Pradeep Kisanlal Boob, Nashik V. Joint Commissioner of Income-tax,

ITA 691/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9200 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Principle of natural justice
• Section: 143(3); 14A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 660 /P U N/201 5 / ASSESSMENT YEAR : 20 10 - 11 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1, NASHIK . / APPELLANT VS. SHRI PRADEEP KISANLAL BOOB, PROP. K.R. BOOB & SONS, P - 8, MIDC, AMBAD, NASHIK . / RESPONDENT PAN: A BRPB9542Q . / ITA NO. 691 /P U N/201 5 / ASSESSMENT YEAR : 20 10 - 11 SHRI PRADEEP KISANLAL BOOB, PROP. K.R. BOOB & SONS, P - 8, MIDC, AMBAD, NASHIK . / APPELLANT PAN: ABRPB9542Q VS. THE JT. COMMI SSIONER OF INCOME TAX, RANGE 1, NASHIK . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI AJAY MODI / DATE OF HEARING : 2 9 .0 6 . 2017 / DATE OF PRONOUNCEMENT: 14 . 0 7 .201 7 ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 2 / O RDER PER SUSHMA CHOWLA, J M : TH E CROSS APPEAL S FILED BY THE REVENUE AND THE ASSESSEE ARE AGAINST THE ORDER OF CIT (A) - I, NASHIK , DATED 11.03.2015 RELATING TO ASSESSMENT YEAR 20 10 - 11 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE REVENUE IN ITA NO.660/PUN/2015 HAS RAISED THE FOLLOWING GROUND OF A PPEAL : - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(A) - I, NASHIK WAS JUSTIFIED IN GIVING A RELIEF OF RS.59,11,376/ - ON ACCOUNT OF BOGUS PURCHASES. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(A) - I, NASHIK WAS JUSTIFIED IN TREATING A SUM EQUIVALENT TO 30% OF THE TOTAL BOGUS PURCHASES I.E. RS.9,00,18,739/ - BE TAKEN AS PROFIT OF THE APPELLANT FOR A.Y. 2010 - 11 ON ACCOUNT OF BOGUS/HAWALA PURCHASES. 3. THE LEARNED CIT(A) - I, NASHIK OUGHT TO HAVE UPHELD THE ORDER OF THE AO AMOUNTING TO RS.3,29,16,997/ - (I.E. RS.1,24,34,570/ - AND RS.2,04,82,427/ - ON ACCOUNT OF BOGUS PURCHASES FROM M/S. SIDDHIVINAYAK CORPORATION AND M/S. NEPTUNE CORPORATION RESPECTIVELY) PASSED UNDER SEC. 143( 3) OF THE IT ACT, 1961 PASSED BY THE ASSESSING OFFICER JT. CIT, RANGE - 1, NASHIK. 4. THE LEARNED CIT(A) - I, NASHIK SHOULD HAVE ENHANCED RS.5,77,82,593/ - ON ACCOUNT OF BOGUS/HAWALA PURCHASES CONFIRMED BY AS PER THE SALES TAX ORDER IN RESPECT OF M/S. ARIHANT PETROCHEM RS.3,96,42,881/ - AND M/S. JINESHWAR TRADE RS.1,81,39,712/ - . 5. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNED CIT(A) BE VACATED AND THAT OF THE ASSESSING OFFICER ACIT, CIRCLE - 1, NASHIK BE RESTORED. ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 3 4. THE ASSESSEE IN ITA NO.691/PUN/2015 HA S RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT(APPEAL) - 1 , NASHIK, HAS ERRED IN CONFIRMING THE ADDITION TO THE TUNE OF RS.2,70 , 05 621/ - WHICH IS WORKED OUT AS 30 % OF PURCHASES MADE FROM THE FOLLOWING PARTIES, BY DISREGARDING APPELLANTS CONTENTION . I. M/S SIDDHIVINAYAK CORPORATION R S. 1 , 17 , 53 , 719/ - II. M/S NEPTUNE CORPORATION R S. 2 , 04 , 82 , 427/ - III. M/S ARIHANT PETROCHEM RS . 3 , 96 , 42 , 881/ - IV. M/S JINESHWAR TRADE R S. 1 , 81 , 39 , 712/ - TOTAL RS 9 , 00 , 18 , 739/ - 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT HAS ERRED IN CONSIDERING THE PURCHASES MADE FROM 'M/S SIDDHIVINAYAK CORPORATION', 'M/S NEPTUNE CORPORATION', 'M/S ARIHANT PETROCHEM', AND 'M/S JINESHWAR TRADE', AS BOGUS PURCHASES BY COMPLETELY DISREGARDING APPELLANTS DETAILED SUBMISSION AND QUANTITATIVE RECO NCILIATION SUBMITTED BY THE APPELLANT AND THEREBY VIOLATED THE PRINCIPLE OF NATURAL JUSTICE . THEREFORE, THIS ACTION NEEDS TO BE QUASHED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT HAS ERRED IN CONSIDERING THE PURCHA SES AS BOGUS PURCHASES FROM ADDITIONAL TWO PARTIES VIZ , @ARIHANT PETROCHEM' AND 'JINESHWAR TRADE', ESPECIALLY IN VIEW OF THE FACT THAT BOTH THESE PARTIES ARE NO T REPORTED AS HAWALA PARTIES BY THE SALES TAX DEPARTMENT AND THEREFORE, SUCH ACTION IS ILLEGAL AND BAD IN LAW. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LOWER AUTHORITIES HAVE ERRED IN MAKING AN ADDITION OF RS.1,65,769/ - BY INVOKING PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 BY DISREGARDING APPELLANTS CONTENTI ON IN THIS REGARDS. 5. THE ISSUE ARISING IN THE CROSS APPEALS IS AGAINST ASSESSABILITY OF BOGUS PURCHASES. 6. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A PROPRIETOR OF M/S. K.R. BOOB AND ALSO M/S. K.R. BOOB AND SONS, WHICH WERE ENGA GED IN THE B USINESS OF RESELLING IN DIESEL, PETROL, OIL, GREASE, SPARE PARTS & TRANSPORT WORK, ETC. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE AS SOLE PROPRIETOR HAD FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.80,73,480/ - . THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IN ITS SOLE PROPRIETARY CONCERN M/S. K.R. BOOB HAD MADE PURCHASES FROM DIFFERENT PERSONS INCLUDING LDO PURCHASES FROM M/S. ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 4 SIDDHIVINAYAK CORPORATION AMOUNTING TO RS.1,24,34,570/ - AND FROM M/S. NEPTUNE CORPORATION, LDO AMOUNTING TO RS.2,0 4,82,427/ - . THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, MAHARASHTRA GIVING NAMES, ADDRESSES AND OTHER DETAILS OF PERSONS, WHO HAD PROVIDED ENTRIES OF BOGUS PURCHASES. THE SAID INFORMATION ALSO CONTAINED THE DETAILS OF BENEFI CIARIES OF SUCH BOGUS BILLS. BEFORE THE SALES TAX AUTHORITIES, THE PERSONS WHO HAD PROVIDED THE ENTRIES HAD ALSO FILED AFFIDAVITS STATING THAT THEY HAD MERELY PROVIDED ENTRIES TO THE BENEFICIARIES AND NO GOODS WERE SUPPLIED BY THEM TO THE SAID BENEFICIARI ES. THE NAME OF ASSESSEE I.E. PROPRIETOR OF M/S. K.R. BOOB WAS IN THE LIST OF BENEFICIARIES, WHO HAD OBTAINED BOGUS PURCHASE BILLS FROM THE ENTRY PROVIDERS. THE DETAILS OF PURCHASE MADE FROM M/S. SIDDHIVINAYAK CORPORATION WERE TO THE TUNE OF RS.1.17 CROR ES AND FROM M/S. NEPTUNE CORPORATION WAS RS.2.04 CRORES. THE CASE OF ASSESSEE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSEE WAS ASKED TO PRODUCE BOTH THE ABOVE PERSONS IN RESPECT OF GENUINENESS OF PURCHASES MADE FROM THEM. THE ASSESSEE WAS UNABLE TO PRODUCE THE DETAILS OF PERSONS CONT ACTED, ADDRESS FROM WHERE THE MATERIAL WAS LIFTED, OCTROI RECEIPTS, ETC. THE ASSESSEE CLAIMED THAT THE MATERIAL WAS TRANSPORTED IN ITS OWN TANKERS. THE ASSESSEE FURTHER CLAIMED THAT THE GOODS PURCHASED WERE ULTIMATELY SOLD AND IN THIS REGARD, HE FURNISHED COMPUTERIZED STOCK STATEMENT. THE ASSESSING OFFICER NOTED THAT THE AUDITOR HAD ONLY CERTIFIED AS PER THE AUDIT REPORT THAT THE BOOKS OF ACCOUNT MAINTAINED WERE CASH BOOK, BANK BOOK AND SALES & PURCHASES REGISTER AND NO STOCK REGISTER WAS VERIFIED BY THE AUDITOR. THE ASSESSING OFFICER ALSO CONDUCTED INDEPENDENT ENQUIRIES BUT THE SAID CONCERNS WERE NOT AVAILABLE ON THE GIVEN ADDRESSES AND IN VIEW THEREOF, THE PURCHASES MADE FROM THE SAID PARTIES WERE ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 5 HELD TO BE NON - GENUINE AND ADDITION OF RS.1.24 CRORES AND RS.2.04 CRORES WERE MADE IN THE HANDS OF ASSESSEE. 7. BEFORE THE CIT(A), THE ASSESSEE FURNISHED WRITTEN SUBMISSIONS WHICH ARE INCORPORATED UNDER PARA 5 AT PAGES 3 TO 12 OF THE APPELLATE ORDER, WHEREIN ONE OF THE SUBMISSIONS MADE AS PER CLAUSE 5 WAS THAT THOUGH THE PURCHASE BILLS OF LIGHT DIESEL OIL (LDO) WERE GIVEN BY M/S. SIDDHIVINAYAK CORPORATION AND M/S. NEPTUNE CORPORATION, BUT THE ACTUAL PURCHASES WERE NOT MADE FROM THEM. THE ASSESSEE FURTHER CONTENDED THAT THE SAID PUR CHASES WERE MADE FROM OPEN MARKET. THE ASSESSEE FURTHER REFERRED TO INFORMATION / VARIOUS DOCUMENTS FILED AND STRESSED THAT WHERE ALL THE DETAILS RELATING TO PURCHASES AND SUPPORTING DOCUMENTS HAVE BEEN FURNISHED INCLUDING THE SALES MADE BY THE ASSESSEE, THEN THE ONUS CAST UPON THE ASSESSEE HAS BEEN DISCHARGED. FURTHER, THE ASSESSEE POINTED OUT THAT IT WAS MAINTAINING STOCK REGISTER AND EVEN STOCK MOVEMENT WAS EXPLAINED AND ALSO THE PAYMENTS AGAINST PURCHASES MADE WERE PAID THROUGH CHEQUES. HE FURTHER ST RESSED THAT THE ADDITION WAS MADE MAINLY ON ACCOUNT OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT AND NO INDEPENDENT ENQUIRY WAS CARRIED OUT BY THE ASSESSING OFFICER. FURTHER, EVIDENCE WHICH IS BEING USED AGAINST THE ASSESSEE, COPIES OF THE SAME W ERE NOT PROVIDED AND HENCE, IT WAS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE CIT(A) OBSERVED THAT THE ASSESSEE HAD ALSO MADE PURCHASES FROM M/S. ARIHANT PETROCHEM OF RS.3,96,42,881/ - AND FROM M/S. JINESHWAR TRADE OF RS.1,81,39,712/ - . THE CIT(A) ASK ED THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE SAID PURCHASES, UNDER WHICH THE ASSESSEE FURNISHED CONFIRMATIONS FROM THE SAID PARTIES AND ALONG WITH OTHER EVIDENCES. THE ASSESSEE ALSO ESTABLISHED THE TRAIL OF GOODS PURCHASED FROM M/S. SIDDHIVINAYAK C ORPORATI ON ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 6 AND M/S. NEPTUNE CORPORATION. IT WAS STRESSED BY THE ASSESSEE THAT THE BOOKS OF ACCOUNT WERE NOT REJECTED AND THE SALES MADE BY THE ASSESSEE HAVE BEEN ACCEPTED AND AGAINST THE SAID SALES, CORRESPONDING PURCHASES HAD TO BE ADOPTED. THE CIT(A) N OTED THAT THE ASST. COMMISSIONER OF SALES TAX, NASHIK DIVISION HAD PASSED THE SALES TAX ORDER IN THE CASE OF ASSESSEE FOR FINANCIAL YEAR 2009 - 10 SHOWING THE TWO CONCERNS I.E. M/S. SIDDHIVINAYAK CORPORATION AND M/S. NEPTUNE CORPORATION AS HAWALA OPERATORS A ND HAD RAISED THE SALES TAX DEMAND OF RS.2.19 CRORES. THE ORDER OF SALES TAX DEPARTMENT IS REPRODUCED UNDER PARA 9 AT PAGES 16 TO 21 OF THE APPELLATE ORDER. THE CIT(A) VIDE PARA 10 NOTED AS UNDER: - 10. THE DETAILED ORDER OF THE SALES TAX DEPARTMENT CLEA RLY ESTABLISHES THAT THE APPELLANT HAD MADE BOGUS PURCHASES FROM THE VARIOUS CONCERNS INCLUDING NEPTUNE CORPORATION AND M/S. SIDDHIVINAYAK CORPORATION. FURTHER, THE ORDER HAS ALSO PROVED THAT THE APPELLANT HAD FILED CONCOCTED DOCUMENTS TO PROVE THE PURCHA SES AS GENUINE WHICH OTHERWISE WERE BOGUS ABINITIO. ALL THE POINTS REITERATED BY THE APPELLANT DURING ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS HAVE ADEQUATELY BEEN CONSIDERED AND ANSWERED BY THE ASSTT. COMMISSIONER OF SALES TAX IN HIS ORDER DATED 16/04 /2012. THE SALES TAX DEPARTMENT HAS DISALLOWED INPUT TAX CREDIT TO THE APPELLANT INTERALIA ON THE PURCHASES SHOWN TO HAVE BEEN MADE FROM THE ABOVE REFERRED TWO CONCERNS. 8. THE CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS MADE INDEPENDENT VERIFICAT ION AND NOTICES UNDER SECTION 133(6) OF THE ACT WERE ISSUED TO M/S. SIDDHIVINAYAK CORPORATION AND M/S. NEPTUNE CORPORATION BUT THE SAME WERE RETURNED UNSERVED WITH THE REMARK NOT KNOWN. THE ASSESSEE COULD NOT FURNISH THE BASIC DOCUMENTS TO PROVE THE GEN UINENESS OF PURCHASES, SUCH AS ANY DOCUMENTARY EVIDENCE OR PROOF OF COLLECTION AND DELIVERY OF MATERIAL, TRANSPORT RECEIPTS, CONFIRMATION OF TWO PARTIES IN SUPPORT OF PURCHASE OF MATERIAL, ETC. THE ASSESSEE FAILED TO PRODUCE DOCUMENTS OF DELIVERY OF THE A LLEGED GOODS. THE CIT(A) ALSO NOTED THAT IN THE CASE OF M/S. NEPTUNE ON CREDIT OF AMOUNT IN BANK ACCOUNT IMMEDIATELY THEREAFTER, THERE WAS CASH WITHDRAWAL. SAME TREND WAS NOTICED IN THE BANK ACCOUNT OF M/S. SIDDHIVINAYAK ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 7 CORPORATION. THE TABULATED DETAI LS OF DEPOSITS IN THE RESPECTIVE BANK ACCOUNTS AND THE WITHDRAWALS ARE AVAILABLE AT PAGES 23 AND 24 OF THE APPELLATE ORDER. THE CIT(A) ALSO THROUGH ENQUIRIES FROM THE COOPERATIVE BANK RECEIVED INFORMATION THAT SOME OF THE PAYMENTS WERE DEPOSITED IN M/S. S HIVE ENTERPRISES, M/S. BIJNI ENTERPRISES, M/S. SUPREME TEXTILES, MUMBAI AND M/S. RATAN TEXTILES WHICH IN NO WAY WERE CONNECTED TO THE PETROLEUM BUSINESS. THE CIT(A) ISSUED LETTERS UNDER SECTION 133(6) TO ALL THE FOUR CONCERNS BUT THE SAME WERE RETURNED UN SERVED. FURTHER, THE CIT(A) NOTED THAT THE ASSESSEE HAD ISSUED CROSSED CHEQUES TO DIFFERENT PARTIES, TOTALING RS.13,34,926/ - . THE CO - OPERATIVE BANK CONFIRMED THE CLEARING OF THE SAID CHEQUES. THE CIT(A) IN THIS REGARD OBSERVED THAT THE ASSESSEE CLAIMS T O HAVE MADE PAYMENTS TO M/S. NEPTUNE CORPORATION VIDE ACCOUNT PAYEE CHEQUE. HOWEVER, IT WAS ESTABLISHED BEYOND DOUBT THAT THE TRANSACTIONS WITH M/S. NEPTUNE CORPORATION AND M/S.SIDDHIVINAYAK CORPORATION WERE NOT GENUINE AND THE AMOUNTS WHICH WERE WITHDRAW N IN CASH FROM THE ACCOUNTS OF THE SAID TWO PERSONS WERE C REDITED IN THE BANK ACCOUNT OF ASSESSEE . THE CIT(A) FURTHER HELD THE ASSESSEE TO HAVE CONCOCTED VARIOUS INVOICES, DELIVERY CHALLANS IN CONNIVANCE WITH THE SAID TWO CONCERNS. THE CIT(A) THUS, OBSER VED THAT THE ASSESSEE HAD PROCURED BOGUS PURCHASE BILLS FROM THE TWO CONCERNS AND RECEIVED BACK THE PAYMENTS MADE TO THEM IN CASH. THE ASSESSEE WAS HELD TO HAVE EVADED SALES TAX, OCTROI AND OTHER STATUTORY PAYMENTS. THE ASSESSEE ON THE OTHER HAND, REFUTE D ALL THE ALLEGATIONS OF THE CIT(A). HOWEVER, IT POINTED OUT THAT WHERE CONSUMPTION COULD BE PROVED I.E. QUANTITY OF STOCKS HAD IN ACTUAL FACT BEEN SOLD, THEN THE PURCHASES COULD NOT BE TREATED AS BOGUS. THE ASSESSEE THEREAFTER, COMPUTED GROSS PROFIT BY APPLYING FAIR PROFIT RATE ON THE AFORESAID BOGUS PURCHASES, IN ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 8 ORDER TO BUY PEACE OF MIND. THE ASSESSEE OFFERED SUM OF RS. 59,13,477/ - AS ADDITIONAL INCOME WHICH WAS REJECTED BY THE CIT(A). 9. THE CIT(A) THEN, MADE ENQUIRIES IN RESPECT OF PURCHASES MADE FROM M/S. ARIHANT PETROCHEM AND M/S. JINESHWAR TRADE AT RS.3.96 CRORES AND RS.1.81 CRORES RESPECTIVELY. SIMILAR EXERCISE WAS CARRIED OUT IN RESPECT OF SAID TWO PARTIES AND THE CIT(A) NOTED SIMILAR TREND OF CASH WITHDRAWALS FROM THE BANK ACCOUNT AFTER DEP OSIT OF CHEQUES ISSUED BY THE ASSESSEE. THE CIT(A) THUS, HELD THAT BOTH M/S. ARIHANT PETROCHEM AND M/S. JINESHWAR TRADE WERE ALSO BOGUS PARTIES. FURTHER, THE SALES TAX DEPARTMENT HAD NOT ALLOWED THE IMPORT TAX CREDIT TO THE ASSESSEE IN RESPECT OF PURCHAS ES M ADE FROM M/S. ARIHANT PETROCHEM. THE CIT(A) THUS, HELD THAT THE PURCHASES MADE FROM SAID TWO PARTIES WERE ALSO BOGUS, WHERE THE ASSESSEE HAD NOT ONLY FAILED TO PRODUCE THE PERSONS BUT ALSO NOT PRODUCED ANY CONFIRMATIONS IN RESPECT OF TWO CONCERNS. TH E CIT(A) HOWEVER, WAS OF THE VIEW THAT THE PROFIT MARGIN EMBEDDED IN SUCH PURCHASES SHOULD BE SUBJECTED TO TAX. THE CIT(A) HOWEVER, HELD THAT SUM EQUIVALENT OF 30% OF BOGUS PURCHASES SHOULD BE TAKEN AS PROFIT OF THE ASSESSEE ON ACCOUNT OF BOGUS / HAWALA P URCHASES. THE ASSESSEE HAD CUMULATIVELY MADE PURCHASES FROM FOUR PARTIES TOTALING RS.9,00,18,739/ - . THE CIT(A) APPLIED THE RATIO OF 30% OF TOTAL PURCHASES TO WORK OUT THE ADDITION IN THE HANDS OF ASSESSEE AT RS. 2,70,05,621/ - . 10 . THE ASSESSEE IS IN APPE AL AGAINST THE ORDER OF CIT(A) IN MAKING THE AFORESAID ADDITION @ 30% OF TOTAL BOGUS PURCHASES. HOWEVER, THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF TOTAL VALUE OF BOGUS PURCHASES. ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 9 1 1 . THE LEARNED AUTHO RIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE CONFIRMATION OF PARTIES WITH PAN NUMBER S HAD BEEN FILED. HE FURTHER REFERRED TO THE ORDER OF CIT(A) AND INDEPENDENT ENQUIRIES MADE BY HIM AND POINTED OUT THAT IN VIEW OF THE CONFIRMATION FILED, NO ADDITION MERITS TO BE MADE IN THE HANDS OF ASSESSEE. 1 2 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT BEFORE THE CIT(A) WHERE THE ASSESSEE HAD ADMITTED THAT THE PURCHASES WERE MADE FROM GR A Y MARKET, THEN THE ADDITION IS WARRAN TED IN THE HANDS OF ASSESSEE. HE MADE SPECIAL REFERENCE TO THE OBSERVATIONS OF THE CIT(A) AT PAGES 23 TO 25 OF THE ORDER . 1 3 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO POINTED OUT THAT VIDE GROUND OF APPEAL NO.4, THE ASSESSEE IS IN APPE AL AGAINST THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT AT RS. 1,65,769/ - , WHERE THE DIVIDEND RECEIVED WAS ABOUT RS.23,000/ - AND INTEREST EXPENDITURE WAS DISALLOWED. HE PLACED REL IANCE ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT V S. HDFC BANK LTD. (2014) 366 ITR 505 (BOM). 1 4 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE IS AGAINST ALLEGED BOGUS PURCHASES MADE BY THE ASSESSEE. THE AS SESSEE WAS RUNNING A SOLE PROPRIETARY CONCERN UNDER THE NAME AND STYLE OF M/S. R.K. BOOB, WHEREIN IT HAD MADE PURCHASES OF LDO FROM DIFFERENT PARTIES I.E. M/S. SIDDHIVINAYAK CORPORATION AND M/S. NEPTUNE CORPORATION. THE BASIS OF THE ASSESSING OFFICER IN R EJECTING PURCHASES IN THE HANDS OF ASSESSEE WAS THE ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 10 INVESTIGATION CARRIED OUT BY THE SALES TAX AUTHORITY, UNDER WHICH IT HAD COMPILED THE LIST OF BOGUS SUPPLIERS, WHO IN TURN, HAD STATED TO HAVE ONLY ISSUED BILLS FOR SUPPLIES WITHOUT MAKING ACTUAL SUPPLIES OF THE GOODS TO VARIOUS BENEFICIARIES. THE LIST OF BENEFICIARIES WAS DRAWN BY THE SALES TAX DEPARTMENT. THE ASSESSING OFFICER HAS ALSO TAKEN NOTE OF THE FACT THAT BEFORE THE SALES TAX DEPARTMENT, THE SAID SUPPLIERS HAD ALSO BY WAY OF AFFIDAVITS CONFIRME D THAT THEY WERE ONLY ISSUING BILLS WITHOUT MAKING ANY SUPPLIES OF GOODS. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE TO JUSTIFY THE PURCHASES MADE BY IT FROM THE ALLEGED HAWALA PARTIES. THE ASSESSEE WAS SHOW CAUSED IN THIS REGARD AND WAS ALSO ASKED T O PRODUCE THE PERSONS. THE ASSESSEE WAS UNABLE TO PRODUCE THE SAME. BEFORE THE CIT(A), THE ASSESSEE IN THE WRITTEN SUBMISSIONS CONFIRMED THAT WHERE THE SAID PARTIES I.E. M/S. SIDDHIVINAYAK CORPORATION AND M/S. NEPTUNE CORPORATION WERE NOT FOUND TO BE TRA CEABLE, THEN IT IS NOT DISPUTED THAT THE GOODS WERE PURCHASED MAY BE FROM GR A Y MARKET. IT MAY BE POINTED OUT HEREIN ITSELF THAT THE ASSESSING OFFICER HAD TREATED THE PURCHASES MADE FROM M/S. SIDDHIVINAYAK CORPORATION AND M/S. NEPTUNE CORPORATION AS BOGUS. THE CIT(A) HOWEVER, MADE CERTAIN INDEPENDENT ENQUIRIES AND ALSO NOTED THAT THE SALE PROCEEDS THOUGH WERE PAID THROUGH CHEQUE TO THE SAID PARTIES BUT ON THE NEXT DATE, CASH WAS WITHDRAWN FROM THE ASSESSEES BANK ACCOUNT AND SIMILAR CASH WAS DEPOSITED IN T HE ACCOUNT OF ASSESSEE. ANOTHER LINE OF ENQURY WAS THE PURCHASES MADE FROM M/S. ARIHANT PETROCHEM AT RS.3.96 CRORES AND M/S. JINESHWAR TRADE AT RS.1.81 CRORES . IN RESPECT OF SAID PARTIES ALSO, THERE WAS CASH WITHDRAWALS ON IMMEDIATE CREDIT OF CHEQUES ISS UED BY THE ASSESSEE. FURTHER, REFERENCE WAS MADE TO THE SALES TAX DEPARTMENT ORDER PASSED IN THE CASE OF DEALERS . THE ASSESSEE HAD FURNISHED COPIES OF SOME OLD CONFIRMATIONS IN RESPECT OF TWO CONCERNS BEFORE THE CIT(A) BUT THE AUTHENTICITY OF THE SAME ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 11 WA S HELD TO BE QUESTIONABLE, ESPECIALLY AFTER ENQUIRIES WERE MADE BY THE SALES TAX DEPARTMENT AND ALSO THE INCOME TAX DEPARTMENT THAT NO BUSINESS ACTIVITIES WERE CARRIED OUT FROM THE ADDRESSES GIVEN IN CONFIRMATION FOR THE SALE INVOICES. THE ASSESSEES CONT ENTION THAT HE WAS NOT GIVEN ADEQUATE OPPORTUNITY OF HEARING OR CONFRONTED WITH THE MATERIAL USED AGAINST HIM WAS FOUND TO BE CONTRARY TO THE FACTS OF THE CASE BY THE CIT(A) . ADMITTEDLY, THE ASSESSEE WAS CONFRONTED WITH THE DOCUMENTS OBTAINED FROM THE BAN KS WHICH CLEARLY REVEALED THAT THE CHEQUES ISSUED BY THE ASSESSEE WERE ENCASHED IMMEDIATELY ON ITS CREDIT. 15. IN THE PRESENT SET OF FACTS, WHERE THE ASSESSING OFFICER HAS ACCEPTED THE SALES, THEN CORRESPONDING PURCHASE OF GOODS FROM GR A Y MARKET STANDS ESTABLISHED, WHICH FACT HAS ALSO BEEN ACCEPTED BY THE ASSESSEE IN ITS LETTER DATED 07.01.2015. IN THE FACTS OF THE PRESENT CASE, WHERE INVESTIGATION HAS BEEN CARRIED OUT AGAINST THE ASSESSEE AND WHERE COMPLETE EVIDENCE COLLECTED AGAINST THE ASSESSEE HAS B EEN CONFRONTED TO HIM, WHICH COULD NOT BE FULLY CONTROVERTED BY THE ASSESSEE, THE PURCHASES MADE FROM THE SAID BOGUS PARTIES CANNOT BE ACCEPTED IN ENTIRETY IN THE HANDS OF ASSESSEE. WE HAVE ALREADY ADJUDICATE D SIMILAR ISSUE IN BUNCH OF APPEALS WITH LEAD O RDER IN M/S. CHHABI ELECTRICALS PVT. LTD. VS. DCIT IN ITA NO.795/PUN/2014, RELATING TO ASSESSMENT YEAR 2010 - 11, ORDER DATED 28.04.2017 AND HAVE CONCLUDED AS UNDER: - 40. IN VIEW OF THE ABOVE SAID RATIOS, THE PRESENT ISSUE OF BOGUS PURCHASES IS TO BE DECIDE D ON THE BASIS OF FACTS OF EACH CASE. THE FIRST ASPECT IS THE INFORMATION RECEIVED BY THE ASSESSING OFFICER FROM THE SALES TAX DEPARTMENT IN RESPECT OF ALLEGED HAWALA DEALERS. IN MANY CASES, THE ASSESSING OFFICER HAS NOT EVEN RECEIVED THE COPY OF STATEME NT RECORDED OR ANY OTHER EVIDENCE FROM THE SALES TAX DEPARTMENT, EXCEPT THE LIST OF HAWALA DEALERS AND ON THE BASIS OF THE SAID LIST, THE ASSESSMENT PROCEEDINGS HAVE BEEN COMPLETED IN THE HANDS OF ASSESSEE, WHO HAD MADE THE PURCHASES FROM THE SAID PARTIES. IN CASE, NO SUCH EVIDENCE HAS BEEN RECEIVED BY THE ASSESSING OFFICER BEFORE MAKING ADDITION, THEN THERE IS NO WARRANT IN MAKING AFORESAID ADDITION IN THE HANDS OF ASSESSEE MERELY ON THE BASIS OF SO CALLED LIST OF HAWALA DEALERS. THERE ARE OTHER CASES, ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 12 W HERE THE ASSESSING OFFICER HAD RECEIVED THE STATEMENT OF THE PERSONS WHO WERE HAWALA DEALERS AND WHO HAD ADMITTED TO HAVE JUST ISSUED BILLS OF SALE WITHOUT DELIVERY OF GOODS. IN SUCH CIRCUMSTANCES, THERE IS EVIDENCE AGAINST THE RESPECTIVE ASSESSEE THAT WH ERE THE SELLER OF THE GOODS, HAS ADMITTED NOT TO HAVE ENTERED INTO REAL TRANSACTION OF SALE OF GOODS. AGAINST SUCH NON - TRANSACTION, THERE CAN BE NO DELIVERY OF GOODS, THEN IT IS CASE OF PASSING OF BILLS OF SALE AND PURCHASES, AGAINST WHICH NO VAT HAS BEEN PAID. SUCH BOGUS PURCHASES ARE THEN TO BE ADDED IN THE HANDS OF ASSESSEE. WHERE THE ASSESSING OFFICER HAD CONFRONTED THE ASSESSEE WITH THE INFORMATION RECEIVED, SUPPLIED COPIES OF STATEMENTS AND WHERE THE PERSONS HAVE NOT BEEN TRACED AND NO CONFIRMATION HAS BEEN FILED BY THE ASSESSEE IN THIS REGARD, THEN THE ADDITION IS TO BE MADE IN THE HANDS OF ASSESSEE ON ACCOUNT OF SUCH BOGUS PURCHASES. IN THE FACTS AND CIRCUMSTANCES OF SOME CASES, THE GOODS HAVE BEEN TRANSFERRED BY SUCH HAWALA DEALERS TO THE RESPEC TIVE PURCHASERS, AGAINST WHICH THE ASSESSEE HAS TO DISCHARGE ONUS OF ESTABLISHING THE TRAIL OF GOODS WHICH ARE TRANSFERRED AND FURTHER SOLD BY THEM. WHERE THE ASSESSEE IS ABLE TO PRODUCE EVIDENCE OF PURCHASE OF GOODS BY WAY OF WEIGHMENT BRIDGE RECEIPTS, T RANSPORTATION DOCUMENTS, PAYMENT OF OCTROI AND SUBSEQUENT SALE OF GOODS TO THE RESPECTIVE PARTIES AND / OR WHERE THE ASSESSEE HAS MAINTAINED COMPLETE QUANTITATIVE DETAILS OF PURCHASE AND SALE OF GOODS, THEN TOTAL BOGUS PURCHASES CANNOT BE ADDED IN THE HAND S OF ASSESSEE, BUT GP RATE OF 10% IS TO BE APPLIED ON BOGUS PURCHASES. WHERE THE ASSESSEE DOES NOT ESTABLISH ITS CASE, THEN THE COMPLETE BOGUS PURCHASES ARE TO BE ADDED AS HAWALA PURCHASES. FURTHER, IN CASES, WHERE THE STATEMENTS ARE RECORDED AND COPIES OF WHICH HAVE BEEN SUPPLIED TO THE ASSESSEE AND ASSESSEE ESTABLISHED THE CASE OF RECEIPT OF GOODS AND ITS ONWARD TRANSMISSION BY WAY OF SALE BILLS, THEN THE FACTUM OF PURCHASES BY THE ASSESSEE STANDS ESTABLISHED IN SUCH CIRCUMSTANCES. HOWEVER, THE BENEFIT OF PURCHASES BEING MADE FROM GREY MARKET, NEEDS ESTIMATION IN THE HANDS OF ASSESSEE. THE TRIBUNAL HAS ALREADY HELD THAT THE ADDITION BE MADE BY ESTIMATING THE SAME @ 10% OF THE ALLEGED HAWALA PURCHASES. ACCORDINGLY, IT IS SO HELD. IN VIEW THEREOF, THE I SSUES WHICH EMERGE ARE AS UNDER: - I . IN CASE NO INFORMATION IS RECEIVED BY THE ASSESSING OFFICER FROM THE SALE TAX DEPARTMENT AND NO COPY OF STATEMENT RECORDED OR ANY OTHER EVIDENCE IS RECEIVED FROM THE SALES TAX DEPARTMENT, THEN NO ADDITION IS TO BE MADE ON THE BASIS OF NAME OF HAWALA DEALER IN THE LIST PREPARED BY THE SALES TAX DEPARTMENT, WHERE THE ASSESSEE HAD ASKED FOR THE SAID INFORMATION DURING ASSESSMENT PROCEEDINGS. II . WHERE THE ASSESSING OFFICER HAD RECEIVED THE STATEMENTS OF PERSONS WHO HAD ADMIT TED TO HAVE JUST ISSUED BILLS OF SALE WITHOUT ANY DELIVERY OF GOODS. IN VIEW OF SUCH EVIDENCE, WHERE THE ASSESSEE HAD NOT ENTERED INTO REAL TRANSACTION OF PURCHASE OF GOODS AND IN THE ABSENCE OF ANY DELIVERY OF GOODS, THE SALES ARE BOGUS AND THE ENTIRE SA LES ARE TO BE ADDED IN THE HANDS OF ASSESSEE. ADMITTEDLY, THE DEALER HAD NOT EVEN PAID VAT AGAINST SUCH PASSING OF GOODS. III . THE CASE WHERE THE ASSESSING OFFICER HAD CONFRONTED THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT AND HAD SUPPLIED COPIES OF STATEMENTS RECORDED AND HAD ALSO ISSUED NOTICE UNDER SECTION 133(6) OF THE ACT, WHERE HAWALA DEALER WAS NOT TRACEABLE AND IN THE ABSENCE OF THE ASSESSEE FAILING TO FILE ANY DOCUMENTARY EVIDENCE OF DELIVERY OF GOODS, ADDITION IS TO BE UPHELD IN THE HAND S OF ASSESSEE ON ACCOUNT OF SUCH BOGUS PURCHASES. ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 13 IV . THE NEXT INSTANCE IS THE CASE OF GOODS WHICH HAVE BEEN ADMITTEDLY SOLD BY THE HAWALA DEALER AND HAS BEEN RECEIVED BY THE ASSESSEE, WHO IN TURN HAD MAINTAINED QUANTITATIVE DETAILS AND ALSO EVIDENCE OF ITS MOVEMENT I.E. TRANSPORTATION DETAILS AND QUALITY CONTROL DETAILS OF CONSUMPTION OF THE SAID MATERIAL OR EXACT DETAILS OF SALE OF THE SAME CONSIGNMENT THROUGH SAME TRANSPORTER DIRECTLY TO THE PARTY, THEN THE TOTAL PURCHASES CANNOT BE ADDED IN THE HANDS OF ASSESSEE. HOWEVER, SINCE THE PURCHASES ARE MADE FROM THE GREY MARKET, SOME ESTIMATION NEEDS TO BE MADE IN THE HANDS OF ASSESSEE. THE TRIBUNAL IN M/S. CHETAN ENTERPRISES VS. ACIT (SUPRA) HAS ALREADY HELD THAT THE ADDITION BE MADE BY ESTIMATING THE SAME @ 10% OF THE ALLEGED HAWALA PURCHASES, OVER AND ABOVE THE GP SHOWN BY THE RESPECTIVE ASSESSEE. V . ANOTHER SET OF CASES WHERE THE STATEMENTS RECORDED BY THE SALES TAX DEPARTMENT HAVE BEEN HANDED OVER TO THE ASSESSEE AND THE COPIES OF SAME HAVE BEEN SUPPLIED T O THE ASSESSEE, THEN WHERE THE ASSESSEE ESTABLISHED THE CASE OF RECEIPT OF GOODS AND ITS ONWARD TRANSMISSION, THEN THE FACTUM OF PURCHASES BY THE ASSESSEE STANDS ESTABLISHED IN SUCH CIRCUMSTANCES. HOWEVER, ESTIMATION IS TO BE MADE IN THE HANDS OF ASSESSEE BECAUSE OF PURCHASES FROM THE GREY MARKET AND FOLLOWING THE ABOVE SAID RATIO, ADDITION IS TO BE MADE BY ESTIMATING THE SAME @ 10% OF THE ALLEGED HAWALA PURCHASES, OVER AND ABOVE THE NET PROFIT SHOWN BY THE ASSESSEE. 1 6 . APPLYING THE RATIO LAID DOWN IN T HE SAID BUNCH OF APPEALS AND IN VIEW OF THE FACTUAL ASPECTS OF THE PRESENT CASE, WE HOLD THAT THE ADDITION ON ACCOUNT OF GP RATE OF BOGUS PURCHASES IS TO BE MADE IN THE HANDS OF ASSESSEE. ACCORDINGLY, WE DIR ECT THE ASSESSING OFFICER TO RESTRICT THE ADDITI ON BY APPLYING THE GP RATE OF 10% ON BOGUS PURCHASES OVER AND ABOVE THE GP RATE SHOWN BY THE ASSESSEE IN LINE WITH THE ORDER IN M/S. CHHABI ELECTRICALS PVT. LTD. VS. DCIT & ORS. (SUPRA). ACCORDINGLY , GROUNDS OF APPEAL NOS.1 TO 3 RAISED BY THE ASSESSEE ARE PARTLY ALLOWED AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 1 7 . IN RESPECT OF GROUND OF APPEAL NO.4 I.E. AGAINST DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT AT RS.1,65,769/ - . THE ASSESSING OFFICER HAD WORKED OUT THE SAID DISALLOWANC E AGAINST DIVIDEND INCOME OF RS.23,000/ - . THE DISALLOWANCE HAS BEEN MADE ON ACCOUNT OF INTEREST ATTRIBUTABLE TO THE SAID INVESTMENTS. THE CASE OF ASSESSEE BEFORE US IS HOWEVER, THAT IT HA D SUFFICIENT ITA NO. 660 /P U N/20 1 5 ITA NO.691/PUN/2015 PRADEEP K. BOOB 14 NON - INTEREST BEARING FUNDS AVAILABLE AND THE SAME WERE UTILIZED FOR MAKING INVESTMENTS , INCOME FROM WHICH IS EXEMPT FROM TAX. ACCORDINGLY, WE HOLD THAT THERE IS NO MERIT IN MAKING THE AFORESAID DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 1 8 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 14 TH DAY OF JU LY , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA C HOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 14 TH JU LY , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPEL LANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I, NASHIK ; 4. / THE PR. CIT - 1 , NASHIK ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE