Ravindra Bhaskar Deshmukh, Raigad V. Deputy Commissioner of Income tax, Panvel

ITA 853/PUN/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9407 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Bogus purchase; Gift; Principle of natural justice; Question of law; Accommodation entries
• Section: 143(3); 142(1); 133A; 69; 145; 148

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.853/PUN/2017 / ASSESSMENT YEAR : 2010-11 SHRI RAVINDRA BHASKAR DESHMUKH L/H NEETA RAVINDRA DESHMUKH, PLOT NO.26, SECTOR-I, MATHERAN ROAD, ADAI CIRCLE, NEW PANVEL, RAIGAD. PAN : AHCPD2323G. . / APPELLANT V/S DY.COMMISSIONER OF INCOME TAX, PANVEL CIRCLE, PANVEL, DIST. RAIGAD. . / RESPONDENT / APPELLANT BY : SHRI M.K. KULKARNI / RESPONDENT BY : SHRI ANIL CHAWARE. / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF T HE ORDER OF COMMISSIONER OF INCOME TAX (A)-I, AURANGABAD DT.27.02.2017 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAGED IN THE BUSINESS OF CIVIL CONTRACT UNDER THE PROPRIETARY CONCERN BY THE NAME R.V. DESHMUKH. ASSESSEE ELECTRONICALLY FILED HIS RETURN OF / DATE OF HEARING : 24.05.2017 / DATE OF PRONOUNCEMENT: 02.06.2017 2 INCOME FOR A.Y. 2010-11 ON 02.10.2010 DECLARING TOTAL INCOME AT RS.93,41,260/-. THE RETURN OF INCOME WAS INITIALLY PROCESSE D U/S 143(1) OF THE ACT. LATER ON THE CASE WAS RE-OPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON 16.07.2013. SUBSEQUENTLY QUESTIONNAIRE ALONG WITH NOTICE U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED ON 26.09.2014 WHEREIN CERTAIN INFORMATION WAS C ALLED FOR. THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DT.23.02.2015 AND THE TOTAL INCOME WAS DE TERMINED AT RS.1,25,04,010/-. AGGRIEVED BY THE ORDER OF AO, ASSES SEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDET DT.27.02 .2017 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE O RDER OF LD.CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS R AISED THE FOLLOWING GROUNDS. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) , AURANGABAD WAS NOT JUSTIFIED IN PASSING TH E EXPARTE APPEAL ORDER HOLDING THE APPELLANT IN DEFAULT TO ATTEND TH E APPEAL PROCEEDINGS AT AURANGABAD. THE APPEAL ORDER BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE APPEAL WAS ORIGINALLY FILED BEFORE LD. CIT(A), THANE. THE APPELLANT FOR THE FIRST TIME CAME TO KNOW THAT ITS APPEAL WAS TRANSFE RRED TO AURANGABAD LD. CIT(A)-I ON READING OF THE APPEAL OR DER ITSELF. NO OPPORTUNITY WAS GIVEN TO APPELLANT BEFORE TRANSFER OF SUCH APPEAL PROCEEDINGS. THEN NOTICES OF HEARING U/S 250 WERE N OT RECEIVED BY THE APPELLANT AT PANVEL . IN THE CIRCUMSTANCES THE EXPARTE APPEAL ORDER IS NOT JUSTIFIED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW FROM THE APPEAL ORDER IT REVEALS THAT THE ORDER OF TRANSFER OF APPEAL IS DT . 07- 10-2016. AS PER APPEAL ORDER THE DATES OF NOTICES O F HEARING UNDER S. 250 APPEAR AS 18-11- 2016, 16-01-2017 ON 21-02-2 017. IN THE REMARKS ONLY COLUMN IT HAS BEEN MENTIONED ONLY THAT NOBODY APPEARED NOR ANY ADJOURNMENT WAS SOUGHT . THE ORDER STATES ABOUT ISSUE OF NOTICES. IT IS WITHOUT ANY MENTION ABOUT S ERVICE AND ALSO THE MODE OF SERVICES EITHER BY POST OR OTHERWISE. I T PROVES NO SERVICE WAS MADE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) FAILED TO CONSIDER THE COMPLIANCE MADE BEFO RE A. O. IN THE ASSESSMENT PROCEEDINGS JUDICIOUSLY AS THE ASSESSMEN T R ECORDS WERE NEITHER CALLED FOR NOR VERIFIED BEFORE ADJUDIC ATING THE MATTER . THE ORDER PASSED BY THE LD. CIT(A)-I AURANGABAD IS ILLEGAL, WITHOUT JURISDICTION. THE ORDER OF THE LD. CIT(A)-I BE SET ASIDE. 3 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE APPEAL OF THE ASSESSEE WAS TRANSFERRED TO AURANGABAD CIT(A ) ORIGINALLY FILED BEFORE LD. CIT(A), THANE WHERE NO REQUEST WAS MADE BY THE APPELLANT FOR SUCH TRANSFER . SUCH TRANSFER OF APPEAL WITHOUT ANY REQUEST FROM THE APPELLANT IS NOT IN CONSONANCE WIT H THE PROVISIONS OF S. 246(3) OF THE ACT WHICH SAYS THE APPEAL CAN B E TRANSFERRED. ON THE REQUEST OF THE APPELLANT OR OTHERWISE. THE TRAN SFER OF APPEAL IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT CAUSI NG GREAT INJUSTICE. THE TRANSFER ORDER OF THE APPEAL TO AURANGABAD WHIC H IS UTTERLY INCONVENIENT BE AND CANCELLED. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE HUGE ADDITION MADE OF RS. 31,62,752/- BY THE A.O. AND LD. CIT(A) HAVING CONFIRMED THE SAME WITHOUT FOLLOWING THE DUE PROCES S OF LAW BE DELETED TO DO COMPLETE JUSTICE TO THE ASSESSEE. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE APPEAL ORDER OF THE LD. CIT(A)-AURANGABAD IS NOT SUSTAINAB LE IN LAW AS THE SAME HAS BEEN PASSED IN WHICH THE NATURAL JUSTICE I S A VICTIM. THE COMPLIANCE OF NATURAL JUSTICE IN ANY PROCEEDINGS IS AN CONSTITUTIONAL MANDATE. WITHOUT THIS THE ORDER PASS ED BY LD. CIT(A) IS UNCONSTITUTIONAL . IT BE QUASHED. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE B Y THE A. O. OF RS. 31,62,752/- BEING SUSPICIOUS (HAWALA) PURCHA SES. THE SALES TURNED OUT OF SUCH PURCHASES HAVE NOT BEEN DISTURBE D. THE VARIOUS AUTHORITIES WERE QUOTED BEFORE HIM WHICH WERE IN FA VOUR OF THE ASSESSEE . WHEN TWO VIEWS ARE POSSIBLE THE LD. CIT(A) OUGHT TO HAVE FOLLOWED THE VIEW FAVOURABLE TO THE ASSESSEE. ON TH IS JUDICIAL PRINCIPLE NO ADDITION IS SUSTAINABLE. THE ADDITION BE DELETED. 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE SOLE CONTR OVERSY WHICH REQUIRES ADJUDICATION IS WITH RESPECT TO ADDITION OF RS.31,62,752/-. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTIC ED THAT ASSESSEE HAD MADE VARIOUS PURCHASES WHICH INCLUDED CERTAIN PURCHASES MADE FROM SUCH DEALERS (WHO WERE CONSIDERED TO BE SUSPICIOUS DEALERS AS PER THE LIST PUBLISHED BY SALES TAX DEPARTMENT, MAHARASHTRA) AND WHEREIN THOSE SUPPLIERS HAD ADMITTED TO HAVE ISSUED BOGUS BILLS WITHOUT DELIVERY OF GOO DS TO VARIOUS PARTIES. AO NOTED THAT SALES TAX DEPARTMENT HA D CONDUCTED INVESTIGATIONS AND UNEARTHED FRAUDULENT RACKET WHEREIN 4 CERTAIN PARTIES HAD ISSUED BOGUS BILLS WITHOUT ACTUAL DELIVE RY OF GOODS. ON THE BASIS OF INFORMATION PASSED ON BY THE SALES TAX DEPARTMENT, SURVEY ACTION WAS CONDUCTED BY THE INCOME TAX DEPARTMENT IN SEVERAL CASES. DURING THE COURSE OF SURV EY SEVERAL BENEFICIARIES ADMITTED TO HAVE OBTAINED BOGUS BILLS. ON THE BASIS OF INFORMATION RECEIVED, IT WAS NOTICED BY THE AO THAT ASSE SSEE HAD ALSO OBTAINED BOGUS BILLS FROM M/S. SHAH INDUSTRIES AND THE TOTAL OF SUCH PURCHASES WERE RS.31,62,752/-. AO HAS NOTED THA T ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE PURCHASES MADE FROM M/S. SHAH INDUSTRIES SHOULD NOT BE TREATED AS NON-GEN UINE. AO NOTED THAT ASSESSEE HAD FAILED TO GIVE ANY EXPLANATION OR CLARIFICATION. AO ACCORDINGLY CONSIDERED THE PURCHASES MAD E BY THE ASSESSEE OF RS.31,62,752/- AS BOGUS PURCHASES AND TREATED IT AS UNEXPLAINED EXPENSES. AGGRIEVED BY THE ORDER OF AO , ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER : 5. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT. THE AO HAD NOTED ON PA GE 2 TO 6 OF THE RE-ASSESSMENT ORDER THAT THE APPELLANT HAD MADE PURCHASES OF RS.31 , 62,752/ - FROM M/S. SHAH INDUSTRIES WHICH WAS IN THE NATURE OF HAWALA T R A N SAC TIONS OR ACCOMMODATION ENTRIES . THE SALES TAX DEPARTMENT HAD CONDUCTED ENQUIRIES IN RESPECT OF THE VARIOUS ENTRY PROVIDERS AND IT CAME TO LIGHT THAT IMPUGNED PURCHASES OF RS.31,62,752/- MADE BY THE ASSESSEE FR OM M/S. SHAH INDUSTRIES WERE FOUND TO BE IN THE NATURE OF ACCOMM ODATION BILLS/HAWALA TRANSACTIONS. THE SAID SUPPLIER HAD AL SO FILED AFFIDAVIT WHEREIN IT ALSO ADMITTED THAT NO REAL BUSINESS WAS CONDUCTED BY IT AND NO PHYSICAL DELIVERY OF GOOD S WAS EVER GIVEN. AFTER RECEIPTS OF CHEQUES, EQUIVALENT CASH WAS GIVEN BACK AF T E R DEDUCTING COMMISSION. THE AO THEN DIRECTED THE ASSESSEE TO SUBSTANTIATE THESE PUR C HASES BUT IN V AIN . THE AO ALSO DIRECTED THE ASSESSEE TO SUBSTANTIATE T HE ALL E G E D PURCHASES WITH DOCUMENTARY EVIDENCES SUCH AS THE CO NFIRMATORY LETTER, LO R RY REC E IPTS, OCTROI R E CEIPTS, WEIGHMENT SLIPS & QUANTITATIVE DETAILS BUT THE ASSESSE E FAILED TO PRODUCE THESE DOCUMENTS. THE AO ACCORDINGLY HELD THAT THE PURCHASES OF RS.31,62,752/- FROM THE ALLEGED SUPPLIER WERE NOT VERIFIABLE AND THER E FORE HE DISALLOWED THE ENTIRE UNVERIFIABLE PURCHASES AND MADE AN ADDITION OF RS.31,62,752/- TO THE INCOME OF THE ASSESSEE. EVEN DURING THE PRESENT APPELLATE PROCEEDINGS, THE COUNSEL OF THE A PPELLANT HAS FAILED TO SUBMIT CONFIRMATORY LETTERS FROM THE ALLE GED SUPPLIER 5 NAMELY M/S. SHAH INDUSTRIES. OTHER CIRCUMSTANTIAL EVIDENCES ALSO GOES AGAINST THE ASSESSEE VIZ. NON S UBMISSION OF PURCHASE ORDERS, TRANSPORT RECEIPTS REGARDING CARRI AGE INWARDS/OUTWARDS, WEIGHMENT BILLS REGARDING WEIGHT OF THE GOODS RECEIVED/SOLD, ITEM WISE COMPLETE DETAILS OF PURCHA SES, SALES, OPENING & CLOSING STOCK . THE RELEVANT FACTORS TO BE TAKEN INTO CONSIDERATION FROM THE ASSESSMENT ORDER OF AO ARE A S UNDER: I) THE ENQUIRIES CONDUCTED BY THE SALES TAX DEPARTMENT REVEALED THAT M/S. SHAH INDUSTRIES WAS ONLY PROVIDI NG ACCOMMODATION BILLS. IT WAS ALSO ADMITTED IN ITS AF FIDAVIT THAT NO REAL BUSINESS WAS CONDUCTED BY IT AND NO PH YSICAL DELIVERY OF GOODS WAS EVER GIVEN. AFTER RECEIPTS OF CHEQUES, EQUIVALENT CASH WAS GIVEN BACK AFTER DEDUCTING SMAL L AMOUNT OF COMMISSION. IT ALSO ADMITTED THAT IT HAD GIVEN BLANK INVOICES AND BLANK SIGNED CHEQUES TO THE ALLE GED BENEFICIARIES. II) THE AO THEN DIRECTED THE ASSESSEE TO SUBSTANTIATE T HESE PURCHASES BUT IN VAIN. THE AO ALSO DIRECTED THE ASS ESSEE TO PRODUCE THE ABOVE SUPPLIER BUT HE FAILED TO PRODUCE IT. III) THE AO ALSO DIRECTED THE ASSESSEE TO SUBSTANTIATE T HE ALLEGED PURCHASES WITH DOCUMENTARY EVIDENCES SUCH A S THE CONFIRMATORY LETTER, LORRY RECEIPTS, OCTROI RECEIPT S, WEIGHMENT SLIPS & QUANTITATIVE DETAILS & OTHER RECORDS IN SUPPORT OF TRANSPORTATION OF GOODS BUT THE ASSESSEE FAILED TO PRODUCE THESE DOCUMENTS. IV) IT WAS HELD THAT MERE PAYMENT THROUGH BANKING CHANN EL WAS NOT SACROSANCT IN LIGHT OF AFFIDAVITS FILED BY THESE SUPPLIERS. THE PURCHASE BILLS OF M/S. SHAH INDUSTRIES WERE NOT FURNISHED DURING THE COURSE OF APPELLATE PROCEEDINGS THEREFOR E IT COULD NOT BE ASCERTAINED AS TO WHETHER THE COLUMNS PERTAINING TO 'LORRY RECEIPT NO.', 'DISPATCH THROUGH' AND 'TRANSPORT THROUGH' WE RE DULY FILLED UP OR LEFT BLANK. THE BILLS OF ALLEGED TRANSPORTERS WERE ALSO NOT FURNISHED. ACCORDINGLY THE MOVEMENT OF GOO DS WAS IN DOUBT. THE REL EV ANT INFORMATION FROM THE SALES TAX DEPARTMENT AND NON AVAILABILITY OF THE LORRY RECEIPTS, BILLS OF TRANSPORTERS, OCTROI RECEIPTS, WEIGHMENT SLIPS & QUANTITATIVE DETAILS/CONSUMPTION RECORDS ITSELF SPEAK ABOUT THE GENUINENESS OF THE TRANSACTIONS IN QUESTION. IT IS WELL SETTLED LAW THAT STRICT RULES OF EVIDENCE DO NOT APPLY TO INCOME-TAX PROCEE DINGS AND CONCLUSIVE PROOF IS ALSO NOT NECESSARY TO ARRIVE AT ANY CONCLUSION OR TO ESTABLISH A FACT. THE AO WAS ENTITLED TO ARRI VE AT A CONCLUSION ON APPRECIATION OF A NUMBER OF FACTS, TH E CUMULATIVE EFFECT WHEREOF MAY BE CONSIDERED TO JUDGE THE SOUND NESS OF THE CONCLUSION. IT WAS CONCEIVABLE THAT A MERE DENIAL B Y THE ASSESSEE WAS NOT SUFFICIENT TO REBUT THE CIRCUMSTAN TIAL EVIDENCE WHICH CONSIDERED ALONG WITH THE CONDUCT OF THE ASSESSEE HAD LED TO THE INESCAPABLE CONCLUSION THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES AND ALLEGED PURCHAS ES WERE NOT GENUINE. 5.1 IT IS A SETTLED LAW THAT INCOME TAX AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF 6 THE RECITALS MADE IN DOCUMENTS. IT WAS THE DUTY OF THE COURT TO GO BEHIND THE SMOKE-SCREEN AND DISCOVER THE TRUE STATE OF AFFAIRS. THE COURT WAS NOT TO BE SATISFIED WITH THE FORM BUT WITH THE SUBSTANCE OF THE TRANSACTIONS. THOUGH THE TRANSACTI ONS IN THE PRESENT CASE WERE THROUGH BANKING CHANNEL BUT THESE WERE ULTIMATELY SETTLED IN CASH. MERELY BECAUSE A PAPER TRAIL HAD BEEN CREATED, THAT WOULD NOT BY ITSELF MAKE THE TRANSACT ION GENUINE. IT WAS HELD BY HONOURABLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MITTAL BELTING AND MACHINERY STORES VS. CIT (253 ITR 341) THAT IF ON THE EXAMINATION OF THE EVIDENCE, IT IS F OUND THAT THERE WAS NO GENUINE TRANSACTION BETWEEN THE PARTIES, A P URE PAPER TRANSACTION COULD NOT HAVE ENTITLED THE ASSESSEE TO CLAIM BENEFIT UNDER THE LAW. SIMILARLY THE HON'BLE MUMBAI TRIBUNA L HELD IN THE CASE OF BALAJI TEXTILES INDUSTRIES PVT LTD VS, ITO (49 ITD 177) THAT ISSUE OF BILLS BY THE ALLEGED SUPPLIER WAS NOT A CONCLUSIVE PROOF. IN THE CASE OF CIT VS. GOLCHA PROPERTIES (PV T.) LTD. (227 ITR 391) (RAJASTHAN HC), IT WAS HELD THAT THE GENUINENE SS OF TRANSACTION, COULD BE DECIDED ON THE BASIS OF PRIMA RY FACTS ON RECORDS. THE DEPARTMENT IS NOT REQUIRED TO LEAD A C LINCHING EVIDENCE TO PROVE THAT PURCHASES ARE BOGUS. THERE A RE NUMBER OF DECISIONS BY THE VARIOUS COURTS, WHERE 100% DISALLO WANCE OF BOGUS PURCHASES, HAS BEEN UPHELD. SOME OF THESE ARE ENUMERATED AS UNDER : 100% DISALLOWANCE OF BOGUS / UNVERIFIABLE PURCHASES WAS UPHELD, IN FOLLOWING CASES : (I) SRI GANESH RICE MILLS VS. CIT (2007) 294 ITR 316 (A LL) (II) KHANDELWAL TRADING CO. VS. ACIT (1996) 55 TTJ (JP) 261. (III) SWETAMBAR STEELS LTD. VS. ITO 707/1075/1262/1263/JD (2002) ITAT (AHD) IN TH E CASE OF SWETAMBAR STEE L S LTD . , T H E HON' BL E ITAT , A HMEDABAD HA D CONF I RMED THE DISALLOWA N CE OF THE BOGUS PU R C H ASE IN E NT IRETY STA T ING T H A T T H E PU R CHA S E S SHOWN FROM TH E R ESPECTIVE PART I ES WE R E FO U N D IN - G E NUI NE. I T WAS NOT A M A TT ER TO BE LOOKED INTO W H ETHER THE A SSESSEE H A D M A D E PURC HA SES FR OM DIFFE RE NT P A RTI ES OTH E R THAN T H E ALLEGED ONES. IT WAS A L S O WORT H MENTIO NI NG THAT THE APPEAL AGAINS T TH E DECISION OF HON'BLE ITAT WAS NOT A DM ITTE D B Y THE HON'BLE GUJARAT H IGH COURT AND TH E ASSESSEE HAD A L SO LOST BEFORE TH E HON' BL E SUPR E ME CO U RT. SO , TH E DECI S ION OV E R THE ISSU E HAD BECOME FINAL . T H ER E WER E JUDICIAL D E C I S ION S WH E R E T H E WH O L E AMOU N T OF B O G US PURCH AS E S WAS DI S A LL OW E D AND T HE ORD E R WAS CO NF IR M ED BY H I G H C OURTS . IT WAS HELD THAT AFT E R I NVOCATION OF P R OVISIO NS OF SE C TION 