ROSE INDUSTRIES, THANE V. ITO 1(3), KALYAN

ITA 7436/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0029 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 19-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KALPESH TURALKAR
• Keywords: Reopening of assessment; Bogus purchase; Rejection of books of accounts; Unexplained investment; Unexplained expenditure; Invalid notice; Business expenditure; Accommodation entries
• Section: 69C; 143(3); 37(1); 147; 69; 145; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ITA NO. 4911 / MUM/ 20 1 5 ( / ASSESSMENT YEAR: 2 00 9 - 10 ) INCOME TAX OFFICER, WARD 1(3 ), 1 ST FLOOR, MOHAN PLAZA, WAYALE NAGAR, KHADAKPADA, KALYAN / VS. M/S ROSE INDUSTRIES GALA NO.712/3/4/5. MAHAVIR COMPOUND, REHNAL BUS STOP, VILLAGE - BHIWNDI - 421302 ( / APPELLANT) : ( / RESPONDENT ) ITA NO. 4929/ MUM/ 2015 ( / ASSESSMENT YEAR: 2 009 - 10 ) M/S ROSE INDUSTRIES GALA NO.712/3/4/5. MAHAVIR COMPOUND, REHNAL BUS STOP, VILLAGE - BHIWNDI - 421302 / VS. INCOME TAX OFFICER, WARD 1(3), 1 ST FLOOR, MOHAN PLAZA, WAYALE NAGAR, KHADAKPADA, KALYAN ( / APPELLANT) : ( / RESPONDENT ) ITA NO. 7436 & 7437 / MUM/ 2016 ( / ASSESSMENT YEAR: 2 010 - 11 & 2011 - 12 ) M/S ROSE INDUSTRIES GALA NO.712/3/4/5. MAHAVIR COMPOUND, REHNAL BUS STOP, VILLAGE - BHIWNDI - 421302 / VS. INCOME TAX OFFI CER, WARD 1(3), 1 ST FLOOR, MOHAN PLAZA, WAYALE NAGAR, KHADAKPADA, KALYAN ( / APPELLANT) : ( / RESPONDENT ) 2 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS ITA NO. 7202 AND 7203/ MUM/ 2015 ( / ASSESSMENT YEAR S : 2 010 - 11 AND 2011 - 12 ) INCOME TAX OFFICER, WARD 1(3), 1 ST FLOOR, MOHAN PLAZA, WAYALE NAGAR, KHADAKPADA, KALYAN / VS. M/S ROSE INDUSTRIES GALA NO.712/3/4/5. MAHAVIR COMPOUND, REHNAL BUS STOP, VILLAGE - BHIWNDI - 421302 ( / APPELLANT) : ( / RESPONDENT ) ./ PAN : AAGFR067 8B ( / APPELLANT) : ( / RESPONDENT ) / REVENUE BY : SHRI AARSI PRASAD / ASSESSEE BY : SHRI KALPESH TURALKAR / DATE OF HEARING : 19 .6. .2017 / DATE OF PRONOUNCEMENT : 30. 6 . 201 7 / O R D E R PER RAJESH KUMAR, A. M: THE CAPTIONED ARE CROSS - APPEAL S BY THE REVENUE AND ASSESSEE PERTAINING TO ASSESSMENT YEAR S 2009 - 10 TO 2011 - 12 . THE APPEALS ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) - 2 , THANE , DATED 30.6.2015 AN D 14.9.2016 WHICH IN TURN HA VE ARISE N FROM AN ORDER S PASSED BY THE ASSESSING OFFICER DATED 18.3.2014 AND 20.3.2015 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 3 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS ITA NO.4929/MUM/2015 2. THE ASSESSEE HAS FILED REVISED GROUNDS OF APPEAL WHICH ARE REPRODUCED BELOW: I) THE COMMISSIONER OF INCOME - TAX (APPEALS) - 2, MUMBAI (HEREINAFTER REFERRED TO 'CIT(A)') ERRED BOTH ON FACTS AND IN LAW IN PASSING THE IMPUGNED ORDER DATED 30TH JUNE, 2015 AND THEREFORE THE SAME IS LIABLE TO BE SET ASIDE ON THIS GROUND ALONE. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF PURCHASE OF RS. 39,07,412/ - , BY ESTIMATING G.P. @ 25% OF RS.1,56,29,649/ - AS BOGUS PURCHASERS AND CONFIRMING T HE ADDITION UNDER SECTION 69C OF THE INCOME TAX ACT 1961 BY REJECTING THE EVIDENCE PRODUCED IN RESPECT OF THE DISPOSAL OF PURCHASES FROM ALLEGED HAWALA DEALERS NAMELY M/S. SHIV SAGAR STEEL (INDIA), M/S PRIME STEEL IMPEX, M/S ASIAN METAL AND INDUSTRY & M/S DEEP METAL AND TUBE TO THE SELLERS BY PRODUCING THE SALES AND PURCHASES IDENTIFICATION ITEM WISE. III) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.39,07,412/ - ON THE BASIS OF THE CERTAIN INFORMATION RECEIVED FROM SALES TAX DEPARTMENT WITHO UT PROVIDING EITHER THE COPIES OF ALLEGED STATEMENTS OF HAWALA DEALERS ADMITTING IN AFFIDAVIT THAT AFTER DEDUCTING DUE COMMISSION OF 1 % THEY HAVE REFUNDED BACK THE BALANCE IN CASH TO THE BUYER/ THE APPELLANT OR NOT GIVING ANY OPPORTUNITY TO CROSS EXAMINE THE SAID ALLEGED HAWALA DEALERS. IV) THE LEARNED CIT (A) ERRED IN INVOKING PROVISIONS OF SECTION 145 (3) OF THE INCOME TAX ACT 1961 WITHOUT GIVING SHOW CAUSE NOTICE TO THE APPELLANT FOR REJECTING ITS BOOKS OF ACCOUNTS AND CONFIRMING DISALLOWANCE OF PURCH ASE OF RS. 39,07,412/ - . THE APPELLANT SUBMITS THAT THE LD. AO HAS NEITHER REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT NOR POINTED ANY DISCREPANCIES IN THE SAME. THE LD. AO ALSO ACCEPTED THE SALES MADE DURING THE YEAR . V) ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING REOPENING PROCEEDINGS INITIATED BY 4 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS THE LD. ASSESSING OFFICER UNDER SECTION 147 OF THE INCOME TAX ACT 1961. THE C.I.T(A) FAILED TO APPRECIATE THAT THE CONDITIONS PRECEDENT TO RE - OPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT ARE NOT SATISFIED IN THE APPELLANT'S CASE AND HENCE THE ORDER PASSED BY THE ASSESSING OFFICER (AO) IS BAD IN LAW AND WITHOUT ANY JURISDICTION. VI) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, T HE LEARNED AO ERRED IN PROCEEDING TO CONCLUDE THE ASSESSMENT 143(3) R.W.S. 147 OF THE ACT ON BAD AND INVALID NOTICE DATED 28.3.2013 WHICH SHOWN ASSESSMENT YEAR FOR WHICH NOTICE IS ISSUED AS AY 2010 - 11 AND NOT AY. 2009 - 2010, THE LEARNED CIT(A) THEREFORE O UGHT TO HELD THAT THE ASSESSMENT 2009 - 2010 IS BAD IN LAW AND SHOULD ANNULLED THE SAME. 3 . AT THE OUTSET, WE WOULD LIKE TO MENTION THAT THE LD.AR DID NOT PRESS GROUND NO.6, THEREFORE DISMISSED AS NOT PRESSED . 4. THE ISSUE RAISED IN GROUNDS OF APPEAL NO .1 TO 3 ARE AGAINST THE CON FIRM ATION OF DISALLOWANCE OF PURCHASE OF RS. 39,07,412/ - , BY ESTIMATING G.P. @ 25% OF THE BOGUS PURCHASES I.E. RS.1,56,29,649/ - AND THUS CONFIRMING THE ADDITION UNDER SECTION 69C OF THE INCOME TAX ACT 1961 AND THE ISSUE RAISED IN GROUND NO.4 IS AGAINST THE REJECTION OF BOOKS OF ACCOUNT BY THE LD.CIT(A) U/S 145(3) OF THE ACT. 5 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF REDRAWING OF COPPER WIRE, PATTA STRIPS AND LABOUR THEREOF AND FILED RETU RN OF INCOME ON 29.9.2009 DECLARING TOTAL INCOME OF RS.1,97,370/ - WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND 5 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS AFTER SELECTING THE CASE FOR SCRUTINY, THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 20.10.2011 AT RS. 2,68,630/ - . THEREAFTER, THE CASE WAS REOPENED U/S 148 OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD MADE BOGUS PURCHASES FROM VARIOUS PARTIES WHICH WERE DECLARED BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA AS HAWALA OPERATOR AND THEIR NAMES WERE APPEAR ING IN THE WEBSITE OF THE STATE GOVERNMENT AND WERE PROVIDING ACCOMMODATION ENTRIES. ACCORDING TO THE INFORMATION RECEIVED , THE ASSESSEE OBTAINED BOGUS PURCHASE BILLS FROM FOLLOWING PARTIES: I) SHIV SAGAR STEEL (INDIA) (AY - 2009 - 10) RS.7,84,042/ - II ) PRIME STEEL IMPEX(AY - 2009 - 10 RS/12,91,945/ - III) ASIAN METAL INDUSTRIES (AY - 2009 - 10) RS.66,33,280/ - IV) DEEP METAL AND TUBE (AY - 2009 - 10) RS.69,20,382/ - DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS DEBITED TOTAL PURCHASES OF RS.5,81,79,603/ - WHICH INCLUDE D PURCHASES OF RS.1,56,29,649/ - MADE FROM THE HAWALA ENTRIES PROVIDERS . THE ASSESSEE WAS ASKED TO SPECIFICALLY DURING THE COURSE OF ASSESS MENT PROCEEDINGS TO PR OVE THE PURCHASE FROM THE ABOVE FOUR PARTIES WITH DOCUMENTARY EVIDENCES BUT THE ASSESSEE COULD NOT PROVE AND FURNISH THE EVIDENCES . FI NALLY, THE AO CAME TO THE CONCLUSION THAT THE PURCHASE MADE BY THE ASSESSEE FROM THESE FOUR PARTI ES OF RS. 1,56,29,649/ - WERE NOT 6 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS GENUINE AS THE SAME WERE MADE FROM THE PARTIES WHO WERE DECLARED HAWALA OPERAT ORS WITHOUT TAKING ACTUAL DELIVERY OF MATERIALS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE BY MAKING ASSESSMENT U/S 143(3) R.W.S. 14 7 OF THE ACT DATED 18.3.2014 AT AN AMOUNT OF RS.1,58,27,020/ - . 6. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). THE ASSESSEE TOOK SEVERAL CONTENTIONS BEFORE THE LD.CIT(A) BY STRONGLY OBJECTING THE TOTAL DISAL LOWANCE OF PURCHASES MADE FROM THESE PARTIES. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE WHICH HAS BEEN INCORPORATED AT PARA 4 OF THE APPELLATE ORDER, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE SUSTAINING THE ADDITION TO THE EXTENT O F 25% OF THE TOTAL PURCHASES OF RS. 1,56,29,649/ - WHICH WORKED OUT AT RS. 39,07,412/ - BEING ESTIMATED GP AT THE RATE OF 25% OF THE TOTAL BOGUS PURCHASES WHILE DELET ING THE ADDITION TO THE TUNE OF RS.1,17,22,236/ - BY OBSERVING AND HOLDING AS UNDER : 6.7 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND NOTICED THAT THE CLAIM OF THE APPELLANT I.E. SALES AGAINST HAWALA PURCHASES HAVE BEEN CREDITED IN THE P&L A/E, APPEARS TO BE ACCEPTABLE TO CERTAIN EXTENT. THEREFORE, THIS IS NOT A CASE WHERE TH E ENTIRE AMOUNT HAS BEEN SIPHONED OFF, BY WAY OF DEBITING BOGUS PURCHASES. DURING THE YEAR, THE APPELLANT HAD DECLARED GP OF RS.23,90,349/ - @ 4% AND NOMINAL NP OF RS.98,609/ - @ 0.16% ON TOTAL TURNOVER OF RS. 5,97,09,9411 - AS AGAINST GP OF RS.17,54,417/ - @ 6 .12% AND NP OF RS.1,59,238/ - @0.55% ON TOTAL TURNOVER OF 7 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS RS.2,86,84,541/ - OF THE LAST YEAR. FROM THESE FACTS, IT IS SEEN THAT THE GP RATE OF THE YEAR UNDER APPEAL (WHEREIN THE ASSESSEE HAS DEBITED BOGUS BILLS OF RS . 1,56,29,649 / - ) HAS GONE DOWN BY MORE THAN 50%, I.E. FROM 6.12% TO 4.00%, FOR WHICH THE LD AR COULD NOT OFFER ANY EXPLANATION. THIS CLEARLY SHOWS THAT THE APPELLANT HAS SUPPRESSED ITS TAXABLE PROFIT, FOR THE REASON BEST KNOWN TO IT. IF THE ACCOUNTS OF THE APPELLANT ARE REJECTED, AS PER PROVISION OF SECTION 145(3) OF THE ACT AND GP OF LAST F.Y. I.E. 2007 - 08 IS ADOPTED IN THE YEAR UNDER APPEAL, THEN THE ADDITION FOR SUPPRESSED GP IS WORKED OUT AT RS.12,65,850 / - (36,54,248 / - LESS 23,88,397 / - ) [(RELYING ON THE RULING OF HON. SUPREME COURT IN THE CASE OF KANCHWALA GEMS VS. JCIT 288 ITR 10 (SC), AS ABOVE]. THIS CLEARLY INDICATES THAT THE APPELLANT HAD SUPPRESSED ITS INCOME BY BOOKING HAWALA PURCHASES. IN THIS CASE, THE 25% DISALLOWANCE, OUT OF HAWALA PURCHASES, IS WORKED OUT AT RS.39,07,412/ - (RS.L,56,29,649 X25 / 100), WHICH APPEARS TO BE QUITE REASONABLE, IN THE LINE OF BUSINESS UNDER DISPUTE. KEEPING IN MIND THE VARIOUS RULINGS, AS DISCUSSED ABOVE, FACTS OF THE CASE, APPELLANT'S INABILITY TO FURNISH THE REQUISITE DETAILS IN THE PRESCRIBED FORMAT, UNAVAILABIL ITY OF HAWALA PARTIES FOR EXAMINATION 1 VERIFICATION ETC, IN MY CONSIDERED OPINION, THE DISALLOWANCE OF 25% I.E. RS 39,07,412/ - OUT OF TOTAL HAWALA PURCHASES OF RS 1,56,29,649/ - , WILL BE REASONABLE TO MEET THE JUSTICE, IN VIEW OF THE DECISIONS OF THE HON,B LE HIGH COURT IN THE CASE OF VIJAY PROTEIN, SANJAY OIL CAKE INDUSTRIES ETC AS ABOVE. ACCORDINGLY, THE APPELLANT WILL GET RELIEF OF RS . 1,17,22,236/- (RS.1,56,29,649/ - LESS RS. RS 39,07,412/ - ) AND BALANCE DISALLOWANCE OF RS . 39,07,412/- IS HEREBY UPHELD. ALL THE GROUNDS OF APPEAL, AS RAISED ABOVE, ARE DECIDED ACCORDINGLY. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS. WE FIND THAT THE IN THE PRESENT CASE, THE LD.CIT(A) REJECTED THE BOOKS OF THE ASSESSEE U/S 143( 5 ) FOR THE REASONS THAT THE ASSESSEE FAILED TO FURNISH THE QUANTITATIVE DETAILS OF PURCHASE AND SALES, CLOSING STOCK, ITEM WISE AND PARTY WISE DETAILS AND THERE FORE THE BOOKS W E RE NOT RELIABLE AND IT WAS NOT POSSIBLE TO CALCULATE 8 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS THE CORRECT AMOUNT OF PROFIT AND THEREAFTER SUSTAINED THE ADDITION TO THE EXTENT OF RS.39,07,412/ - BEING 25% OF THE BOGUS PURCHASES TOWARDS ESTIMATED GP. IN OUR OPINION, THE LD.CIT(A) HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT. WE ALSO FIND THAT THE ASSESSEE HAS MADE PAYMENT THROUGH BANKING CHANNELS AND ALSO RECORDED CORRESPONDING SALES IN THE BOOKS OF ACCOUNT. IT WAS ALSO ARGUED BEFORE US THAT THE ASSESSEE MADE PAYMENT TOW AR DS VAT TAX ON ALL THESE PURCHASE ON BEHALF OF THE SUPPLIERS WHEN REQUIRED BY THE SAL ES TAX DEPTT GOVT OF MAHARASHTRA WHEN THE SUPPLIERS COULD NOT BE TRACED . WE ALSO FIND THAT THE ASSESSEES BOOKS OF ACCOUNTS WERE AUDITED BY THE TAX AUDITORS AND AUDIT REPORT WAS ALSO PREPARED IN FORM 3CD WHICH CERTIFIED THAT THE STOCK REGISTER WAS DULY MA INTAINED. UNDER THESE CIRCUMSTANCES , WE ARE OF THE VIEW THAT THE GP ADDITION MADE BY THE LD.CIT(A) IS ON THE HIGHER SIDE AND CAN NOT BE SUSTAINED. THE CASE OF THE ASSESSEE ALSO FIND SUPPORT FROM THE DECISION OF THE COORDINATE BENCH IN THE CASE OF DCIT VS SHRI SHIV ANKAR R. SHARMA ITA NO 5149/M/2014 & ITA NO 4260/M/2015 ORDER DATED 16.09.2016. THE OPERATIVE PART IS EXTRACTED BELOW: - 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY AO AND CIT(A) IN THEIR RESPECTIVE ORDERS AS WELL AS CONSIDERED THE RATIO LAID DOWN BY VARIOUS DECISIONS CITED BY LD. DR AND AR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. F ROM 9 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS THE RECORD WE FOUND THAT BY RELYING ON THE OFFICIAL WEBSITE OF THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA REGARDING SUSPICION PARITIES PROVIDING ACCOMMODATION ENTRIES, THE AO HAS MADE AN ADDITION. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE AO, THE ASSESSEE HAS SUPPLIED COPY OF BILLS, COP OF THE BANK STATEMENT TO PROVE THAT PAYMENT MADE FOR PURCHASES, AND COPY OF LEDGER ACCOUNTS OF ALL EIGHT PARTIES. THE ASSESSEE IS AN INDIVIDUAL CARRYING ON A PROPRIETARY BUSINESS IN THE NAME OF M/S NOBL E CONSTRUCTION COMPANY, UNDERTAKING CONSTRUCTION WORK OF DAMS AND CANALS ON BEHALF OF GOVERNMENT OF MAHARASHTRA IN THE INTERIOR PART OF THE STATE. IN THE INTERIOR PARTS THE GOODS ARE NOT AVAILABLE EASILY. THE GOVERNMENT CONTRACTS ARE TIME BARRING CONTRACT AND THE WORK IS REQUIRED TO BE COMPLETED ON TIME. ACCORDINGLY, WHEN THE MATERIAL IS REQUIRED IN EMERGENCY THE TELEPHONIC ORDERS ARE PLACED UPON THE PARTIES WHO SUPPLY THE MATERIALS AT SITE. THE CORRESPONDING CONSUMPTION OF MATERIALS IN RESPECT OF WHICH THE PURCHASES WERE AFFECTED BY THE ASSESSEE FIRM HAVE NOT BEEN DOUBTED BY LD. AO. NEITHER ANY DOCUMENT INFORMATION HAS BEEN PROVIDED BY THE AO NOR HE HAS GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE SAID PARTY AND AO HAS CONCLUDED THAT THE PURCH ASES BY ASSESSEE COMPANY FROM THE SAID PARTY IS BOGUS MERELY ON THE BASIS OF INFORMATION FROM SALES TAX DEPARTMENT. THE AO HAS NOT CONDUCTED ANY INDEPENDENT ENQUIRES FOR MAKING THE ADDITION ESPECIALLY SINCE THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS OF S HOWING BOOKS OF ACCOUNT, PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUE AND PRODUCING BILLS FOR PURCHASE OF GOODS. FROM THE RECORD WE FOUND THAT THE GROSS PROFIT OF THE ASSESSEE HAS BEEN CONSISTENTLY GROWING YEAR AFTER YEAR WHICH IS DEPICTED IN THE TABLE BELOW AND WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT: ASSESSMENT SALES GROSS PROFIT GP RATIO YEAR 2008 - 09 21,59,13,671 2,06,07,377 9.54% 2009 - 10 30,70,57,145 3,91 ,87,695 12.76% 2010 - 11 23,89,16,358 4,05,61,675 16.97% 2011 - 12 13,48,05,536 3,07,24,335 22.79% THE ACCOUNTS OF THE APPELLANT WERE DULY AUDITED U/S 44AB OF THE ACT AND TH E SAME HAVE NOT BEEN REJECTED BY AO. HOWEVER FROM THE ABOVE TABLE IT IS EVIDENT THAT ASSESSEE HAS BEEN DECLARING HIGHER 10 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS GROSS PROFIT DURING THE YEAR UNDER CONSIDERATION AS COMPARED TO THE GP RATE SHOWN IN EARLIER YEARS. 9. HON'BLE BOMBAY HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (P) LTD (216 TAXMAN 171), HELD AS UNDER : - SECTION 37(1) OF THE INCOME - TAX ACT, 1961 - BUSINESS EXPENDITUREALLOWABILITY OF [BURDEN OF PROOF] - ASSESSMENT YEAR 2001 - 02 - ASSESSING OFFICER DISALLOWED INCOME OF ASSESSEE ALL EGING NONGENUINE PURCHASES FROM DIFFERENT PARTIES - COMMISSIONER (APPEALS) UPHELD ORDER OF ASSESSING OFFICER - ASSESSEE FILED LETTERS OF CONFIRMATION OF SUPPLIERS, COPIES OF BANK STATEMENT SHOWING ENTRIES OF PAYMENT THROUGH ACCOUNT PAYEE CHEQUES TO SUPPLIE RS AND STOCK RECONCILIATION STATEMENTS - SALES OF PURCHASED GOODS WERE NOT DOUBTED AND SUBSTANTIAL AMOUNT OF SALES MADE BY ASSESSEE WAS TO GOVERNMENT DEPARTMENT - FURTHER, BOOKS OF ACCOUNT OF ASSESSEE HAD NOT BEEN REJECTED - TRIBUNAL DELETED DISALLOWANCE - WHETHER MERELY BECAUSE SUPPLIERS HAD NOT APPEARED BEFORE ASSESSING OFFICER OR COMMISSIONER (APPEALS), IT COULD NOT BE CONCLUDED THAT PURCHASES WERE NOT MADE BY ASSESSEE - HELD, YES [PARA 71 [IN FAVOUR OF ASSESSEE. THE ABOVE DECISION SQUARELY APPLIES TO THE CASE OF THE ASSESSEE AS ENTIRE SALES IN CASE OF ASSESSEE IS MADE TO THE GOVERNMENT. 10. HON'BLE CHANDIGARH TRIBUNAL IN THE CASE OF ITO VS ARORA ALLOYS LTD (2012) (12 ITR (TRIB) 263). THIS DECISION HAS BEEN AFFIRMED BY THE PUNJAB & HARYANA HIGH COURT IN 370 ITR 372, WHEREIN IT WAS HELD AS UNDER: - SECTION 69C OF THE INCOME - TAX ACT, 1961 - UNEXPLAINED EXPENDITURE - ASSESSMENT YEAR 2004 - 05 - WHERE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE INCURRED FOR PURCHASE OF RAW MATERIAL WAS SOLELY BASED ON INF ORMATION RECEIVED FROM CENTRAL EXCISE DEPARTMENT, SAME COULD NOT BE SUSTAINED IN FAVOUR OF ASSESSEE. 11 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS 11. THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BABULAL C. BORANA V. THIRD INCOME - TAX OFFICER [2005] 144 TAXMAN 674 (BOM) ALSO SUPPORTS OUR C ONTENTION. 12. FURTHERMORE, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. M.K. BROTHERS (GUJARAT HIGH COURT) (163 ITR 249), HELD AS UNDER: - [ SECTION 69 OF THE INCOME - TAX ACT, 1961 - UNEXPLAINED INVESTMENTS - IN RELEVANT A SSESSMENT YEAR ASSESSEE MADE CERTAIN PURCHASES FROM SOME PARTIES AND MADE PAYMENT THROUGH CHEQUES - ITO FOUND THAT PARTIES WERE NOT AVAILABLE TO CROSS - EXAMINE AND THAT THOUGH PURCHASES WERE CLAIMED TO HAVE BEEN MADE ON CREDIT '. - BASIS, PAYMENTS WERE SHOWN TO HAVE BEEN MADE AFTER SUBSTANTIAL LAPSE OF TIME AFTER DATE OF PURCHASE - ITO HELD THOSE TRANSACTIONS TO BE BOGUS AND ADDED BACK AMOUNT SPENT ON PURCHASES AS INCOME OF ASSESSEE - WHETHER TRIBUNAL WAS JUSTIFIED IN DELETING AFORESAID ADDITION TO INCOME OF ASSESSEE ON GROUND THAT THERE WAS NO EVIDENCE TO SHOW THAT VOUCHERS GIVEN BY THOSE PARTIES TO ASSESSEE WERE BOGUS OR THAT ANY PART OF THOSE PAYMENTS CAME BACK TO THE ASSESSEE - HELD, YES 13. IN VIEW OF THE DETAILED FINDING RECORDED BY CIT(A), WHICH HAS NO T BEEN CONTROVERTED BY LD. DR BY BRINING ANY POSITIVE MATERIAL ON RECORD, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). APPLYING THE PROPOSITION OF LAW DISCUSSED IN THE ABOVE JUDICIAL PRONOUNCEMENTS TO THE FACTS OF THE INSTANT CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) SUSTAINING ADDITION OF RS.3 LAKHS OUT OF TOTAL PURCHASES. 14. THE FACTS AND CIRCUMSTANCES IN THE ASSESSMENT YEAR 2011 - 2012 ARE PARI MATERIA, THEREFORE, FOLLOWING THE REASONING GIVEN HEREINABOVE, WE DO NOT FIN D ANY REASON TO INTERFERE IN THE FINDINGS SO RECORDED BY CIT(A), WHICH ARE AS PER MATERIAL ON RECORD. 15. IN THE RESULT BOTH APPEALS OF THE REVENUE ARE DISMISSED. 12 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS THE FACTS OF THE ASSESSEE ARE SQUARELY COVERED BY THE ABOVE DECISIONS AND WE , THEREFORE , RES PECTFULLY FOLLOWING THE SAME HOLD THAT THE ADDITION AT THE RATE OF 4 % WOULD BE REASONABLE AND JUSTIFIED IN THE PRESENT CIRCUMSTANCES WHILE UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS . ACCORDINGLY , THE ORDER OF THE LD.CIT(A) IS MODIFIED AS ABOVE AND THE AO IS DIRECTED ACCORDINGLY. THE ISSUE IN G ROUND NO.1 TO 3 ARE PARTLY ALLOWED AND GROUND NO.4 IS DISMISSED. 8 . GROUND NO.5 RAISED BY THE ASSESSEE IS AGAINST THE REOPENING OF ASSESSMENT U/S 147/148 OF THE ACT. 9 . AFTER EXAMINING THE ASSESSMENT ORDER AND THE APPELLATE ORDER AND VARIOUS FACTS PUT BEFORE US DURING THE COURSE OF HEARING, WE FIND THAT THE REOPENING WAS BASED ON VALID REASONS AS THE AO HAS RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOM AND THERE WAS NO DOUBT THAT THE ASSESSEE WAS AV AILING BOGUS ENTRIES FOR PURCHASES FROM FOUR PARTIES AS STATED HEREIN ABOVE WITHOUT PURCHASING ANY ACTUAL MATERIAL . ONLY THEREAFTER RECORDING DUE SATISFACTION, THE AO REOPENED THE CASE U/S 147/148 OF THE ACT. UNDER THESE CIRCUMSTANCES AND CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE REOPENING IN SUCH CIRCUMSTANCES IS QUI TE VALID AS THERE WERE SEVERAL REASONS TO JUSTIFY THE 13 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS REOPENING. ACCORDINGLY, GROUND OF REOPENING OF THE ASSESSMENT TAKEN BY THE ASSESSEE IS DISMISSED. 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.7436 & 7437/MUM/2016 1 1 . WE HAVE ALREADY DECIDED THE IDENTICAL ISSUE IN APPEAL FOR THE ASSESSMENT YEAR 2009 - 10 IN FAVOUR OF THE ASSESSEE BY GIVING PART RELIED. SINCE, THE FACTS OF TH ESE CASES ARE IDENTICAL TO THAT OF ASSESSMENT YEAR 2009 - 10 THEREFORE OUT DECISION AS TAKEN IN ITA NO.4929/MUM/2015 WOULD, MUTATIS MUTANDI, APPLY TO THESE APPEALS AS WELL. ACCORDINGLY, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ITA NO.4911/MUM/2015 , IT A NO.7202 AND 7203/MUM/2015 1 2 . ALL THE THREE APPEALS BY THE REVENUE ARE ON SIMILAR FACTS AND IDENTICAL GROUNDS, THEREFORE FOR THE SAKE OF CONVENIENCE WE REPRODUCE GROUNDS OF APPEAL TAKEN IN ITA NO.4911/MUM/2015. 1 3 . GROUNDS OF APPEAL TAKEN BY THE REVE NUE ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RELYING ON THE DECISION OF SUPREME COURT IN THE CASE OF KANCHANWALA GEMS VS. JCIT 288 ITR 10(SC) AND HON'BLE HIGH COURT'S DECISION IN THE CASE OF VIJAY PR OTEIN, SANJAY OIL CAKE INDUSTRIES, ETC .. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT FOLLOWING THE ORDER OF ITAT, PUNE IN ITA NO. 1411 - 1415 DATED 20.02.2015 IN THE CASE OF M/S. 14 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS KOLTE PATIL DE VELOPERS LTD. WHEREIN 100% ADDITION OF BOGUS PURCHASES WAS CONFIRMED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN GIVING RELIEF TO THE ASSESSEE TO THE EXTENT OF SUPPRESSED G.P. OUT OF TOTAL BOGUS PURCHASES EVEN THO UGH - (I) THE ASSESSEE COULD NOT PRODUCE PRIMARY EVIDENCES LIKE OCTROI RECEIPTS, DELIVERY CHALLAN ETC. EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASES BEFORE THE AO AND BEFORE CIT(A). (II) THE AFFIDAVITS FILED BY THE ENTRY PROVIDERS BEFORE SALES TAX AUTHORITIES CANNOT BE IGNORED HAVING EVIDENTIARY VALUE. 4. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 1 4 . SINCE WE HAVE ALREADY DECIDED THE APPEAL OF THE ASSESSEE BY GIVING PART RELIEF BY HOLDING THAT THE GP ON BOGUS PURCHASES TO THE EXTENT OF 4 % WOULD BE REASONABLE AND JUSTIFIED. IN THE PRESENT CIRCUMSTANCES, THE APPEAL S OF T HE REVENUE BECOMES INFRUCTUOUS AND DISMISSED ACCORDINGLY. 1 5 . IN SUM AND SUBSTANCE THE APPEALS OF THE ASSESSEE ARE ALLOWED AS INDI CATED ABOVE AND THAT OF REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JUNE , 2017. SD SD ( MAHAVIR SINGH ) (RAJESH KUM AR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 30. 6 .2017 SRL,SR.PS 15 ITA NO.4911/MUM/2015 AND OTHER FIVE APPEALS / 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, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI