The ITO, Ward-3(2), Ahmedabad V. M/s. A.S. Corporation, Ahmedabad

ITA 813/AHD/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6206 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-04-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 13-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 69C; 143(3); 131; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE ITO, WARD - 3(2), ROOM NO. 102, B WING, FIRST FLOOR, PRATYAKSH KAR BHAVAN, PANJARAPOLE, AMBAWADI, AHMEDABAD (APPELLANT) VS M/S. A. S. CORPORATION, GALI NO. 9, NAVI MOHALLAT, PANCHKUWA, AHMEDABAD PAN: AAGFA6209 H ( RESPONDENT) M/S. A. S. CORPORATION, GALI NO. 9, NAVI MOHALLAT, PANCHKUWA, AHMEDABAD PAN: AAGFA6209 H (APPELLANT ) VS THE ITO, WARD - 3(2), R OOM NO. 102, B WING, FIRST FLOOR, PRATYAKSH KAR BHAVAN, PANJARAPOLE, AMBAWADI, AHMEDABAD (RESPONDENT) REVENUE BY : S H RI K. MADHUSUDAN , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 12 - 04 - 2 017 DATE OF PRONOUNCEMENT : 21 - 04 - 2 017 I T A NO . 812 TO 814 / A HD/20 12 A Y 200 3 - 04,04 - 05 & 2005 - 06 C. O. NOS. 102 TO 104 /AHD/2012 (IN ITA NO S . 812 TO 814 /AHD/20 12) A Y 200 3 - 04,04 - 05 & 2005 - 06 I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 2 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE THREE APPEAL S FILED BY REVENUE AND THREE CROSS OBJECTIONS FILED BY ASSESSEE FOR A.Y. 2003 - 04 , 2004 - 05 & 2005 - 06 AR I SE FROM ORDER OF THE CIT(A) - 6, AHMEDABAD DATED 22 - 02 - 2012 IN APPEAL NO S. CIT(A) - VI/ITO.WD.3(2)/430/10 - 11 , CIT(A) - VI/ITO.WD.3(2)/431/10 - 11 & CIT(A) - VI/ITO.WD.3(2)/432/10 - 11; RESPECTIVELY, IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT , 1961; IN SHORT THE ACT . 2. AS T HE FACTS IN THESE THREE APPEALS FILED BY REVENUE & IN THESE THREE CROSS OBJECTIONS FILED BY ASSESSEE ARE SIMILAR , SO, WE TAKE ITA NO. 812/AHD/2012 & CO NO. 102/AHD/2012 FOR ASSESSMENT YEAR 2003 - 04 AS THE LEAD CASE AND DE CIDE ALL OF THEM ACCORDINGLY. ITA NO. 812/AHD/2012 3 . THE REVE NUE HAS RAISED FOLLOWING SUBSTANTIVE GROUND OF APPEAL: - 1. THE LD. CIT (A) HAS ERRED IN LAW AND IN FACTS IN REDUCING THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES FROM 25% OF THE BOGUS PURCHASES TO 5% OF THE TOTAL BOGUS PURCHASES. 4. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 21,943/ - WAS FILED ON 24 - 10.2003. SUBSEQUENTLY, NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 29 - 03 - 2010. THE ASSESSEE REPLIED BY SUBMITTING THAT I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 3 ITS OR IGINAL RETURN FILED BE CONSIDERED IN RESPONSE TO THE NOTICE U/S. 48 OF THE ACT. THEREAFTER, NOTICES U/S. 143(2)/142(1) OF THE ACT WERE ISSUED. 5. BRIEF FACTS OF THE CASE IS THAT IN THIS CASE SEARCH ACTION WAS CONDUCTED BY THE CENTRAL EXCISE DEP ARTMENT . THE SEARCH ACTION WAS CONDUCTED ON THE BASIS OF INFORMATION THAT THE M/S. SULEKH R AM STEEL LTD , AHMEDABAD WAS INDULGED IN EVASION OF EXCISE DUTY BY CLEARING OF THEIR FINISHED GOODS TMT BARS ILLICITLY TO THEIR DEALER VIZ. M/ S A.S. CORPORATION AHMEDABAD (ASSE SSEE) . THE A.S. CORPORATION (ASSESSEE) USED TO PROCURE BOGUS PURCHASE BILLS FROM OTHER CONCERNS IN RESPECT OF THE SAID ILLICIT GOODS SO AS TO SETTLE THEIR BOOKS OF ACCOUNTS F OR SUCH ILLICIT PURCHASES. SO, M/S SU LE KHRAM STEEL LTD. HAD CLEARED EXCISABLE GOOD S THROUGH THE ASSESSEE WHO THEN SOLD TO OTHER PARTIES THROUGH ITS INVOICES. THE ASSESSEE HAS OBTAINED BOGUS BILLS OF PURCHASES THROUGH A BROKER SHRI KIRITBHAI C. PATEL WHO HAS ADMITTED OF SUPP LYING THE BOGUS BILLS OF PURCHASE TO THE ASSESSEE. HE HAD ALS O PROVIDED T HE LIST O F PAR T IES FRO M WHERE THE BILLS HAD BE E N PROCURED. THE TRANSPORTERS HAVE ADMITTED TO HAVE TRANSPORT ED THE G OODS F R O M THE PR E MISE S OF M/S SUKHRAM STEELS TO END USERS. BY THIS MODUS OPERANDI, THE ASSESSEE PROCURED BOGUS PURCHASE BILLS F ROM VARIOUS PARTIES AND THE AMOUNT WERE PAID TO THEM AS SHOWN IN THE BILLS THROUGH CHEQUE S . SUBSEQUENTLY, THE ENTIRE MONEY USED TO BE RETURNED TO THE ASSESSEE BY THE PURCHASE PARTIES AFTER WITHDRAWING FROM THE BANK AFTER DEDUCTING THEIR COMMISSION . THE ST ATEMENT OF SH. KIRTIBHAI CHHANDBHAI PATEL WAS RECORDED BY THE EXCISE I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 4 DEPARTMENT. THE ASSESSING OFFICER ALSO ISSUED SUMMONS U/S. 131 OF THE ACT TO THE COMMISSION AGENT SHRI KIRITIBHAI C. PATEL AND TO THE FOLLOWING FOUR PARTIES: - 1. A.B. BROTHERS 2. OM SALES CORP ORATIONS 3. SHREENATHAJI SALES CORPORATION 4. CENTURY CORPORATION DETAILS OF PURCHASES MADE FROM THE ABOVE PARTIES ARE AS UNDER: SR. NAME AMOUNT OF NO. BOGUS BILL ISSUED 1 M/S. A. B. BROTHERS 1,04,38,372 2 M/S. OM SALES CORPORATION 26,49,909 3 M/S. SHREENATHJI SALES 16,40,639 4 M/S. CENTURY CORPORATION 1,03,87,964 TOTAL 2,51,16,884 OUT OF THE ABOVE PARTIES , THE SUMMO NS U/S. 131 OF THE ACT COULD BE SERVED ON THE M/S. CENTURY CORPORATION AND M/S. A.B. BROTHERS ONLY. THE REMAINING SUMMONS WERE RETURNED UN - SERVED BY THE POST REMARKS NOT KNOWN . IN RESPONSE TO THE SUMMONS ONLY SHRI CHETAN THAKKAR OF M/S. CENTURY CORPORATION ATTENDED AND IN HIS STATEMENT ADMITTED THAT HE WAS NOT DOING ANY BUSINESS IN RESPECT OF M/S. CENTURY CORPORAT ION AND STATED THAT HE DID NOT KNOW M/S. A.S. I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 5 CORPORATION . MR. KIRITBHAI C. PATEL IN HIS STATEMENT RECORD ED U/S. 131 OF THE ACT BY THE ASSESSING OFFICER ADMITTED THAT FOR PROVIDING PURCHASE BILLS HE HAD RECEIVED COMMISSION @ 1%. THE DETAILS OF BOGUS BILL S ISSUED BY THE ABOVE PARTIES AND COMMISSION PAID IN CASH ARE AS UNDER: - SR. NAME AMOUNT OF COMMISSION COMMISSION NO. BOGUS BILL @1%TO @ 4% TO ISSUED SHRI PURCHASE KIRTIBHAI PARTIES CHHANABHAI PATEL 1 M/S. A. B. BROTHERS 1,04,38,372 104384 313352 2 M/S. OM SALES 26,49,909 26499 105996 CORPORATION 3 M/S. SHREENATHJI SALES 16,40,639 16406 65626 CORP. 4 M/S. CENTURY 1,03,87,964 103880 311640 CORPORATION TO TAL 2,51,16,884 251169 1004676 THE ASSESSING OFFICER HAD ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE BOGUS PURCHASES OF RS. 2,51,16884/ - SHALL NOT BE TREATED AS BOGUS PURCHASE AND ACCORDINGLY ADDED TO THE TOTAL INCOME. AS REQUIRED BY THE ASSESSE, THE ASSESSING OFFICER HAS ALSO I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 6 PROVIDED CROSS - EXAMINATION OF THE PARTIES WHOSE STATEMENT S WERE RECORDED. THE ASSESSEE STATED THAT STATEMENT OF THE PERSONS SHOULD NOT BE RELIED UPON AS THEY HAVE AVOIDED TO RELEVANT QUESTION DURING CROSS EXAMINATIO N AND THE BURDEN WAS ON THE DEPARTMENT TO PROVE THE VARIOUS ALLEGATIONS. THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED AND THE ASSESSING OFFICER HAD MADE ADDITION OF RS. 69,42,480/ - BY OBSERVING AS UNDER: - 9. 11 I HAVE CONSIDERATION THE FACTS AND CIRC UMSTANCES OF THE CASE. I HAVE ALSO GONE THROUGH THE REPLIES / EVIDENCES FURNISHED BY THE ASSESSEE. IT IS TO MENTION HERE THAT SUFFICIENT OPPORTUNITY WAS PROVIDED TO TH E ASSESSEE TO FURNISH DETAILS/ CONFIRMATIONS TO PROVE THE GENUINENESS OF PURCHASES MADE DU RING THE YEAR UNDER CONSIDERATION. BUT FROM THE SUBMISSION OF THE ASSESSEE IT IS SEEN THAT ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE PURCHASES WHICH WERE MADE FROM THE ABOVE REFERRED PARTIES. 9.1 IN THIS REGARD I RELIED UPON THE DECISION IN THE CASE OF VIJAY PROTEINS LTD. V/S. ASST. CIT (2003) 80TTJ 215(215) 137 TAXMAN 90(RAJKOT), IN WHICH IT WAS HELD THAT THE ASSESSEE FAILED TO PROVE ITS PURCHASES GENUINE. ACCORDINGLY DISALLOWANCES @25% OF NONE GENUINE PURCHASES WERE CONFIRMED. 10 IN VIEW OF D ETAILED REASONS GIVEN IN THE SHOW CAUSE NOTICES, DETAILED REASONS STATED AS ABOVE, DECISION IN THE CASE OF VIJAY PROTEINS LTD. V/S. ASST. CIT (2003) 80TTJ 215(215) 137 TAXMAN 90(RAJKOT), AS WELL AS LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS E VIDENT THAT THE ASSESSEE FAILED TO PROVE GENUINENESS OF PURCHASES MADE FROM THE ABOVE PARTIES AS PER SHOW CAUSE DTD. 20.12.2010, THEREFORE, 25% OF UNVERIFIABLE PURCHASES OF RS.2,51,16,884/ - WHICH COMES TO RS.62,79,221/ - ARE HEREBY TREATED AS BOGUS PURCHASE S. 11. I N VIEW OF ABOVE STATED FACTS, AN AMOUNT OF RS.62,79,221/ - ARE HEREBY AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE FIRM AS BOGUS PURCHASES. 12. FURTHER, YOU HAVE PAID COMMISSION FOR PROCURING BOGUS PURCHASE BILLS FROM THE BOGUS PURCHASE PAR TIES AND ALSO PAID COMMISSION TO SHRI KIRTIBHAI C. PATEL FOR OBTAINING BOGUS PURCHASE BIL LS AS PER THE SHOW CAUSE NOTICE SHRI KIRTIBHAI C. PATEL COMMISSION AGENT IN HIS STATEMENT RECORDED U/S.131 OF THE I.T. ACT ON 20.12.2010 ACCEPTED THAT HE HAS RECEIVED TH E COMMISSION ON BOGUS PURCHASE RS. 100 TO RS. 150 AND ALSO COMMISSION REC EIVED BY THE PURCHASER PARTIES RS. 400 TO RS. 500 PER RS. 1 LAC'S BILL. 12. VIDE THIS OFFICE SHOW CAUSE LETTER DTD. 20.11.2010, YOU HAVE CALLED FOR EXPLANATION FOR UNEXPLAINED EXP ENDITURE IN VIEW OF THE PROVISIONS OF SECTION 69C OF THE I.T. ACT. IN THIS REGARD VIDE PARA NO. 11 OF ASSESSEE'S REPLY DTD. 24.12.2010 STATED THAT THE ASSESSEE HAS NOT PAID ANY COMMISSION FOR THE PURCHASES IS NOT I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 7 ACCEPTABLE ON THE REASONS AS DISCUSSED IN T HE PRECEDING PARAS. THEREFORE, THE COM MISSION PAID TO THE PURCHASERS RS. 400 PER 1 LAC AS WELL AS TO S HRI KIRTIBHAI CHHANABHAI PATEL RS. 100 PER 1 LAC TREATED AS E XPLAINED EXPENDITURE U/S.69C OF THE I.T. ACT AND ADDED TO THE TOTAL INCOME OF THE AS SESSEE. DETAILED CALCULATION OF COMMISSION WORKED OUT AS UNDER: - SR. NO. NAME AMOUNT OF BOGUS BILL ISSUED COMMISSION RS 150 (PER 1 LAC)TO SHRI KIRTIBHAI CHHANABHAI PATEL COMMISSION RS. 500 (PER 1 LAC) TO PURCHASE PARTIES 1. M/S. A. B. BROTHERS 1,04,38, 372 15658 52192 2 . M/S. OM SALES CORPORATION 26,49,909 3975 13250 3 . M/S. SHREENATHJI SALES CORP. 16,40,639 2460 8203 4 M/S. CENTURY CORPORATION 1,03,87,964 15581 51940 TOTAL... 2,51,16,884 37674 125585 IN VIEW OF THE ABOVE TO TAL COMMISSION RS. 1,63,259/ - (37674 + 125585) TREATED AS UNEXPLAINED U/S.69C OF THE I.T. ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. SUBJECT TO THE ABOVE REMARKS AND DATA MADE AVAILABLE TOTAL INCOME IS COMPUTED AS UNDER: - TOTAL INCOME AS PER RET URN OF INCOME RS. 21,943 ADD: ADDITIONS/DISALLOWANCES AS DISCUSSED: 1 IN RESPECT OF BOGUS PURCHASES AS PER PARA. 1 1 62,79,221 2 IN RESPECT OF UNEXPLAINED EXPENDITURE EXPENSES AS PER PARA. 1 2 1,63,259 RS.64,42,480 I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 8 TOTAL INCOME AS SSESSED RS.64,64,423 RS.64,64,420 6. AGGRIEVED AGAINST THE IMPUGNED ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO HAD RESTRICTED THE ADDITION TO THE EXTENT OF 5% OF THE VALUE OF PURCHASES FROM THESE PARTIES IN ALL THE THREE ASSESSMENT YEARS AS AGAINST 25% MADE BY HIM ALONG WITH COMMISSION PAID BY THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF THE LD . CIT(A) IS REPRODUCED AS UNDER: - 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESSME NT ORDER, AND APPELLANT'S WRITTEN SUBMISSION. ASSESSING OFFICER RECEIVED INFORMATION FROM CENTRAL EXCISE DEPARTMENT AND INVESTIGATION WING THAT APPELLANT WAS ACTUALLY SELLING THE GOODS MANUFACTURED BY SULEKHRAM STEELS PRIVATE LTD WHICH WERE CLANDESTINELY R EMOVED WITHOUT PAYING EXCISE DUTY. TO ACCOUNT FOR SALE OF THESE GOODS, APPELLANT WAS TAKING BOGUS BILLS RAISED IN THE NAME OF SEVERAL BOGUS SUPPLIERS. THIS WAS ALSO CONFIRMED BY BROKER SHRI KIRIT C PATEL IN THE STATEMENT WHO ORGANIZED THESE BOGUS BILLS FOR PURCHASE. EVEN SALES TAX DEPARTMENT CONFIRMED THAT THE 11 ENTITIES WHO ISSUED BILLS TO THE APPELLANT ARE FAKE ENTITIES. THE TRANSPORTERS ALSO CONFIRMED THAT GOODS WERE NOT PURCHASED OR TRANSPORTED FROM THESE ENTITIES BUT THE GOODS WERE DIRECTLY SUPPLIED F ROM THE PREMISE OF SULEKHRAM STEELS PRIVATE LTD. ALL THESE EVIDENCES CLEARLY PROVED THAT APPELLANT DISCLOSED PURCHASES IN THE BOOKS FROM THESE PARTIES WHEREAS GOOD WERE ACTUALLY PURCHASED FROM SULEKHRAM STEELS PRIVATE LTD. IN VIEW OF THESE FACTS ELABORATEL Y DISCUSSED IN THE ASSESSMENT ORDER BY THE ASSESSING OFFICER, THE PURCHASES IN THE NAME OF 11 PARTIES ARE BOGUS. THESE PARTIES ONLY ISSUED BILLS AND RECEIVED SMALL COMMISSION FOR GIVING SUCH BILLS. APPELLANT ARGUED THAT IT ACTED ONLY AS TRADER WHO PURCHASE D AND SOLD SAME QUANTITY OF GOODS BACK TO BACK. EVEN GOODS WERE DIRECTLY DELIVERED TO THE PREMISE OF PURCHASERS BY THE TRANSPORTERS. IT IS NOT IN DISPUTE THAT APPELLANT ACTED ONLY AS A TRADER AND DID NOT STOCK ANY QUANTITY OF GOODS BEFORE SALE. THERE IS CO MPLETE QUANTITY TALLY OF GOODS PURCHASED AND SOLD I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 9 THEREFORE EVEN IF GOODS WERE NOT PURCHASED FROM THE PARTIES ISSUING ONLY BILLS, GOODS WERE PURCHASED FROM SOME OTHER PARTY I.E. SULEKHRAM STEEL PRIVATE LTD. THE OBJECTIONS OF THE APPELLANT AGAINST TREATING THE PURCHASES FROM 11 PARTIES AS BOGUS HAVE BEEN CONSIDERED. I FOUND NONE OF THEM SUSTAINABLE IN THE LIGHT OF EVIDENCES AND FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. ASSESSING OFFICER NEED NOT HAVE TO PROVE THE NEXUS BETWEEN CASH WITHDRAWALS FROM T HE BANK ACCOUNTS OF BOGUS SUPPLIERS AND RECEIPT OF SUCH CASH BY THE APPELLANT. ONCE IT IS PROVED THAT THE PARTIES HAVE ISSUED ONLY BILLS WITHOUT SUPPLYING GOODS, ONUS SHIFTS ON THE APPELLANT TO PROVE THAT PURCHASES ARE GENUINE. HOWEVER APPELLANT DID NOT DO ANYTHING TO PROVE THE ALLEGED BOGUS PURCHASES GENUINE. ONLY RAISING OBJECTIONS AND FINDING CONTRADICTIONS IN THE STATEMENTS DO NOT PROVE THE PURCHASES GENUINE. IN THE LIGHT OF VARIOUS STATEMENTS AND EVIDENCES REFERRED BY THE ASSESSING OFFICER, IT IS CLEAR THAT APPELLANT TOOK BOGUS BILLS FOR PURCHASES IN THESE THREE YEARS AND ACCORDINGLY THESE PURCHASES ARE HELD TO BE NOT GENUINE. AFTER CONCLUDING THAT PURCHASES FROM THESE PARTIES WERE NOT GENUINE, ASSESSING OFFICER APPLIED 25 PERCENT PROFIT AS WAS DONE IN THE CASE OF VIJAY PROTEINS BY ITAT AHMEDABAD. APART FROM THIS, ASSESSING OFFICER ALSO MADE ADDITION OF UNACCOUNTED COMMISSION PAYMENT AT NOMINAL RATES TO THE BROKER AS WELL AS THESE BILL ISSUING PARTIES. APPELLANT SUBMITTED THAT THE MARGIN IN THE WHOLESAL E TRADING OF METAL IS NOT EVEN 2% AND THEREFORE THE PROFIT MARGIN OF VIJAY PROTEINS @ 25% WHICH IS A MANUFACTURING ENTITY CANNOT BE APPLIED. APPELLANT SUBMITTED THAT IN SEVERAL CASES WHERE PURCHASES WERE HELD TO BE BOGUS, ITAT AHMEDABAD CONFIRMED ONLY NOMI NAL PROFIT. IN THE CASE OF ITO VERSUS SUNSTEEL, 92 TTJ 1126 DATED 17 JUNE 2004, ITAT AHMEDABAD CONFIRMED RS 50,000 AS THE PROFIT ON BOGUS PURCHASES OF RS 2739407. THE ADDITION WORKS OUT TO ABOUT 2%. APPELLANT ARGUED THAT THIS IS A CASE SIMILAR TO APPELLANT 'S LINE OF BUSINESS AND THEREFORE A SIMILAR PROFIT CAN BE ESTIMATED. IN OTHER CASES DECIDED BY JURISDICTIONAL ITAT ALSO, 25% PROFIT IS NOT CONFIRMED IN THE CASE OF A TRADER. HONOURABLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S DOLAT PROTEINS, TAX APPEAL NU MBER 561 OF 2010 ON THE SIMILAR ISSUE SET - ASIDE THE MATTER TO ITAT IN WHICH 3% ADDITION ON BOGUS PURCHASES WAS CONFIRMED WITH THE DIRECTION TO EXAMINE IF THE ASSESSEE HAPPENS TO BE A TRADER AND NOT MANUFACTURE. CONSIDERING ALL THESE DECISIONS OF JURISDICTI ONAL ITAT AND HIGH COURT, IT IS CLEAR THAT THE PROFIT MARGIN ON ACCOUNT OF BOGUS PURCHASES IN THE CASE OF TRADER WILL BE MUCH LESS AS COMPARED TO MANUFACTURE. ACCORDINGLY, I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 10 25% PROFIT MARGIN ESTIMATED BY THE ASSESSING OFFICER IN THE APPELLANT'S CASE IS ON H IGHER SIDE. CONSIDERING THE FACTS AND JUDICIAL DECISIONS, I ESTIMATE THE PROFIT MARGIN ON BOGUS PURCHASES AT 5%. SINCE APPELLANT WAS HELPING SULEKHRAM STEEL PRIVATE LTD IN CLANDESTINE REMOVAL OF GOODS WITHOUT PAYING EXCISE DUTY, APPELLANT MIGHT BE COMPENSA TED FOR SUCH EXCISE DUTY EVASION AND THEREFORE 5% PROFIT MARGIN EVEN ON WHOLESALE TRADE OF METAL IS QUITE REASONABLE. ASSESSING OFFICER IS DIRECTED TO MAKE THE ADDITION @5% OF THE VALUE OF PURCHASES FROM THESE PARTIES IN ALL THE THREE ASSESSMENT YEARS AS A GAINST 25% MADE BY HIM. ADDITION TO THIS EXTENT IS CONFIRMED IN ALL THE THREE YEARS. ASSESSING OFFICER ALSO MADE ADDITION OF UNACCOUNTED COMMISSION PAYMENT ON PROCURING BOGUS BILLS. SHRI KIRIT C PATEL HAS STATED IN HIS STATEMENT THAT HE WAS ALSO CHARGING COMMISSION ON SUCH BOGUS BILLS ALONG WITH THE PARTIES WHO PROVIDED BOGUS PURCHASES BILLS. APPELLANT DENIED MAKING SUCH PAYMENTS AND ARGUED THAT DEPARTMENT HAS NO EVIDENCE FOR SUCH PAYMENT TO THESE PARTIES. HOWEVER ONCE IT IS PROVED THAT APPELLANT OBTAINED BOGUS PURCHASES BILLS FROM THESE PARTIES, IT IS CLEAR THAT THESE PARTIES WILL BE COMPENSATED FOR THIS. THE ASSESSING OFFICER MADE DISALLOWANCE ON THE BASIS OF COMMISSION STATED TO HAVE BEEN RECEIVED BY SHRI KIRIT C PATEL AND OTHER PARTIES. THEREFORE THE UN ACCOUNTED COMMISSION PAYMENT IS UN EXPLAINED EXPENDITURE UNDER SECTION 69C. A CCORDINGLY THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUCH COMMISSION IS CONFIRMED IN ALL THE THREE YEARS. 7. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIAL AS PER RECORD. WE NOTICED THAT THE ASSESSING OFFICER A FTER CONCLUDING THAT PURCHASES FROM THESE PARTIES WERE NOT GENUINE, APPLIED 25 PERCENT PROFIT AS WAS DONE IN THE CASE OF VIJAY PROTEINS BY ITAT AHMEDABAD IN WHICH THE HONOURABLE HIGH COURT OF GUJARAT HAS HELD AS UNDER: - ' IT IS A MATTER OF FACT THAT THE GOODS WERE NOT RECEIVED FROM THE PARTIES FROM WHOM IT IS SHOWN TO HAVE BEEN PURCHASED BUT, SUCH MATERIAL WAS RECEIVED FROM A DIFFERENT SOURCE WHICH IS EXCLUSIVELY WITHIN THE KNOWLEDGE OF THE ASSESSEE AND N ONE ELSE. THEREFORE, IT IS EVIDENT THAT THE ASSESSEE HAD INFLATED THE EXPENDITURE IN QUESTION BY SHOWING HIGHER AMOUNT OF PURCHASE PRICE THROUGH THE FICTITIOUS INVOICES IN THE NAMES OF 33 BOGUS SUPPLIERS. CONSIDERING THE OVERALL FACTUAL SCENARIO, THE TRIBU NAL WAS JUSTIFIED IN DISALLOWING 25% OF THE PURCHASE PRICE ' . I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 11 WE OBSERVED THAT THE LD. CIT(A) HAS TAKEN THE VIEW THAT 5% OF MARGIN ON THE WHOLE SALE TRADE WAS QUITE REASONABLE. IN THIS CONNECTION WE HAVE CONSIDERED THAT THE LD.CIT(A) HAD RESTRICTED THE A DDITION TO THE 5% FROM THE 25% ON ASSUMPTION BASIS WITHOUT ANY CONCRETE AND COGENT SUPPORTING DETAIL AND EVIDENCES. WE FIND THAT THE ISSUE INVOLVED IN THIS CASE WAS NOT SIMPLY SUPPRESSION OF GROSS PROFIT BY INFLATING OF EXPENSES AS IN THIS CASE THE ASSES SEE WAS INDULGED IN CLEARING FINISHED GOODS WITHOUT PAYING OF EXCISE DUTY AS A DEALER OF M/S SUKHRAM STEEL LTD . THE ASSESSEE WAS USED TO PROCURE BOGUS PURCHASE BILLS FROM OTHER CONCERNS IN RESPECT OF THE SAID ILLICIT GOODS SO AS TO SETTLE THE BOOKS O F ACCOUNTS FOR SUCH ILLICIT PURCHASES. M/S SUKHRAM STEEL LTD. HAD CLEARED EXCISABLE GOODS THROUGH THE ASSESSEE WHO THEN SOLD TO OTHER PARTIES THROUGH ITS INVOICES. THE ASSESSEE HAS OBTAINED BOGUS BILLS OF PURCHASES AND HAD ALSO PROVIDED THE LIST OF PARTI ES FROM WHERE THE BILLS HAD BEEN PROCURED. BY THIS MODUS OPERANDI, THE ASSESSEE PROCURED BOGUS PURCHASE BILLS FROM VARIOUS PARTIES AND THE AMOUNT WERE PAID TO THEM AS SHOWN IN THE BILLS THROUGH CHEQUE AND SUBSEQUENTLY, THE ENTIRE MONEY USED TO BE RETURNED TO THE ASSESSEE BY THE PURCHASE PARTIES AFTER WITHDRAWING FROM THE BANK AFTER DEDUCTING THEIR COMMISSION . WE FIND THE LD. CIT(A) FAILED TO CONSIDER THE UNEXCEPTIONAL AND FRAUDULENT STRATEGY EMBRACED BY THE ASSESSEE BEFORE ARRIVING AT THE CONCLUSION TH AT 5% OF MARGIN WAS QUITE REASONABLE IN THE CASE OF THE ASSESSEE. WE FIND THAT THERE WAS NO SUPPORTING AND COHERENT EVIDENCES TO DEMONSTRATE RATIONALITY IN THE DECISION OF THE LD. CIT(A) TO COMPARE I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 12 THE GROSS PROFIT IN THE CASE OF THE ASSESSEE WITH GROSS PROFIT OF NORMALLY RUNNING BUSINESS CONCERNS. IN VIEW OF THE ABOVE STATED FACTS AND CIRCUMSTANCES, WE CONSIDERED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN HIS DECISION IN REDUCING THE PERCENTAGE MARGIN IN THE CASE OF THE ASSESSEE. THEREFORE, WE SUSTAIN TH E ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INDULGING IN BOGUS AND NON - GENUINE PURCHASES BY THE ASSESSEE AS ELABORATED SUPRA IN THIS ORDER. C. O. NO. 102 /AHD/2012 8 . THE ASSESSEE HAS FILED FOLLOWING GROUNDS IN CROSS OBJECTION. 1. THAT ON FACTS, AND IN LAW, THE LEARNED CIT (A) HAS GRIEVOUSLY ERRED IN HOLDING THAT THE RE OPENING OF ASSESSMENT U/S.147 OF THE ACT IS VALID. 2. THAT ON - FACTS AND IN LAW IT OUGHT TO HAVE BEEN HELD THAT RE - OPENING IS BAD - IN - LAW, AS THERE IS NO INDEPENDENT 'REAS ON TO BELIEVE' OF THE A.O. 3. THAT ON FACTS AND IN LAW, THE LEARNED CIT (A) HAS GRIEVOUSLY ERRED IN HOLDING THE PURCHASES AS NON - GENUINE AND THEREBY ERRED IN CONFIRMING THE ESTIMATED ADDITION @5% OF THE PURCHASE VALUE. 4. THAT THE LEARNED CIT(A) HAS GRI EVOUSLY ERRED IN CONFIRMING THE ALLEGED COMMISSION PAYMENT AS UNEXPLAINED EXPENDITURE U/S.69C OF THE ACT. 5. THAT THE ALLEGED COMMISSION PAYMENT OUGHT TO HAVE BEEN DELETED IN THE ABSENCE OF ANY INDEPENDENT EVIDENCE AND CROSS - EXAMINATION OF THE STATEMENT OF PERSONS CONCERNED. 9 . GROUND NO 3 AND 5 OF THE ASSESSEE ARE INT ER - CONNECTED TO THE GROUNDS OF APPEAL OF THE REVENUE WHICH HAVE BEEN DEALT ALONG WITH I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 13 THE GROUNDS OF REVENUE IN THIS ORDER SO N O SEPARATE ADJUDICATION IS REQUIRED . 10. R EGARDING GROUND NO . 4 OF THE ASSESEE THAT LD. CIT(A) WAS ERRED IN CONFIRMING THE COMMISSION PAYMENT AS UNEXPLAINED EXPENDITURE U / S 69 C OF THE ACT , WE FIND THAT IT HAD BEEN PROVED AS ELABORATED IN THIS ORDER THAT BOGUS BILLS OF PURCHASES WERE OBTAINED BY THE ASSESSEE. THE SE FACTS WERE ALSO CONFIRMED FROM THE STATEMENT S OF THE PARTIES AND BROKER SHR KIRIT C PATEL WHO HAD BEEN PAID THE COMMISSION ON PROVIDING THE BOGUS BILLS OF PURCHASES AS ELABORATED ABOVE IN THIS ORDER. WE FIND THE LD.CIT(A) WAS JUSTIFIED IN SUSTAINING T HE UNACCOUNTED COMMISSION PAYMENT OF RS.2,45,849 / - MADE TO THESE PARTIES U/S 69C OF THE ACT, THEREFORE WE DISINCLINED TO INTERFERE IN THE FINDING OF THE LD. CIT(A) ON THIS ISSUE. 11. IN THE RESULT, THE APPEAL S OF THE REVENUE FOR ASSESSMENT YEARS 200 2 - 03 TO 2004 - 05 ARE ALLOWED AND THE CROSS OBJECTIONS OF THE ASSESSEE FOR ASSESSMENT YEARS 2002 - 03 TO 2004 - 05 ARE DISMISSED. . ORDER PR ONOUNCED IN THE OPEN C OURT ON 21 - 04 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL ME MBER ACCOUNTANT MEMBER AHMEDABAD : DATED 21 /04 /2017 I.T.A NO S. 812 TO 814 & CO NOS. 1 0 2 TO 1 0 4 / AHD/2012 PAGE NO ITO VS. M/S. A.S. CORPORATION 14 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,