SHRI ATUL JAIN, Ujjain V. THE ACIT 2(1), Ujjain

ITA 797/IND/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2220 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: S S DESHPANDE
• Keywords: Bogus purchase; Question of law
• Section: 133(6); 131

Judgement Text

SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 1 OF 11 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER SHRI ATUL JAIN, 5-A, METAL CRAFT ENGINEERING INDUSTRIAL AREA, MAXI ROAD UJJAIN V. ASSISTANT COMMISSIONER OF INCOME TAX 2(1) UJJAIN / // / APPELLANT / // / RESPONDENT . .. . . .. . /. /./. /. PAN: AEAPJ 4319 R / // / APPELLANT BY SHRI S.S. DESHPANDE, CA / // / RESPONDENT BY SHRI MOHD. JAVED, SR. D.R. DATE OF HEARING 09-05-2017 DATE OF PRONOUNCEMENT 1 5 - 05 - 2017 / O R D E R PER O.P. MEENA, ACCOUTANT MEMBER. 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 20-10-2014 OF COMMISSIONER OF INCOME-TAX (APP EALS)- UJJAIN (IN SHORT CIT(A)) AND RELATES TO ASSESSMENT YEAR2009-10 ON FOLLOWING GROUNDS: G ROUND NO. 1&2 RELATES TO MAINTAINING ADDITION OF RS . 21,64,000/- ON ACCOUNT OF ALLEGED BOGUS PURCHASE EV EN THOUGH IT WAS PROVED THAT MATERIAL HAD COME TO FACTORY. THE PURCHASE COULD NOT BE CONFIRMED AS FRO M THE RESPECTIVE SELLERS BECAUSE OF BUSINESS EITHER C LOSED OR SHIFTED. 2. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DERIVES . .. . . .. . /. /. /. /. I.T.A. NO. 799/IND/2014 / // / ASSESSMENT YEAR: 2009-10 SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 2 OF 11 INCOME FROM SALE OF MACHINERY PARTS AND PACKING BOX ES IN THE NAME OF M/S. METAL CRAFT ENGINEERING A PROPRIETARY CONCERN OF THE ASSESSEE. THE ASSESSEE HAD SHOWN PURCHASES OF R S. 4,06,77,448/-. THE AO MADE INQUIRIES BY ISSUING COM MISSIONS UNDER SECTION 131 (1)(D) AND NOTICES UNDER SECTION 133(6) OF THE ACT AND FOUND THAT PURCHASES OF RS. 5,75,600/- FROM M/S. CHIRAG CORPORATION, MUMBAI , RS. 7,52,300/- FROM M/S. BALA JI CORPORATION, MUMBAI AND RS. 8,32 200/- FROM M/S. R ISHABH METAL (INDIA), MUMBAI, TOTALING TO RS.21,64,100/- WERE FOUND TO BE BOGUS ON THE GROUND THAT ABOVE PARTIES WERE NON- EXISTENT ON THE GIVEN ADDRESS, CLOSED THE BUSINESS AND DISCREPA NCIES LIKE NON AVAILABILITY OF TRANSPORTATION BILLS THROUGH RAIL A ND ROAD, PAYMENTS THROUGH CHEQUES WERE CREDITED TO OTHER PER SONS ACCOUNT, PAYMENT MADE AFTER END OF THE YEAR AND TOT AL PAYMENTS MADE TO SUPPLIER WAS NOT PROVED. THEREFORE, SAME WE RE DISALLOWED AND ADDED TO TOTAL INCOME. 3. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT (A). IT WAS NOTICED IN THE CASE OF CHIRAG CORPO RATION, ITS PROPRIETOR MS. GEETA JAIKANT MEHTA, VIDE HER LETTER DTD. 07-05- 2011 STATED THAT SHE CLOSED HER BUSINESS IN DECEMBE R, 2006DUE TO HER HEALTH PROBLEM. HENCE, SHE HAD NOT DONE ANY BUSINESS SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 3 OF 11 WITH THE ASSESSEE AS HER BUSINESS WAS ALREADY CLOSE D AND SHE ALSO STATED THAT SHE DOES NOT KNOW ABOUT THE FIRM AND ITS PROPRIETOR. IN THE CASE OF M/S. BALAJI SALES CORPO RATION LETTER UNDER SECTION 133(6) DTD. 01-04-2011 WAS USED TO TH IS FIRM BUT LETTER WAS REMAIN UNDELIVERED WITH REMARKS THAT TH E GIVEN ASSESSEE WAS NOT AVAILABLE AT THE GIVEN ADDRESS. SUBSEQUENT COMMISSION ISSUED UNDER SECTION 131 TO ITO WARD 22( 3)(1) MUMBAI, WHO REPORTED THAT THE PARTY IS NOT AVAILABL E ON THE GIVEN ADDRESS AND AS PER ITD RECORD THE PARTY HAS NOT FIL ED ANY RETURN OF INCOME FOR ANY OF THE YEAR. IN THE CASE OF M/S. RISHABH METAL (INDIA) THE LETTER UNDER SECTION 133(6) DTD. 01-04- 2011 WAS REMAINED UN SERVED WITH REMARKS OF POSTAL AUTHORITI ES AS NOT KNOWN. THE AO MADE BILL WISE ENQUIRIES IN RESPECT OF THE ALLEGED ABOVE THREE PARTIES. THE PAYMENT MADE IN NAME OF TH ESE PARTIES WAS NOT CREDITED IN THEIR ACCOUNTS BUT IT WAS CREDI TED AND DEPOSITED IN THE ACCOUNTS OF THE PARTIES WHO WERE D EALING ALTOGETHER DIFFERENT TYPE OF COMMODITIES. IN THE LI GHT OF THESE FACTS AND CIRCUMSTANCES, THE LD. CIT (A) HAS CONCLUDED TH AT THE APPELLANT HAS FAILED TO PRODUCE THE TRANSPORTATION BILLS AND HAMALI CHARGES , CHEQUES WERE CREDITED IN THE ACCOU NTS OF THE PARTIES WHO HAVE NO BUSINESS WITH THE ASSESSEE NOR PRODUCTION, SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 4 OF 11 CONSUMPTION STOCK REGISTER MAINTAINED. ACCORDINGLY, THE ADDITION OF RS. OF RS. 21,64,100/- WAS CAME TO BE C ONFIRMED. 4. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEF ORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE, SU BMITTED THAT THE LD. AR SUBMITTED THAT THE STAINLESS STEEL SHEET S WHICH ARE USED FOR MANUFACTURE OF BOWLS ARE PRODUCED BY VERY FEW MANUFACTURERS IN INDIA LIKE JINDAL, SELLUM INDUSTRI ES AND ARE ALSO IMPORTED. SINCE, THEY ARE OF A SPECIFIC QUALIT Y, THERE ARE NOT EASILY AVAILABLE IN INDORE OR UJJAIN MARKET AND ARE REQUIRED TO BE PURCHASED FROM BOMBAY OR GUJRAT. THE BROKERS ARE EN GAGED FOR OBTAINING THESE SS SHEETS, WHO ACQUIRE THEM FROM TH E MARKET SUPPLIES TO THE ASSESSEE. THE PAYMENT IS MADE ONLY AFTER ASCERTAINING THE QUALITY OF GOODS SINCE THE PRINCIP LE M/S KIRLOSKAR BROTHERS REQUIRE THEM AS PER PARTICULAR S PECIFICATION. IT WAS ASSERTED THAT THE GOODS HAVE BEEN RECEIVED BY T HE ASSESSEE AND HAVE BEEN ENTERED IN THE STOCK REGISTER AND THE COMPLETE QUANTITATIVE DETAILS HAVE BEEN FURNISHED IN THE AUD IT REPORT (PAGE 14 OF PAPER BOOK). NO DAY TO DAY STOCK REGISTER IS MAINTAINED. HOWEVER, THE TOTAL QUANTITY OBTAINED AND THE TOTAL QUANTITY USED IN PRODUCTION IS RECORDED. THE QUANTITIES IN TONS H AS BEEN TALLIED AND HAVE BEEN ACCEPTED BY THE CENTRAL EXCISE. THE S ALES TAX SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 5 OF 11 DEPARTMENT HAS ALSO ACCEPTED THE SALES AND THE COPI ES OF THE SALES TAX ORDER ARE ATTACHED AT PAGE 49 OF THE PAPE R BOOK. THE CHEQUES HAVE BEEN ISSUED TO THE RESPECTIVE PARTIES AND THERE WAS NO EVIDENCE ON RECORD TO SHOW THAT THE AMOUNTS HAVE BEEN RECEIVED BACK. THEREFORE, THERE IS NO DISPUTE THAT THE MATERIAL HAS BEEN RECEIVED AND FOUND CONSUMED AND SALES HAVE NOT BEEN EFFECTED. THE LD. AR HAS RELIED IN THE CASE OF ACIT -5(1), INDORE VS. SHREE STEELS IN I.T.A. NO. 141/IND/2012 ASSESSMENT YEAR 2003- 04 TO 2006-07 AND OTHERS DATED 26.07.2012 WHEREIN T HE HON'BLE TRIBUNAL AT PAGE 37 PARA 4.4.2 IS SPECIFICALLY CONF IRMED THE ADDITION OF RS. 6% OF PURCHASE PRICE. THE HON'BLE T RIBUNAL ALSO CONSIDERED THE CASE OF CIT VS. RAJENDRA SINGH DHARA M SINGH VS. DCIT IN I.T.A. NO. 497/IND/2010(ASSESSMENT YEAR 200 7-08) DATED 17.05.2016, INDORE BENCH IN PARA 11 AT PAGE 2 8 AND UPHELD THE ADDITION OF 10% OF THE ALLEGED BOGUS PUR CHASE PRICE. THEREFORE, IT WAS CONTENDED THAT THE ADDITION MADE BY THE AO MAY PLEASE BE DELETED, SINCE THE GOODS RECEIVED ARE ENTERED IN THE BOOKS AND THE QUANTITATIVE DETAILS HAVE BEEN FURNIS HED WHICH HAVE BEEN ACCEPTED BY THE SALES TAX. 5. ON THE OTHER HAND, THE LD. SENIOR DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND VEHEMENTLY ARGUED THAT TH E ASSESSEE SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 6 OF 11 HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES AS THE PAYMENT ISSUED IN THE NAME OF PERSONS BUT SAME WERE CREDITE D IN THE NAME OF OTHER ACCOUNT OF THE PURCHASE PARTIES. FURT HER, THE ASSESSEE FAILED TO PROVE THE TRANSPORTATION THROUGH WHICH GOODS ARE TRANSPORTED THEREFORE, THE ASSESSEE FAILED TO D ISCHARGED HIS ONUS OF PROVING THE PURCHASE TRANSPORTATION PAYMENT ETC. AS WELL AS THE FINDINGS RECORDED BY THE LOWER AUTHORITY MAY BE SUSTAINED. 6. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAS SHOWN PURCHASES OF RS. 5.75 LACS. FROM CHIRAG CORPORATION, RS. 8.36 LACS. FROM RISHABH METAL IND IA, RS. 7.52 LACS FROM BALAJI SALES CORPORATION ALL PARTIES ARE FROM BOMBAY. IT IS SEEN THAT MS. GEETA JAIKANT MEHTA, PROPRIETOR OF CHIRAG CORPORATION VIDE HER LETTER DATED 07.05.2012 CLEARL Y STATED THAT SHE HAS CLOSED HER BUSINESS IN DECEMBER, 2006 AND H AS NOT DONE ANY PURCHASE AND AS NOT DONE ANY TRANSACTION OF SAL ES WITH THE ASSESSEE. IT IS ALSO SEEN THAT THE CHEQUE ISSUED IN THE CASE OF CHIRAG CORPORATION WAS CREDITED IN THE NAME OF KANI KA ENTERPRISES HAVING ADDRESS AT 163/63 IN THE COMMERC IAL MARKET, KALUPUR, AHMEDABAD. THEREFORE, THE ASSESSEE HAS NOT ABLE TO ESTABLISH GENUINENESS PURCHASE FROM THE SAID PARTY SIMILARLY, IN SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 7 OF 11 THE CASE OF BALAJI SALES CORPORATION AND RISHAB MET AL (INDIA). THE NOTICES ISSUED U/S 133(6) DATED 1.4.2012 WERE RETUR N ANSWERED BY POSTAL AUTHORITIES AS NOT AVAILABLE ON THE GIVEN ADDRESS AND THE CHEQUE ISSUED IN RESPECT OF THESE PARTIES WAS C REDITED IN SOME OTHER NAMES THE ASSESSEE HAS ALSO FAILED TO PR ODUCE THE PROOF OF TRANSPORTATION OF GOODS, THEREFORE, THE P URCHASE MADE BY THE ASSESSEE FROM THE ABOVE REFERRED THREE PARTI ES CANNOT BE TREATED AS GENUINENESS HOWEVER, WE FIND THAT THE AS SESSEE IS ENGAGED IN THE MANUFACTURING AND SALES OF M/S STEEL BOXES AND BOWLS AND ALIED PRODUCTS THE QUANTITATIVE DETAILS A RE MAINTAINED BY THE ASSESSEE AS REFLECTED AT PAGE 14 OF PAPER BO OK OF THE ACCOUNTS ARE AUDITED AND REPORTED U/S 44B OF THE A CT. THE AUDITED COPY OF BALANCE SHEET PROFIT AND LOSS ACCOU NT HAVE BEEN FILED THE SALES EFFECTED BY THE ASSESSEE HAVE BEEN ACCEPTED BY THE SALES TAX DEPARTMENT . IT IS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE REQUIRES A SPECIFIC QUALITY OF SHEETS FOR MANUFACTURING OF THE ITEMS TO BE SUPPLIED TO M/S KI RLOSKAR BROTHERS WE ALSO FIND THAT THE PURCHASES ARE MADE T HROUGH BROKERS WHEREIN THE SAID PERSON WAS GIVEN THE PAYME NT TO THESE PARTIES HAVE BEEN EFFECTED THROUGH BANKING CHANNEL. IT IS THE ESSENCE OF TRANSACTION SO AS TO DECIDE THE GENUINEN ESS WHILE SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 8 OF 11 DECIDING UPON THE QUESTION OF ONUS OF PROOF SINCE T HE NECESSARY DETAILS REGARDING PURCHASE ARE NOT PROVED BEYOND DO UBT THE SUPPLIERS WERE NOT RESPONDED OR NOT TRANSPORTED HOW EVER, WE FIND THAT ALL TRANSACTIONS WERE MADE THROUGH BANKING CHA NNELS AND THE TRANSACTION WERE REPORTED TO THE SALES TAX DEPA RTMENT. THE ASSESSEE IS MAINTAINING THE QUANTITATIVE DETAILS TH ROUGH NOT DAY TO DAY STOCK IS MAINTAINED THE GOODS HAVE BEEN SOLD WHICH NOT HAVE BEEN DOUBTED MORE PARTICULARLY IN THE CASE OF KIRLOSKAR BROTHERS THEREFORE, THESE PURCHASES CANNOT BE TURNE D ON BOGUS PURCHASES AND TOTALITY. WE ARE OF THE VIEW THAT THE ASSESSEE HAS SOLD THE GOODS AFTER MANUFACTURING WHEN THE ASSESSE E HAS SOLD THESE GOODS THEN CORRESPONDING PURCHASES MADE, CANN OT BE REGARDED TOTAL NON-GENUINE THE LD. AR HAS PLACED RE LIANCE IN THE CASE OF RAJENDRA SING DHARAM SINGH RAJPAL (SUPRA) T HE DECISION OF THIS BENCH WHEREIN THE BENCH HAS REFERRED THE DE CISION IN THE CASE OF SANJAY OIL CAKE INDUSTRY VS. CIT 316 ITR 27 4(GUJRAT) WHEREIN IN THE FACTS ARE THAT THE ASSESSEE HAS MADE PURCHASE FURTHER THE AO COULD NOT PROVE THE MONEY WHICH WAS PAID BY THE ASSESSEE THROUGH ACCOUNT PAY CHEQUE AND COULD BE GI VEN TO THE ASSESSEE BUT IN THE INTEREST OF JUSTICE AND FAIR PL AY WE ARE OF THE VIEW THAT WHEN THE QUANTITATIVE DETAILS ARE MAINTAI NED AND SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 9 OF 11 PAYMENT IS MADE THROUGH BANKING CHANNEL AND SALES A RE FOUND TO BE GENUINE HENCE, ENTIRE PURCHASE CANNOT BE TREA TED AS BOGUS AS HELD IN THE CASE OF VIJAY TRADING COMPANY VS. IT O (2016) 76 TAXMANN.COM 366 (GUJRAT) OF WHICH RELEVANT PARA IS REPRODUCED AS UNDER: MR. S.N. DIVATIA, LEARNED ADVOCATE APPEARING FOR TH E ASSESSEE SUBMITTED THAT THE TRIBUNAL HAS ERRED IN LAW AND ON FACTS IN REVERSING THE ORDER OF THE CIT AND ERRED IN HOLDING THAT THE IMPUGNED PURCHASES WERE BOGUS AND PAYMENTS FOR PURCHASES HAD COME BACK TO THE ASSESSEE. HE SUBMITTED THAT THE TRIBUNAL HAS FAILED TO APPRECIATE THE EVIDENCE PRODUCED BY THE APPELLANT TO PROVE THE GENUINENESS OF THE IMPUG NED PURCHASES INSTEAD RELIED UPON IRRELEVANT EVIDENCE SO AS TO COME TO THE CONCLUSION THAT THE IMPUGNED PURCHASES WERE BOGUS. HE HAS RELIED UPON THE DECISIONS OF THIS COURT IN T HE FOLLOWING CASES: (I) CIT V. SIMIT P. SHETH [2013] 38 TAXMANN.COM 385/219 TAXMAN 85/38 TAXMANN.COM 385 (GUJ.) ; (II) CIT V. BHOLANATH POLY FAB (P) LTD [2013] 40 TAXMANN.COM 494/[2014] 220 TAXMAN 82/[2013] 355 ITR 290 (GUJ.) ; (III) SANJAY OILCAKE INDUSTRIES V. CIT [2009] 316 ITR 274 (GUJ.) . 6. MRS. MAUNA BHATT, LEARNED ADVOCATE APPEARING WITH M R. KARAN SANGHANI, LEARNED ADVOCATE FOR THE ASSESSEE HAS SUPPORTED THE IMPUGNE D ORDER AND SUBMITTED THAT THE TRIBUNAL IS JUSTIFIED IN HOLDING THAT THE CIT(A) IS NOT JUST IFIED IN HIS ACTION IN MODIFYING THE ORDER OF ASSESSING OFFICER. 7. THE ISSUE INVOLVED IN THE PRESENT GROUP OF APPEALS IS SQUARELY COVERED BY THE DECISION OF THE APEX COURT IN THE CASE OF SIMIT P. SHETH (SUPRA ) WHEREIN THIS COURT HAS OBSERVED AS UNDER: '7. THAT BEING THE POSITION, NOT THE ENTIRE PURCHAS E PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCO ME OF THE ASSESSEE. SO MUCH IS CLEAR BY DECISION OF THIS COURT. IN PARTICULAR, COU RT HAS ALSO TAKEN A SIMILAR VIEW IN CASE OF COMMISSIONER OF INCOME TAX-IV V. VIJAY M MISTRY CONSTRUCTION LTD. VIDE ORDER DATED 10.01.2011 PASSED IN TAX APPEAL NO. 1090 OF 2009 AN D IN CASE OF COMMISSIONER OF INCOME TAX-I V. BHOLANATH POLY FAB PVT. LTD. VIDE O RDER DATED 23.10.2011 PASSED IN TAX APPEAL NO. 63 OF 2012. THE VIEW TAKEN BY THE TRIBUN AL IN CASE OF VIJAY PROTEINS PVT. LTD. V. CIT REPORTED IN 58 ITD 428 CAME TO BE APPROVED. 8. IF THE ENTIRE PURCHASES WERE WHOLLY BOGUS AND TH ERE WAS FINDING OF FACT ON RECORD THAT NO PURCHASE WERE MADE AT ALL, COUNSEL FOR THE REVEN UE WOULD BE JUSTIFIED IN ARGUING THAT THE ENTIRE AMOUNT OF SUCH BOGUS PURCHASES SHOULD BE ADDED BACK TO THE INCOME OF THE SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 10 OF 11 ASSESSEE. SUCH WERE THE FACTS IN CASE OF ACIT (OSC) WARD 5(3) NADIAD V. PAWANRAJ B BOKADIA (SUPRA). 9. THIS BEING THE POSITION, THE ONLY QUESTION THAT SURVIVES IS WHAT SHOULD BE THE FAIR PROFIT RATE OUT OF THE BOGUS PURCHASES WHICH SHOULD BE ADD ED BACK TO THE INCOME OF THE ASSESSEE. THE COMMISSIONER ADOPTED RATIO OF 30% OF SUCH TOTAL SALES. THE TRIBUNAL, HOWEVER, SCALED DOWN TO 12.5%. WE MAY NOTICE THAT I N THE IMMEDIATELY PRECEDING YEAR TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSE SSEE HAD DECLARED GROSS PROFIT @ 3.56% OF THE TOTAL TURNOVER. IF THE YARDSTICK OF 30 %, AS ADOPTED BY THE COMMISSIONER, IS ACCEPTED GP RATE WILL BE MUCH HIGHER. IN ESSENCE, T HE TRIBUNAL ONLY ESTIMATED THE POSSIBLE PROFIT OUT OF PURCHASES MADE THROUGH NON-G ENUINE PARTIES. NO QUESTION OF LAW IN SUCH ESTIMATION WOULD ARISE. THE ESTIMATION OF R ATE OF PROFIT RETURN MUST NECESSARILY VARY WITH THE NATURE OF BUSINESS AND NO UNIFORM YAR DSTICK CAN BE ADOPTED. ' 7.1 SIMILARLY IN THE CASE OF BHOLANATH POLY FAB (P) LT D (SUPRA), THIS COURT OBSERVED AS UNDER: '6. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITT ED NO ERROR. WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHET HER THE PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS IS ES SENTIALLY A QUESTION OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CAM E TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE THE CLOTH AND SELL THE FINISH ED GOODS. IN THAT VIEW OF THE MATTER, AS NATURAL COROLLARY, NOT THE ENTIRE AMOUNT COVERED UN DER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDED THEREIN WOULD BE SUBJECT TO TAX. T HIS WAS THE VIEW OF THIS COURT IN THE CASE OF SANJAY OILCAKE INDUSTRIES V. CIT [2009] 316 ITR 274 (GUJ) . SUCH DECISION IS ALSO FOLLOWED BY THIS COURT IN A JUDGMENT DATED AUGUST 1 6, 2011, IN TAX APPEAL NO. 679 OF 2010 IN THE CASE OF CIT V. KISHOR AMRUTLAL PATEL. I N THE RESULT, TAX APPEAL IS DISMISSED.' 7.2 A SIMILAR QUESTION CAME UP BEFORE THIS COURT IN TH E CASE OF SANJAY OILCAKE INDUSTRIES (SUPRA) AND THIS COURT WHILE DECIDING TH E SAID ISSUE HAS HELD AS UNDER: '12 THUS, IT IS APPARENT THAT BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE CONCURRENTLY ACCEPTED THE FINDING OF THE ASSESSING OFFICER THAT THE APPARENT SELLERS WHO HAD ISSUED SALE BILLS WERE NOT TRACEABLE. THAT GOOD S WERE RECEIVED FROM THE PARTIES OTHER THAN THE PERSONS WHO HAD ISSUED BILLS FOR SUCH GOOD S. THOUGH THE PURCHASES ARE SHOWN TO HAVE BEEN MADE BY MAKING PAYMENT THEREOF BY ACCO UNT PAYEE CHEQUES, THE CHEQUES HAVE BEEN DEPOSITED IN BANK ACCOUNTS OSTENSIBLY IN THE NAME OF THE APPARENT SELLERS, THEREAFTER THE ENTIRE AMOUNTS HAVE BEEN WITHDRAWN B Y BEARER CHEQUES AND THERE IS NO TRACE OR IDENTITY OF THE PERSON WITHDRAWING THE AMO UNT FROM THE BANK ACCOUNTS. IN THE LIGHT OF THE AFORESAID NATURE OF EVIDENCE IT IS NOT POSSIBLE TO RECORD A DIFFERENT CONCLUSION, DIFFERENT FROM THE ONE RECORDED BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL CONCURRENTLY HOLDING THAT THE APPARENT SEL LERS WERE NOT GENUINE, OR WERE ACTING AS CONDUIT BETWEEN THE ASSESSEE-FIRM AND THE ACTUAL SELLERS OF THE RAW MATERIALS. BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE, T HEREFORE, COME TO THE CONCLUSION THAT IN SUCH CIRCUMSTANCES, THE LIKELIHOOD OF THE P URCHASE PRICE BEING INFLATED CANNOT BE RULED OUT AND THERE IS NO MATERIAL TO DISLODGE SUCH FINDING. THE ISSUE IS NOT WHETHER THE PURCHASE PRICE REFLECTED IN THE BOOKS OF ACCOUN T MATCHES THE PURCHASE PRICE STATED TO HAVE BEEN PAID TO OTHER PERSONS. THE ISSUE IS WHETH ER THE PURCHASE PRICE PAID BY THE ASSESSEE IS REFLECTED AS RECEIPTS BY THE RECIPIENTS . THE ASSESSEE HAS, BY SET OF EVIDENCE AVAILABLE ON RECORD, MADE IT POSSIBLE FOR THE RECIP IENTS NOT BEING TRACEABLE FOR THE PURPOSE OF INQUIRY AS TO WHETHER THE PAYMENTS MADE BY THE ASSESSEE HAVE BEEN ACTUALLY RECEIVED BY THE APPARENT SELLERS. HENCE, THE ESTIMA TE MADE BY THE TWO APPELLATE SHRI ATUL JAIN V. ACIT-2(1)UJJAIN/ I.T.A. NO.797/IND/2014/A.Y.:09-10 PAGE 11 OF 11 AUTHORITIES DOES NOT WARRANT INTERFERENCE. EVEN OTH ERWISE, WHETHER THE ESTIMATE SHOULD BE AT A PARTICULAR SUM OR AT A DIFFERENT SUM, CAN N EVER BE AN ISSUE OF LAW. 13 IN THE AFORESAID SET OF FACTS AND CIRCUMSTANCES OF THE CASE, THE IMPUGNED ORDER OF THE TRIBUNAL IS AN ORDER WHICH IS MADE IN ACCORDANCE WI TH LAW AND DOES NOT REQUIRE ANY INTERFERENCE. THE QUESTIONS REFERRED AT THE INSTANC E OF THE ASSESSEE AS WELL AS THE REVENUE ARE, THEREFORE, ANSWERED IN THE AFFIRMATIVE , I.E., IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE IN RELATION TO THE QUESTIONS A T THE INSTANCE OF THE ASSESSEE, AND IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN R ELATION TO THE QUESTIONS AT THE INSTANCE OF THE REVENUE.' 8. IN VIEW OF THE ABOVE POSITION OF LAW, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER'S ACTION IN TREATING THE PURCHASES AS BOGUS AND ADDIN G THE ENTIRE COST OF PURCHASES IN THE ASSESSMENT OUGHT NOT TO HAVE BEEN RESTORED BY THE T RIBUNAL. THE VIEW TAKEN BY THE TRIBUNAL IN THE CASE OF VIJAY PROTEINS LTD. V. CIT [1996] 58 ITD 428 (AHD.) HAS BEEN APPROVED. IN THAT VIEW OF THE MATTER, KEEPING IN MIND THE FACT THAT N OT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDED THER EIN WOULD BE SUBJECT TO TAX, WE FIND THAT IT SHALL BE APPROPRIATE TO RESTRICT THE DISALLOWANC E MADE IN THIS REGARD TO 25% OF THE COST OF SUCH PURCHASES IN EACH YEAR. 9. IN VIEW OF THE ABOVE, THE QUESTION RAISED IN THE PR ESENT APPEALS IS ANSWERED PARTLY IN FAVOUR OF THE ASSESSEE AND PARTLY IN FAVOUR OF THE REVENUE. 25% OF THE PAYMENTS MADE TO THE PARTIES SHALL BE DISALLOWED ON ACCOUNT OF POSSIBLE INFLATION OF PURCHASE PRICE. CONSEQUENTLY, THE IMPUGNED JUDGMENT AND ORDER PASSED BY THE ITAT IS MODIFIED TO THE AFORESAID EXTENT. HENCE, THE PRESENT TAX APPEALS ARE ALLOWED ACCORDIN GLY. THEREFORE, CONSIDERING THE RATIO OF THE ABOVE DECIS ION OF OTHER CASES HAVE ALSO BEEN CONSIDERED. WE ARE OF THE CONS IDERED OPINION THAT 25% OF SUCH BOGUS PURCHASES WOULD BE T REATED AS UNDISCLOSED ACCORDINGLY, THE AO IS DIRECTED TO DRAW 25% TO THE PURCHASES OF RS. 21,64,100/- FOR DISALLOWANCE. ACCO RDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.5.2017 SD/- SD/- ( .. ) /(C.M. GARG) (..) /(O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER DATED: 15.05.2017 SB*