The ITO, Ward-2(4), Ahmedabad V. Shri Devendra Girdharilal Jain,HUF, Ahmedabad

ITA 776/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6908 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B KULSHRESTHA
• Keywords: Bogus purchase; Income from undisclosed sources; Question of law
• Section: 69C; 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., , BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.776/AHD/2011 ( / ASSESSMENT YEAR : 2007-08) THE ITO WARD-2(4) AHMEDABAD / VS. DEVENDRA GIRDHARILAL JAIN, HUF AF-1, RUSHIKA APARTMENTS NR.SUJATA FLATS, SHAHIBAUG AHMEDABAD ./ ./ PAN/GIR NO. : AADHD 7924 H ( # / APPELLANT ) .. ( $% # / RESPONDENT ) #& / APPELLANT BY : SHRI B.KULSHRESTHA, SR.DR $% #' & / RESPONDENT BY : -NONE- ()'* / DATE OF HEARING 08/12/2014 +,-.'* / DATE OF PRONOUNCEMENT 30/12/2014 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-XVI, AHMEDAB AD (CIT(A) IN SHORT) DATED 10/01/2011 PERTAINING TO ASSESSMEN T YEAR (AY) 2007-08. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN ITS APPEAL READS AS UNDER:- ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 2 - 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALL OWING RELIEF OF RS.2,84,01,250/- ON ACCOUNT OF BOGUS PURCHASES O F RS.2,98,96,050/- ADDED IN THE ASSESSMENT ORDER. (A DDITION CONFIRMED TO THE EXTENT OF RS.14,94,800/- BEING 5% OF RS.298,96,050/-. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AS SESSING OFFICER SINCE THE ASSESSEE HAS FAILED TO DISCLOSE H IS TRUE INCOME. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 17/12/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE DISALLOWANCE OF THE EXPENDITURE TOWARDS PURCHASES A MOUNTING TO RS.2,98,96,050/- AND ALSO MADE VAT PENALTY OF RS.1, 000/-, DISALLOWANCE OF OFFICE RENT OF RS.60,000/-, DISALLOWANCE OF GODO WN RENT OF RS.45,600/- AND ADJUSTMENT MADE U/S.145A OF THE ACT ON ACCOUNT OF THE DIFFERENCE IN CLOSING STOCK AMOUNTING TO RS.5,41,926/-. AGAINST THIS, ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 5% OF THE PURCHASES. HOWEVER, CONFIRMED THE DISALLOWANCE MADE ON ACCOUNT OF THE OFFICE RENT, ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 3 - GODOWN RENT AND RESTRICTED THE DISALLOWANCE MADE ON ACCOUNT OF THE CLOSING STOCK. NOW, THE REVENUE IS IN APPEAL. 3. THE ONLY EFFECTIVE GROUND IS AGAINST IN ALLOWING RELIEF OF RS.2,84,01,250/- MADE ON ACCOUNT OF BOGUS PURCHASES BY THE LD.CIT(A). 4. NO ONE APPEARED ON BEHALF OF THE ASSESSEE AND NO ADJOURNMENT APPLICATION HAS BEEN FILED. ON LAST DATE OF HEAR ING, I.E. ON 27/10/2014, NOTICE OF HEARING WAS SENT THROUGH DR. THE REVENUE HAS PLACED A LETTER DATED 24/11/2014 ON RECORD STATING THAT THE NOTICE OF HEARING WAS SERVED BY WAY OF AFFIXTURE. IT IS STATED IN THE LETTER TH AT THE RESPONDENT IS NOT AVAILABLE ON THE GIVEN ADDRESS. UNDER THESE FACT S, THE APPEAL WAS TAKEN UP FOR HEARING IN THE ABSENCE OF THE ASSESSEE. 5. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO AND S UBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DISA LLOWANCE. HOWEVER, HE SUBMITTED THAT THE LD.CIT(A) HAS CATEGORICALLY CONF IRMED THE FINDINGS OF THE AO ABOUT THE PURCHASES NOT MADE FROM THE PARTIE S AS CLAIMED BY THE ASSESSEE. HE DREW OUR ATTENTION TOWARDS PARAGRAPH NO.2.4.1 OF THE APPELLATE ORDER. HOWEVER, DESPITE HAVING CONFIRMED THAT THE PURCHASES WERE NOT MADE FROM THE CONCERNED PARTIES, THE LD.CI T(A) PROCEEDED TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 5% OF TH E PURCHASES. ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 4 - 6. WE HAVE HEARD THE LD.SR.DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT THE AO HAS GIVEN AN ELABORATE FINDING FOR NOT ACCEPTING THE EXPLANATION OF THE ASSESSEE IN PARAS-3.2 TO 3.4 OF HIS ORDER WHICH ARE REPRODUCED AS UNDER:- 3.2. THE REPLY FILED BY THE ASSESSEE VIDE LETTER DT D.2.12.2009 HAS BEEN CONSIDERED. THE CLAIM OF THE ASSESSEE THAT NO ADDIT ION IN RESPECT OF ABOVE REFERRED BOGUS PURCHASES INTRODUCED BY THE ASSESSEE IN THE NAME OF THE PARTIES MENTIONED ABOVE SHOULD BE MADE IS NOT ACCEP TABLE BECAUSE OF FOLLOWING REASONS:- (I) IT IS WELL SETTLED LAW THAT ONUS LIES ON THE A SSESSEE TO PROVE THE GENUINENESS OF ANY EXPENDITURE WHICH IS CLAIMED AS DEDUCTION IN COMPUTING ITS TAXABLE INCOME. THEREFORE, THE ONUS IN THE INSTANT CASE SQUARELY LIES ON THE ASSESSEE TO PROVE THE GEN UINENESS OF THE PURCHASES OF THE OF THE ABOVE REFERRED PARTIES AS H E HAS CLAIMED DEDUCTION IN RESPECT OF THE EXPENDITURE, BEING THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THESE PARTIES. TILL DATE THE ASSESSEE HAS NOT PRODUCED (EXCEPT COPIES OF ACCOUNT OF THESE PARTIES) ANY EVIDENCE IN SUPPORT OF HIS CLAIM THAT HE HAS ACTUAL LY MADE ABOVE REFERRED PURCHASES FROM THESE PARTIES. IN SPITE OF HAVING BEEN SPECIFICALLY REQUESTED TO PRODUCE THE ORIGINAL SALE INVOICES CLAIMED TO HAVE BEEN ISSUED BY THESE PARTIES IN RESPECT OF ABOVE REFERRED PURCHASES AND COPIES OF THE CHEQUES WHICH THE ASSESSEE SHOULD HAVE ISSUED IN FAVOUR OF THESE PARTIES, THE ASSESSEE HAS NOT PRODUCED THESE DOCUMENTS TILL DATE. (II) IN HIS SUBMISSION, THE ASSESSEE HAS RELIED HE AVILY ON THE FACT THAT PAYMENT HAS BEEN MADE BY THE ASSESSEE THROUGH CHEQU ES TO THESE PARTIES. IT HAS ALSO BEEN CLAIMED THAT NAME OF THES E PARTIES DULY APPEAR IN THE BANK STATEMENT OF THE ASSESSEE. THE A SSESSEE HAS FURTHER CLAIMED THAT THESE FACTS ESTABLISH THAT THE PAYMENTS AGAINST THESE PARTIES HAVE BEEN MADE BY THE ASSESSEE TO THE SAID PARTIES ONLY. OF THESE ISSUES, THE CORRECT FACTUAL POSITION IS AS UNDER:- ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 5 - (B) NOT A SINGLE CHEQUE ISSUED BY THE ASSESSEE AGAINST THESE PURCHASES HAS BEEN CREDITED IN THE ACCOUNT OF ANY O F THESE PARTIES. (C) NONE OF THE CHEQUE ISSUED WAS ACCOUNT PAYEE CHEQUE. (D) NO CHEQUE WAS ISSUED IN FAVOUR OF ANY OF THESE PARTIES . HOWEVER, TO BEFOOL AND MISGUIDE THE REVENUE AUTHORI TIES, IN SOME CASES, THE! ASSESSEE HAS WRITTEN SOME-WHAT NAMES SIMILAR TO THESE PARTIES, EG. AMBUJA INTERMEDIATES (NOT M/S.AMBUJA INTERMEDIATES PVT. LTD.), ARCATA TRADE L INKS (NOT M/S.ARCATA TRADE LINK PVT. LTD.), ROHAN DYE (NOT M/ S.ROHAN DYES & INTERMEDIATES LTD.) (E) SOME OF THE CHEQUES ISSUED AGAINST THESE PURCH ASES WERE CREDITED IN THE ACCOUNTS OF M/S.MOHIT INTERNATIONAL AND M/S. THE GREEN BOOK OF INDIA WHICH ARE PROPRIETORSHIP CO NCERN OF SHRI DEVENDRA G. JAIN, KARTA OF DEVENDRA G. JAIN HU F, THE ASSESSEE. OTHER CHEQUES WERE CREDITED IN THE ACCOUN TS OF VARIOUS 'SHROFFS' (THE PERSONS ENGAGED IN CHEQUE DI SCOUNTING BUSINESS). THE DETAILS (TO THE EXTENT THAT COULD BE RECEIVED FROM VARIOUS BANKS) OF ALL THE CHEQUES ISSUED AGAIN ST THESE PURCHASES AND CREDITED IN VARIOUS BANK ACCOUNTS ARE AS PER THE ANNEXURE ATTACHED WITH THE ASSESSMENT ORDER, WH ICH FORMS PART OF THIS ASSESSMENT ORDER. HENCE THE ARGUMENT OF THE ASSESSEE THAT SINCE THE A SSESSEE HAS ISSUED CHEQUES (TO DIFFERENT PARTIES), THEREFORE, T HE CLAIM OF THE ASSESSEE FOR DEDUCTION IN RESPECT OF THESE PURCHASE S SHOULD BE ALLOWED, CANNOT BE ACCEPTED. (III) M/S.AMBUJA INTERMEDIATES PVT. LTD., M/S.RO HAN DYES & INTERMEDIATES LTD. AND M/S.ARCATA TRADE LINKS PVT. LTD. HAVE DENIED HAVING MADE ABOVE REFERRED SALES TO THESE PA RTIES AND M/S.VISHAL ENTEPRISE, YOGESHWAR ENTERPRISE AND M/S. NAVRANG CORPORATION ARE NOT EXISTING AT THE ADDRESS GIVEN B Y THE ASSESSEE. ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 6 - THEREFORE, THE CLAIM OF THE ASSESSEE FOR DEDUCTION IN RESPECT OF THE ABOVE REFERRED PURCHASES CLAIMED TO HAVE BEEN M ADE FROM THESE PARTIES, CANNOT BE ALLOWED. (IV) THE ASSESSEE HAS FURTHER ARGUED IN HIS SUBMIS SION THAT AS THE SALES OF THE ASSESSEE ARE BEING TREATED AS GENUINE, THEREFORE, ALL THE PURCHASES SHOWN BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS SHOULD ALSO BEEN TREATED AS GENUINE AND DEDUCTION I N RESPECT OF ALL SUCH PURCHASES SHOULD BE ALLOWED, EVEN IF THESE PURCHASES ARE PROVED TO BE BOGUS. THIS ARGUMENT OF THE ASSESSEE I S NOT ACCEPTABLE, BECAUSE AS DISCUSSED EARLIER, IT IS A W ELL SETTLED LAW THAT ONUS LIES ON THE ASSESSEE TO