SUMIT M. MALHOTRA, KALYAN V. ITO 3(4), MUMBAI

ITA 6697/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9166 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 15-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Bogus purchase; Question of law; Tangible material; Accommodation entries; Reason to believe
• Section: 133(6); 147; 148; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , A M AND SHRI SANDEEP GOSAIN , J M ./ I.T.A. NO S . 6697 & 6698 /MUM/2016 ( / ASSESSMENT YEAR S : 2009 - 10 & 2 010 - 11 ) MR. SUMIT M. MALHOTRA C/O. M/S. S. M. STEEL TRADERS 702, A WING, ARCHIES APARTMENT, OAK BAUG, NEAR RAILWAY STATION, KALYAN (W) 421 301 / VS. INCOME - TAX OFFICER 3(4), RANI MANSION, 2 ND FLOOR, MURBAD ROAD, KALYAN (W) 421 301 ./ ./ PAN/GIR NO. AAYPM 8541 J ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI V. JUSTIN / DATE OF HEARING : 16.08.2017 / DATE OF PRONOUNCEMENT : 16.10. .2017 / O R D E R PER SHAMIM YAHYA , A. M.: T H E S E APPEAL S BY THE ASSESSEE ARE DIRECTED AGAINST COMMON ORDER OF LEARNED CIT ( A ) DATED 16.08.2016 AND PERTAIN TO ASSESSMENT YEAR S 2009 - 10 AND 2010 - 11. 2. S INCE, COMMO N G ROUNDS HAVE BEEN RAISED AGAINST THE COMMON ORDER OF LEARNED C1T ( A ) , THESE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 ITA NO S . 6697 & 6698/M / 16 (A.YS.09 - 10 & 10 - 11) MR. SUMIT M. MALHOTRA VS. I TO 3. FIRST ISSUE RAISED IS THAT THE REOPENING WAS NOT JUSTIFIED. 4. SECOND ISSUE RAISED IS THAT LD. CIT ( A ) ERRED IN SUSTAINI NG DISALLOWANCE OF 12.5 % PERCENT OF BOGUS PURCHASE . 5 . B RIEF FACTS OF THE CASE ARE AS UNDER : S INCE FACTS ARE SIMILAR WE ARE CONSIDERING FACTS AGAIN FIGURES FROM ASSESSMENT YEAR 2009 - 10. I N THIS CASE , THE ASSESSEE I S ENGAGED IN THE BUSINESS OF TRADING OF M.S. BEAMS, ANGLES, CHANNELS AND SCRAP IN THE NAME OF HIS PROPRIETARY CONCERN M/S. S.M. STEEL TRADERS. DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HAD SHOWN TOTAL TURNOVER OF RS.1,45,32,877 / - ON WHICH GROSS PROFIT AND NET PROFIT OF RS. 4,32,437/ - & RS. 2,14,347/ - WAS SHOWN GIVING THE GROSS PROFIT AND NET PROFIT RATIO OF 2.98% AND 1.47% RESPECTIVELY. INFORMATION HAD BEEN RECEIVED BY THE AO FROM THE SALES - TAX DEPARTMENT, MAHARASHTRA TO THE EFFECT THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF TRANSAC TIONS WITH HAWALA DEALERS. THE ASSESSEE HAD SHOWN PURCHASES AMOUNTING TO RS.1,08,91,612 / - FROM THE FOLLOWING PARTIES - SR. NO. NAME OF HAWALA DEALER TIN OF HAWALA DEALER PAN OF HAWALA DEALER AMOUNT OF BILL 1 VITRAG TRADING CO. 27830385697V AAF F V20 04C 36,15,641 / - 2 SAMPARK STEELS 27170360840V ABAFS4806M 36,60,863 / - 3 PRAYAN TRADING CO. 27740535951V AAISP6755D 36,15,108 / - TOTAL 1,08,91,612 / - 3 ITA NO S . 6697 & 6698/M / 16 (A.YS.09 - 10 & 10 - 11) MR. SUMIT M. MALHOTRA VS. I TO THE NAMES OF THESE PARTIES WERE APPEARING IN THE LIST OF HAWALA DEALERS AS SUPPLIED B Y THE SALES - TAX DEPARTMENT OF MAHARASHTRA. THE HAWALA DEALERS HAD ADMITTED BEFORE THE SALES - TAX AUTHORITIES IN THEIR STATEMENT 7 AFFIDAVIT THAT THEY WERE PROVIDING ONLY ACCOMMODATION BILLS WITHOUT THERE BEING ANY ACTUAL PURCHASE 7 SALE OF GOODS. THOUGH THE PAYMENT WAS RECEIVED BY THE SAID PARTIES FROM THEIR CUSTOMERS THROUGH BANKING CHANNELS, HOWEVER, AFTER CLEARING OF THE CHEQUES CASH WAS WITHDRAWN AND HANDED OVER TO THE CUSTOMERS AFTER DEDUCTION OF NOMINAL COMMISSION CHARGES. THE AO ISSUED NOTICE U/S. 148 OF THE I.T. ACT DATED 27.05.2013 TO THE ASSESSEE FOR RE - OPENING OF THE ASSESSMENT PROCEEDINGS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE AO ASKED THE ASSESSEE TO FILE DOCUMENTARY EVIDENCE TO ESTABLISH THE GENUINENESS OF THE PURCHASES LIKE COPY OF P URCHASE BILLS, TRANSPORTATION AND OCTROI PAYMENT RECEIPTS AS WELL AS STOCK REGISTER. THE ASSESSEE WAS ALSO ASKED TO FILE DETAILS OF MODE OF PAYMENT AND ALSO TO ESTABLISH THAT THE GOODS HAD ACTUALLY BEEN RECEIVED AT HIS PREMISES. THE ASSESSEE WAS ABLE TO FI LE COPIES OF PURCHASE BILLS AND LEDGER ACCOUNT OF TRANSPORTATION CHARGES WHICH WERE PAID IN CASH AND WERE SUPPORTED BY SELF MADE VOUCHERS. THE ASSESSEE ALSO FILED COPI ES OF SOME OCTROI RECEIPTS. THE A.O. ISSUED NOTICE U/S. 133(6) OF THE IT. ACT TO THE ABOV E LISTED PARTIES WHICH WERE RECEIVED BACK UNSERVED WITH THE REMARK 'LEFT / NOT KNOWN'. ON BEING ASKED TO PRODUCE THESE PARTIES BEFORE THE AO FOR VERIFICATION, THE ASSESSEE FAILED TO DO SO. FOR ALL THESE REASONS THE AO HELD THAT THE ASSESSEE HAD NOT BEEN AB LE TO ESTABLISH THE GENUINENESS OF THE PURCHASES SHOWN FROM 4 ITA NO S . 6697 & 6698/M / 16 (A.YS.09 - 10 & 10 - 11) MR. SUMIT M. MALHOTRA VS. I TO THE ABOVE LISTED THREE PARTIES AND THEREFORE MADE ADDITION OF RS.1,08,91,612/ - TO THE ASSESSEES INCOME ON ACCOUNT OF UNPROVED PURCHASES. 6 . A GAINST THE ABOVE ORDER , THE ASSESSEE APPEALED BEFORE THE L D . CIT ( A ) WHO CONF I RMED THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF 12.5% OF THE BOGUS PURCHASE. THE LD. CIT ( A ) HELD AS UNDER: 8. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISSIONS, OBSERVATIONS OF THE AO IN THE ASSESSMENT O RDER AND THE FACTS OF THE CASE. THE APPELLANT HAD S HOWN PURCHASES AMOUNTING TO RS. 1,08,91,612 / - FROM THE ABOVE LISTED THREE PARTIES WHICH WERE APPEARING IN THE LIST OF HAWALA DEALERS AS PER INFORMATION RECEIVED FROM THE SALES - TAX AUTHORITIES OF MAHARASHTRA GOV ERNMENT. THE HAWALA DEALERS HAD ADMITTED BEFORE THE SALES - TAX AUTHORITIES IN THEIR STATEMENT 7 AFFIDAVIT THAT THEY WERE PROVIDING ONLY ACCOMMODATION BILLS WITHOUT T HERE BEING ANY ACTUAL PURCHASE / SALE OF GOODS. THOUGH THE PAYMENT WAS RECEIVED BY THE SAID PARTIES FROM THEIR CUSTOMERS THROUGH BANKING CHANNELS, HOWEVER, AFTER CLEARING OF THE CHEQUES CASH WAS WITHDRAWN AND HANDED OVER TO THE CUSTOMERS AFTER DEDUCTION OF NOMINAL COMMISSION CHARGES. ON BEING ASKED TO ESTABLISH THE GENUINENESS OF THE PURCHASES FROM THE ABOVE LISTED PARTIES, THE APPELLANT WAS ABLE TO FILE COPIES OF PURCHASE BILLS, COPY OF LEDGER ACCOUNT OF THE PARTIES AND COPY OF THE APPELLANT'S BANK ACCOUNT TO SHOW THAT THE PAYMENT TO THE SAID PARTIES HAD BEEN MA DE THROUGH BANKING CHAN NELS. THE APPELLANT WAS NOT ABLE TO FILE DOCUMENTARY EVIDENCE TO ESTABLISH THE MOVEMENT OF THE GOODS FROM THE PREMISES OF THE SAID PARTIES TO THE APPELLANT'S BUSINESS PREMISES. THE NOTICES SENT TO THESE PARTIES U/S. 133(6) OF THE I.T. ACT BY THE AO HAD BEE N RECEIVED BACK UNSERVED WITH THE REMARK 'LEFT / NOT KNOWN'. ON BEING ASKED TO PRODUCE THESE PARTIES BEFORE THE AO FOR VERIFICATION, THE APPELLA NT FAILED TO DO SO. IT IS THEREFORE HELD THAT THE APPELLANT HAD FAILED TO ESTABLISH THE GENUINENESS OF PURCHASES FROM THE ABOVE LISTED THREE PARTIES. THEREFORE, THE BOOKS OF ACCOUNTS OF THE APPELLANT WERE NEITHER COMPLETE NOR RELIABLE AND THE AO THEREFORE, HAD RIGHTLY REJECT ED THE SAME U/S. 145(3) OF THE I.T. ACT. 9. HOWEVER IT IS ALSO TRUE THAT IF THE SALES WERE THERE, PURCHASES HAVE TO BE THERE AS WELL AS HELD BY THE IT AT, BOMBAY BENCH 'B' IN THE CASE OF BALAJI TEXTILE INDUSTRIES PVT. LTD. IN COL. NO. 28(A) OF THE AUDIT REPORT, THE APPELLANT HAS FILED QUANTITATIVE DETAILS OF OPENING STOCK, PURCHASES, SA LES AND CLOSING STOCK OF VARIOUS ITEMS TRADED BY THE APPELLANT. THIS INFORMATION HAS BEEN FILED 5 ITA NO S . 6697 & 6698/M / 16 (A.YS.09 - 10 & 10 - 11) MR. SUMIT M. MALHOTRA VS. I TO AS PER ANNEXURE - 4 OF THE AUDIT REPORT AND WAS ALSO FILED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THIS INFORMATION SHOWS THAT THE GOODS WE RE ACTUALLY PURCHASED RESULTING IN SUBSEQUENT SALE. HOWEVER, IT COULD NOT BE ESTABLISHED THAT THE GOODS HAD BEEN PURCHASED FROM THE PARTIES LISTED ABOVE. IN VIEW OF THE DETAILED FACTS OF THE APPELLANT'S CASE AS DISCUSSED ABOVE, IT IS SEEN THAT THE APPELL ANT COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASE TRANSACTIONS WITH THE PARTIES LISTED ABOVE. THEREFORE, THE ONLY INFERENCE THAT CAN BE DRAWN IN THIS CASE IS THAT THE APPELLANT HAD MADE PURCHASES IN THE OPEN MARKET AND HAD ONLY OBTAINED BILLS FROM TH E HAWALA DEALERS. IN THIS PROCESS THE APPELLANT WOULD HAVE SAVED ON THE SALES - TAX / VAT AND ENHANCED HIS PROFIT BY INFLATING THE PURCHASES. THEREFORE A SUITABLE DISALLOWANCE IS REQUIRED TO BE MADE ON ACCOUNT OF UNPROVED PURCHASES AFTER REJECTING THE APPELL ANT'S BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. IN THIS REGARD IT IS SEEN THAT IN THE CASE OF CIT VS SIMIT P. SHETH, 356 ITR 451, HON'BLE GUJRAT HIGH COURT UPHELD A DISALLOWANCE OF 12.5% OF SUCH UNPROVED PURCHASES AFTER HOLDING AS UNDER IN THE PRESENT CAS E, CIT BELIEVED THAT WHEN AS A TRADER IN STEEL THE ASSESSEE SOLD CERTAIN QUANTITY OF STEEL, HE WOULD HAVE PURCHASED THE SAME QUANTITY FROM SOME SOURCE. WHEN THE TOTAL SALE IS ACCEPTED BY THE ASSESSING OFFICER, HE COULD NOT HAVE QUESTIONED THE VERY BASIS OF THE PURCHASES. IN ESSENCE THEREFORE, THE COMMISSIONER (APPEALS) BELIEVED ASSESSEES THEORY THAT THE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM THE PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNTS. THAT BEING THE POSITION, NOT THE ENTIRE PURCHA SE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. SO MUCH IS CLEAR BY DECISION OF THIS COURT. IN PARTICULAR, COURT HAS ALSO TAKEN A SIMILAR VIEW IN CASE OF COMMISSIONER OF INCOME TAX - IV VS. VIJAY M MISI RY CONSTRUCTION LTD. VIDE ORDER DATED 10.01.2011 PASSED IN TAX APPEAL NO. 1090 OF 2009 AND IN CASE OF COMMISSIONER OF INCOME TAX - I VS. BHOLANATH POLY FAB PVT. LTD. VIDE ORDER DATED 23.10.2012 PASSED IN TAX APPEAL NO. 63 OF 2012. THE VIEW TAKEN BY THE TRIBU NAL IN CASE OF VIJAY PROTEINS PVT. LTD. VS. CIT REPORTED IN 58 ITD 428 CAME TO BE APPROVED. THIS BEING THE POSITION, THE ONLY QUESTION THAT SURVIVES IS WHAT SHOULD BE THE FAIR PROFIT RATE OUT OF THE BOGUS PURCHASES WHICH SHOULD BE ADDED BACK TO THE INCOME OF THE ASSESSEE. THE COMMISSIONER ADOPTED RATIO OF 30% OF SUCH TOTAL SALES. THE TRIBUNAL, HOWEVER, SCALED DOWN TO 12.5%. WE MAY NOTICE THAT IN THE IMMEDIATELY PRECEDING YEAR TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARED GROSS PROFIT @ 6 ITA NO S . 6697 & 6698/M / 16 (A.YS.09 - 10 & 10 - 11) MR. SUMIT M. MALHOTRA VS. I TO 3.56% OF THE TOTAL TURNOVER. IF THE YARDSTICK OF 30%, AS ADOPTED BY THE COMMISSIONER, IS ACCEPTED GP RATE WILL BE MUCH HIGHER. IN ESSENCE , THE TRIBUNAL ONLY ESTIMATED THE POSSIBLE PROFIT OUT OF PURCHASES MADE THROUGH NON - GENUINE PARTIES. NO QUESTION OF LAW IN SUCH ESTIMATION WOULD ARISE. THE ESTIMATION OF RATE OF PROFIT RETURN MUST NECESSARILY VARY WITH THE NATURE OF BUSINESS AND NO M UNIFORM YARDSTICK CAN BE ADOPTED. 10. AS THE APPELLANT IS ENGAGED IN THE BUSINESS OF TRADING IN M.S. BEAMS, ANGLES, CHA NNELS ETC., RELYING ON THE DECISION OF HON'BLE GUJRAT HIGH COURT IN THE CASE OF SMITH P. SETH (SUPRA) DISALLOWANCE ON ACCOUNT OF UNPROVED PURCHASES IS RESTRICTED TO RS.13,61,451/ - BEING 12.5% OF THE UNPROVED PURCHASE AMOUNT OF RS. 1,08,91,6127 - . THE AO IS D IRECTED ACCORDINGLY. 11 . THE FACTS OF THE APPELLANT'S CASE FOR A.Y. 2010 - 11 ARE SIMILAR TO THE FACTS OF THE A.Y. 2009 - 10 AS DISCUSSED ABOVE. THEREFORE, THE DISALLOWANCE ON ACCOUNT OF UNPROVED PURCHASES FOR THIS YEAR IS ALSO RESTRICTED TO RS. 6,59,7927 - B EING 12.5% OF THE UNPROVED PURCHASE AMOUNT OF RS. 52,78,3387 - . 12. IN RESULT, BOTH THE APPEALS OF THE APPELLANT ARE PARTLY ALLOWED. 7 . AGAINST THE ABOVE ORDER OF LEARNED CIT ( A ), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 8 . WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE. H E NC E , THESE APPEALS ARE BEING DISPOSED OF BY HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSING THE RECORDS. 9 . THE FIRST COMMON ISSUE RAISED PERTAINS TO THE V ALIDITY OF REOPENING. THIS ISSUE WAS NEVER RAISED BEFORE THE LEARNED CIT - A. ASSESSEE HAS ALSO PARTICIPATED IN THE ASSESSMENT PROCEEDINGS AS WELL AS PROCEEDINGS BEFORE THE LEARNED CIT - A WITHOUT CHALLENGING THE VALIDITY OF REOPENING. 7 ITA NO S . 6697 & 6698/M / 16 (A.YS.09 - 10 & 10 - 11) MR. SUMIT M. MALHOTRA VS. I TO 10 . WE FIND THAT TANGIB LE AND COGENT INCRIMINATING MATERIAL WERE RECEIVED BY THE AO WHICH CLEARLY SHOWED THAT THE ASSESSEE WAS BENEFICIARY OF BOGUS PURCHASE ENTRIES FROM BOGUS ENTRY PROVIDERS WHICH FORMED THE REASON TO BELIEVE BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THE IN FORMATION SO RECEIVED BY THE AO HAS LIVE LINK WITH REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. ON THESE INCRIMINATING TANGIBLE MATERIAL INFORMATION, ASSESSMENT WAS REOPENED. AT THIS STAGE THERE HAS TO BE PRIMA FACIE BELIEF BASED ON SOME TANGIBLE AND MATERIAL INFORMATION ABOUT ESCAPEMENT OF INCOME AND THE SAME IS NOT REQUIRED TO BE PROVED TO THE H ILT. IN THIS REGARD, I REFER TO THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT(A) VS. RAJESH JHAVERI STOCK BROKERS P. TD, 291 ITR 500: - 'SECTI ON 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO LAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CA USE OR JUSTIFICATION. IF THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE (HAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOULD H AVE FINALLY ASCERTAINED THE FACT BY LEGA/ STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANAGNESE ORE CO, ITD. V. ITO(1991) 191 ITR 662, FOR INITIAT ION OF ACTION UNDER SECTION 147(A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIAT ION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISIT E BELIEF WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE AO IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO, (P.) LTD. (19 96) 217 ITR 597 (SUPREME COURT): RAYMOND WOOLLEN MILLS LTD. V. ITO 8 ITA NO S . 6697 & 6698/M / 16 (A.YS.09 - 10 & 10 - 11) MR. SUMIT M. MALHOTRA VS. I TO (1999)236 ITR 34 (SUPREME COURT). 1 1 . THE ABOVE DISCUSSION AND PRECEDENT FROM APEX COURT FULLY JUSTIFY THE VALIDITY OF REOPENING IN THIS CASE. ACCORDINGLY, WE UPHOLD THE VALIDITY OF REOPEN ING. 1 2 . AS REGARDS THE MERITS OF THE CASE , WE FIND THAT CREDIBLE AND COGENT INFORMATION WAS RECEIVED IN THIS C ASE BY THE ASSESSING OFFICER THAT CERTAIN ACCOMMODATION ENTRY PROVIDER/BOGUS SUPPLIERS WERE BEING USED BY CERTAIN PARTIES TO OBTAINED BOG US BILLS. A SSESSEE WAS FOUND TO HAVE TAKEN ACCOMMODATION ENTRY/BOGUS PURCHASE BILLS DURING THE CONCERNED ASSESSMENT YEAR FROM DIFFERENT PARTIES. BASED UPON THIS INFORMATION ASSESSMENT WAS REOPENED. THE CREDIBILITY OF INFORMATION RELATING TO REOPENING REMAI NED UN - ASSAILED BEFORE THE LEARNED CIT - A. IN SUCH FACTUA L SCENARIO , THE ASSESSING OFFICER HAS MADE THE NECESSARY ENQUIRY. THE ISSUE OF NOTICE TO ALL THE PARTIES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY CONFIRMATION FROM ANY OF THE PARTY. ASSESSEE HAS ALSO NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NECESSARY EVIDENCE RELATING TO TRANSPORTATION OF THE GOODS WAS ALSO NOT ON RECORD. IN THIS FACTUAL SCENARIO IT IS AMPLY CLEAR THAT ASSESSES HAS OBTAINED BOGUS PURCHASE BILLS. MERE PREPAR ATION OF DOCUMENTS FOR PURCHASES CANNOT CONTROVERT OVERWHELMING EVIDENCE THAT THE PROVIDER OF THESE BILLS ARE BOGUS AND NON - EXISTENT. 1 3 . THE S ALES T AX DEPARTMENT IN ITS ENQUIRY HAVE FOUND THE PARTIES TO BE PROVIDING BOGUS ACCOMMODATION ENTRIES. THE ASSES SING OFFICER ALSO ISSUED NOTICES TO THESE PARTIES AT THE ADDRESSES PROVIDED BY THE ASSESSEE. ALL THESE NOTICES HAVE RETURNED UNSERVED. ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE PARTIES. NEITHER THE 9 ITA NO S . 6697 & 6698/M / 16 (A.YS.09 - 10 & 10 - 11) MR. SUMIT M. MALHOTRA VS. I TO ASSESSEE HAS BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THESE PARTIES. IN SUCH CIRCUMSTANCES THERE IS NO DOUBT THAT THESE PARTIES ARE NON - EXISTENT. THE P URCHASE BILLS FROM THESE NON - EXISTENT THE/BOGUS PARTIES CANNOT BE TAKEN AS COGENT EVIDENCE OF PURCHASES. IN LIGHT OF THE OVERWHELMING EVIDENCE THE REVENUE AUTHORITIES CANNOT PUT UPON BLINKERS AND ACCEPT THESE PURCHASES AS GENUINE. THIS PROPOSITION IS DULY SUPPORTED BY HONBLE APEX COURT DECISION IN THE CASE OF SUMATI DAYAL 214 ITR 801 AND DURGA PRASAD M ORE 82 ITR 540. IN THE PRESENT CASE , THE ASSESSEE WANTS THAT THE UNASSAILABLE FACT THAT THE SUPPLIERS ARE NON - EXISTENT AND THUS BOGUS SHOULD BE IGNORED AND ONLY THE DOCUMENTS BEING PRODUCED SHOULD BE CONSIDERED. THIS PROPOSITION IS TOTALLY UNSUSTAINABLE IN LIGHT OF ABOVE APEX COURT DECISIONS. 1 4 . WE FURTHER F IND THAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ E NTERPRISES HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES WHEN THE SALES HAVE NOT BEEN DOUBTED. HOWEVER , THE FACTS OF THAT CASE WERE DIFFERENT . F URTHERMORE , THE SALES IN THAT CASE WERE BASICALL Y TO GOVERNMENT DEPARTMENTS. HENCE , THE RATIO FROM THIS DECISION IS NOT APPLICABLE ON THE FACTS OF THE CASE. 1 5 . IN THESE CIRCUMSTANCES , THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO HONBLE GUJARAT HIGH COURT DECISION IN THE CASE OF T AX A PPEAL N O . 240 OF 2003 IN THE C ASE OF N K INDUSTRIES VS. DY CIT , ORDER DT 20 . 06.2016, WHEREIN 100% OF THE BOGUS PURCHASES WAS HELD TO BE ADDED IN THE HANDS OF THE ASSESSEE AND TRIBUNALS RESTRICTION OF THE ADDITION TO 25% OF THE BOGUS PURCHASES WAS SET ASIDE. IT WAS 10 ITA NO S . 6697 & 6698/M / 16 (A.YS.09 - 10 & 10 - 11) MR. SUMIT M. MALHOTRA VS. I TO EXPOUNDED THAT WHEN PURCHASE BILLS HAVE BEEN FOUND TO BE BOGUS 100% DISALLOWANCE WAS REQUIRED. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER ALONG WITH OTHERS HAS BEEN DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DT 16.1 . 2017. 1 6 . WE FURTHER NOTE TH AT HONBLE RAJASTHAN HIGH COURT HAS SIMILARLY TAKEN NOTE OF DECISIONS OF THE APEX COURT ON THE ISSUE OF BOGUS PURCHASES IN THE CASE OF CIT JAIPUR VS SHRUTI GEMS IN ITA NO. 658 OF 2009. THE HONBLE HIGH COURT HAS REFERRED TO THE DECISION OF C IT JAIPUR VS. A DITYA GEMS, D. B. IN ITA NO. 234 OF 2008 DATED 0 2 . 11 . 2016, WHEREIN THE HONBLE COURT HAD INTER ALIA HELD AS UNDER: ' CONSIDERING T HE LAW DECLARED BY THE SUPREME CO URT IN THE CA SE OF VIJAY PROTEINS LTD. VS. COMMISSIONER OF INCOME TAX, SPECIAL LEAVE TO APP EA L (C) NO.8956/2015 DECIDED ON 06.04.2015 WH EREBY THE SUPREME COURT HAS DISMISSED THE SLP CONFIRMED THE ORDER DATED 09.12.2014 PASSED BY THE GUJARAT HIGH COURT AND OTHER DECISIONS OF THE HIGH COURT OF GUJARAT IN THE CASE OF SANJAY OILCAKE INDUSTRIES VS. COM MISSIONER OF INCOME TAX (2009) 316 ITR 274 (GUJ) AND N.K. INDUSTRIES LTD. VS. DY. C.I.T., TAX APPEAL NO.240/2003 DECIDED ON 20.06.2016, THE PARTIES ARE BOUND BY THE PRINCIPLE OF LAW PRONOUNCED IN THE AFORESAID THREE JUDGMENTS. 1 7 . HOWEVER , WE NOTE THAT THIS IS NOT AN APPEAL BY THE R EVENUE. HENCE , IT WILL NOT BE APPROPRIATE TO TAKE AWAY THE RELIEF ALREADY GRANTED BY THE REVENUE TO THE ASSESSEE. HENCE , WE CONFIRMED THE ORDER OF LEARNED CIT ( A ). 1 8 . IN THE RESULT , TH E S E APPEAL S FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.10.2017 SD/ - SD/ - ( SANDEEP GOSAIN ) (S HAMIM YAHYA ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 16.10.2017 11 ITA NO S . 6697 & 6698/M / 16 (A.YS.09 - 10 & 10 - 11) MR. SUMIT M. MALHOTRA VS. I TO . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI