ACIT, Circle - 34, Kolkata , Kolkata V. Bhawarlal Aloke Kumar , Kolkata

ITA 779/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6298 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 23-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Keywords: Bogus purchase; Unexplained expenditure; Business income; Opportunity of cross examination; Cost of acquisition; Third party statement; Accommodation entries; Assessment record; Onus to prove
• Section: 69C; 143(3); 142(1); 133(6); 37(1); 69; 145; 148

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 779 / KOL / 20 18 ASSESSMENT YEAR :2014-15 ACIT, CICLE-34, AAYAKAR POORVA, 7 TH FLOOR, 110, SHANTIPALLY, KOLKATKA-107 V/S . BHAWARLAL ALOKE KUMAR P-12, NEW HOWRAH BRIDGE APPROACH ROAD, 4 TH FLOOR, KOLKTA-700001 [ PAN NO.AADFB 0620 N ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI ROBIN CHOUDHURY, ADDL. CIT-DR /BY RESPONDENT NONE /DATE OF HEARING 04-02-2019 /DATE OF PRONOUNCEMENT 03-05-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2014-15 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATAS ORDER DATED 23.01.2018 PASSED IN CASE NO.224/CIT(A)-10/C-34/14-15/16-17/KO L, INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. CASE CALLED TWICE. NONE APPEARS AT THE ASSESSEES B EHEST DESPITE THE REGISTRY HAVING SENT AN RPAD NOTICE. IT IS ACCORDIN GLY PROCEEDED EX PARTE . 2. REVENUES SOLE SUBSTANTIVE GRIEVANCE RAISED IN T HE INSTANT APPEAL SEEKS TO CHALLENGE CORRECTNESS OF CIT(A)S ACTION PARTLY UPHOLDING ASSESSING OFFICERS FINDINGS DISALLOWING ASSESSEES PURCHASE( S) OF 3,22,28,000/- ONLY TO THE EXTENT OF 15% VIDE IMPUGNED FOLLOWING DETAILED DISCUSSION:- 06. FINDINGS &. DECISION: ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 2 1. I HAVE CAREFULLY EXAMINED THE ACTION OF THE LD.A O IN MAKING THE IMPUGNED DISALLOWANCE OF RS.3,22,28,OOO/- AND THE SUBMISSION OF THE APPELLANT I LD. A.R MADE BEFORE THE LD ASSESSING OFFICER AS WELL AS IN APPEAL. I HAVE ALSO CAREFULLY PERUSED VARIOUS JUDICIAL DECISIONS FILED BY THE APP ELLANT AND RELIED UPON BY HIM. IT IS OBSERVED THAT THE LD.AO ADDED THE IMPUGNED AMOUNT O F RS.3,22,28,OOOI- BEING TO PURCHASES CLAIMED TO HAVE BEEN MADE DURING THE YEAR - UNDER CONSIDERATION FROM VERTAIN PARTIES, NAMELY M/S PRANTEEK DISTRIBUTOR-S P. LTD., M/S BNDJ DISTRIBUTORS LTD. AND M/S VYASS VYAPAAR P.LTD ON THE MAIN GROUND OF A PPELLANT'S FAILURE TO PRODUCE THESE THREE PARTIES BEFORE HIM FOR EXAMINATION, THE REBY NOT EVEN PROVIDING THE IDENTITIES OF THESE SELLING PARTIES. THE LD AO HAS ALSO METICULOUSLY ANALYZED THE ANNUAL ACCOUNTS FILED BY TWO OF THESE THREE PARTIES AS SHOWN IN MCA WEBSITE AND OBSERVED THAT THESE COMPANIES HAVE NEITHER ANY ASSE TS, NOR ARE THEY RENT FOR ESTABLISHMENT. THEREAFTER THE LD. AO CONCLUDED THAT THE SELLING PARTIES ARE MERE PAPER COMPANIES INDULGED IN PROVIDING BOGUS BILLING ENTRIES TO THE APPELLANT. 2. THE APPELLANT I LD A.R FOR THE APPELLANT ON THE OTHER HAND ADVANCED THE FOLLOWING ARGUMENTS THROUGH HIS WRITTEN SUBMISSION: A. ALL THE SUBJECT THREE PARTIES WERE HAVING INCOME TAX PAN (QUOTED BY LD. AO HIMSELF), VAT TIN NO. AND BANK ACCOUNTS. THESE P ARTIES HAVE FILED THEIR RESPECTIVE INCOME TAX RETURNS FOR THE SUBJECT YEAR UNDER CONSIDERATION. HENCE, DOUBTS OF LD. AO ABOUT EVEN THE IDENTITY OF THREE MENTIONED PARTIES ARE UNCALLED FOR. B. NONE OF THESE THREE PARTIES OR THEIR DIRECTORS H AD OR HAVE ANY RELATIONSHIP WHATSOEVER WITH THE APPELLANT FINN OR ITS PARTNERS, AND THAT THERE WAS NO MATERIAL WHATSOEVER TO ESTABLISH THAT MONEY PAID BY APPELLANT TO THESE PARTIES EVER CAME BACK TO APPELLANT. C. THE PURCHASE MADE FROM THESE PAL-TIES WERE SUPPO RTED BY BILLS WHICH WERE DULY RECORDED IN APPELLANT'S BOOKS OF ACCOUNTS AND THESE BOOKS HAVE NOT BEEN REJECTED BY ID. AO. D. ALL TYPES OF PROFIT RATIOS VIZ. GROSS PROFIT RAT IO, NET PROFIT RATIO AND OPERATING PROFIT RATIO FOR THE YEAR UNDER CONSIDERATION ARE H IGHER THAN EARLIER YEARS' SAME RATIO ACCEPTED IN SCRUTINY ASSESSMENTS AS WELL AS RESPECTIVE AVERAGE RATIO OF FOUR YEAR-S AS IS SEEN FROM CHARTS DEPICTE D IN APPELLANT'S WRITTEN SUBMISSION. E. THE GROSS PROFIT RATIO, NET PROFIT RATIO AND OPE RATING PROFIT: RATIO OF THE YEAR UNDER- CONSIDERATION, AFTER CONSIDERING THE IMPACT OF ADDITION OF RS.3,22,28,000/- MADE BY LD. A,O SHOW VERY ABNORMAL INCREASE IN RESPECTIVE RATIO FROM THE EARLIER YEAR'S RESPECTIVE RATIO ACCE PTED BY DEPARTMENT IN SCRUTINY ASSESSMENTS OR RESPECTIVE AVERAGE RATIO OF FOUR YEARS AS DEPICTED IN CHARTS SUBMITTED BY THE APPELLANT. F. MOREOVER, LD. AO HAD NOT BROUGHT OR: RECORD ANY OTHER COMPARABLE INSTANCE OF HIGHER PROFIT RATIOS IN THE LINE OF APP ELLANT'S BUSINESS FOR THE YEAR UNDER CONSIDERATION. HENCE, THE LD AO'S ALLEGATION OF APPELLANT RESORTING TO BOGUS PURCHASES TO REDUCE ITS PROFIT IS MERELY SURM ISE AND CONJECTURE OF LD. A/O AND HAS NO SUBSTANCE. G. THE APPELLANT HAS NO STATUTORY POWER TO ENFORCE ATTENDANCE OF ANY PARTY BEFORE THE LD AO AND APPELLANT HAD NO DIRECT OR IN DIRECT CONTROL OVER THE WAY OF MAINTAINING ACCOUNTS AND OTHER AFFAIRS OF CONCER NED PARTIES HENCE NON- APPEARANCE OF CONCERNED PARTIES BEFORE LD. AO OR AN Y ALLEGED DISCREPANCY IN ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 3 THESE PARTIES ACCOUNTS FILED BEFORE MCA, CANNOT BE THE SOLE GUIDING FACTOR TO TERM THE ENTIRE PURCHASES FROM, THE SAID THREE PART IES AS BOGUS. THESE PARTIES MAY HAVE THEIR PERSONAL REASONS FOR NON APPEARANCE BEFORE THE LD. AO OR FOR NOT PRESENTING TRUE ACCOUNTS BUT MERELY FOR THAT AP PELLANT OUGHT NOT TO BE PENALIZED. 