PROVE THE GENUINE NESS OF THE PURCHASES, IF THE ASSESSEE CLAIMS ANY DEDUCTION IN RESPECT OF SUCH PURCHASES. IN THE CASE UNDER CONSIDERATION, AS THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE ASSESSEE HAS ACTUAL LY MADE ABOVE REFERRED PURCHASES FROM THE PARTIES MENTIONED ABOVE , THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THESE PURCHASES CA NNOT BE ALLOWED MERELY BECAUSE THE ASSESSEE HAS MADE SALES. IT IS INCUMBENT ON THE ASSESSEE TO PROVE THAT SUPPLIERS W ERE GENUINE SUPPLIERS OF THESE GOODS AND THEY REALLY SUPPLIED T HESE GOODS TO THE ASSESSEE AND THE ASSESSEE REALLY MADE PAYMENT B Y CHEQUES TO THESE VERY PARTIES AND NONE ELSE. SUCH A BURDEN HAS TO BE DISCHARGED BY THE ASSESSEE WITH VERY STRONG AND CLI NCHING EVIDENCE IN VIEW OF THE BLATANT DENIAL BY SOME OF T HE PARTIES AND NONE-EXISTENCE TO OTHER PARTIES. AS THE ASSESSEE HA S FAILED TO PROVE THAT ABOVE REFERRED GOODS WERE ACTUALLY PURCH ASED BY HIM, THEREFORE, DEDUCTION IN RESPECT OF EXPENDITURE CLAI MED TO HAVE BEEN INCURRED BY THE ASSESSEE FOR MAKING ABOVE REFE RRED PURCHASES HAS TO BE DISALLOWED. (V) FURTHER, SECTION 40A(3) OF THE I.T. ACT, 1961 PROVIDES THAT IF THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE , DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, NO DEDUCTION SH ALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE HAS NOT MADE PAYMENT EI THER BY ACCOUNT PAYEE CHEQUES OR ACCOUNT PAYEE BANK DRAFTS, HENCE NO ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 7 - DEDUCTION COULD HAVE BEEN ALLOWED IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS PURCHASES REFERRED ABOVE FROM THESE PARTIES, EVEN IF THESE PURCHASES WERE GENUINE PURCHASES. (VI) THE ASSESSEE HAS ALSO ARGUED THAT AS THE ASSES SEE HAS SOLD THE GOODS, IT PROVES THAT THE ASSESSEE MUST HAVE RECEIV ED THE GOODS, IF NOT FROM THESE PARTIES, FROM OTHER PARTIES; HENC E, THE ASSESSEE SHOULD BE ALLOWED THE DEDUCTION IN RESPECT OF THE P URCHASES THAT MUST HAVE MADE FROM OTHER PARTIES. THE ASSESSEE VID E LETTER DTD.8.12.2009 WAS GIVEN AN OPPORTUNITY TO GIVE THE COMPLETE DETAILS AND EVIDENCES OF PURCHASES, IF ANY, CLAIMED TO HAVE BEEN MADE, OUT OF BOOKS OF ACCOUNTS, FROM OTHER PARTIES. HE WAS ALSO REQUESTED TO GIVE DETAILS AND EVIDENCES OF PAYMENTS MADE IN RESPECT OF SUCH UNACCOUNTED PURCHASES, IF ANY. THE ASSESSEE HAS NOT FURNISHED ANY DETAILS OF THE OUT OF BOOKS PURCH ASES, SOURCE OF SUCH PURCHASES, PAYMENT MADE AGAINST SUCH PURCHASES AND SOURCE OF SUCH PAYMENTS, IF ANY. IT IS ONLY IN THE KNOWLEDGE OF THE ASSESSEE FROM WHERE UNACCOUNTED PURCHASES, IF ANY, HAS BEEN MADE BY HIM AND FROM WHICH SOURCE THE PAYMENTS AGAI NST ANY SUCH PURCHASES HAVE BEEN MADE. AS THE ASSESSEE HAS NOT FURNISHED DETAILS OF SOURCE OF SUCH PURCHASES AND S OURCE OF PAYMENTS MADE AGAINST SUCH PURCHASES, THEREFORE, TH E CLAIM OF THE ASSESSEE FOR ALLOWING DEDUCTION IN RESPECT OF A NY UNACCOUNTED PURCHASES CANNOT BE ALLOWED. (VII) PROVISO TO SECTION 69C OF THE I.T. ACT, 1961 PROVIDES THAT NOTWITHSTANDING ANY THING CONTAINED IN ANY OTHER PR OVISION OF THE I.T. ACT, NO DEDUCTION UNDER ANY HEAD OF INCOME SHA LL BE ALLOWED IN RESPECT OF ANY EXPENDITURE FOR WHICH NO EXPLANAT ION ABOUT THE SOURCE OF SUCH EXPENDITURE IS OFFERED BY THE ASSESS EE OR IN THE OPINION OF THE A.O. THE EXPLANATION OFFERED IS NOT SATISFACTORY. IN THE CASE UNDER CONSIDERATION, AS THE ASSESSEE HAS N OT BEEN ABLE TO FURNISH ANY EXPLANATION ABOUT THE SOURCE OF ANY UNACCOUNTED PURCHASES OR SOURCE OF PAYMENT OF SUCH PURCHASES, T HEREFORE, THE ARGUMENT OF THE ASSESSEE THAT HE SHOULD BE ALLOWED DEDUCTION IN RESPECT OF UNACCOUNTED PURCHASES THAT HE MUST HAVE MADE, TO SALE THE GOODS, CANNOT BE ACCEPTED. ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 8 - (VIII) I HAVE PERUSED ALL THE DECISIONS OF VARIOUS HIGH COURTS & TRIBUNALS CITED BY THE ASSESSEE IN HIS SUBMISSION. NONE OF THE DECISION SAYS THAT DEDUCTION IN RESPECT OF ANY EXPE NDITURE CAN BE ALLOWED TO THE ASSESSEE EVEN IF THE ASSESSEE FAILS TO PROVE GENUINENESS OF SUCH EXPENDITURE. IN THE CASE UNDER CONSIDERATION AS THE ASSESSEE HAS FAILED TO PROVE THAT HE HAS MAD E ABOVE REFERRED PURCHASES FROM THE PARTIES MENTIONED ABOVE , THEREFORE, THE CLAIM OF THE ASSESSEE CANNOT BE ALLOWED. UNDER THE SIMILAR CIRCUMSTANCES, THE DELHI HIGH COURT IN THE CASE OF LA MEDICA (250 ITR 575) HAS OBSERVED TO THE EFFECT THAT THE DECISION H AS TO BE TAKEN ON RELEVANT MATERIAL AND NOT ON IRRELEVANT MATERIAL. IN THAT CASE, THE ASSESSEE HAS SHOWN THE PURCHASE OF R AW MATERIAL FROM A PARTY WHICH WAS FOUND NONEXISTENT AND AMOUNT OF PURCHASE PRICE WAS CONSIDERED AS INCOME FROM UNDISC LOSED SOURCE OF ASSESSEE. THE TRIBUNAL HELD THAT NOT WITH STANDING SUSPICIOUS CIRCUMSTANCES OF PURCHASES, THE GOODS SO PURCHASED WERE PLEDGED WITH THE BANK AND HENCE NONEXISTENCE O F THE SELLER COULD NOT BE THE BASIS FOR DOUBTING THE GENUINENESS OF THE PURCHASE AND/OR TO INFER THAT THERE WAS FICTITIOUS PURCHASES. THE DELHI HIGH COURT ON REFERENCE HELD THAT THE TRIBUNA L HAS NOT TAKEN INTO CONSIDERATION RELEVANT MATERIAL AND HAS ACTED ON IRRELEVANT MATERIALS. WHAT WAS UNDER CONSIDERATION WAS WHETHER THE PURCHASES WERE MADE FROM A PARTICULAR PARTY AS CLAIMED BY THE ASSESSEE. ONCE IT WAS ACCEPTED THAT THE SUPPLIE S WERE NOT MADE BY THE SAID PARTY TO WHOM THE PAYMENTS WERE AL LEGEDLY WHETHER THE PURCHASES WERE MADE FROM SOME OTHER SOU RCE COULD NOT HAVE WEIGHED WITH THE TRIBUNAL AS A FACTOR IN F AVOUR OF THE ASSESSEE AND CONCLUDED THAT THE ASSESSING OFFICER H AS RIGHTLY TREATED SUCH PURCHASES AS INCOME FROM UNDISCLOSED S OURCES. THE HON'BLE HIGH COURT DECIDING THE CASE HAS OBSERV ED AS UNDER:- 'HELD, THAT THE TRIBUNAL HAD NOT TAKEN INTO CONSIDE RATION RELEVANT MATERIALS AND HAD ACTED ON IRRELEVANT MATERIALS. TH E QUESTION BEFORE THE TRIBUNAL WAS NOT WHETHER PURCHASES WERE MADE FR OM ANOTHER CONCERN. WHAT WAS UNDER CONSIDERATION WAS WHETHER T HE PURCHASES WERE MADE FROM K AS WAS CLAIMED BY THE ASSESSEE. ON CE IT WAS ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 9 - ACCEPTED THAT THE SUPPLIES WERE NOT MADE BY K TO WH OM PAYMENTS WERE ALLEGED TO HAVE BEEN MADE, THE QUESTION WHETHER THE PURCHASES WERE MADE FROM SOME OTHER SOURCE COULD NOT HAVE WEIGHTED WITH THE TRIBUNAL AS A FACTOR IN FAVOUR OF THE ASSESSEE. THE CONCLUSION OF THE TRIBUNAL WERE, THEREFORE, CLEARLY ERRONEOUS, CONTRA RY TO THE MATERIALS ON RECORD AND HAD BEEN ARRIVED AT WITHOUT TAKING IN TO CONSIDERATION RELEVANT MATERIAL AND BY PLACING RELIANCE ON IRRELE VANT MATERIALS. WHERE THE TRIBUNAL ACTED PARTLY ON RELEVANT AND PAR TLY ON IRRELEVANT MATERIALS, AND IT WAS NOT POSSIBLE TO SAY TO WHAT E XTENT THE LATTER HAD INFLUENCED ITS MIND, THE FINDING WAS VITIATED BECAU SE OF THE USE OF IRRELEVANT MATERIALS. THE TRIBUNAL HAD NO MATERIAL TO COME TO THE CONCLUSION THAT THE SUM OF RS.3,82,750 COULD NOT BE TREATED AS THE ASSESSEE' S INCOME FROM UNDISCLOSED SOURCES.' THE HON'BLE ITAT AHMEDABAD 'C' BENCH IN ITA NO.1262 /AHD/2002 A.Y. 1994-95 VIDE ORDER DT.30.4.2003, IN THE CASE OF SWETAMBER STEEL LTD. VS. ITO WARD 4(3), BARODA, FOLLOWING THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LA MEDICA 250 ITR 575 HAS UPHELD THE ORDER OF THE AO AND CIT(A), DISA LLOWING THE WHOLE OF THE CLAIM OF THE ASSESSEE OF BOGUS PURCHASES. TH E MATTER WAS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE IN VIEW OF THE OBSERVATIONS OF THEIR LORDSHIPS OF DELHI HIGH COURT IN THE ABOVE REFERRED CASE. APPEAL AGAINST THIS ORDER OF THE ITAT WAS NOT ADMITTED BY THE HON'BLE HIGH COURT AS WELL AS THE ASSESSEE LOST IT BEFORE THE HO N'BLE SUPREME COURT. NON ADMISSION OF APPEAL U/S.260A BY THE HON'BLE HIG H COURT ON THE GROUND THAT NO SUBSTANTIAL QUESTION OF LAW ARISE FR OM THE ORDER OF THE TRIBUNAL IS HELD BY THE HON'BLE SUPREME COURT IN NI RMA INDUSTRIES LTD. VS. DCIT (283 ITR 402), TO BE THE CONFIRMATION OF T HE TRIBUNAL ORDER AND ITS MERGER IN THE HON'BLE HIGH COURT ORDER. THE HON'BLE ITAT, AHMEDABAD 'D' (3 RD MEMBER) BENCH HAS FOLLOWED THE ABOVE REFERRED DECISION OF THE ITAT, AHMEDABAD, WHILE DECIDING THE CASE OF ACIT CIR.5, BARODA VS. AMAR MINING CO. 121 IT 273 (AHD.). 3.3. IN VIEW OF THE FACTS DISCUSSED ABOVE, IT IS HE LD THAT THE ASSESSEE HAS INFLATED HIS EXPENDITURE BY INTRODUCING FOLLOWING B OGUS PURCHASES IN THE NAME OF PARTIES MENTIONED BELOW. M/S.AMBUJA INTERMEDIATES PVT. LTD. ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 10 - SR.NO. DATE ITEM AMOUNT(RS.) 1. 20.04.2006 H. ACID 7,05,262/ - 2. 20.05.2006 H.RDS 11,78,682/- 3. 09.06.2006 H.RDS 13,93,031/- 4. 20.06.2006 H.RDS 13,76,731/- 5. 01.07.2006 H.RDS 9,80,896/ - 6. 01.07.2006 H.RDS 12,64,453/- 7. 17.07.2006 H.RDS 20,80,417/ - 8. 22.12.2006 H.ACID 11,23,969/- 9. 21.03.2007 H.RDS 13,34,297/- TOTAL RS.1,14,37,738/- M/S.ROHAN DYES & INTERMEDIATES LTD. SR.NO. DATE ITEM AMOUNT(RS.) 1. 01.03.2007 J.ACID 38,61,312/- 2. 01.03.2007 K.ACID 35,58,464/ - 3. 01.03.2007 H.ACID 35,58,464/ - 4 01.03.2007 H.AVID 38,61,312/ - TOTAL RS.1,48,39,552/- M/S.ARCATA TRADE LINKS PVT. LTD. SR.NO. DATE ITEM AMOUNT(RS.) 1. 07.12.2006 J.ACID 10,35,000/- TOTAL RS.10,35,000/- M/S.VISHAL ENTERPRISE SR.NO. DATE ITEM AMOUNT(RS.) 1. 20.12.2006 RDS 7,73,760/- TOTAL RS.7,73,760/- M/S.YOGESHWAR ENTERPRISE ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 11 - SR.NO. DATE ITEM AMOUNT(RS.) 1. 02.03.2007 RDS 5,64,246/- TOTAL RS.5,64,246/- M/S.NAVRANG CORPORATION. SR.NO. DATE ITEM AMOUNT(RS.) 1. 08.09.2006 12,45,754/ - TOTAL RS.14,45,754/- 3.4. THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS. 2,98,96,050/- (RS.1,14,37,738/- + RS. 1,48,39,552/- + RS.10,35,00 07- + RS.7,73,760/- + RS.5,64,246/- + RS. 12,45,754/-) BEING BOGUS PURCHA SES INTRODUCED IN THE NAME OF ABOVE REFERRED PARTIES IS DISALLOWED AND AD DED BACK TO THE INCOME OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE FOR DEDUCTI ON OF RS. 2,98,96,050/- IS ALSO DISALLOWABLE U/S.40A(3) AS THE PAYMENT AGAINST THESE BOGUS PURCHASES HAVE BEEN MADE OTHERWISE THAN BY AN ACCOUNT PAYEE C HEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT. PENALTY PROCEEDINGS U/ S.271 (1) (C) HAVE ALREADY BEEN INITIATED FOR FILING INACCURATE PARTICULARS OF INCOME THEREBY CONCEALING THE INCOME OF RS. 2,98,96,050/-. 6.1. HOWEVER, THE LD.CIT(A) ACCEPTED THAT THE PURCH ASES WERE NOT MADE FROM THE CONCERNED PARTIES, BUT PROCEEDED TO R ESTRICT THE DISALLOWANCE TO THE EXTENT OF 5% OF THE TOTAL PURCH ASES. THE FINDING OF THE LD.CIT(A) IS REPRODUCED HEREUNDER FOR THE SAKE OF CLARITY. 2.4.4 IN VIEW OF THE ABOVE, THE DECISIONS RELIED U PON BY THE AO ARE NOT APPLICABLE BUT THE DECISION OF HONOURABLE GUJARAT H IGH COURT IN THE CASE OF M K BROTHERS (SUPRA) AND THE DECISION OF HO NOURABLE ITAT AHMEDABAD IN THE CASE OF RASIKLAL K. PAREKH (SUPRA) AND THE DECISION OF HONOURABLE ITAT AHMEDBAAD IN THE CASE OF VIJAY P ROTEINS LTD. IS SQUARELY APPLICABLE. THE APPELLANT HAS ADMITTED IN THE ALTERNATIVE ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 12 - ARGUMENT THAT AT LEAST 4% HAS BEEN SAVED ON VAT BY RESORTING TO PURCHASING OUTSIDE THE BOOKS OF ACCOUNTS AND OBTAIN ING BILLS OF SOME OTHER PARTY. FURTHER, NO DISALLOWANCE CAN BE MADE U NDER SECTION 40A(3) IN VIEW OF THE DECISION OF HONOURABLE ITAT A HMEDABAD IN THE CASE OF VIJAY PROTEINS LTD. (SUPRA) AND ALSO THE OT HER DECISIONS QUOTED BY THE APPELLANT AND REPRODUCED ABOVE IN THE SUBMIS SION OF THE APPELLANT. CONSIDERING THE ABOVE CIRCUMSTANCES IT W OULD BE FAIR IF 5% OF THE PURCHASES ARE DISALLOWED AS EXPENDITURE WHI CH THE ASSESSEE WOULD HAVE SAVED BY BUYING FROM THE OPEN MARKET OUT SIDE THE BOOKS OF ACCOUNT. THEREFORE, THE DISALLOWANCE MADE BY THE AO OF RS.2,98,96,050/- IS RESTRICTED TO RS.14,94,800/-. T HIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. 6.2. WE FIND THAT THE AO HAS GIVEN VARIOUS REASONS FOR NOT ACCEPTING THE EXPLANATION OF THE ASSESSEE. THE AO HAS GIVEN FINDING THAT THE ASSESSEE FAILED TO PRODUCE THE ORIGINAL SALE INVOIC ES, NOT A SINGLE CHEQUE ISSUED BY THE ASSESSEE AGAINST THESE PURCHASES HAS BEEN CREDITED IN THE ACCOUNT OF ANY OF THESE PARTIES, NONE OF THE CHEQUE WAS ISSUED AS A/C.PAYEE CHEQUE AND NO CHEQUE WAS ISSUED IN FAVO UR OF ANY OF THESE PARTIES. THE AO HAS ALSO INVOKED THE PROVISIONS OF SECTION 40A(3) AND PROVISO TO SECTION 69C OF THE ACT. WE FIND THAT T HERE IS NO FINDING OR ANY WHISPER ON THESE OBJECTIONS OF THE ASSESSING OF FICER IN THE IMPUGNED ORDER. THE LD.CIT(A) HAS SIMPLY RESTRICTED THE DI SALLOWANCE TO THE EXTENT OF BENEFIT OF VAT, I.E. 5% OF THE TOTAL PUR CHASES. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE UNABLE TO CONFIRM THE FINDING OF THE LD.CIT(A), THEREFORE THE ORDER OF THE LD.CIT (A) IS SET ASIDE ON THIS ISSUE AND RESTORE THE SAME BACK TO HIS FILE FOR DEC ISION AFRESH IN ACCORDANCE WITH LAW. THE LD.CIT(A) IS HEREBY DIREC TED TO DECIDE THE ITA NO.776 /AHD /2011 ITO VS. DEVENDRA GIRDHARILAL JAIN, HUF ASST.YEAR 2007-08 - 13 - ISSUE AFTER OBTAINING REMAND REPORT FROM THE AO AND DECIDE ALL HIS OBJECTIONS IN ACCORDANCE WITH LAW. THUS, GROUND RA ISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON TUESDAY, THE 30TH DAY OF DECEMBER,2014 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/12 /2014 2*..,(.../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $% # / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-XVI, AHMEDABAD 5. 7(8$45 , *45. , 3 / DR, ITAT, AHMEDABAD 6. 8:;<) / GUARD FILE. / BY ORDER, %7$ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD