUPPORTED THE ORDER OF THE AO. AR STATED THAT ASSESSEE HAD PRODUCED ALL THE NECESSARY DOCUMENTS BEFORE THE AO, THE COPIES OF PURCHASE BILLS AND BANK STATEMENT, INDICATING THE PAYMENT THROUGH BANKING CHANNELS WERE FURNISHED, THAT AO HAD NOT DOUBTED THE SALES SHOWN BY THE ASSESSEE . HE RELIED UPON THE CASES OF NIKUNJ EXIM ENTERPRISES PVT. LTD. (372 ITR 619) AND GOOLARNALLY HASANJEE (ITA/3740 - 41/MUM/2012 - A.Y. 06 - 07 AND 08 - 09, DT.10.6.14). 2) WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABL E ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE INVOLVING IDENTICAL FACTS HAS ALREADY BEEN CONSIDERED AND DECIDED IN FAVOUR OF THE ASSESSEE BY THE 'G' BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF GOOLAMALLY HASSANJI (SUPRA). WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL AND SAME READS AS UNDER: I) THE ASSESSEE IS TRADER IN COTTON AND MAN - NW4E FABRICS ON RETAIL AS WELL AS WHOLESALE. THE ASSESSEE FILED RETURN OF INCOME ON 2710.2006 DECLARING TOTAL INCOME AT RS.4.68,0891/. THE S AID RETURN WAS PROCESSED U/S. 143(1) OF THE ACT AND THEREAFTER IT WAS REOPENED AND NOTICE U/S. 148 WAS ISSUED AND SERVED UPON THE ASSESSEE. THE NOTICES U/S. 143(2) AND 142(1) WERE ALSO ISSUED AND SERVED UPON THE ASSESSEE. K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 21 II) THE SURVEY OPERATION U/S. 133A WAS CONDUCTED ON THE PREMISES OF SHRI RAKESH KUMAR M. GUPTA, PROPRIETOR OF M/ S. MANO) MILLS, SHRI MOHIT R. GUPTA PROP. OF U/S. ASTHA SILK INDUSTRIES AND SMT. HEMA R. GUPTA, PROP. OF U/S. SHREE RAM SALES & SYNTHETICS, IN THE COURSE OF THE SURVEY OPERATION, IT CAME TO THE NOTICE OF THE SURVEY PARRY THAT THE AFORE STATED PERSONS WERE ENGAGED EXCLUSIVELY IN THE ACTIVITY OF ISSUING ACCOMMODATION BILLS ON WHICH THEY RECEIVED COMMISSION AT THE RATE OF 1%. IT WAS ALSO NOTICED THAT ASSESSEE IS ALSO ONE OF THE PERSO NS WHO HAD MADE PURCHASES FROM THE AFOREMENTIONED PARTIES. THE ASSESSEE WAS ASKED TO JUSTIFY HIS PURCHASES FROM THE AFOREMENTIONED PARTIES. III) THE ASSESSEE SUB MITTED BILLS WITH DELIVERY CHALLA N, THE EVIDENCE OF MAKING PAYMENT THROUGH ACCOUNT PAYEE CHEQUE . THE ASSESSEE ALSO FILED MONTHLY QUANTITATIVE STOCK RECONCILIATION. THE ASSESSEE WAS FURTHER ASKED TO EXPLAIN WHY THE BOGUS PURCHASES MADE FROM THE AFOREMENTIONED PARTIES BE NOT ADDED TO THE IN COME. IT WAS EXPLAINED BY THE A SSESSEE THAT THE STATEMENTS GIV EN BY SHRI RAKESH KUMAR M. GUPTA AND HIS FAMILY MEMBERS ARE NOT CORRECT IT WAS FURTHER EXPLAINED THAT PURCHASES AND SALES ARE DULY REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT WAS ALSO BROUGHT TO THE NOTICE OF THE AO THAT THE AFFIDAVIT OF SHRI RAK ESH KUMAR M . GUPTA AND HIS FAMILY MEMBERS WHO HAVE DENIED IN THE SAID AFFIDAVIT ABOUT THE ACTIVITY OF K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 22 ISSUANCE OF BOGUS BILLS. THE EXPLANATION OF THE ASSESSEE DID NOT FIND ANY FAVOUR FROM THE AO WHO WAS OF THE OPINION THAT THE ASSESSEE HAS AVAIL ED BOGUS BI LLS AMOUNTING TO RS. 10,59.265/ - . THE AO WENT ON TO TREAT THE PURCHASES AMOUNTING TO RS. 10.59,265 / - FROM THE SAID SHRI RAKESH KUMAR M. GUPTA AND HIS FAMILY MEMBERS AS BOGUS AND ACCORDINGLY ADDED THE SOME TO THE RETURNED INCOME OF THE ASSESSEE AND COMPLETED THE ASSESSMENT. IV) AGGRIEVED BY THIS, THE AS SESSEE CARRI ED THE MATTER BEFORE THE ID. CIT(A). BEFORE THE LD. CI T(A), THE ASSESSEE REITERATED HIS SUBMISSIONS. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS MADE BY THE ASSESSEE, THE ID. C1T(A) CAME TO THE C ONCLUSION THAT AN ADHOC ADDITION OF RS. 1,35,0001 - WHICH IS ABOUT 12.5% OF THE PURCHASE IN QUESTION WOULD MEET THE ENDS OF JUSTICE. THE 14. CI T(A) RESTRICTED THE ADDITION TO RS .1,35,000/ - V) AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. VI) THE LD. COUNSEL FOR THE ASSESSEE REITERATED THAT THE AO HAS GROSSLY ERRED IN TREATING THE PURCHASES AS BOGUS PURCHASE. IT IS THE SAY OF THE ID. COUNSEL THAT THE LAD. CIT (A) FURTHER ERRED IN MAKING AN ADHOC DISALLOWANCE WHICH HAS NO BASIS. VII) PER CONTRA, THE LD . DR RE LI ED UPON THE FINDINGS OF THE AO . VIII) WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE ENTIRE ADDITION HAS BEEN MADE ON THE STATEMENT OF K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 23 ONE SHRI RAKESH KUMAR M . GUPTA AND HIS FAMILY MEMBERS. IT IS THE ALLEGATION OF THE REVENUE THAT THE SAID FAMILY MEMBERS WERE ISSUING ACCOMMODATI ON BILLS TO THE ASSESSEE. THE AO ACCORDINGLY WENT ON TO TREAT THE ENTIRE PURCHASES AS BOGUS PURCHASES. HOWEVER, WE FIND THAT THE SALES MADE BY THE ASSESSEE HAVE BEEN ACCEPTED. IT IS AN ELEMENTARY RULE OF ACCOUNTANCY AS WELL AS TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM SALES, OTHERWISE IT COU LD AMOUNT TO LEVY OF INCOME - TA X ON GROSS RECEIPTS OR ON SALES. WE FURTHER FIND THAT THE AU HAS NOT COMMENTED UPON THE RETRA CTION MADE BY SHRI RAKESH KUMAR M . GUPTA AND HIS FAMILY MEMBERS. WE NOTICED THAT THE SAID RETRACTION WAS MADE BY FILING AN AFFIDAVIT. NOTHING HAS BEEN BROUGHT ON RECORD EXCEPT FOR THE STATEMENT OF SHRI RAKESH KUMAR M . GUPTA WHICH CO ULD SUGGEST THAT THE PURCHASES MADE BY THE ASSESSEE ARE BOGUS. IX) CONSIDERING THE ENTIRE FACTS IN TOTALITY AND KEEPING IN MIND THAT NO ADVERSE INFERENCE HAS BEEN DRAWN SO FAR AS SALES ARE CONCERNED, WE DO NOT FIND ANY REASON FOR MAKING ANY DISALLOWANCE ON THIS ACCOUNT THE ADHOC A DDITION SUSTAINED BY THE LD. CIT (A) IS ALSO WITHOUT ANY BASIS AND THE SAME IS DELETED.' X) WE FURTHER FIND THAT IN THE CASE OF JEETENDRA HARSHAD KUMAR TEXTILES (ITA/771 & 2211/MUM/2011 DATED 21 - 11 - 2012), SIMILAR ISSUE WAS DECIDED I N FAVOUR OF THE ASSESSEE, THAT THE K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 24 DECISION OF THE TRIBUNAL IN THE CASE OF JEETENDRA HARSHAD KUMAR TEXTILES WAS SUBSEQUENTLY FOLLOWED BY THE TRIBUNAL TO DECIDE A SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF M/S PRAMIT TEXTILES (I TA/3948 TO 3953/ MUM/2012 AND ITA/4012 TO 4015 AND 40 20 TO 4021/ MUM/2012 DATED 01.10.2013) AND NEETA TEXTILES(ITA/6138 - 40/MUM/201 3, DTD. 27.05.2015). IN THE CASES OF ASHISH JOBANPUTRA (ITA NO.2566/MUM / 2013 ). IN THE CASE OF NIKUNJ EXIM (SUPRA)THE HON'BLE BOMBAY HIGH COURT HAS DEALT THE ISSUE OF BOGUS PURCHASES AND CORRESPONDING SALES AS UNDER: - WE HAVE CONSIDERED THE SUBMISSION ON BEHALF OF THE REVENUE. HOWEVER, FROM THE ORDER OF THE TRIBUNAL DATED APRIL 30 TH , 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 RE SPONDENT 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. F URTHER, 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 K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 25 BECAUSE THE SUPPLIERS HAVE NOT APPEAR ED 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 INCOME - TAX (APPEALS) HAVE DISALLOWED THE DEDU CTION 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 TH , 2010, OF THE TRIBUNAL. ' THERE IS NO DOUBT THAT THE AO HAD ACCEPTED THE GENUINENESS OF SALES MADE BY THE ASSESSEE. HE HAD NO T MADE ANY EFFORT TO MAKE FURTHER INVESTIGATION TO SUBSTANTIATE HIS ALLEGATIONS WITH REGARD TO NON - GENUINENESS OF THE PURCHASES. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE FAA WAS NOT JUSTIFIED IN PARTLY UPHOLDING T HE ADDITIONS. FOLLOWING THE ABOVE MENTIONED DECISIONS OF THE TRIBUNAL AND THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 26 15. SINCE THE ISSUE INVOLVED IN PRESENCE CASE IN IDENTICAL TO THE ONE DEA L T W ITH BY THE TRIBUNA L AS ABOVE , ADHERING TO THE DOCTRINE OF STARE DECISIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT - A . 16 . A S REGARDS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE BY DENYING THE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE TH E PERSON ON WHOSE BASIS/STATEMENT ADDITIONS WAS MADE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF H R M EH TA ( SUPRA ) HAS EXPOUNDED THAT REVENUE WAS NOT JUSTIFIED IN MAKING ADDITIONS AT THE TIME OF REASSESSMENT WITHOUT HAVING FIRST GIVING THE ASSESSEE AN OPPORTUNITY TO CROSS EXAMINE THE DEPONENT UNDERSTATEMENT RELIED UPON BY THE ASSESSING OFFICER. FURTHER THE DECISION FROM THE HONBLE APEX COURT IN THE CASE OF KISHANCHAND CHILLARAM ( SUPRA ) RELIED UPON BY LD. CIT - A IS ALSO GERMANE HERE. IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT WE FIND TH AT THE ADDITIONS IN THIS CASE ARE NOT JUSTIFIED . HENCE WE SET ASIDE THE ORDER'S OF AUTHORITIES BEL OW AND DELETE THE ADDITION. K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 27 IN THE RESULT THE APPEAL S FILED BY THE REVENUE STANDS DISMISSED AND THE APPEALS FILED BY THE ASSESSEE STAND ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 07.03.2017 SD/ - SD/ - RAVISH SOOD SHAMIM YAHIYA JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 07.03.2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . OPY BY ORDER NISHANT VERMA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI K. ASHOK KUMAR & CO. ITA NO.6665, 6239, 6666, 6240, /MUM./2013 ITA NO. 3391, 4630/MUM./2014 28