M/s. Prakash Industries, Patan V. The ACIT.,C.C.1(1), Ahmedabad

ITA 791/AHD/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7935 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 03-08-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 18-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: K C THAKER
• Keywords: Bogus purchase; Unexplained cash credit; Additional evidence; Accommodation entries
• Section: 143(3); 142(1); 133A; 133(6); 147; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA NOS. 1695/AHD/ 2014, 2418 & 2419/AHD/2012 (ASSESSMEN T YEARS: 2007-08 TO 2009-10) JAYANTILAL P. THAKKAR, PROP. OF JYOTI TRADERS, 90/38, SARDAR GUNJ, PATAN 384265 (N.G.) APPELLANT VS. A.C.I.T., C.C. 1(1), AHMEDABAD RESPONDENT & ITA NOS. 2041/AH D/2014, 2366 & 2367/AHD/2012 (ASSESSMEN T YEARS: 2007-08 TO 2009-10) A.C.I.T., CENTRAL CIRCLE 1(1), AHMEDABAD APPELLANT VS. SHRI JAYANTILAL P. THAKKAR, PROP. OF JYOTI TRADERS, 90/38, SARDAR GUNJ, PATAN 384265 RESPONDENT PAN: AARPT7445D & ITA NOS. 1694/AHD/ 2014, 791 & 792/AHD/2013 (ASSESSMEN T YEARS: 2007-08 TO 2009-10) M/S. PRAKASH INDUSTRIES, 121, G.I.D.C., CHANASMA, PATAN 384220 APPELLANT ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 2 - VS. A.C.I.T., C.C. 1(1), AHMEDABAD RESPONDENT & ITA NO . 2039/AHD/2014 (ASSESSME NT YEAR: 2007-08) INCOME-TAX OFFICER WARD-1, PATAN APPELLANT VS. M/S. PRAKASH INDUSTRIES, 121, G.I.D.C., CHANASMA, PATAN 384220 RESPONDENT PAN: AAFFP9237P & ITA NOS. 1693/AHD/ 2014, 793 & 794/AHD/2013 (ASSESSMEN T YEARS: 2007-08 TO 2009-10) M/S. AASHADEEP INDUSTRIES, 31, G.I.D.C., CHANASMA, PATAN 384220 APPELLANT VS. A.C.I.T., C.C. 1(1), AHMEDABAD RESPONDENT & ITA NO . 2040/AHD/2014 (ASSESSME NT YEAR: 2007-08) INCOME-TAX OFFICER WARD-1, PATAN APPELLANT ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 3 - VS. M/S. AASHADEEP INDUSTRIES, 31, G.I.D.C., CHANASMA, PATAN 384220 RESPONDENT PAN: AAKFA8566F /BY REVENUE : SHRI V. K. SINGH, SR. D.R. /BY ASSESSEE : SHRI K. C. THAKER, A.R. /DATE OF HEARING : 11.12.2017 /DATE OF PRONOUNCEMENT : 22.12.2017 ORDER PER BENCH THIS BATCH OF FOURTEEN APPEALS PERTAINS TO THREE AS SESSEES NAMELY SHRI JAYANTILAL P. THAKKAR, M/S. PRAKASH INDUSTRIES & AA SHADEEP INDUSTRIES. THE CIT(A)-1, AHMEDABAD HAS PASSED ALL THE LOWER APPELL ATE ORDERS IN THESE CASES. FIRST ASSESSEE AND THE REVENUE HAVE FILED THEIR CRO SS APPEALS IN AYS. 2007-08 TO 2009-10 ITA NOS. 1695/AHD/2014 WITH ITA NOS. 2418 & 2419/AHD/2012 FOLLOWED BY LATTERS CROSS APPEAL THERETO ITA NOS. 2041/AHD/ 2014, 2366 & 2367/AHD/2012. THE ABOVE CROSS APPEALS FOR FIRST ASSESSMENT YEAR E MANATE AGAINST THE CIT(A)S ORDER DATED 02.04.2014 IN CASE NO. CIT(A)-I/012/CC- 1(1)/2013-14, UPHOLDING VALIDITY OF RE-ASSESSMENT THEREBY PARTLY UPHOLDING ASSESSING OFFICERS ACTION DISALLOWING THE ENTIRE ALLEGED BOGUS PURCHASES OF R S.1,25,16,350/- TO THE EXTENT OF 25% ONLY COMING TO RS.31,29,085/-, INVOLVING PROCEE DINGS U/S.148 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. THE ABOVE CROSS APPEALS FOR LATTER TWO ASSESSMENT YEARS ARISE AGAINST THE CIT(A)S COM MON ORDER DATED 17.08.2012 IN CASE NO. CIT(A).I/CC-1(1)/114&159/2010-11 ADOPTING SIMILAR COURSE OF ACTION TO ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 4 - UPHOLD 25% OF THE BOGUS PURCHASES DISALLOWANCE INVO LVED OF RS.4,20,46,515/- & RS.57,77,470/-; RESPECTIVELY, INVOLVING PROCEEDINGS U/S.143(3) OF THE ACT. 2. THERE ARE TOTAL FOUR CASES RELATING TO SECOND AS SESSEE M/S. PRAKASH INDUSTRIES. ASSESSMENT YEAR 2007-08 CONTAINS ASSES SEES AND REVENUES CROSS APPEALS ITA NOS. 2039 & 1694/AHD/2013 DIRECTED AGAI NST THE CIT(A)S ORDER DATED 03.04.2014 IN CASE NO. CIT(A)-I/CC.1(1)/010/2 013-14 , UPHOLDING VALIDITY OF RE-ASSESSMENT AS WELL AS PARTLY CONFIRMING ASSESSIN G OFFICERS ACTION DISALLOWING ALLEGED BOGUS PURCHASES OF RS.1,18,46,009/- TO THE EXTENT OF 25% ONLY, IN PROCEEDINGS U/S.143(3) R.W.S. 148 OF THE ACT. LATT ER TWO ASSESSMENT YEARS 2008-09 INVOLVE ASSESSEES APPEALS ONLY ITA NOS. 791 & 792/ AHD/2013 PREFERRED AGAINST THE CIT(A)S SEPARATE ORDERS; BOTH DATED 21.12.2012 IN CASE NOS. CIT(A)- I/CC.1(1)/358/2010-11 & CIT(A)-I/CC.1(1)/359/2010-1 1, CONFIRMING ASSESSING OFFICERS ACTION DISALLOWING ENTIRE ALLEGED BOGUS P URCHASES OF RS.2,39,63,829/- AND RS.26,88,354/-; RESPECTIVELY, IN PROCEEDINGS U/S.14 3(3) OF THE ACT. 3. WE NOW COME TO THE ABOVE THIRD ASSESSEES CASES. ASSESSMENT YEAR 2007-08 INVOLVES ASSESSEES AND REVENUES CROSS APPEALS ITA NOS. 1693 & 2040/AHD/2014 AGAINST THE CIT(A)S ORDER DATED 03.04.2014 IN CASE NO. CIT(A)-I/011/CC- 1(1)/2013-14 INTER ALIA AFFIRMING VALIDITY OF RE-AS SESSMENT AND IN PARTLY CONFIRMING ASSESSING OFFICERS ACTION DISALLOWING ALLEGED BOGU S PURCHASES OF RS.1,18,46,010/- TO THE EXTENT OF 25% ONLY, IN PROCEEDINGS U/S.143(3 ) R.W.S. 148 OF THE ACT. LATTER TWO ASSESSMENT YEARS 2008-09 & 2009-10 CONTAIN ASSE SSEES APPEALS ONLY ITA NOS. 793 & 794/AHD/2013 DIRECTED AGAINST THE CIT(A)S OR DERS; BOTH DATED 21.12.2012 IN CASE NO. CIT(A)-I/CC.1(1)/357/2010-11 & CIT(A)-I /CC.1(1)/356/2010-11, UPHOLDING ASSESSMENT FINDINGS DISALLOWING ENTIRE AL LEGED BOGUS PURCHASES OF RS.2,87,48,822/- & RS.57,77,470/- AS WELL AS ADMITT ED UNDISCLOSED INCOME OF RS.26LACS IN LATTER CASE; RESPECTIVELY, IN PROCEEDI NGS U/S.143(3) OF THE ACT. 4. A COMBINED PERUSAL OF ALL THE ABOVE CASE FILES R EVEALS THAT THE SOLE SUBSTANTIVE ISSUE SOUGHT TO BE RAISED IS QUA DISALL OWANCE OF BOGUS PURCHASES ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 5 - FOLLOWED BY QUANTUM THEREOF. ASSESSMENT YEAR 2007- 08 IN ALL THREE ASSESSEES CASES INVOLVES PROCEEDINGS U/S.148 R.W.S. 147 OF TH E ACT. LEARNED COUNSEL REPRESENTING ASSESSEES IS VERY VERY FAIR AT THE OUT SET IN NOT PRESSING FOR THIS LEGAL ISSUE DURING THE COURSE OF HEARING. THIS CORRESPON DING GROUND IN ALL THE ABOVE CASES IS THEREFORE REJECTED AS NOT PRESSED. 5. WE NOW ADVERT TO THE ABOVE SOLE ISSUE ON MERITS REGARDING CORRECTNESS OF ALLEGED BOGUS PURCHASES DISALLOWANCE AND QUANTUM TH EREOF. IT IS EVIDENT THAT THE CIT(A)S ORDERS IN SOME CASES RESTRICT THE SAME TO THE EXTENT OF 25% PARTICULARLY IN ASSESSMENT YEAR 2007-08 WHEREAS HE UPHOLDS THE ENTI RE DISALLOWANCE IN THE REMAINING INSTANCES. BOTH THE LEARNED REPRESENTATI VES SUBMIT AT THE OUTSET THAT ALL THESE CASES INVOLVE THE IMPUGNED BOGUS PURCHASES DI SALLOWANCE ON ACCOUNT OF THE FACT THAT THE DEPARTMENT HAD CONDUCTED A SEARCH ACT ION IN ASSESSEES SUPPLIERS CASE IN MAJORITY OF APPEALS AND IN SUPPLIERS SUPPLIER C ASE (THE SAME ENTITY M/S. EDIBLE OIL MILLS GROUP). THEY STATE THAT WE COULD TAKE AN Y OF THESE APPEALS AS THE LEAD CASE. WE THEREFORE TREAT THIRD ASSESSEES APPEAL I TA NO.2039/AHD/2014 FOR ASSESSMENT YEAR 2007-08 AS THE LEAD ONE. 6. RELEVANT FACTS ARE IN A VERY BRIEF COMPASS. THI S ASSESSEE MANUFACTURES AND TRADES IN ATTA AND WHEAT. THERE IS NO DISPUTE THAT IT HAD BEEN CLAIMING TO HAVE MADE ITS RAW MATERIAL PURCHASES FROM M/S. VISHAL TRADERS , VIRPUR, DIST. KHEDA. THE DEPARTMENT CARRIED OUT A SEARCH AND SURVEY ACTION IN M/S. EDIBLE OILS MILLS GROUPS OF PATAN DISTRICT AND AGENTS / BROKERS OF MEHSANA A ND SABARKANTHA DISTRICTS ON 01.09.2008. THE DEPARTMENTAL AUTHORITIES NOTICED T HE SAID ENTITY TO HAVE ISSUED BOGUS / ADJUSTMENT BILLS TO A LARGE NUMBER OF ENTIT IES FROM FINANCIAL YEAR 2006-07 ONWARDS. THE SAID AUTHORITIES GOT RECORDED STATEME NT OF M/S. VISHAL TRADERS PROP. SHRI DHARMENDRA J. PANDYA ADMITTING THEREIN THAT TH E ABOVE ENTITY IN THE NAME OF M/S. VISHAL TRADERS WAS NOT IN EXISTENCE SINCE THE LAST TWO ASSESSMENT YEARS. AND THAT IT HAD BEEN ISSUING BOGUS ADJUSTMENT BILLS ONL Y. MR. PANDYA FURTHER STATED THAT HIS MR. MADANLAL L. SHAH (CHANDAK) HAD INTRODUCED A LL THE PURCHASES PARTIES TO HIM. HE HAD ALSO OPENED VARIOUS BANK ACCOUNTS IN M /S. HARIJ NAGARIK SAHKARI ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 6 - BANK LTD., MEHSANA NAGARIK SAHKARI BANK LTD., KALUP UR COMMERCIAL CO-OPERATIVE BANK LTD. AND DENA GRAMIN BANK LTD. WHEREIN HE USED TO APPROPRIATE BILL AMOUNTS IN QUESTION DEPOSITED BY CHEQUES FOLLOWED BY CASH W ITHDRAWALS. THIS FOLLOWED SECTION 133A SURVEY ACTION IN ASSESSEES CASE. THE RE IS HARDLY ANY ISSUE BETWEEN THE PARTIES THAT THIS ASSESSEE HAD SHOWN TO HAVE MA DE ITS RAW MATERIAL PURCHASES FROM THE ABOVE ENTITY IN THESE THREE ASSESSMENT YEA RS. THE ASSESSING OFFICER THEREFORE SOUGHT TO VERIFY ASSESSEES PURCHASES DUR ING SCRUTINY. IT IS EVIDENT FROM ASSESSMENT ORDER DATED 04.03.2013 THAT HE INTER ALI A OBSERVED THEREIN THAT IT WAS ASSESSEES BOUNDEN DUTY TO PROVE ITS PURCHASES IN Q UESTION BY LEADING INDEPENDENT THIRD PARTY EVIDENCE IN SUPPORT OF RELEVANT BOOK EN TRIES ALONGWITH PURCHASE REGISTER, SALES REGISTER, SUPPLIERS AND TRANSPORTERS FOR THE PURPOSE OF SATISFYING GENUINENESS ELEMENT THEREIN. HE THEREFORE TREATED ALL THE IMPU GNED PURCHASES OF RS.74,86,140/- IN THE IMPUGNED YEAR IN CASE OF M/S. VISHAL TRADERS TO BE BOGUS BEING IN THE NATURE OF ACCOMMODATION ENTRIES ONLY. ALL THIS RESULTED I N THE SAID PURCHASES DISALLOWANCE IN ENTIRETY. 7. THE CIT(A) PARTLY UPHOLDS THE ABOVE IMPUGNED DIS ALLOWANCE FROM 100% TO THE EXTENT OF 25% AS FOLLOWS: 5. ON GOING THROUGH THE ASSESSMENT ORDER IT CAN BE DEDUCED THAT THE ASSESSING OFFICER MADE THE ADDITION OF BOGUS PURCHA SES FOR FOLLOWING REASONS: (I) SEARCH IN THE CASE OF SHRI MADANIAL L. SH AH AND HIS STATEMENT : SEARCH AND SURVEY ACTION IN EDIBLE OIL MILL GROUP C ASES ON 1.9.2008 REVEALED THAT MANY CONCERNS WERE OBTAINING ONLY BIL LS CLAIM PURCHASES IN THEIR ACCOUNTS. IN THE ASSESSMENT ORDER HAS MENTIONED THAT A SEARCH U/S.132 WAS CONDUCTED IN THE CASE OF SHRI MADANIAL L. SHAH ON 1.9.2008. H E INFORMED IN STATEMENT DATED 22.9.2008 THAT HE HAD INTRODUCED VARIOUS TRAD ERS OF HARIJ AND PATAN TO SHRI DHARMENDRA J. PANDYA, PROPRIETOR OF M/S. VI SHAL TRADERS, VIRPUR. HE HAD FURTHER CONFIRMED THAT M/S. VISHAL TRADERS, VIRPUR HAD ISSUED ONLY BOGUS BILLS AND NO DELIVERY OF GOODS HAD BEEN MADE BY IT. THAT VISHAL TRADERS HAD ISSUED ONLY BOGUS / ADJUSTMENT BILLS AN D HAD NOT DELIVERED ANY GOODS LIKE OIL CAKES OR ANY OTHER ITEMS MENTIONED I N THE BILL. THAT VEHICLE NUMBERS WRITTEN IN THE BILLS WERE ALSO FICTITIOUS. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS S TATED THAT NO DETAILS AND REGISTERS WERE PRODUCED BY THE ASSESSEE. HE HAS MEN TIONED THAT CROSS ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 7 - EXAMINATION OF SHRI MADANLAL L. SHAH WAS GIVEN TO T HE REPRESENTATIVE OF THE ASSESSEE. (II) STATEMENTS OF THE PROPRIETOR OF VISHAL TRADERS : BOGUS PURCHASES WERE MADE BY THE ASSESSEE FROM M/S. VISHAL TRADERS. THIS WAS PROVED BY THE STATEMENTS RECORDED OF THE PROPRIETOR OF VISHAL TRA DERS - (532, MARKET YARD, VIRPUR, DISTRICT- KHEDA) WHOSE PROPRIETOR - SHRI DH ARMENDRA J. PANDYA IN THE STATEMENTS RECORDED BY THE DEPARTMENT ON 9.7.20 08 AND 26.9.2008 ADMITTED THAT HE HAD ISSUED ONLY BOGUS BILLS AND HA D NOT MADE ANY DELIVERY OF GOODS. HE STATED THAT HE RECEIVED ONLY CASH COMM ISSION FOR ISSUING BILLS. COPIES OF STATEMENTS OF SHRI DHARMENDRA J. PANDYA W ERE PROVIDED TO THE APPELLANT BY THE ASSESSING OFFICER. THE ASSESSING O FFICER ADDED RS.70,75,459/- BECAUSE ACCORDING TO HIM THE ASSESSE E - M/S PRAKASH INDUSTRIES- HAD SHOWN PURCHASES RS.70,75,459/- FROM VISHAL TRADERS WHICH THE AO HAS HELD TO BE BOGUS. THUS THE AO HELD THAT PURCHASES TOTALING TO RS.70,75,459/- ARE BOGUS. PERUSAL OF THE-SHOW CAUSE NOTICE ISSUED BY THE A.O. TO THE APPELLANT SHOWS THAT THE AO GAVE OPPORT UNITIES TO THE APPELLANT TO PROVE THE PURCHASES FROM VISHAL TRADERS 532, MAR KET YARD, VIRPUR, DISTRICT- KHEDA AS GENUINE PURCHASES BUT THE ASSESS EE FAILED. (III). DESPITE OPPORTUNITIES PURCHASES FROM VI SHAL TRADERS NOT PROVED BY THE ASSESSEE: IN THE ASSESSMENT ORDER INFORMS THA T THE ASSESSING OFFICER THROUGH SHOW CAUSE LETTER ASKED THE ASSESSEE TO PRO DUCE VARIOUS DETAILS AND REGISTERS, SUPPLIERS AND TRANSPORTERS. THE ASSESSI NG OFFICER HAS ELABORATED THIS POINT AND HAS STATED THAT HE ASKED THE ASSESSE E TO SUBSTANTIATE THE CLAIM OF PURCHASES BY PRODUCING GATE-PASS, L.R. RECEIPTS, CHALLANS, VOUCHERS ETC. HE ASKED THE ASSESSEE TO ESTABLISH QUANTITATIVE CO- RELATION BETWEEN THE PURCHASE AND SALES IN VIEW OF THE MANUFACTURING PRO CESS FLOW CHART, YIELD PERCENTAGE, WASTAGE RATIO AND POWER CONSUMPTION. DE SPITE OPPORTUNITIES, THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE ASKED BY THE ASSESSING OFFICER, BUT FOR THE LEDGER ACCOUNTS OF THE VISHAL TRADERS 5 32, MARKET YARD, VIRPUR, DISTRICT- KHEDA AND COPIES OF BILLS OF VISHAL TRADE RS. 5.1 IN ORDER TO VERIFY THE' GENUINENESS OF THE PURC HASES MADE BY THE APPELLANT FROM M/S VISHAL TRADERS, THE ASSESSMENT R ECORDS WERE CALLED FOR FROM THE ASSESSING OFFICER AND COPIES OF THE BANK A CCOUNTS OF M/S VISHAL TRADERS WITH THE HARIJ NAGRIK SAHKARI BANK LTD., HA RIJ AND KALUPUR COMMERCIAL COOPERATIVE BANK LTD. AHMEDABAD WERE OBT AINED U/S 133(6) OF THE ACT. A COPY OF THESE BANK ACCOUNTS IS ENCLOSED AT ANNEXURE A1 TO A3 TO THIS ORDER. ON PERUSAL OF THE BANK STATEMENTS OF TH E BANK ACCOUNTS OPENED BY SHRI DHARMENDRA J. PANDYA, PROPRIETOR OF M/S. VI SHAL TRADERS, VIRPUR A CONTINUOUS PATTERN OF DEPOSIT AND IMMEDIATE CASH WI THDRAWAL IS CLEARLY SEEN. THAT SUCH A PATTERN IS NOT SEEN IN ANY ACTU AL MANUFACTURING CONCERN. THIS PATTERN OF DEPOSIT IN BANK ACCOUNT OF VISHAL T RADERS FOLLOWED BY IMMEDIATE CASH WITHDRAWAL IS IN CONSONANCE WITH THE STATEMENTS OF SHRI ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 8 - DHARMENDRA J. PANDYA AND MADANLAL L. SHAH THAT ONLY BOGUS BILLS WERE ISSUED. 5.2 WHILE MAKING ADDITION OF BOGUS PURCHASES TOTALI NG TO RS.70,75,459/- FROM VISHAL TRADERS BY THE APPELLANT THE A.O. HAS R ELIED UPON FOLLOWING DECISIONS : 1. CIT VS. LA MEDICA 250 ITR 0575 (2001) (DE LHI HIGH COURT) 2. SREE RAJVEL & CO. VS. CIT 268 ITR 0267 (2 003) (KERALA HIGH COURT) 3. BEENA METALS VS. CIT 240 ITR 0222(1999) ( KERALA HIGH COURT) 4. KAVERI RICE MILLS VS. CIT 157 TAXMAN 0376 (20 06) (ALLAHABAD HIGH COURT) 5.3 AFTER CAREFUL CONSIDERATION OF THE DETAILS FILE D AND CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLA NT THE FOLLOWING FACTS EMERGE: 1. PROPRIETOR OF VISHAL TRADERS - SHRI DHARMENDRA P ANDYA DURING STATEMENTS RECORDED BY THE DEPARTMENT ON 9.7 .2008 AND 26.9.08 CONFIRMED THAT ONLY BILLS ISSUED NOT GOODS DELIVERED. 2. APPELLANT DEPOSITS CASH OF EQUIVALENT AMOUNT IN HIS HARIJ NAGRIK SAHAKARI BANK LTD ACCOUNT ON THE SAME DATE B EFORE HE ISSUES ANY CHEQUE TO VISHAL TRADERS AND VISHAL TRADERS WIT HDRAWS CASH OF THE SAME AMOUNT ON THE SAME DATE. 3. ANALYSIS, OF THE BANK ACCOUNT OF VISHAL TRADERS AT HARIJ NAGRIK SAHAKARI BANK LTD SHOWS THAT IMMEDIATELY AFT ER A CHEQUE IS DEPOSITED, CASH OF EQUIVALENT AMOUNT IS WITHDRAWN O N THE SAME DATE BY VISHAL TRADERS. 4. ANALYSIS OF THE BANK ACCOUNT OF THE APPELLANT AT HARIJ NAGRIK SAHAKARI BANK LTD AND THOSE OF VISHAL TRADERS ESTAB LISHES A STRANGE PATTERN OF CASH DEPOSIT, CHEQUE ISSUANCE BY THE APP ELLANT, AND CASH WITHDRAWAL BY THE BILL ISSUING CONCERNS OF THE SAME AMOUNT ON THE SAME DATE, THUS NOT RULING OUT THAT CHEQUES ISSUED TO THESE ENTITIES COME BACK TO THE APPELLANT THROUGH CASH WITHDRAWALS BY THESE ENTITIES AND THAT IS WHY CASH IS DEPOSITED ON THE S AME DATE OF THE SAME AMOUNT BY THE APPELLANT. A FULL CIRCLE GETS ES TABLISHED. 5.4 PURCHASES FROM VISHAL TRADERS: THE ASSESSING OF FICER HAS ADDED PURCHASES MADE BY THE APPELLANT RS.70,75,459/- MADE BY THE APPELLANT FROM M/S. VISHAL TRADERS, GANJ BAZAR, HARIJ ON THE GROUN D THAT THE PROPRIETOR OF THIS CONCERN SHRI DHARMENDRA PANDYA IN HIS STATEMEN T BEFORE THE DEPARTMENT HAS STATED THAT HE IS ONLY GIVING FICTIT IOUS ENTRIES AND IS NOT SUPPLYING ANY MATERIAL WHATSOEVER. THE AO FURNISHED A COPY OF THE STATEMENT OF SHRI DHARMENDRA PANDYA TO THE APPELLAN T. 5.6 ANALYSIS OF VISHAL TRADERS BANK ACCOUNT IN THE SAME BANK SHOWS THAT ON THE SAME DATES I.E. 28.2.2007, 1.3.2007, 3.3.200 7, 6.3.2007, 7.3.2007, ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 9 - 27.3.2007 AND 28.3.2007 CHEQUES WERE DEPOSITED AND ON THE SAME DATES CASH IS WITHDRAWN BY VISHAL TRADERS. RELEVANT ENTRIES OF BANK STATEMENT OF VISHAL TRADER S - A/C.NO.4775 (HARJJ NAGRIK SAHAKARJ BANK. LTD.) DATE CH. NO. NARRATION DEPOSIT WITHDRAWALS 28.2.2007 844725 BY TRANSFER PRAKASH INDUSTRIES RS. 5,00,000/- 28.2.2007 022177 BY TRANSFER PRAKASH INDUSTRIES RS. 5,00,000/- 28.2.2007 022178 BY TRANSFER PRAKASH INDUSTRIES RS. 5,00,000/- 28.2.2007 022179 BY TRANSFER PRAKASH INDUSTRIES RS. 5,00,000/- 28.2.2007 21291 SELF RS. 5,00,000/- 28.2.2007 21291 SELF RS. 5,00,000/- 28.2.2007 21291 SELF RS. 5,00,000/- 28.2.2007 21291 SELF RS. 5,00,000/- 01.03.2007 22180/965518 BY TRANSFER PRAKASH INDUSTRIES/DIVYA TRADERS RS. 5,00,000/- 01.03.2007 21295 SELF RS, 5,00,000/- 03.03.2007 22181 BY TRANSFER PRAKASH INDUSTRIES RS. 4,00,000/- 03.03.2007 21296 SELF RS. 4,00,000/- 06.03.2007 22182 B Y TRANSFER PRAKASH INDUSTRIES RS. 4,00,000/- 06.03.2007 21297 SELF RS. 4,00,000/- 07.03.2007 22183 BY TRANSFER PRAKASH INDUSTRIES RS. 4,00,000/- 07.03.2007 21298 SELF RS. 4,00,000/- 27.03.2007 22184/968122 BY TRANSFER PRAKASH INDUSTRIES/DIVYA TRADERS RS.16,57,000/- 27.03.2007 SELF RS. 16,57,000/- 28.03.2007 22185/968125 BY TRANSFER PRAKASH INDUSTRIES/DIVYA TRADERS RS.17,18,459/- 28.03.2007 SELF RS. 17,18,500/- 5.7 IN THE ABOVE BANK TRANSACTIONS OF THE APPELLANT AND VISHAL TRADERS SHOW THAT WHAT WAS GIVEN THROUGH CHEQUES TO VISHAL TRADERS REACHED BACK THE APPELLANT AND THAT IS WHY THE CASH DEPOSITS IN THE BANK JUST BEFORE OR AFTER ISSUING CHEQUES TO VISHAL TRADERS. TRANSACTIO NS / PAYMENTS BY THE APPELLANT TO VISHAL TRADERS ARE ONLY AN EYE WASH, S PECIALLY WHEN BOTH THE APPELLANT (M/S. PRAKASH INDUSTRIES) AND VISHAL TRAD ERS (DHARMENDRA PANDYA) ARE APPARENTLY COLLUDING TO ISSUE BILLS ONL Y WITHOUT ACTUALLY TRANSACTING BUSINESS. THIS FACT IS FURTHER CONFIRME D FROM THE STATEMENT OF SHRI DHARMENDRA PANDYA, PROPRIETOR M/S. VISHAL TRAD ERS WHEREIN HE HAS STATED THAT WHAT WAS TRANSACTED WAS ONLY ACCOMMODAT ION BILLS AND NO ACTUAL SUPPLIES OF ANY KIND WERE MADE. ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 10 - 6. ONCE IT IS ESTABLISHED THAT THE PURCHASES MADE B Y THE APPELLANT FROM M/S VISHAL TRADERS IS NOT GENUINE, THEN IT BECOMES IMPORTANT TO DECIDE WHETHER THE ENTIRE BOGUS PURCHASES MADE JOE ADDED T O THE INCOME OF THE APPELLANT OR SOME PERCENTAGE HAS TO BE ADOPTED FOR MAKING THE ADDITION. THE AO HAS DISALLOWED THE ENTIRE PURCHASES. THE AR OF THE APPELLANT RELYING ON THE ORDERS OF THE IT AT, AHMEDABAD SUBMITTED THA T THE ADDITION MUST BE LIMITED TO 5% OF THE PURCHASES MADE FROM M/S VISHAL TRADERS. IN THIS REGARD, IT IS SEEN THAT THE CASE OF THE APPELLANT I TSELF FOR THE AY 2008-09 IN APPEAL NO.CLT(A)4/CC.L(L)/358/2010-LL AND FOR AY 20 09-10 IN APPEAL- NO.CIT(A)-L/CC.L(L)/359/2010-LL IT HAS BEEN HELD TH AT THE PURCHASES MADE FROM M/S VISHAL TRADERS ARE NOT GENUINE AFTER DISCU SSING THE FACTS ELABORATELY. IN FACT, IN THE CASE OF GUJARAT AMBUJA EXPORT LIMITED FOR A.YS. 2007-08, 2008-09 AND -2009-10 THE A BENCH OF 1TAT A HMEDABAD HAS ALSO UPHELD THE FINDING THAT THE PURCHASES MADE BY THE A PPELLANT FROM M/S VISHAL TRADERS ARE BOGUS. MY PREDECESSOR, THE THEN CLT(APP EALS)-I, AHMEDABAD IN THE FOLLOWING CASES UPHELD THE DISALLOWANCE OF 25% OF THE BOGUS PURCHASES MADE FROM VISHAL TRADERS. SR.NO. NAME OF THE CASE A.Y. 1. .M/S. JAGDAMBA GINNING FACTORY 2008-09 2. M/S. PRAKASH INDUSTRIES 2008-09 3. M/S. AASHADEEP INDUSTRIES 2008-09 4. M/S. AASHADEEP INDUSTRIES 2009-10 5. M/S. PANKAJ COTTON INDUSTRIES 2009-10 6. M/S. OMSHREE NAGRAJ GINNING 2009-10 7. SHRI BHADRESH S. SHAH 2008-09 8. SHRI BHADRESH S. SHAH 2009-10 9. SHRI KANUBHAI M. KHATRI 2008-09 10. SHRI JAYANTILAL P. THAKKAR PROP: JYOTI TRADERS 2008-09 11. SHRI JAYANTILAL P. THAKKAR PROP: JYOTI TRADERS 2009-10 6.1 SIMILARLY IN THE CASE OF JAGDAMBA GINNING FACTO RY V. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1(1) AH MEDABAD FOR A.Y. 2008-09 THE D BENCH OF THE IT AT AHMEDABAD HAS HELD THE CONTENTION OF THE DEPARTMENT THAT THE PURCHASES MADE FROM M/S VISHAL TRADERS WAS NOT GENUINE. THE IT AT HAS, HOWEVER, REDUCED THE DISALL OWANCE MADE BY THE AO TO 25%I OF THE PURCHASES MADE FROM M/S VISHAL TRADE RS. THE GUJARAT HIGH COURT IN THE CASE OF SANJAY OILCAKE INDUSTRIES V. C OMMISSIONER OF INCOME TAX REPORTED IN 316 1TR 274(GUJ) HAS HELD THAT DISA LLOWANCE OF 25% OF THE PURCHASES IS REASONABLE WHEN THE PURCHASES ARE BOGU S BUT THE SALES HAVE NOT BEEN QUESTIONED. SIMILARLY THE ITAT AHMEDABAD I N THE CASES OF VIJAY PROTEINS LTD. V. ASSISTANT COMMISSIONER OF INCOME T AX REPORTED IN (1996) 58ITD 428(AHMEDABAD) AND IN THE CASE OF N. K. PROTE INS LTD. V. DEPUTY COMMISSIONER OF INCOME TAX REPORTED IN (2004) 4 SOT 479 (AHD) HAVE HELD THAT DISALLOWANCE OF 25% OF THE PURCHASES IN T HE CASE OF BOGUS ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 11 - PURCHASES IS REASONABLE. IN THE CASE OF JAGDAMBA GI NNING FACTORY ALSO THE ORDER HAD BEEN PASSED BY THE UNDERSIGNED IN APPEAL NO. CIT(A)- I/CC.1(1)/169/2010-11 DATED 21.12.2012. IN VIEW OF THE ABOVE, AND FOLLOWING THE JUDICIAL HIERARCHY, THE AO IS DIRECTE D TO DISALLOW 25% OF THE PURCHASES MADE FROM M/S VISHAL TRADERS. 6.2 IN VIEW OF THE ABOVE THE ADDITION MADE BY THE A O IS REDUCED FROM 74,86,140/- TO RS.18,71,535/-. THIS LEAVES BOTH THE PARTIES AGGRIEVED TO THE EXTE NT AS INDICATED IN THEIR RESPECTIVE PLEADINGS. 8. LEARNED COUNSEL REPRESENTING ASSESSEE FIRST OF A LL SEEKS TO TREAT THE ABOVE IMPUGNED PURCHASES AS ENTIRELY GENUINE IN THE COURS E OF HEARING. HE FURTHER PLEADS THAT BOTH THE LOWER AUTHORITIES DID NOT AFFORD CROS S EXAMINATION OPPORTUNITY OF EITHER MR. PANDYA OR MR. CHANDAK (SUPRA) TO THE ASS ESSEE. HIS CASE THEREFORE IS THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) HA VE ERRED IN DISALLOWING THE IMPUGNED PURCHASES EVEN TO THE EXTENT OF 25%. WE F IND NO MERIT IN EITHER OF THESE SUBMISSIONS. THE FACT REMAINS THAT THE ASSESSEE HA S FAILED TO PROVE GENUINENESS OF THE IMPUGNED PURCHASES BY LEADING COGENT EVIDENCE A S DISCUSSED IN BOTH THE LOWER PROCEEDINGS. IT WAS ASSESSEES PRIMARY ONUS TO LEA D SUFFICIENT EVIDENCE SO AS TO SHIFT THE BURDEN BACK TO THE ASSESSING OFFICER. IT HAS COME ON RECORD THAT THE ABOVE SUPPLIER M/S. VISHAL TRADERS GAVE ONLY BOGUS PURCHA SES ENTRIES TO ALL ITS CUSTOMERS. THIS CLINCHING FINDING HAS GONE UNREBUTTED FROM ASS ESSEES SIDE. WE THEREFORE SEE NO REASON TO INTERFERE WITH BOTH THE LOWER AUTHORIT IES CONCURRENT FINDINGS HOLDING ASSESSEES PURCHASES IN QUESTION TO BE NOT GENUINE. THE ASSESSEE FAILS IN ITS FIRST SUBSTANTIVE PLEA ACCORDINGLY. 9. THIS LEAVES US WITH QUANTIFICATION ISSUE PERTAIN ING TO THE ABOVE PURCHASES DISALLOWANCE. LEARNED DEPARTMENTAL REPRESENTATIVE QUOTES A CATENA OF CASE LAW I.E. HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT I N SLP (CIVIL) 769 /2017 N. K. PROTEINS LTD. VS. DCIT DISMISSED IN LIMINE ON 16.01 .2017 THEREBY CONFIRMING HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IN TAX APPEAL NO. 243 OF 2003 DECIDED ON 20.06.2016 UPHOLDING THIS TRIBUNALS ORDER RESTR ICTING SIMILAR BOGUS PURCHASES ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 12 - DISALLOWANCE TO THE EXTENT OF 25% ONLY. MR. SINGH TAKES US TO PARA 6 ONWARDS OF THE ABOVE DETAILED JUDGMENT WITH OBSERVATIONS ON TH E IMPUGNED BOGUS PURCHASES ISSUE STATED TO BE IN REVENUES FAVOUR. HE THEN CI TES HONBLE JURISDICTIONAL HIGH COURTS OTHER JUDGMENT IN CASE OF ACIT VS. PAVANRAJ B. BOKADIA TAX APPEAL NO. 2345 OF 2009 UPHOLDING SUCH PURCHASES DISALLOWANCE IN ENTIRETY. NEXT CASE LAW SOUGHT TO BE QUOTED IS THIS TRIBUNALS CO-ORDINATE BENCH DECISION IN SWETAMBER STEEL LTD.S CASE AS WELL AS ACIT VS. AMAR MINING COMPANY (2009) 121 ITD 273 (AHD)(TM) TO PRESS FOR RESTORING THE ABOVE BOGUS PU RCHASES DISALLOWANCE TO THE EXTENT OF 100%. LEARNED COUNSEL REPRESENTING ASSES SEE ON THE OTHER HAND FILED BEFORE US THIS TRIBUNALS CO-ORDINATE BENCHS DECIS ION IN GUJARAT AMBUJA EXPORTS LTD. VS. ACIT IT(SS)A NO. 124/AHD/2012 DATED 17.04. 2013 DISALLOWING IDENTICAL PURCHASES TO THE EXTENT OF 5% ONLY AS UPHELD IN TAX APPEAL NO. 840 OF 2013 DECIDED ON 10.02.2014. 10. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO R IVAL SUBMISSIONS. THE SOLE ISSUE LEFT FOR OUR ADJUDICATION IS THAT OF QUANTIFI CATION OF THE IMPUGNED PURCHASES DISALLOWANCE IN CASE OF M/S. VISHAL TRADERS. WE CO NFRONTED BOTH THE PARTIES ABOUT A CO-ORDINATE BENCH DECISION IN ACIT VS. PANKAJ COT TON INDUSTRIES CASE ITA NO.858/AHD/2012 DECIDED ON 27.10.2017 UPHOLDING THE CIT(A)S ORDER UNDER CHALLENGE THEREIN RESTRICTING SIMILAR PURCHASES DIS ALLOWANCE IN CASE OF VISHAL TRADERS ITSELF IN ASSESSMENT YEARS 2008-09 AND 2009 -10 AS EMANATED FROM THE VERY SEARCH/SURVEY IN QUESTION READING AS UNDER: 3. IT THUS EMERGES FROM A PERUSAL OF THE ABOVE RI VAL PLEADINGS THAT THE MAIN ISSUE IN THIS FORMER ASSESSMENT YEAR 2008-09 IS THA T OF VALIDITY OF ASSESSEES COTTON PURCHASES MADE FROM M/S VISHAL TRADERS TO TH E TUNE OF RS. 2,84,58,054/-. CASE FILE REVEALS THAT THE INSTANT LIS EMANATED FRO M A SEARCH ACTION DATED 01-09- 2008 CARRIED OUT AT M/S EDIBLE OIL MILLS GROUP OF P ATAN DISTRICT AND ITS GROUP CONCERNS ON SUBSEQUENT DATES. ONE SHRI DHARMENDRA J. PANDIYA, PROPRIETOR OF M/S VISHAL TRADERS, VIRPUR DID NOT EXIST AND IT HAD BEEN ISSUING BOGUS/ADJUSTMENT ENTRIES FOR THE PAST TWO YEARS IN RESPECT OF OIL SE EDS, OIL CAKES AND OTHER PURCHASE ITEMS. ALL THE SAID MATERIAL RESULTED IN A SURVEY ACTION BEING CONDUCTED IN ASSESSEES CASE U/S 133A OF THE ACT. THE ASSESSEE S PARTNER SHRI PANKAJ SONI GOT RECORDED HIS STATEMENT IN COURSE OF THE SAID SURVEY ADMITTING TO HAVE TAKEN ADJUSTMENT BILLS IN RESPECT OF PURCHASES FROM M/S V ISHAL TRADERS. HE FURTHER UNDERTOOK TO DECLARE THE 20% OF THE ABOVE PURCHASES HAS ASSESSEES UNDISCLOSED ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 13 - INCOME TO THE TUNE OF RS. 5691610/-. THERE IS NO D ISPUTE THAT THE SAID PURCHASES READ A FIGURE OF RS. 28458054/- IN CASE OF M/S VISH AL TRADERS IN THE IMPUGNED ASSESSMENT YEAR. THIS MADE THE ASSESSING OFFICER T O SEEK NECESSARY PURCHASE DETAILS DURING SCRUTINY. THE ASSESSEE FAILED TO PR OVE THE SAME DESPITE AVAILING VARIOUS OPPORTUNITIES. THE ASSESSING OFFICER THERE AFTER DISALLOWED ALL THE ABOVE PURCHASES AS WELL AS ADDED ABOVE DISCLOSED AMOUNT O F RS. 5691610/- AS WELL AS CASH DEPOSITS MADE IN ASSESSEES BANK ACCOUNTS READ ING A FIGURE OF RS. 32385600/- AS UNEXPLAINED U/S. 68 OF THE ACT. 4. THE ASSESSEE PREFERRED APPEAL. IT CHOSE TO FILE ADDITIONAL EVIDENCE/SUBMISSIONS IN LOWER APPELLATE PROCEEDINGS . THE CIT(A) SOUGHT REMAND REPORT. THE ASSESSING OFFICER SUBMITTED THE SAME O N 14-02-2012 REITERATING HIS ABOVE BOGUS PURCHASES AND DISALLOWANCES/ADDITIONS ( SUPRA). THE CIT(A) THEREAFTER OBSERVED THAT IT WAS AT THE BEST A CASE OF RAW MATERIAL PURCHASES UNREGISTERED DEALERS TO SAVE VAT ETC. HE FINDS IN PAGE 15 AS PER AUDIT REPORT SCHEDULED AS ANNEXSURE-2 THAT THE ASSESSING OFFICER HAD NOT DOUBTED SALES AND CLOSING STOCK QUANTITY NEITHER IN ASSESSMENT NOR REMAND PROCEEDINGS. THE CIT(A) THEN RESTRICTS THE IMPUGNED DISALLOWANCE OF RS. 28819545/- TO THE TUNE OF 25% THEREOF COMING TO 7204886/- ONLY. HE THEREAFTE R APPLIES TELESCOPING METHOD QUA ADMITTED UNDISCLOSED INCOME OF RS. 5691610/- (S UPRA) TO CONCLUDE THAT THE ABOVE BOGUS PURCHASES DISALLOWANCE @ 25% WOULD COVE R THIS LATTER FIGURE AS WELL. THE CIT(A) LASTLY REVERSES ASSESSING OFFICERS FIND INGS IN PART MAKING SECTION 68 ADDITION OF RS. 32385600/- TO THE TUNE OF RS. 44930 4/- ONLY AS UNDER: IN GROUND NO.5 THE APPELLANT HAS DISPUTED THE ADD ITION OF RS.3,23,85,600 BEING UNEXPLAINED CASH CREDIT. PERUSAL OF PARA 4 OF THE ASSESSMENT ORDER SHOWS THA T THE ASSESSING OFFICER MADE VERIFICATION OF BANK ACCOUNTS AND ADDED BACK A LL CASH DEPOSITS APPEARING IN TWO ACCOUNTS WITHOUT GIVING SEPARATELY THE AMOUNTS AND DATES OF DEPOSITS. THE ADDITION WAS MADE AS UNDER: '4.1 VIDE NOTICE U/S. 142(1) OF THE I.T. ACT DATED 16.8.2010, THE ASSESSEE WAS ASKED TO EXPLAIN THE CASH DEPOSITS IN THE BANK ACCO UNTS. ON VERIFICATION OF THE COPY OF BANK ACCOUNTS SUBMITTED BY THE ASSESSEE, IT IS NOTICED THAT THE ASSESSEE HAS MADE CASH DEPOSITS IN THE BANK ACCOUNTS AS UNDE R : NAME OF BANK BANK A/C. NO. CASH DEPOSITS HARIJ NAGRILL SAHAKARI BANK 4833 RS.2,39,73,600 LTD. DENA BANK CCA/C.NO.156 RS. 84,12,000 TOTAL ... RS.3,23,85,600 4.2 VIDE SUBMISSION DATED 20.10.2010, THE ASSESSEE FURNISHED COPY OF BANK STATEMENTS. HOWEVER, THE ASSESSEE DID NOT FURNISH E XPLANATION OF SOURCE OF CASH DEPOSITS INTO THESE BANK ACCOUNTS. THE ASSESSE E ALSO DID NOT FURNISH CASH BOOK. THEREFORE, A SUMMONS U/S. 131 OF THE LT. ACT WAS ISSUED ON 1.11.2010 AND THE ASSESSEE WAS ASKED TO ATTEND THE OFFICE., O N 11.11.2010 ALONGWITH ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 14 - EXPLANATION OF SOURCE OF ALL CASH DEPOSITS IN THE B ANK ACCOUNT ALONGWITH DOCUMENTARY EVIDENCES. THE ASSESSEE WAS ALSO REQUIR ED TO PRODUCE CASH BOOK FOR VERIFICATION. HOWEVER, THE ASSESSEE FAILED TO A TTEND THIS OFFICE TILL DATE AND FURNISH THE EXPLANATION OF SOURCE OF CASH DEPOSITS AND ALSO FAILED TO PRODUCE THE CASH BOOK. 13. DURING THE COURSE OF APPELLATE PROCEEDINGS IT W AS PLEADED THAT CASH DEPOSITS WERE OUT OF CASH AVAILABLE IN THE CASH BOO K. SOFT COPY OF THE CASH BOOK WAS IMPOUNDED BY THE DEPARTMENT DURING SURVEY AND HARD COPY WAS PRODUCED DURING APPELLATE PROCEEDINGS STATING THAT THE TWO CASH BOOKS SHOW THAT ENOUGH CASH WAS AVAILABLE WITH THE APPELLANT F OR MAKING CASH DEPOSITS. THE ASSESSING OFFICER WAS ASKED BY MY PREDECESSOR T HROUGH HIS LETTER DATED 3.6.2011 TO VERIFY THE CONTENTION OF THE APPELLANT. THE ASSESSING OFFICER THROUGH HIS REPORT DATED 13.2.2012 FOUND DIFFERENCE OF RS.5,03,026 AND OF RS.55,246 IN CASH WITHDRAWAL ENTRIES AND DIFFERENCE OF RS.1,08,968 IN CASH DEPOSIT ENTRIES ON COMPARING THE HARD COPY CASH BOO K PRODUCED LATER WITH THE SOFT COPY CASH BOOK IMPOUNDED BY THE DEPARTMENT. RE PORT OF THE ASSESSING OFFICER HAS BEEN REPRODUCED IN PARA 8 ABOVE. THE RE PORT WAS MADE AVAILABLE TO THE APPELLANT AND IT WAS STATED THAT THE DISCREP ANCY IS MINOR AND THAT NETTING OF THE DIFFERENCE IN DEPOSITS AND WITHDRAWA LS SHOULD BE ALLOWED. THE DISCREPANCY ON NETTING COMES TO RS. 4,49,304. CASH WITHDRAWAL DISCREPANCY AS PER A.O. RS.5,03,02 6 CASH WITHDRAWAL DISCREPANCY AS PER A.O. RS. 55,2 46 RS. 5,58,272 LESS: CASH DEPOSIT DISCREPANCY AS PER A.O. RS. 1,08 ,968/- RS.4,49,304 14. IT MAY BE MENTIONED HERE THAT ANALYSIS OF BANK ACCOUNTS OF THE APPELLANT WHICH INCLUDES HARIJ BANK ACCOUNT SHOWS THAT SAME A MOUNTS ISSUED TO VISHAL TRADERS THROUGH CHEQUES STAND DEPOSITED IN CASH AT TIMES ON THE SAME DATE WHEN THE CHEQUE IS ISSUED TO VISHAL TRADERS, AND AN ALYSIS OF VISHAL TRADERS BANK ACCOUNT SHOWS THAT IMMEDIATELY ON DEPOSIT OF C HEQUE CASH HAS BEEN WITHDRAWN OF THE SAME AMOUNT. THIS INDICATES THAT C ASH IS RECEIVED BACK FROM VISHAL TRADERS AND DEPOSITED IN THE BANK ACCOUNT OF THE APPELLANT. IN OTHER WORDS IT IS APPELLANT'S OWN MONEY (CHEQUES ISSUED, FOR PURCHASES MADE THROUGH ACCOMMODATION BILLS) WHICH COMES BACK TO HI M IN CASH AND IS DEPOSITED IN THE BANK ACCOUNT. IN MY VIEW CASH DEPO SITS ADDITION OUT OF ADDITION OF RS.3,23,85,600 TO THE EXTENT OF RS.2,88 ,19,545 ON ACCOUNT OF PURCHASES FROM VISHAL TRADERS GETS TELESCOPED IN TH E ADDITION OF RS.2,88,19,545 ON ACCOUNT OF PURCHASES FROM VISHAL TRADERS 25% OF WHICH HAS BEEN UPHELD IN THIS APPEAL. THIS LEAVES AMOUNT OF RS.35,66,055 (RS.3,23,85,600 - RS.2,88,19,545) THE APPELLANT'S C ONTENTION IS THAT CASH WAS DEPOSITED IN BANK ACCOUNTS BECAUSE IT WAS AVAILABLE AS PER CASH BOOKS MAINTAINED BY THE APPELLANT. THE ELECTRONIC CASH BO OK IMPOUNDED AT THE TIME OF SURVEY AT THE PREMISES OF THE APPELLANT AND THE HARD COPY CASH BOOK HAVE BEEN COMPARED BY THE ASSESSING OFFICER AT THE REMAN D REPORT STAGE, AND THE DIFFERENCE ON NETTING OF DISCREPANCY IN CASH BOOKS COMES TO RS.4,49,304 ONLY. IT MAY BE REMEMBERED THAT IN THE REMAND REPORT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY MAJOR CASH DEPOSIT DISCREPANCY THER EFORE THE ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDITS AFTER NETTING I S UPHELD TO THE EXTENT OF RS.4,49,304. THE REMAINING ADDITION OF RS. 35,66,05 5 (RS.3,23,85,600 (CASH DEPOSIT ADDITION MADE BY A.O.) - RS.2,88,19,545 (BO GUS PURCHASES THROUGH ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 15 - ACCOMMODATION BILLS FROM VISHAL TRADERS TELESCOPED IN THE ADDITION OF RS.3,23,85,600) IS DIRECTED TO BE DELETED BECAUSE T HE ENTIRE ADDITION ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS HAS BEEN MADE WITHOUT INFORMING THE SPECIFIC DATES AND AMOUNTS OF CASH DEPOSITS BY THE ASSESSING OFFICER AND IN THE REMAND REPORT THE ASSESSING OFFICER HAS NOT OBJECTE D TO THE CONTENTION OF THE APPELLANT THAT CASH WAS DEPOSITED ACCORDING TO THE CASH AVAILABLE AS PER CASH BOOK AND ON VERIFICATION OF THE CASH BOOKS SUBMITTE D BY THE APPELLANT DISCREPANCY OF RS.4,49,304 IS ONLY FOUND. THUS ADDI TION OF RS.4,49,304 IS UPHELD AS UNEXPLAINED CASH DEPOSITED IN BANK ACCOUN TS OUT OF ADDITION OF RS.3,23,85,600 MADE IN THE ASSESSMENT ORDER. THE BA LANCE IS DIRECTED TO BE DELETED. 5. THIS LEAVES BOTH THE PARTIES AGGRIEVED TO THE EX TENT OF THEIR GRIEVANCE PLEADED IN THEIR ABOVE AVERRED GROUNDS. 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL SUBMISSIONS. LEARNED COUNSEL REPRESENTING ASSESSEE FAILS TO REBUT BOTH T HE LOWER AUTHORITIES FINDINGS THAT IT HAD OBTAINED BOGUS PURCHASE ENTRY FROM M/S VISHAL TRADERS EXISTING ON PAPER ONLY. HIS FIRST PLEA IS THAT THE ASSESSEE HAD PAID FOR ITS PURCHASES BY WAY OF ACCOUNT PAYEE CHEQUES. WE HOWEVER ARE OF THE VI EW THAT THE SAID LEDGERS OR MODE OF PAYMENTS HARDLY HAVE ANY GENUINENESS ELEMEN TS IN VIEW OF THE ABOVE OVERWHELMING ELEMENT INDICATING THE ASSESSEE TO HAV E OBTAINED BOGUS PURCHASES ENTRIES. WE THEREFORE FIND NO REASON TO UPSET BOTH THE LOWER AUTHORITIES FINDINGS TREATING THE ABOVE PURCHASES AS BOGUS IN PRINCIPLE. 7. BOTH THE LEARNED REPRESENTATIVES NEXT ARGUMENT I S QUA THE QUANTUM OF DISALLOWANCE. LEARNED DEPARTMENTAL REPRESENTATIVE ARGUES VERY STRONGLY THAT WE OUGHT TO DISALLOW THE ENTIRE PURCHASES IN TUNE WITH ASSESSING OFFICERS ACTION AS PER HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IN ACIT VS. PAWANRAJ B. BOKADIA TAX APPEAL NO. 2345 OF 2009 DECIDED ON 27-09-2011. THE ASSESSEE ON THE OTHER HAND PLEADS THAT THE VERY ISSUE IN CASE OF M/S VISH AL TRADERS ITSELF (SUPRA) STANDS ADJUDICATED QUA THE IMPUGNED ASSESSMENT YEAR IN CAS E OF M/S GUJARAT AMBUZA LTD. VS. ACIT IN IT(SS)A 124/AHD/2012 DECIDED ON 17 -04-2013 WHEREIN A CO- ORDINATE BENCH HAS DISALLOWED IDENTICAL PURCHASES T O THE EXTENT OF 5% ONLY. HONBLE JURISDICTIONAL HIGH COURT JUDGMENT IN TAX A PPEAL 840 OF 2013 DECIDED ON 10-02-2014 IS STATED TO HAVE UPHELD THE SAME. THE A SSESSEE THEREFORE SUBMITS THAT WE OUGHT TO DISALLOW ONLY 5% OF THE ABOVE PURCHASES . 8. HEARD RIVAL SUBMISSIONS. WE HAVE EXAMINED RIVAL GRIEVANCE(S) AT LENGTH. WE DO NOT FIND MERIT IN EITHER PARTIES SUBMISSIONS . THE CIT(A) HAD ADMITTEDLY UPHELD THE IMPUGNED BOGUS PURCHASES DISALLOWANCES T O THE EXTENT OF 25%. THE REVENUES PLEA DOES NOT DESERVE TO BE ACCEPTED SINC E THE ASSESSING OFFICER HAS NOT FOUND ANY INFIRMITY IN ASSESSEES STOCK AS WELL ITS RAW MATERIAL PURCHASE, CONSUMED AND SOLD AS STATED IN ITS AUDIT REPORT. C OUPLED WITH THIS, WE FIND THAT HONBLE JURISDICTIONAL HIGH COURTS RECENT JUDGMENT IN CASE OF M/S. N.K. INDUSTRIES VS. DCIT DATED 20-06-2016 IN TAX APPEAL 240 OF 20 13 AND RELATED CASES UPHOLDS A CO-ORDINATE BENCHS DECISION THEREIN DISALLOWING 25% OF PURCHASES AMOUNT IN CASE OF BOGUS BILLS. HONBLE APEX COURT HAS DECLIN ED SPECIAL LEAVE PETITION, SLP(C) CC NO. 963/2017 ON 16-01-2017 AS WELL. WE T HEREFORE FIND NO MERIT IN REVENUES FORMER GRIEVANCE SEEKING TO REVIVE ENTI RE PURCHASES DISALLOWANCE OF ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 16 - RS. 28819545/-. ITS CORRESPONDING FIRST SUBSTANTIV E IS THEREFORE REJECTED. SO IS THE OUTCOME OF ITS LATTER SUBSTANTIVE GROUND REGARDING ADMITTED UNDISCLOSED INCOME OF RS. 5691610/- AS ASSESSEES AUTHORIZED PERSONS SUR VEY STATEMENT UNDERTAKING TO DECLARING 20% OF THE VERY PURCHASES IS VERY WELL LE SS THAN THE PURCHASES DISALLOWANCE @ 25% UPHELD IN THE INSTANT PROCEEDING S. THE REVENUES APPEAL ITA 858/AHD/2012 FAILS. 9. WE NOW ADVERT TO ASSESSEES ARGUMENTS SEEKING TO REDUCE THE ABOVE PURCHASES DISALLOWANCES FROM 25% TO 5% ONLY AS PER HONBLE JURISDICTIONAL HIGH COURTS DECISION IN GUJARAT AMBUZA EXPORTS LTD. A PERUSAL OF THE SAID CO-ORDINATE BENCH ORDER REVEALS THAT THERE WAS NO MATERIAL ON R ECORD AS AGAINST THE CIT(A)S FINDINGS REPRODUCED HEREINABOVE THAT THE CONCERNED ASSESSEE HAD IN FACT PAID CHEQUES TO M/S VISHAL TRADERS WHO IN TURN WITHDREW CASH AMOUNTS TO BE DEPOSITED BACK IN PAYERS ACCOUNT. WE THEREFORE FOLLOW HONBL E JURISDICTIONAL HIGH COURTS DECISION IN N.K. INDUSTRIES TO CONFIRM THE CIT(A)S ACTION UPHOLDING THE IMPUGNED BOGUS PURCHASES DISALLOWANCE TO THE EXTENT OF 25% O NLY. THE ASSESSEES FIRST SUBSTANTIVE GROUND IN ITS CROSS OBJECTION IS THEREF ORE REJECTED. 10. THIS LEAVES US WITH ASSESSEES SECOND SUBSTANTI VE GROUND SEEKING TO DELETE SECTION 68 ADDITION OF RS. 4,49,304/- AS UPHELD IN LOWER APPELLATE PROCEEDINGS THEREBY PARTLY REVERSING ASSESSING OFFICERS ACTION ADDING ENTIRE CASH DEPOSITS OF RS. 3,23,85,660/- AS EXTRACTED IN PRECEDING PARAGRA PHS. IT HAS COME ON RECORD THAT THE LD. CIT(A) HAS VERY WELL ESTABLISHED THE T RAIL BEHIND THE IMPUGNED CASH DEPOSITS TO BE EMANATING FROM CASH RECEIVED IN CASE OF M/S VISHAL TRADERS. LEARNED COUNSEL REPRESENTING ASSESSEE FAILS TO REBU T THE SAID CLINCHING FINDINGS. WE THEREFORE FIND NO REASON TO AGREE WITH ASSESSEE S INSTANT LATTER SUBSTANTIVE GROUND AS WELL. ASSESSEES CO 106/AHD/2012 IS ALSO DECLINED. BOTH THE LEARNED REPRESENTATIVES FAIL TO PINPOINT ANY DISTINCTION ON FACTS. IT THEREFORE EMERGES THAT THE SAID CO-ORDINATE BENCH H AS ALREADY PLACED RELIANCE ON HONBLE JURISDICTIONAL HIGH COURTS LATEST JUDGMENT IN N. K. PROTEINS (SUPRA). IT FURTHER TRANSPIRES THAT THE CIT(A)S ABOVE EXTRACTE D FINDINGS IN PARA 6 MAKE IT CLEAR THAT RELEVANT FACTS IN THE SAID CASE AS WELL AS INS TANT ONE ARE ON IDENTICAL FOOTING. WE THEREFORE ADOPT CONSISTENCY IN THE INSTANT FACTS AS WELL TO UPHOLD THE CIT(A)S WELL REASONED FINDINGS IN RESTRICTING THE IMPUGNED BOGUS PURCHASES DISALLOWANCE TO THE EXTENT OF 25% ONLY. THIS LEAD CASE APPEAL ITA NO. 2039/AHD/2014 IS ACCORDINGLY DISMISSED. 11. LEARNED COUNSEL REPRESENTING ASSESSEE AT THIS S TAGE SUBMITTED THAT SOME OF THE INSTANT APPEALS INVOLVE AN INSTANCE WHEREIN M/S . VISHAL TRADERS IS SUPPLIERS SUPPLIER OF THE RAW MATERIAL IN QUESTION. WE REMIN DED HIM THAT THE ABOVE CASE OF PANKAJ COTTON INDUSTRIES (SUPRA) WOULD SQUARELY APP LY IN THE INSTANT CASE AS WELL AS ITA NOS. 1695/AHD/14 & 13 ORS. [SHRI JAYANTILAL P. THAKKAR & 2 ORS.] - 17 - WE HAVE ADOPTED A BROADER FORMULA IN UPHOLDING THE IMPUGNED PURCHASES DISALLOWANCE TO THE EXTENT OF 25%. THE SAME SHALL TAKE CARE OF ALL TECHNICAL OBJECTIONS BEING RAISED AT BOTH PARTIES BEHEST. W E THEREFORE ADOPT THIS 25% DISALLOWANCE RATE IN ALL THESE CASES ON CONSISTENCY FORMULA. 12. WE ACCORDINGLY DISMISS REVENUES ALL APPEALS IT A NOS. 2366 & 2367/AHD/2012, ITA NO. 2041/AHD/2014 (IN FIRST ASSE SSEES CASE), ITA NO. 2039/AHD/2013 AND ITA NO. 2040/AHD/2014 IN REMAININ G TWO ASSESSEES CASES. THE FIRST ASSESSEES ALL THREE APPEALS ITA NO. 2418 & 2419/AHD/2012, 1695/AHD/2014 ARE DISMISSED. SECOND ASSESSEES APP EALS ITA NOS. 791 & 792/AHD/2013 ARE PARTLY ALLOWED. ITS THIRD APPEAL ITA NO.1694/AHD/2013 IS DISMISSED. THIRD ASSESSEES FORMER TWO APPEALS ITA NOS. 793 & 794/AHD/2013 ARE PARTLY ALLOWED WHEREAS ITA NO. 1693/AHD/2014 IS DIS MISSED. ORDERED ACCORDINGLY. [PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF DECEMBER, 2017.] SD/- SD/- ( PRADIP KUMAR KEDIA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 22/12/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0