3. THE APPELLANT HAS RELIED UPON CERTAIN JUDICIAL D ECISIONS AND COURT RULINGS, AND THEY ARE QUITE RELEVANT IN THE FACTUAL AND LEGAL MA TRIX OF THE CASE: A. CIT VS. NIKURIJ EXIMP ENTERPRISES P LTD.(2015) 372, ITR 619 (BORN) (2013) 35 TAXMAN.COM 384,(BOMBAY) '7. -----------WE FIND THAT THE TRIBUNAL HAS DELETE D TILE ADDITIONS ON ACCOUNT OF BOGUS PURCHASES NOR ONLY ON THE BASIS OR STOCK STATEMENT I.E. RECONCILIATION STATEMENT, BUT ALSO IN VIEW OF THE OTHER FACTS. THE TRIBUNAL RECORDS THAT THE BOOKS OF ACCOUNTS OF THE RESPONDENT- ASSESSEE HAVE NOT BEEN REJECTED. SIMILARLY, THE SAL ES HAVE NOT BEEN DOUBTED AND IT IS AN ADMITTED POSITION THAT' SUBSTA NTIAL AMOUNT OF SALES HAVE BEEN MADE TO THE GOVERNMENT DEPARTMENT I.E. DE FENCE RESEARCH AND DEVELOPMENT LABORATORY, HYDERABAD. FUR THER, THERE WERE CONFIRMATION LETTERS FILED BY THE SUPPLIERS, C OPIES OF INVOICES FOR PURCHASES AS WELL AS COPIES OF BANK STATEMENT ALL O F WHICH WOULD INDICATE THAT THE PURCHASES WERE IN FACT MADE. IN O UR VIEW MERELY BECAUSE THE SUPPLIERS HAVE NOR APPEARED BEFORE THE ASSESSING OFFICE OR THE CIT(A), ONE CANNOT CONCLUDE THAT THE PURCHAS ES WERE NOT MADE BY THE RESPONDENT- ASSESSEE. THE ASSESSING OFFICER AS WELL AS CIT(A) HAVE DISALLOWED THE DEDUCTION OF RS1.33 CRORES ON A CCOUNT OF PURCHASES MERELY ON THE BASIS OF SUSPICION BECAUSE THE SELLERS AND THE CANVASSING AGENTS HAVE NOT BEEN PRODUCED BEFORE THEM, 11FE RIND THAT THE ORDER OF THE TRIBUNAL IS WELL A REASONED O RDER TAKING INTO ACCOUNT ALL THE FACTS BEFORE CONCLUDING THAT THE PU RCHASES OF RS.1.33 CRORES WAS NOT BOGUS. NO FAULT CAN BE FOUND WITH TH E ORDER DATED 30.04.2010 OF THE TRIBUNAL. ' B. ACIT VS. BHARAT HI-TECH (CEMENT) P,LTD,,(201.6) 46 CCH 0012 KOL TRIB (2016) 176 TTJ (KOL) 166 7.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE PAPER BOOK TH AT THE ENTIRE LEDGER ACCOUNT OF THE SUPPLIER WAS PROVIDED BEFORE THE LEA RNED AO. WE FIND THAT M/S SHAKTI TRADING COMPANY (SUPPLIER) IS REGIS TERED UNDER SALES TAX LAWS VIDE REGISTRATION NUMBER JST NO.JR 349S(C) LEF 23.9.2K; CST NO.19751387254 AND TIN NO. 19751428091. WE ARE IN AGREEMENT WITH THE LEARNED AR THAT THE PURCHASES MA DE FROM THIS PARTY ARE FORMING PART OR SALES TAX RECORDS AND STO CK REGISTER. IT IS NOT THE CASE OF THE LEARNED AO THAT THE CONCERNED SUPPL IER HAD NOT SUPPLIED ANY GOODS TO THE ASSESSEE. THIS IS EVIDENT FROM ONE OF THE SAMPLE INVOICES SUBMITTED BY THE ASSESSEE BEFORE TH E AO WHICH PROVED THAT THE GOODS HAD INDEED MOVED FROM SUPPLIE R TO THE ASSESSEE. MOREOVER, WHAT PURCHASED BY THE ASSESSEE IS THE RAW MATERIAL WITHOUT WHICH, IT COULD NOT HE, MANUFACTUR ED THE FINISHED PRODUCT I. E CEMENT. ADMITTEDLY THE CEMENT MANUFACT URE HAS BEEN SOLD AND THE PROCEEDS THEREON IS CREDITED TO PROFIT AND LOSS ACCOUNT. WE FIND THAT THE PAYMENT FOR PURCHASES HAVE BEEN MA DE BY ACCOUNT PAYEE CHEQUES WHICH FACT HAS BEEN ACCEPTED AS GENUI NE BY THE LEARNED AO. WE ALSO FIND THAT THE ASSESSES HAD GIVE N REASONABLE ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 4 EXPLANATION BEFORE THE LOWER AUTHORITIES THAT THE P ROPRIETOR OF SHAKTI TRADING COMPANY HAD EXPIRED AND THEIR BUSINESS IS C LOSED IN THE LAST KNOWN ADDRESS WITH THE ASSESSEE AND NO SUBSEQUENT T RANSACTIONS WERE MADE WITH THE SAID SUPPLIER. WE FIND THAT THE LEARNED AO HAD TREATED THIS PURCHASE AS BOGUS ONLY ON THE LIMITED GROUND THAT HIS NOTICE U/S 133(6) OF THE ACT COULD NOT BE SERVED ON THE SUPPLIER IN THE ADDRESS GIVEN BY THE ASSESSEE. IN OUR OPINION, THIS ALONE CANNOT BE THE DECIDING FACTOR FOR TREATING THE PURCHASES AS B OGUS. NOTHING PREVENTED THE LEARNED AO FROM MAKING THE VERIFICATI ON FROM THE BANKERS OF THE ASSESSEE AS TO WHETHER THE PAYMENTS MADE BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES HAD INDEED B EEN CREDITED ONLY TO THE ACCOUNT OF THE SUPPLIER OR NOT. WE FIND THAT THE PAYMENTS MADE TO THE SUPPLIER HAS BEEN ACCEPTED AS GENUINE B Y THE LEARNED AO. THEN THE SCOPE FOR DISPUTING THE PURCHASES MADE FROM SUPPLIER IS LOST. HENCE WE DON'T FIND ANY INFIRMITY IN THE ORDE R OF THE LEARNED CITA IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 6 RAISE D BY THE REVENUE IS DISMISSED. ' C. BEAUTY TAX (EARLIER FLORALS INDIA) VS. DCIT ORDE R DATED 10.04.2017 OF HON'BLE ITAT, JAIPUR BENCH IN ITA NO. 508JIJ/2016 '8 THE ONLY GRIEVANCE OF THE ASSESSING OFFICER IS T HAT THE ASSESSEE HAS FAILED TO PRODUCE THE PARTY SO AS TO ESTABLISH GENUINENESS OF THE TRANSACTION AND SECONDLY, NO PAYMENT HAS BEEN MADE TO THE PARTY TILL THE YEAR END. THE ID. CIT(A) WHILE CONFIRMING THE D ISALLOWANCE HAS STATED THAT THOUGH CONFIRMATION HAS BEEN OBTAINED F ROM THE PETTY, HOWEVER, A SIMPLE CONFIRMATION IS NOT SUFFICIENT TO ESTABLISH THE FACT OF PURCHASE WITHOUT ELABORATING WHAT MORE IS REQUIRED FROM THE ASSESSEE TO JUSTIFY ITS CLAIM. REGARDING NON APPEARANCE OF T HE SUPPLIER, THE ASSESSEE HAS SUBMITTED THAT THE SUPPLIER WAS BASED IN DELHI AND HE HAS DENIED COMING TO JAIPUR BUT AT THE SAME TIME, H E HAS SENT ITS REQUISITE CONFIRMATION DIRECTLY TO. THE DEPARTMENT BY THE REGISTERED POST. FURTHER THE AMOUNT OUTSTANDING AGAINST THE SA ID PURCHASES HAS BEEN PAID BY ACCOUNT PAYEE CHEQUE IN APRIL AND MAY, 2015 AND NOW THERE IS NO OUTSTANDING AMOUNT AGAINST THE SAID SUP PLIER. REGARDING THE OTHER DETAILS SUBMITTED BY THE ASSESSEE, NAMELY COPY OF LEDGER AMOUNT AND PURCHASE BILL OF M/S MAHAVEER TEXTILES, COPY OF THE CONFIRMATION OF THE AMOUNT SENT BY M/S MAHAVEER TEX TILE MILLS TO THE DEPARTMENT AND THE' FACT THAT THE MATERIALS SO PURC HASES FORM PART OF THE TURNOVER AND WHICH HAS BEEN EXPORTED, THERE IS NO FINDING BY THE ASSESSING OFFICER AS TO REASONS FOR NON ACCEPTANCE OF THE SAID DOCUMENTS AND IN ABSENCE OF THAT, THE STAND TAKEN B Y THE REVENUE CANNOT BE ACCEPTED. MERELY NON-APPEARANCE OF THE SU PPLIER IN ABSENCE OF ANY OTHER CORROBORATE EVIDENCE CANNOT. B E A BASIS OF JUSTIFY THE STAND OF THE REVENUE THAT THE TRANSACTI ON OF PURCHASE IS BOGUS. IN THE RESULT THE PURCHASES MADE FROM M/S MA HAVEER TEXTILES HAVE NOT BEEN PROVED TO BE BOGUS BY THE REVENUE AND THE SAID ADDITIONS CANNOT BE SUSTAINED IN THE EYE OF LAW IN ABSENCE OF ANY CONCLUSIVE EVIDENCE BROUGHT ON RECORD. THE GROUND O F APPEAL TAKEN BY THE ASSESSEE IS THUS ALLOWED. ' D. ACIT VS. MAHESH KR. SHAH ORDER DATED 31.01.2017 OF HON'BLE ITAT MUMBAI BENCH IN ITA NO. 5194/MUM/2014: ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 5 4.3.4----------- FOR WHATEVER REASON, THE FACT REM AINS THAT THE ASSESSEE HAD FILED COPIES OF PURCHASE INVOICES; EXTRACTS OF STOCK LEDGER SHOWING/ENTRY/EXIT OF MATERIALS, COPIES OF BANK STA TEMENTS TO EVIDENCE THAT PAYMENTS FOR THESE PURCHASE WERE MADE THROUGH NORMAL BANKING CHANNELS, ETC. TO ESTABLISH GENUINENESS OF THE AFOR ESAID PURCHASES. FROM THE RECORD IT IS EVIDENT THAT THE AO HAS NOT D OUBTED THE SALES AFFECTED BY THE ASSESSEE AND THEREFORE IT WOULD BE LOGICAL TO CONCLUDE THAT WITHOUT CORRESPONDING PURCHASES BEING MADE, TH E ASSESSEE COULD NOT HAVE EFFECTED SALES OFF BANK STATEMENTS T O EVIDENCE THAT PAYMENTS FOR THESE PURCHASES WERE MADE 4.3.5. IN OUR CONSIDERED VIEW, THE AO HAS NOT BROUG HT ON RECORD ANY MATERIAL EVIDENCE LA CONCLUSIVELY PROVE THAT THE SAID PURCHA SES ARE BOGUS. MERE RELIANCE BY THE AO ON INFORMATION OBTAINED FROM THE SALES DEPAR TMENT OR ON STATEMENT/AFFIDAVITS OF THE 12 PARTIES BEFORE THE SALES TAX DEPARTMENT O R THAT THESE PARTIES DID NOT RESPOND TO NOTICES ISSUED UNDER SECTION 133(6) OF T HE CT, WOULD NOT IN ITSELF SUFFICE TO TREAT THE PURCHASES AS BOGUS AND MADE THE ADDITION UNDER SECTION 69C OF THE ACT. IF THE AO DOUBTED THE GENUINENESS OF THE SAID PURCHASE S, IT WAS INCUMBENT UPON HIM TO CAUSE FURTHER INQUIRIES IN THE MATTER IN ORDER T O ASCERTAIN THE GENUINENESS OR OTHERWISE OF THESE TRANSACTIONS. -- ----- -- .. 4.3.6. IN THE FACTUAL MATRIX OF THE CASE ON HAND WH ERE THE AO FAILED TO CAUSE ANY EQUITY TO BE MADE TO ESTABLISH HIS SUSPICIONS THAT THE SAID PURCHASES ARE BOGUS, THE ASSESSEE HAS BROUGHT ON RECORD DOCUMENTARY EVIDENCE S TO ESTABLISH THE GENUINENESS OF THE SAID PURCHASES TRANSACTIONS, THE ACTION OF THE AO IN BRUSHING ASIDE THESE EVIDENCES CANNOT BE ACCEPTED. ------- - --- .. ------- - ------- ---- ------ - ---- --- ---- --------. MOREOVER, WHEN THE PAYMENTS FOR THE SAID PURCHASES TO THE SAID 1.2 PERSONS IS THROUGH PROPER BANKING CHANNELS AND THER E IS NO EVIDENCE BROUGHT ON RECORD BY THE AO TO ESTABLISH THAT THE SAID PAYMENT S WERE ROUTED BACK TO THE ASSESSEE, THE ADDITION MADE BY THE AO IS UNSUSTAINA BLE. WE ARE FORTIFIED IN THIS VIEW OF OURS BY THE DECISIONS, INTER ALIA, THE HON'BLE B OMBAY HIGH COURT IN THE CASES OF NIKUNJ EXIMP ENTERPRISES PVT. LTD. (SUPRA) AND ASHI SH INTERNATIONAL (SUPRA) AND THE DECISION OF THE COORDINATE BENCH IN THE CASE OF M/S VAMAN INTERNATIONAL PVT. LTD. (ITA NO. 794/MUM/2015 DATED 16.11.2016). IN THIS FA CTUAL AND LEGAL MATRIX OF THE CASE ON THIS ISSUE, AS DISCUSSED ABOVE, WE FIND NO REASON FOR INTERFERENCE IN THE ORDER OF THE LEARNED CIT(A) AND CONSEQUENTLY UPHOLD HER ORDER DELETING THE ADDITION OF RS.9645545/- MADE UNDER SECTION 69C OF THE ACT A S UNEXPLAINED EXPENDITURE IN RESPECT OR THE AFORESAID PURCHASES. CONSEQUENTLY, G ROUND 1 TO 4 OF THE REVENUE'S APPEAL ARE DISMISSED. E. ACIT VS. RAMILA PRAVEEN SHAH ORDER DATED OS.03.2 015 OF HON'BLE ITAT, MUMBAI BENCH IN ITA NO. 5246/MUM/2013 '6. ----------- IF THE ADDITION MADE BY THE AO. IS ACCEPTED, THEN G.P. RATIO OF THE APPELLANT DURING THE PRESENT A. Y. WILL BECOME ABNORMALLY HIGH AND THEREFORE THAT IS NOT ACCEPTABLE BECAUSE IT ONUS OF TILE AO BY BRINGING ADEQUATE MATERIAL ON RECORD TO PROVE THAT SUCH A HI GH G. P. RATIO EXISTS IN THE NATURE OF BUSINESS CARRIED OUT BY THE APPELLANT. FURTHER, IT HAS TO BE APPRECIATED THAT (I)PAYMENTS WERE THROUGH BANKING CHANNEL AND BY CHEQUE, (II) NOTICES COMING BACK.' D OES NOT MEAN, THOSE PARTIES ARE BOGUS, THEY ARE JUST DENYING THEIR BUSI NESS TO AVOID SALES TAX/VAT ETC. (III) STATEMENT BY THIRD PARTIES CANNOT BE CON CLUDED ADVERSELY IN ISOLATION AND WITHOUT CORROBORATING EVIDENCES AGAINST APPELLA NT ,(IV') NO CROSS EXAMINATION HAS BEEN OFFERED BY AO TO THE APPELLANT TO CROSS EXAMINE THE ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 6 RELEVANT PARTIES (WHO ARE DEEMED TO BE WITNESS OR A PPELLANT TO CROSS EXAMINE THE RELEVANT PARTIES (WHO ARE DEEMED TO BE WITNESS OR APPROVER BEING USED BY AO AGAINST THE APPELLANT) WHOSE NAME APPEAR IN T HE WEBSITE WWW.MEHEVET.QOV. IN AND (V) FAILURE TO PRODUCE PART IES CANNOT BE TREATED ADVERSELY AGAINST APPELLANT 7. HENCE, ON A CONSPECTUS OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE ID. CIT(A) ON THIS ISSUE. G. DCIT VS. SHIV SHANKAR R. SHARMA ORDER DATED 16.0 9.2016 OF HON'BLE ITAT MUMBAI BENCH IN ITA NO,5149/MUM/20.4 ' 8. --------.--------- . THE CORRESPONDING CONSUMP TION OF MATERIALS IN RESPECT OF WHICH THE PURCHASES WERE AFFECTED BY THE ASSESSEE F IRM HAVE NOT BEEN DOUBTED BY ID. AO. ---. --------------------------- --- . THE AO HAS NOT CONDUCTED ANY INDEPENDENT ENQUIRES (OR MAKING THE ADDITION ES PECIALLY SINCE THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS OF SHOWING BOOKS OF ACCOUNT, PAYMENT BY V/AY OF ACCOUNT PAYEE CHEQUE AND PRODUCI NG BILLS FOR PURCHASE OF GOODS. FROM THE RECORD WE FOUND THAT THE GROSS PROF IT 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: A.Y SALES GROSS PROFIT GP RATIO 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 16.9% 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 THE SAME HAVE NOT BEEN REJECTED BY AO. HOWEVER FROM THE ABOVE TABLE IT IS EVIDENT THAT ASSESSEE HAS BEEN DECLARING HIGHER GRO SS PROFIT DURING THE YEAR UNDER CONSIDERATION AS COMPARED TO THE GP RATE SHOW N 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---------- -------------------------- ----- -.------- -------------.--- - WHETHER MERELY BECAUSE SUPPLIERS HAD NOT APPEARED BEFORE ASSESSING OFFICER OR COMMISSIONER ( APPEALS), IT COULD NOT BE CONCLUDED THAT PURCHASES WERE NOT MADE BY ASSESS EE - 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 . 12. FURTHERMORE, THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V, M.K. BROTHERS (GUJARAT HIGH COURT) (163 ITR 249), HELD AS UNDER:- [----------------------.---- WHETHER TRIBUNAL WAS J USTIFIED 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 WE RE BOGUS OR THAT ANY PART OF THOSE PAYMENTS CAME BACK TO THE ASSESSEE-HELD, Y ES 13. IN VIEW OF THE DETAILED FINDING RECORDED BY CIT (A), WHICH HAS NOT BEEN CONTROVERTED BY ID. DR BY BRINING ANY POSITIVE MATE RIAL 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 ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 7 CASE .. WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F CIT(A) SUSTAINING ADDITION OF RS.3 LAKHS OUT OF TOTAL PURCHASES. ' H. SHUBH LAXMI EXPORTS VS. ITO (2007) 26 CCH 041.4 JAIPUR TRIB (2008) 10 DTR (JP. TRIB.) 0281 '11. ----------UNDISPUTEDLY, IT IS NOT A/WAYS WITHI N THE CONTROL OF A PURCHASER TO PRODUCE THE SUPPLIERS BEFORE THE AO TO ESTABLISH TH E GENUINENESS OF CLAIM OF PURCHASES. WHAT IS EXPECTED FROM A PRUDENT PURCHASE R TO ESTABLISH GENUINENESS OF CLAIM OF PURCHASES IS FURNISHING OF PURCHASE BILL CONTAINING AL! THE NECESSARY DETAILS OF THE TRANSACTION, PAYMENT- THROUGH BANKING CHANNEL, BOOKS OF ACCOUNT, ETC. IN THE PRESENT CASE THE ASSE SSEE HAD FURNISHED PURCHASE BILLS ISSUED BY NAMED FOUR PARTIES, THEIR CST/RST NUMBER. PANS, PROOF REGARDING PAYMENT MADE BY ACCOUNT PAYEE CHEQU ES, ETC. WHICH WAS EXPECTED FROM A PRUDENT PURCHASER. THUS, THE ASSESS EE HAD DISCHARGED ITS PRIMARY ONUS. I. RAJESH P. SONI VS. ACIT (20()6) 100 TT) (AHD. ) 892 11. W HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD. THE ADMITTED FACTS OF THE CASE ARE THAT PURCHASE WERE R ECORDED IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED. THE PURCHASE ARE SUPPO RTED BY PROPER BILLS/VOUCHERS. THE ASSESSEE FILED THE NECESSARY DE TAILS REGARDING NAME, ADDRESS, SALES TAX NUMBER. THE PAYMENTS WERE MADE T HROUGH BANKING CHANNELS. THUS, THE SALE AGAINST THE PURCHASES ARE NOT DOUBTED. IT IS NOT THE CASE OF AO THAT AMOUNTS PAID FOR PURCHASES HAD COME BACK TO THE ASSESSEE. WE NOTICED THAT THE AO HAD MADE ADDITION MERELY ON THE GROUND THAT THE SUPPLIERS ARE NOT LOCATED AND THEY WERE NOT PRODUCE D FOR EXAMINATION. AFTER CONSIDERING THE FACTS OF THE CASE WE ARE OF THE VIE W THAT WHEN PURCHASES ARE SUPPORTED WITH AUTHENTICATED PURCHASE BILLS HAVING SALES TAX NUMBERS AND PAYMENT THROUGH CHEQUES, THE ADDITION CANNOT BE MAD E UNDER S. 69 OR 69A AS IN THIS SECTION THE ADDITION CAN BE MADE IN FOLL OWING CIRCUMSTANCES: '(I) WHEN ASSESSEE HAS MADE INVESTMENT WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT, OR (II) THE ASSESSEE OTTERS NO EXPLANATION OR THE EXPL ANATION IS NOT SATISFACTORY. 13. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION IS NOT WARRANTED. WE ACCORDINGLY DELETE TH E ADDITION OF RS. 739082.' 4. AFTER GOING THROUGH THE FINDINGS OF THE LD. AO A ND THE APPELLANT'S SUBMISSIONS WITH JUDGMENTS CITED, I AM OF THE CONSIDERED VIEW THAT A DDITION OF WHOLE AMOUNT OF PURCHASES MADE FROM A PARTY JUST BECAUSE THAT PARTY DID NOT APPEAR BEFORE THE LD. AO OR BECAUSE IT HAD NOT MAINTAINED ITS ACCOUNTS CO RRECTLY, IS UNJUSTIFIED PARTICULARLY WHEN IDENTITIES OF PARTIES ARE PROVED, BILLS OF PAR TIES ARE PRODUCED, CONFIRMATION FROM THOSE PARTIES ARE ON RECORD, PAYMENT TO THESE PARTI ES ARE THROUGH BANKING CHANNELS, THESE PARTIES HAVE NO PROXIMAL OR DISTAL RELATIONSH IP WITH THE APPELLANT AND APPELLANT'S DIFFERENT PROFIT RATIOS FOR CONCERNED Y EAR (YEAR ENDED 31.03.2014) HAVE SHOWN BETTER RESULTS THAN RESPECTIVE AVERAGE RATIO. IT IS ALSO TO BE KEPT IN MIND THAT INSTANT CASE IS NOT PRECISELY A CASE ATTRACTING ADD ITION U/S 69C OF INCOME TAX ACT, 1961. IT IS ALSO NOTEWORTHY THAT EARLIER VEER'S ASS ESSMENTS HAVE BEEN COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT AND THE PROFIT RATIOS AFTER ADDITION OF THE ENTIRE ALLEGED BOGUS PURCHASES FROM THESE THREE PAR TIES GO UP ABNORMALLY HIGH FROM THE RESPECTIVE RATIO ACCEPTED IN EARLIER YEARS IN S CRUTINY ASSESSMENTS. THERE IS NOTHING ON RECORD TO SUGGEST SUCH ABNORMALLY HIGH R ATIOS IN ANY OTHER COMPARABLE CASE OF SAME LINE OF BUSINESS AND TOTE: TURNOVER OF THE APPELLANT HAS NOT BEEN CAST ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 8 ASPERSIONS ON BY THE LD. AO. AT THE SAME TIME, THE FACTS OF NON-APPEARANCE CONCERNED PARTIES BEFORE LD. AO CANNOT BE IGNORED A LTOGETHER AND IF NO ADDITION MADE, NON-COMPLIANCE OF DEPARTMENT NOTICES MAY BECO ME AN ACCEPTABLE POSITION WAND THEREFORE IN MY CONSIDERED VIEW THERE HAVE TO BE CERTAIN DETERRENTS IN THE MATTER. 5. I FIND THAT IN THE CIRCUMSTANCES EMANATING FROM THE CASE, THE LD AO HAS TREATED THE ALLEGED PURCHASES AS BOGUS, BUT HAS NOT REJECTE D THE BOOKS OF ACCOUNTS, WHICH IN ESSENCE MEANS THAT THE SALES HAVE BEEN FOUND TO BE ACCEPTABLE. IN MY CONSIDERED VIEW OF THE FACTUAL MATRIX, THIS WOULD APPEAR TO BE A CASE WHERE PURCHASES HAVE BEEN MADE FROM PARTIES OTHER THAN THOSE MENTIONED I N THE BOOKS OF ACCOUNTS. THESE PURCHASES WERE IN ALL PROBABILITY FROM THE GREY MAR KET, AND ACCORDINGLY BILLS OBTAINED. I FIND THAT IN SUCH SITUATIONS, HON'BLE COURTS HAVE TAKEN A VIEW THAT THE ENTIRE UNVERIFIED PURCHASES ARE NOT RENDERED VULNERABLE FO R ADDITION; RATHER ONLY THE 'ELEMENT OF PROFIT' EMBEDDED FROM SUCH PURCHASES OU GHT TO BE CONSIDERED FOR ADDITION. IT WOULD BE JUST AND FAIR IN MY CONSIDERE D VIEW TO ARRIVE AT SUCH PERCENTAGES OF THE PROFITS WHICH WOULD JUSTIFY SUCH ADDITION. 6. IN THE CASE OF COMMISSIONER OF INCOME TAX VS SIM IT P SHETH, REPORTED IN [2013] 38 TAXMANN.COM 385 (GUJARAT)/[2013] 356 ITR 451 (GU JARAT) THE HON'BLE HIGH COURT OF GUJARAT HAS IN A SIMILAR FACTUAL MATRIX SUSTAINE D THE DECISION OF THE HON'BLE ITAT TO SUSTAIN THE G.P AT 12 %. THE HEAD NOTES OF THE SAI D DECISION ARE AS UNDER: IT: WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FR OM PARTIES OTHER THAN THOSE MENTIONED ILL BOOKS OF ACCOUNT, NOT ENTIRE PU RCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF' ASSESSEE [2013] 38 TAXMANN.COM 385 (GUJARAT) HIGH COURT OF GUJARAT COMMISSIONER OF INCOME-TAX V. SIMIT P. SHETH AKIL K URESHI AND MS, SONIA GOKANI, JJ. TAX APPEAL NO. 553 OF 2012 JANUARY 16, 2013 SECTION 145 OF THE INCOME-TAX ACT, 1961 - METHOD OF ACCOUNTING - ESTIMATION OF PROFITS [BOGUS PURCHASES] - ASSESSMENT YEAR 2006-07 - ASSESSEE WAS ENGAGED IN ,BUSINESS OF TRADING IN STEEL ON WHOLESALE BASIS - ASSESSING OFFICER HAVING FOUND THAT SOME OF ALLEGED SUPPLIERS OF STEEL TO ASSESSEE HAD NOT SUPPLIED STEEL TO ASSESSEE BUT HAD ONLY PROVIDED SALE BILLS, HELD THAT PURCHASES M ADE FROM SAID PARTIES WERE BOGUS - HE, ACCORDINGLY, ADDED ENTIRE AMOUNT OF PURCHASES TO GROSS PROFIT OF ASSESSEE - COMMISSIONER (APPEALS) HAVING FOUND THAT ASSESSEE H AD INDEED MADE PURCHASES, THOUGH NOT FROM NAMED PARTIES BUT OTHER PARTIES FRO M GREY MARKET, SUSTAINED ADDITION TO EXTENT OF 30 PER CENT OF PURCHASE COST AS PROBAB LE PROFIT OF ASSESSEE - TRIBUNAL HOWEVER, SUSTAINED ADDITION TO EXTENT OF 12.5 PER C ENT - WHETHER SINCE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THA N THOSE MENTIONED IN BOOKS OF ACCOUNT, ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCH ASES COULD BE ADDED TO ASSESSEE'S INCOME HELD, YES - WHETHER HENCE, ORDER OF TRIBUNAL NEEDED NO INTERFERENCE -, HELD, YES [PARAS 6, 7 & 9] [IN FAVO UR OF ASSSSESSEE] 7. SIMILARLY IN THE CASE OF M/S B J EXPOS VS. ACIT -30(1), MUMBAI HAS HELD THAT IT WOULD BE JUST AND ADEQUATE TO ESTIMATE THE PROFIT E LEMENT IN AN IDENTICAL FACTUAL MATRIX. BY THEIR ORDER DATED 13 TH SEPTEMBER, 2017, THE HON'BLE ITAT HAVE ADJUDICATED AS UNDER: [ QUOTE] 2. IN THESE APPEALS, THE ASSESSEE HAS MORE OR LESS RAISED COMMON GROUNDS. HOWEVER, THE ONLY SOLITARY ISSUE ARISING FROM THOSE GROUNDS OF APPEAL RE/ATE TO B} EXPORTS GROUP ADDITIONS MADE BY THE AO TOWARDS BO GUS PURCHASES FROM ALLEGED HAWALA OPERATORS AND FINDINGS OF THE CIT(A) IN REDU CING THE DISALLOWANCE MADE BY THE AO TO NET PROFIT ELEMENT IN THOSE ALLEGED BOGUS PURCHASES. ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 9 3. THE BRIEF FACTS OF THE CASE AS EXTRACTED FROM IT A NO.5442/MUM/2016 ARE THAT THE AO HAS REOPENED THE ASSESSMENT, BASED UPON INFORMAT ION RECEIVED FROM THE DGIT (INV), MUMBAI ON A SEARCH ACTION CONDUCTED ON SHRI BHENWERLEL LAIN GROUP THAT THE ASSESSEE IS A BENEFICIARY OF ACCOMMODATION ENTRIES PROVIDED BY M/S LITTLE DIAM, ONE OF THE BENAMI CONCERNS FLOATED BY SHRI BHANWARLAL J AIN. THE AO RELIED UPON THE STATEMENT RECORDED ON OATH DURING THE SEARCH PROCEE DINGS IN THE CASE OF SHRI BHENWERLEL JAIN AND HIS SON, SBRI REJESH BHANWARLAL JAIN, WHEREIN THEY HAVE CONFESSED TO HAVE FLOATED DUMMY CONCERNS IN THE NAM E OF FRIENDS AND RELATIVES OF GIVING ACCOMMODATION ENTRIES OF PURCHASES. ACCORDIN GLY NOTICE U/S 148 OF' THE INCOME-TAX ACT, 1961 WAS ISSUED. IN RESPONSE TO NOT ICE U/S 148, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS.12,78 ,131. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICES U/S 1 43(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPR ESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED DETAILS CA LLED FOR. 4. DURING THE COURSE OF' ASSESSMENT PROCEEDINGS, TH E AO ASKED THE ASSESSEE TO PRODUCE NECESSARY EVIDENCE IN SUPPORT OF GENUINENES S OF THE PURCHASES 13.] EXPORTS GROUP MADE FROM CERTAIN PARTIES. NOTICES U/S.133(6) OF THE .4CT WERE ISSUED, BUT THE NOTICES ISSUED U/S 133(6) WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES BY STATING THAT NO SUCH PERSONS WERE AVAILABLE AT THE GIVEN AD DRESSES. THEREFORE, THE AO ISSUED SHOW CAUSE NOTICE TO ASSESSEE ASKING IT TO S UBSTANTIATE THE PURCHASES CLAIMED TO HAVE BEEN MADE HORN THE ALLEGED HAWALA O PERATORS WITH NECESSARY EVIDENCE. IN RESPONSE, THE ASSESSEE FILED PURCHASE INVOICES, EXPORT INVOICES, SHIPPING BILLS, AIRWAYS BILLS, EXPORT HILL REALIZAT ION CERTIFICATES, BANK STATEMENT SHOWING PAYMENT FOR PURCHASES AND STOCK REGISTERS TO PROVE THE PURCHASES MADE FROM THE ALLEGED PARTIES ARE GENUINE. THE AO, AFTER CONSIDER ING RELEVANT SUBMISSIONS OR THE ASSESSEE END ALSO TAKING INTO ACCOUNT THE INFORMATI ON RECEIVED HORN DGIT (INV) FURTHER COUPLED WITH INDEPENDENT ENQUIRIES CONDUCTE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS, CAME TO THE CONCLUSION THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES OF PURCHASES FROM M/S LITTLE DIAM AND HENCE, THE PURCHASES FROM M/S LITTLE DIAM HAS BEEN TREATED AS UNEXPLAINE D EXPENDITURE U/S 69C OF THE ACT, AND ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE . 5 . AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). BEFORE CIT(A), THE ASSESSEE REITERATED ITS STAND TAKEN BEFORE THE AO. THE ASSESSEE FURTHER SUBMITTED THAT MERELY BECAUSE A TH IRD PARTY HAS ALLEGED THAT CERTAIN PARTIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENT RIES AND ALSO BJ EXPORTS GROUP THEY, LISTED AS SUSPICIOUS HAWALA OPERATORS, ADDITI ON CANNOT BE MADE IGNORING ALL EVIDENCE FILED IN THE FORM OF PURCHASE INVOICE, EXP ORT INVOICES, SHIPPING BILLS, AIRWAYS BIT EXPORT BILL REALIZATION CERTIFICATES, BANK STAT EMENT SHOWING PAYMENT FOR PURCHASES AND STOCK DETAILS TO PROVE THAT THE PURCHASES MADE FROM THE SAID PARTIES ARE SOLD IN THE NORMAL COURSE OF BUSINESS. THE ASSESSEE FURTHER SUBMITTED THAT IT IS IN THE BUSINESS EXPORT OF DIAMONDS AND PURCHASES FROM M/S LITTLE DIAM HAS BEEN EXPORTED FOR WHICH NECESSARY EVIDENCES IN THE FORM OF EXPORT INVOICES, SHIPPING BILLS, AIRWAYS BILLS, EXPORT BILL REALIZATION CERTIFICATES, BANK S TATEMENT SHOWING PAYMENTS FOR PURCHASES HAVE BEEN FILED. THE ITEMS OF GOODS PURCH ASED WITH QUANTITATIVE DETAILS HAVE BEEN FILED BEFORE THE AO. THE AO HAS NOT POINT ED OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT AND STOCK. REGISTERS. IN THE ABSEN CE OF ANY FINDING AS TO THE INCORRECTNESS OF BOOKS OF ACCOUNT AND STOCK REGISTE R, PURCHASES FROM THE ABOVE PARTIES CANNOT BE DOUBTED, MORE SO, WHEN ALL THE DE TAILS HAVE BEEN FURNISHED TO JUSTIFY THE PURCHASES. 6. THE CIT(A), AFTER CONSIDERING THE EXPLANATIONS O F THE ASSESSEE AND ALSO RELYING UPON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF VIJAY PROTEINS LTD VS CIT (2015) 58 TAXMAN.COM 44 AND CIT VS SMIT P SHETH 356 ITR 451 (GUJ, HELD THAT ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 10 THE EVIDENCES GATHERED DURING THE COURSE OF ASSESSM ENT PROCEEDINGS REVEALED THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF BJ EXP ORTS GROUP ACCOMMODATION ENTRIES PROVIDED BY SHRI BHANWARLAL JAIN GROUP. HE ALSO OBSERVED THAT IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS NOT FILED NECES SARY EVIDENCES TO JUSTIFY THE PURCHASES FROM THOSE PARTIES. THE FACT THAT NOTICES ISSUED U/S 133(6) TO THE ADDRESSES PROVIDED BY THE ASSESSEE HAVE BEEN RETURN ED BY THE POSTAL AUTHORITIES UNSERVED ALSO INDICATES THAT THE PARTIES ARE NOT EX ISTED AT THE GIVEN ADDRESSES. ALL THESE FACTS GO TO PROVE THAT PURCHASES FROM THE ABO VE PARTIES ARE NOT GENUINE AND HENCE, THE AO WAS RIGHT IN TREATING 'PURCHASES FROM SAID PARTY AS BOGUS IN NATURE. THE CIT(A) FURTHER OBSERVED THAT THE AO HAS NOT DIS PUTED SALES DECLARED BY THE ASSESSEE. THE PURCHASES / SALES CO-RELATION HAS NOT BEEN CONTROVERTED BY THE AO. NO DISCREPANCY IN STOCK HAS BEEN POINTED OUT. THE F ACT THAT PAYMENTS MADE FOR THE PURCHASES ARE ROUTED THROUGH BANKING CHANNELS IS NO T DISPUTED. NO EVIDENCE HAS BEEN BROUGHT' ON RECORD TO SHOW THAT THE CASH PAYME NT MADE ON THE PURCHASES HAS BEEN PAID BACK TO THE ASSESSEE BY THE SELLER. THUS, AT BEST, IT CAN BE CONCLUDED THAT THE PRIMARY INPUTS BEHIND AVAILING SUCH BOGUS BILLS WAS TO REDUCE THE PROFITS. IN THE FACTS AND CIRCUMSTANCES AND ALSO BY CONSIDERING THE RATIO OF JUDGEMENT OF HON'BFE GUJARAT HIGH COURT CITED SUPRA, THE CIT(A) DIRECTED THE AO TO ESTIMATE PROFIT OF 30% ON THE ALLEGED BOGUS PURCHASES. AGGRIEVED BY THE OR DER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD . CIT(A) ERRED IN BJ EXPORTS GROUP DISALLOWING 30% OF THE PURCHASES MADE FROM M/ S LITTLE DIAM IGNORING THE FAD THAT THE PURCHASES WERE MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND THE PURCHASES ARE EXPORTED IN THE NORMAL COURSE OF BUSINESS OF THE ASSESSEE. THE LD.AR FURTHER SUBMITTED THAT MERELY BECAUSE THI RD PARTIES HAD MADE UNSUBSTANTIATED STATEMENTS, IT CANNOT NOT BE SAID T HAT THE PURCHASES MADE BY THE ASSESSEE WERE BOGUS OR UNVERIFIABLE. THE ASSESSEE H AS DISCHARGED ITS ONUS BY FURNISHING ALL DETAILS CALLED FOR TO PROVE THE GENU INENESS OF THE PURCHASES. IN THE ABSENCE OF INCORRECTNESS OF BOOKS OF ACCOUNT OR STO CK REGISTERS, MERELY ON THE BASIS OF THIRD PARTY STATEMENT ADDITION CANNOT BE MADE IN SPITE OF PRODUCING ALL THE DETAILS. 8. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE AO HAS BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT PURCHASES FROM ABOVE PARTIES ARE BO GUS IN NATURE IS EVIDENT FROM THE FACT THAT THE PARTIES HAVE ACCEPTED BEFORE DGIT (IN V) THAT THEY ARE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. THE LD. DR REFERRI NG TO THE DECISION OF HNON'BLE SUPREME COURT IN THE CASE OR N.K. PROTEINS LTD IN S LP 759 OF 2017 DATED 16-01- 2017 SUBMITTED THAT ONCE IT IS PROVED THAT THE PURC HASES ARE BOGUS, THEN ADDITION SHOULD BE MADE FOR ENTIRE PURCHASES AND NOT FOR PRO FIT ELEMENT EMBEDDED IN SUCH PURCHASES. IN THIS CASE, ELT EVIDENCES LEAD TO A CO NCLUSION THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES FROM THE ABOVE PARTIES AND HENCE, THE AO HAS RIGHTLY MODE ADDITION TOWARDS BOGUS BJ EXPORTS GROUP PURCH ASES AND HIS ORDER SHOULD BE RESTORED. 9 . WE HAVE HEARD BOTH THE PARRIES AND PERUSED MATE RIALS AVAILABLE ON RECORD. THE AO DISALLOWED PURCHASES MADE FROM CERTAIN PARTIES O N THE BASIS OF INFORMATION RECEIVED FROM DCIT (INV) WHICH WAS FURTHER SUPPORTE D BY THE LIST PREPARED BY MAHARASHSTRA SALES TAX DEPARTMENT WHICH SHOW THESE PARTIES AS SUSPICIOUS HAWALA OPERATORS INVOLVED IN PROVIDING ACCOMMODATION ENTRI ES. THE AO FURTHER OBSERVED THAT DURING THE COURSE OF SEARCH IN BHANWARLAL JAIN GROU P, SHRI BHANWARLAL JAIN AND HIS SON SHRI RAJESH BHANWARLAL JAIN ADMITTED THAT THEY HAVE FLOATED DUMMY CONCERNS IN THE NAME OF FRIENDS AND RELATIVES WHICH WERE ENGAGE D IN GIVING ACCOMMODATION ENTRIES. THE AO BASED ON THE INFORMATION RECEIVED F ROM DGIT(INV) COUPLED WITH FURTHER INDEPENDENT ENQUIRIES CONDUCTED DURING THE COURSE OR ASSESSMENT PROCEEDINGS, CAME TO THE CONCLUSION THAT THE PURCHA SES FROM THE SAID PARTIES ARE ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 11 BOGUS IN NATURE AND ASSESSEE FAILED TO SUBSTANTIATE THE ABOVE PURCHASES WITH NECESSARY EVIDENCES. ACCORDING TO THE AO, THOUGH AS SESSEE FURNISHED PURCHASE INVOICES AND PROOF OF PAYMENTS, THE FACT THAT THE P ARTIES THEMSELVES ADMITTED THAT THEY WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRI ES, THE EVIDENCES FILED BY THE ASSESSEE CANNOT- BE TAKEN AS CONCLUSIVE TO HELD THE PURCHASES AS GENUINE IN NATURE. THE CONTENTION OF THE ASSESSEE IS THAT MERELY BECAU SE PARTIES HAVE NOT RESPONDED TO THE NOTICE ADDITION CANNOT BE MADE TOWARDS PURCHASE S WHICH BJ EXPORTS GROUP ARE SUPPORTED BY PROPER EVIDENCES. THE ASSESSEE ALSO CO NTENDED THAT THE AO HAS NOT POINTED OUT ANY IRREGULARITY IN THE BOOKS OF ACCOUN T OF STOCK STATEMENT AND IN THE ABSENCE OF ANY FINDING AS TO THE INCORRECTNESS OF H OCKS OF ACCOUNT, ADDITION CANNOT BE MADE SOLELY ON THE BASIS OF THIRD PARTY STATEMEN T. 10. THE AO MADE ADDITIONS BASED ON THE INFORMATION RECEIVED FROM MAHARASHTRA SALES-TAX DEPARTMENT END THE DGIT(INV). THE AO FURT HER OBSERVED THAT THE PARTIES HAVE ADMITTED BEFORE THE SALES-TAX DEPARTMENT THAT THEY ARE PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELIVERY OR GO ODS. WE FIND THAT THE AO HAS BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT THE ASSE SSEE HAS MADE PURCHASES FROM CERTAIN PARTIES WHO ARE INVOLVED IN PROVIDING ACCOM MODATION ENTRIES, NO DOUBT, THE ASSESSEE HAS FURNISHED CERTAIN EVIDENCES TO PROVE T HE PURCHASES AS GENUINE. BUR THE FACT REMAINS THAT THE NOTICES ISSUED U/S 133(6) TO THE ADDRESSES GIVEN BY THE ASSESSEE WERE RETURNED UNSERVED WITH REMARK 'NO SUC H PARTIES ARE AVAILABLE AT THE GIVEN ADDRESS, THEREFORE WE ARE OF THE CONSIDERED V IEW THAT MERE PRODUCTION OF PURCHASE BILL END PAYMENT PROOF WOULD NOT ABSOLVE T HE ASSESSEE OF HIS INITIAL ONUS TO PROVE THE PURCHASES, MORE PARTICULARLY, WHEN OTHER (ACTS CLEARLY SHOW .A FINGER ON THE ASSESSEE THAT THE ABOVE PARTIES ARE INVOLVED IN ACC OMMODATION ENTRIES AND THE ASSESSEE IS ONE OR THE BENEFICIARIES OF SUCH ACCOMM ODATION ENTRIES. THEREFORE, THE AO HAS RIGHT IN TREATING THE PURCHASES MADE FROM AB OVE PARTIES ARE NOT BJ EXPORTS GROUP GENUINE. WE FURTHER OBSERVE THAT THE ASSESSEE HAS FURNISHED CERTAIN EVIDENCES INCLUDING PURCHASE BILLS AND PAYMENT PROO F TO PROVE THE PURCHASES. THE ASSESSEE ALSO PRODUCED BOOKS OF ACCOUNT AND STOCK D ETAILS BEFORE THE AO. THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN BOOKS OF ACC OUNT AND STOCK REGISTERS, THE AO HAS NEVER DOUBLED SATES DECLARED BY THE ASSESSEE. I N THE ABSENCE OF ANY FINDING AS TO THE INCORRECTNESS IN BOOKS OF ACCOUNT AND STOCK REGISTERS, PURCHASES CANNOT BE DOUBTED. UNDER THESE FACTS AND CIRCUMSTANCES IT CAN BE CONCLUDED THAT THE ASSESSEE HAS OBTAINED BILLS TO REDUCE PROFITS. HENCE, WHAT N EEDS TO BE TAXED IN THIS CASE IS ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES, BUT NOT THE ENTIRE PURCHASES FROM THE ABOVE PARTIES. 11. HAVING SAID SO, LET US EXAMINE WHAT IS REASONAB LE PROFIT IN CASE OF THESE TRANSACTIONS. VARIOUS COURTS AND TRIBUNALS HAVE UPH ELD ESTIMATION OF PROFIT RANGING FROM 12.5% TO 25% DEPENDING UPON FACTS AND CIRCUMST ANCES OF EACH CASE. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF VIJAY PRO TEINS LTD VS ACIT (SUPRA) HAS UPHELD ESTIMATION OF NET PROFIT AT 15% ON BOGUS PUR CHASES. IN YET ANOTHER CASE, THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SM IT P SHETH (SUPRA) HAS TAKEN A VIEW THAT NO UNIFORM YARDSTICK CALL BE APPLIED FOR ESTIMATION OF NET PROFIT WHICH DEPENDS UPON FACTS AND CIRCUMSTANCES OF EACH CASE. THE HON'BLE HIGH COURT FURTHER OBSERVED THAT IN SUCH CASES, THE PROFIT BJ EXPORTS GROUP ELEMENT EMBEDDED IN SUCH PURCHASES CAN ONLY BE ADDED TO THE INCOME OF THE AS SESSEE. THE ITAT, MUMBAI BENCHES IN SEVERAL CASES HAS UPHELD ESTIMATION OF N ET PROFIT AT 12.5% ON SUCH PURCHASES. THEREFORE, CONSIDERING THE OVERALL FACTS & CIRCUMSTANCES OF THE CASE AND ALSO RELYING UPON THE RATIO OF CASE LAWS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT IN THE CASE OF BOGUS PURCHASES, ONLY PROFIT ELEMENT EM BEDDED IN SUCH PURCHASES NEEDS TO BE TAXED BUT NOT TOTAL PURCHASES. ACCORDIN GLY, WE DIRECT THE AO TO ESTIMATE NET PROFIT AT 12.5% ON TOTAL ALLEGED BOGUS PURCHASE S. ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 12 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 13. THE FACTS AND CIRCUMSTANCES IN ITA NOS 5443 & 5 444/MUM/2016 ARE IDENTICAL TO ITA NO.5442/MUM/2016 BUT FOR THE FIGURES WHICH WE H AVE DECIDED ABOVE. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL THE DECISION AND DISCUSSION MADE IN THE FOREGOING PARAGRAPHS EQUALLY APPLY TO THESE APPEALS ALSO. THE AO IS DIRECTED TO ESTIMATE NET PROFIT AT 12.5% ON TOTAL ALLEGED BOGUS PURCHASES FOR ASSESSMENT YEARS 2008-09 AND 2009-10 ALSO. THESE APPEALS ARE PARTLY ALLOWED. 14. IN THE RESULT, ALL THE THREE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH SEPTEMBER, 2017. [UNQUOTE] 8. ACCORDINGLY, IN MY VIEW, A FAIRLY ESTIMATED ADDI TION ON ACCOUNT OF THE NET PROFIT OUT OF AGGREGATE PURCHASES MADE FROM THE SUBJECT THREE PARTIES WOULD MEET THE ENDS OF JUSTICE. CONSIDERING ALL THE ASPECTS NARRATED ABOVE , IT IS DIRECTED THAT ADDITION ON ACCOUNT OF PURCHASES FROM THESE THREE PARTIES BE RE STRICTED TO 15% OF AGGREGATE PURCHASES FROM THESE PARTIES AND IT COMES TO RS.48, 34,200J- BEING 15% OF RS.3,22,28,000/-. THE GROUNDS NO. 1 TO 6, ACCORDINGLY, STAND ADJUDICA TED AS PARTLY ALLOWED, AS INDICATED SUPRA. 3. MR. CHOUDHURY VEHEMENTLY CONTENDS DURING THE COU RSE OF HEARING THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN PARTLY CONFIRMING THE ASSESSING OFFICERS ACTION TO THE EXTENT 15% GROSS PROFIT ELEMENT IN ASSESSEES PURCHASES. HE REITERATES THE ASSESSMENT FINDINGS THAT THE ASSESSEE COULD NOT PROVE HIS PURCHASES IN ISSUE BY WAY OF THE RELEVANT SUPPORTIVE EVIDENCE DURING THE COURSE OF ASSESSMENT AND ALSO THAT THE ASSESSING OFFICER COULD NOT VERIFY THE IMPUGNED PUR CHASE DESPITE AFFORDING AMPLE OPPORTUNITIES TO THE TAXPAYER. WE FIND NO MER IT IN REVENUES INSTANT ARGUMENTS CHALLENGES CORRECTNESS OF CIT(A)S ACTION PARTLY CONFIRMING THE IMPUGNED PURCHASE DISALLOWANCE TO THE EXTENT OF 15% THEN IN ENTERITY. IT HAS COME ON RECORD THAT CIT(A) HAS DISALLOWED ONLY 15% PORTION IN ASSESSEES PURCHASES DESPITE THE FACT THE LATTER HAD PLACED ON RECORD ALL THE RELEVANT DETAILS / EVIDENCE IN SUPPORT OF ITS CLAIM RIGHT FR OM THE VERY BEGINNING IN THE NATURE OF SUPPLIERS PANS, BANK ACCOUNTS, LEDGERS, ASSESSMENT RECORDS ETC. BEFORE THE ASSESSING OFFICER. COUPLED WITH THIS, TH E FACT ALSO REMAINS THAT THE REVENUE ITSELF HAS ACCEPTED THE ASSESSEES CORRESPON DING SALES AS CORRECT GIVING RISE TO ITS BUSINESS INCOME IN MANUFACTURING / TRADING ACTIVITIES IN ISSUE. ITA NO.779/KOL/2018 A.Y. 2 014-15 ACIT, CIR-34, KOL. VS. BHAWA RLAL ALOKE KUMAR PAGE 13 WE FURTHER FIND THAT THE CIT(A)S DISCUSSION HAS TA KEN INTO CONSIDERATION VARIOUS CORRESPONDING JUDICIAL PRECEDENTS RESTRICTI NG PURCHASE DISALLOWANCE TO THE EXTENT PROFIT RATIO / REASONABLE AD HOC FIGURE IN THE GIVEN FACTS. WE CONCLUDE IN THESE PECULIAR FACTS AND CIRCUMSTANCES THAT THE CIT(A) HAS RIGHTLY DISALLOWED ONLY THE PROFIT @ 15% OF THE ASSESSEES PURCHASES THAN CONCURRING WITH THE ASSESSING OFFICERS ACTION DECLINING ENTIR E PURCHASES. THIS REVENUES SOLE GRIEVANCE FAILS THEREFORE. 4. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 03/05/2019 SD/- SD/- ( %) (' %) (DR.A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 03 / 05 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT, CIR-34, AAYAKAR POORVA, 7 TH FLOOR, SHANTIAPLLY, KOLKATA-107 2. /RESPONDENT-BHAWARLAL ALOKE KUMAR, P-12, NEW HOWRAH BRIDGE APPROACH ROAD, 4 TH FLOOR, KOLKAT-001 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ 3,