1 4 5 ( 3 ), T H E AS S ES S ING OFFICER ACQUIR E D THE MANDATE EV E N TO A D D TH E WHOL E A MOU N T O F PURCHASES FOUND AS BOGUS TO THE TOTAL INCOM E OF THE A S S ESS EE . ONE S U C H CAS E WAS SR I GA NESH RICE MILL S VS . CI T 294 ITR 316 (ALL) W H E R E THE ENTIRE AMOUNT OF B O GUS PURCHASES, FROM 5 PARTIES, WAS DISA LL OW E D AND SAME W A S UPHELD . T H E R ELEVANT PORTION OF T H E ORDER OF THE T R IB UNA L AS CO N F IR M E D B Y HIGH COURT O F ALL A HABAD I S REPRODUCED, HERE AS UND E R: 'O NCE IT I S F OUND TH A T TH E PUR C HASES W ER E BOGUS , A DD I TION HA S TO B E MA D E T O T H E EX T E N T OF TH E PU RC HASES FOUND TO BE F I C T I TIOU S . T H E C ON S ID ERAT ION TH AT TH E GRO SS P R OFIT DI S CLOS E D BY THE AS SE SS EE C OMPAR ES F A VOURABL Y A S C OMP A R E D TO THE EA R LIER Y E ARS IS WHOLLY I RRELEVANT. TO NEUTRALIZE THE EFFECT OF INF LATION IN PU RC HASES , TH E ONLY COUR S E OPEN TO T HE INCOME-TAX OFFICER 7 IS TO ADD BACK THAT AMOUNT TO THE INCOME IRRESPECTI VE OF THE FACT WHETHER THE R ATE OF GROSS P R O F IT GOES UP AND WHETHER THE RESULTANT GROSS PROFIT IS HIGHER T HAN THE GROSS P R OFIT NORMALLY SHOWN IN THE EARLIER YEARS.' 5.2 IN VIEW OF THE F OREGOING DISCUSSION, THE PERCENTAGE OF IS ALLOWANCE OF BOGUS P U R C H ASE S , HAS TO BE BASED ON THE FACTS OF EACH CASE , HENCE THE SAME CANNOT BE GE NE R ALI ZE D IN EV E R Y C A SE. T H E CO UN SE L O F A PPELLANT HA S PL ACE D RE LIAN CE ON TH E DECISION OF HON ' B L E MURNBAI TRIB UN A L I N T H E CASE O F DCI T VS. SHRI RAJEEV G . KALATHIL (IT A NO . 6 72 7/MUM /2 01 2 DATED 2 0 . 08. 2 014) B U T THE FA CT S O F SAID CASE WERE DISTINGUISHABLE. IN THE CITED CASE, C O P I ES OF CONS I G N MENT B ILL S S H OWE D THA T TH E MATERIAL SO PURCHASED WAS TRANSPORTED BY GOVERNMENT APPROVED TRANSPORT CONTRA CTORS WHO HAD DELIVERED THE MATERIAL AT THE SITE . BESIDES ABOVE, SOME OF THE MATERIAL SO PURCHASED WAS SHOWN IN THE CLOSING STOCK AS PER THE STATEMENT S UBMITTED ON RECORD. THE CLOSING STOCK WAS ALSO VERI FIED BY THE AUDITORS. SIMILARLY IN THE CASE OF NIKUNJ EXIMP ENT ERPRISES PVT . LTD., THERE WAS A CATEGORICAL FINDING THAT THE MOVEMENT O F GOODS WAS NOT IN DOUBT . IN THE PRESENT CASE, THE GOODS HAVE NOT BEEN TRANSP ORTED BY THE GOVERNMENT APPROVED TRANSPORT CONTRACTORS. THE LORRY R E C E IPTS / TRUCK NUMBERS HAVE NOT BEEN FURNISHED . FURTHER THE MOVEMENT OF GOODS IS IN DOUBT . THERE IS NOTHING TO INDICATE THAT THE MATERIAL SO PURCHASED WAS LYING IN THE CLOSING STOC K . THE APPELLANT HAS ALSO PLACED RELIANCE ON THE DECISION OF HON'BLE JODHPUR TRIBUNAL IN THE CASE OF INCOME TAX OFFICER VS. PERMANAND (2008)(25 SOT 11; 107 TTJ 395). IN TH E CITED CASE, THE ASSESSEE HAD DISCHARGED THE PRIMARY ONUS CAST ON HIM BY SECTION 69 OF THE ACT B Y SHOWING THE PURCHASES, TH E IR ENTRIES IN THE BOOKS OF ACCOUNTS, PAYMENTS BY WA Y OF ACCOUNT PAYEE CHEQUE, PRODUCING THE VOUCHER S OF SALES OF THE GOODS. IN THE PRESENT CASE, THE APPELLANT HAS FAILED TO BR ING ON RECORD ANY EVIDENCE TO PROVE THAT THE ALLEGED PURCHASES WERE G ENUINE. IN THE CASE OF CIT VS. SUNRISE TOOLING SYSTEM (P) LTD. (36 1 ITR 206), THE DIRECTOR I . E. SHRI D . K . JAIN STATED DURING THE COURSE OF SURVEY U/S 133A THAT PURCHASES OF RS . 43,34 , 496/ - MADE BY THE ASSESSEE COMP AN Y FROM S HRE E L AXMI INDUSTRIAL CORPORATION WERE BOGUS. HOWEVER LATER ON, HE RETRACTED FROM THE STAT E MENT . IN THESE CIRCUMSTANCES, IT WAS HELD BY HO N 'BLE DELHI HIGH COURT THAT IMPUGNED ADDITION WAS NOT JUSTIFIED . THIS DECISION IS THER E FORE DISTI N GUISHABLE A N D NOT APPLICABLE TO THE FACTS & CIRCUMSTANCES OF THE PRESENT CASE. IN THE CASE OF SARAF GRAMODYOG SANSTHAN VS, ITO (108 ITD 115), IT WAS NOTED BY THE HON'BLE A GRA T RIBUNAL THAT AFTER DISALLOWANCE OF IMPUGNED PURCHASES, GP WORKED OUT TO 18 2% WHICH WAS UNREASONABLE & IMPOSSIBLE TO ACHI E V E IN SUCH LINE OF' BUSINESS . T HI S DECISION IS ALSO DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS & C IRCUMSTANCES OF THE PR E SENT CASE. IN THE CASE OF CI T VS. LEADE R S VAL V ES (P) LTD (285 ITR 435), THE HON'BLE PUNJAB & HARYANA HIGH COURT HELD THAT THE PURCHAS E OF SCRAP COULD NOT BE TERMED BOGUS FOR THE R E ASON THAT IN TH E SUBSEQUENT AS S E S S M E NT YEAR 1987-88, THE PURCHASES FROM THESE VERY PARTIES STOOD ACCEPTED BY THE DEPARTMENT TO A VERY SUBSTANTIAL EXTENT . NO SALE INVOICES WERE FOUND TO BE UNDER- VALU E D OR THE PURCHASES INFLATED. THE EXTRAORDINARY PROF IT IN RESPECT OF GOODS SOLD AND A S R E CORDED IN THE BOOKS OF ACCOUNT WHICH OUGHT TO HAVE BEEN TAKEN F AV OU R ABL Y QUA THE ASS E SS E E, WAS CONSID E RED 'ADVERSE' BY THE A SSESSING OFFICER BY A DOPTING AN E RRONEOUS APPROACH . THE ASSESSEE'S CONTENTION THAT OUT OF TOTAL PU RC HASE S OF NON - F E RROUS M E TALS OF RS . 2 . 4 4 CROR E S, THE ASSESSING OFFICER HAD T R EA T E D PURCHASES W ORTH RS. 1 . 4 9 CRORES ONLY AS BOGUS AND IT WAS IMPOSSIBLE TO M AN UFACTURE THE GOOD S SHOWN TO HAVE BEEN 8 MANUFACTURED BY IT OUT OF THE R E M A INING PURCHASES IF TH E ASSESSING OFFICER'S CONCLUSION WAS ACCEPTED ALSO FO UND F A VO UR W ITH THE TRIBUNAL . THIS WAS A SIMPLE FINDING OF FACT BASED UPON A PP RE CIATION OF TH E MAT E RIAL ON RECORD AND THUS NO QUESTION OF LAW AROSE. I FAIL TO UND E R ST AND AS TO HOW THIS DECISION IS OF ANY HELP TO THE APPELLANT . THE PURCHASES FR O M M I S S HAH INDU S TRI ES HAV E NOT BE E N ACCEPTED AS G E NUINE IN THE EARLIER YEARS. THE APPELLANT HAS ALSO FAILED TO SHOW AS TO HOW AND WHERE THE MATERIA L SO PURCHASED WAS UTILIZED IN THE CIVIL CONTRACTS. FUR T HER THE APPELLANT HAS ALL E G E D T H AT H E WAS NO T ALLOW E D TO C ROSS E XA M I N E THE SAID S UPPLIER A LLEGED TO B E HAW A LA D EA L E RS AND THEREFORE IT VIOLATED PRINCIPL E S OF NATURAL JUSTICE. IT MUST B E A PP REC I A T E D HER E THAT IT WAS NOT THE INCOME TAX DEPARTMENT WHICH HAD RECORDE D T H E ST A TE M E NTS OF THE ALLEG E D SUPPLIER OR HAD IN ITS POSSESSION AFFIDAVITS OF THE A L L EG ED HAWALA DEALERS. THE APPELLANT CAN'T DENY THAT H E HAD NOT BEEN CONFRONTED WIT H TH ESE E VID E NCES AS THE SALES T AX DEPARTMENT HAD ISSUED SHOW - CAUSE NOTICES T O A LL TH E BENEFICIARI E S INCLUDING TH E ASSESSE E AND IN MAJORITY OF CASES, VAT HAD A LSO BEEN COLLECTED FROM THE BENEFICIARIES. IN THE C ASE OF SMT. KUSUM LATA THUKRAL (327 ITR 424) THE HONOURABLE PUN JAB & HARYANA HIGH COURT HAD AN OCCASION TO DEAL WITH THE SAME ISSUE . IN THE CITED CASE, THE LEARNED AUTHORISED REPR E SENTATIV E OF THE ASSESSEE HAD SOUGHT ANNULMENT OF THE ORDER ON THE G ROUND T H AT TH E A S SE SS EE WAS NOT A LLOWED TO CROSS EXAMINE THE DONORS. THE HONOURABLE H I GH C OURT DISAGRE E D W ITH THIS PREPOSITION. WHATEVER MATERIAL THE ASSESSING OFFI CE R HAD GATHERED WAS PUT TO THE ASSESSEE TO COMMENT . THEREFORE, THE S TAT E MENTS OF THE DONOR S WHO HAD DENIED TO HAVE MADE ANY GIFT, HAD NOT BEEN UTIL I ZE D AGAINST THE ASS E SSE E WITHOUT AFFORDING THE OPPORTUNITY OF THE ASSESSEE. T H E ASS E SSEE HAD NOT DISCHARGED THE INITIAL ONUS TO PRODUCE THE NECESSARY EV ID E N CE TO SUPPORT THE GENUINENESS O F THE TRANSACTIONS. THE DONORS IN THEIR ST AT E MENTS HAD DENIED TO HAVE GIVEN ANY GIFTS TO SMT. KUSUM LATA THUKRAL, THE ASSESS EE. THEY HAD DENIED EVEN THE ACQUAINTANCE WITH THE ASSESSEE. THEY HAD ALSO DENIED TO HAVE MADE THE DEPOSIT OF CASH IN THEIR ACCOUNTS AND ISSU E OF DRAFTS FOR THE PURPOSE OF GIFTS. WHEN THE DONORS HAD DENIED TO HAVE GIVEN ANY GIFTS IT HAD TO BE LOGICALLY CONCLUDED THAT IT WAS THE ASSESSEE'S OWN MONEY, WHICH WAS ROUTED THROUGH THE MODE OF ALLEGED GIFTS THROUGH THE ACCOUNTS OF THE PERSONS, WHO WERE NOT AWARE ABOUT THE DEPOSIT OF MONEY IN THEIR ACCOUNTS AND PURCHASE OF BANK DRAFTS IN FAVOUR OF THE ASSESSEE. IT WAS HE LD BY THE HON'BLE PUNJAB & HARYANA HIGH COURT THAT THE QUESTION WHETHER DENIAL OF OPPORTUNITY OF CROSS-EXAMINATION RESULTED IN VIOLATION OF NATURAL JUSTICE DEPENDED UPON THE FACTS OF EACH CAS E. THE OBJECT OF CROSS-EXAMINATION WAS TO TEST THE VERACITY OF TH E VERSION GIVEN IN EXAMINATION-IN CHIEF. IT WAS HELD THAT EVEN IF C ROSS-EXAMINATION WAS ALLOWED AND THE DONORS WHO HAD DISOWNED THE MAK ING OF GIFTS, WERE CONFRONTED AND SHOWN TO BE FACTUALLY WR ONG, THE SAME WOULD HAVE MADE NO DIFFERENCE. AS THERE WAS NO NATU RAL LOVE AND AFFECTION AND IN ITS ABSENCE, THE GIFTS WERE NOT GE NUINE. THE APPEAL OF THE ASSESSEE WAS ACCORDINGLY DISMISSED. R EVERTING BACK TO THE PRESENT CASE, IT WOULD HAVE MADE NO DIF FERENCE EVEN IF THE APPELLANT HAD BEEN ALLOWED AN OPPORTUNITY TO CR OSS-EXAMINE THE ALLEGED SUPPLIER AS IT HAD CATEGORICALLY ADMITT ED TO BE INVOLVED IN GIVING ONLY ACCOMMODATION ENTRIES. IT IS AN ARGU MENT JUST FOR THE SAKE OF THE ARGUMENT . MERE DENIAL BY THE APPELLANT IS NOT SUFFICIENT TO REBUT THE CIRCUMSTANTIAL EVIDENCE WHI CH IS IN THE POSSESSION OF THE DEPARTMENT. THE APPELLANT HAS MIS ERABLY FAILED TO SHOW MOVEMENT OF THE GOODS OR QUANTITATIVE DETAI LS AND STOCK 9 REGISTER. THE APPELLANT HAS NOT DISCHARGED HIS ONUS OF PROVING THE GENUINENESS OF THE IMPUGNED PURCHASES YET HE HAS BL AMED THE AO FOR NOT CONDUCTING ALL KIND OF ENQUIRIES. LOOKIN G TO THE CIRCUMSTANTIAL EVIDENCE IN THE PRESENT CASE, IT IS EVIDENT THAT IMPUGNED PURCHASES OF RS.31,62,752/- FROM THE ALLEG ED SUPPLIER NAMELY M/S SHAH . INDUSTRIES WERE NOT GENUINE. ONE HAS TO CONSIDER THE TOTALITY OF FACTS, SURROUNDING CIRCUMS TANCES AND HUMAN PROBABILITY FOR ARRIVING AT SUCH A CONCLUSION . THE APPELLANT IS NOT WILLING TO COME CLEAN AND HENCE ONE WILL HAV E TO TAKE RESOURCE FOR ARRIVING AT A CONCLUSION ON THE BASIS OF MATERIAL ON RECORD. THE APPELLANT HAS FAILED TO PRODUCE THE CON FIRMATIONS FROM THE ALLEGED SUPPLIER & DOCUMENTARY EVIDENCES IN SUPPORT OF ALLEGED PURCHASES. THE APPELLANT HAS FAILED TO PROD UCE THE QUANTITATIVE DETAILS. IN VIEW OF FACTS AND CIRCUMST ANCES IN THE PRESENT CASE, I ACCORDINGLY HOLD THAT THE APPELLANT HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES MADE FROM MIS SH AH INDUSTRI E S. ACCORDINGLY THE BOOKS OF ACCOUNT OF THE APPELLAN T ARE REJECTED U/S 1 4 5 ( 3 ) OF TH E ACT AS THESE DO NOT DISCLOSE TRUE STATE OF AFFAIRS. IT WAS HELD BY THE HONOURABLE ALLAHABAD TRIBUNAL I N THE CASE OF ISHRAWATI DEVI VS ITO (298 ITR. AT 393) THA T THE COMMISSIONER ( A PPEALS) HAS POWERS CONTERMINOUS WITH THOSE OF TH E A SS E SSING OFFICER. TH E COMM I SSIONER (APPEALS) CAN DIRECT THE ASSESSING OFF I CE R TO DO WHAT THE LATTER FAILED TO DO. UNLESS THERE ARE SPECIFIC FETTERS PLACED U PON TH E POW E RS OF TH E C OMMISSION E R (APP E ALS) BY EXPRESS WORDS , H E EXERCISES THE SAME POW E R S A S DOES TH E ORIGINAL COURT OR AUTHORITY . IN FACT, THE ENTIR E ASSESSMENT IS THRO WN OP E N BEFORE HIM. HE CAN TRAVEL OUTSID E THE R E CORD, I . E, THE RETURN MAD E B Y T H E A S S ES S EE AN D ASS E SSMENT O R D E R PASSED BY TH E A SSESSING OFFICER . H E IS C OMP E T E NT TO CONDUCT A DETAIL E D E X AMINATION OF ANY ASPE C T D E ALT WITH S UMMARILY OR BRI E FL Y B Y THE ASS E SSING OFFICER . T HOUGH TH E A O HAD NOT REJ E CT E D THE BOOKS OF ACCO U N T IN TH E PR E SENT CASE, Y E T TH E S AM E HA V E B EE N R E JECTED BY THE UNDERSIGN E D IN L I G H T OF FINDINGS RENDER E D IN EARLI E R PARAGRAPHS . THE APPELLANT IS ENGAGED IN THE BUSINESS OF CIVIL C ONTRACTS AND DURING THE YEAR UNDER REFERENCE, HE HAD SHOWN TURNO VER OF RS.14,86,75,331/-. THE APPELLANT IS THE END USER OF MATERIAL SO PURCHASED FROM THE HAWALA DEALER. FURTHER IN ABSENC E OF QUANTITATIVE DETAILS, THERE IS VALID GROUND TO HOLD THAT THE APPELLANT MUST HAVE INFLATED ITS PURCHASES TO REDUCE THE TAXA BLE PROFITS. IN THE ABSENCE OF CONSUMPTION RECORDS, IT CAN'T BE SA ID THAT GOODS S O PURCHAS E D BY THE APPELLANT WERE ACTUALLY CONSUMED IN THE CI VIL C ONTRACTS. IT IS THE CASE OF THE APPELLANT THAT ALLE GED RAW MATERIAL WAS CONSUMED IN TH E C I V IL C ONTRACTS HOWEVER THIS STATEMENT HAS REMAINED UNSUBSTANTIATED. IN VIEW OF A BOV E FA C TS, THI S IS A CASE WHERE THE ENTIRE CASH HAS BEEN SIPHONED OFF BY DE B IT IN G TH E BOGUS PURCHASES. MOREOVER IF ENTIRE PURCHASES OF RS.31,62 ,752/- ARE DISALLOWED THEN NP WILL BE MARGINALLY INCREASED FRO M 6.30% TO 8 . 42% WHICH IS NOT ABNORMAL BY ANY STANDARDS . THEREFORE, FOLLOWING THE PRINCIPLE LAID DOWN IN TH E DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SRI GANESH RICE MILLS (294 ITR 316), THE ADDITION OF RS.31,62,752/ - MADE BY THE AO IS SUSTAINED. THESE GR OUND S OF APPEAL ARE ACCORDINGLY DISMISSED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. 10 5. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT LD.CIT(A ) HAS PASSED AN EX-PARTE ORDER. HE SUBMITTED THAT THE NOTICE FOR HEARING FROM LD.CIT(A) WAS NOT RECEIVED BY THE ASSESSEE. HE FURTHER SUBMITTED THAT ASSESSEE ORIGINALLY FILED APPEAL BEFOR E LD.CIT(A), THANE BUT THE APPEAL WAS TRANSFERRED TO LD.CI T(A), AURANGABAD AND NO OPPORTUNITY WAS GIVEN TO ASSESSEE B EFORE TRANSFER OF SUCH APPELLATE PROCEEDINGS. HE THEREFORE SUB MITTED THAT THERE IS VIOLATION OF NATURAL JUSTICE AND REQUESTED THAT THE MATTER MAY BE REMITTED BACK TO LD.CIT(A) AND HE UNDER T OOK TO CO- OPERATE BY FILING THE NECESSARY DETAILS. LD.D.R. ON THE OTHE R HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPEC T TO ADDITION OF RS.31,62,752/- MADE ON ACCOUNT OF BOGUS PURCHASES. FROM THE ORDER PASSED BY LD.CIT(A), IT IS SEEN THAT IT IS AN EX-PARTE ORDER AND HAS BEEN PASSED ON THE BASIS OF MATERIAL ON RECORD BY L D.CIT(A). BEFORE US, LD.A.R. HAS SUBMITTED THAT HE HAD ORIGINALLY FILED A PPEAL BEFORE LD.CIT(A), THANE. BEFORE THE TRANSFER OF APPEAL BEFORE LD.CIT(A), AURANGABAD, NO OPPORTUNITY OF HEARING WAS GIVEN A ND FURTHER SINCE NOTICE WAS NOT RECEIVED BY HIM HE COULD NOT APPEAR BEFORE LD.CIT(A), AURANGABAD. THE AFORESAID SUBMISSIONS HAV E NOT BEEN CONTROVERTED BY REVENUE OR FOUND TO BE UNTRUE. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS AND THE PRAYER OF THE ASSESSEE TO GRANT ONE MORE OPPORTUNITY OF HEARING, WE ARE OF THE VIEW THAT IN THE INTEREST OF NATURAL JUSTICE, ASSESSEE HAS TO BE GRA NTED ONE MORE OPPORTUNITY OF HEARING. WE THEREFORE RESTORE THE ISSUE BACK TO THE FILE OF LD.CIT(A), AURANGABAD TO DECIDE THE APPEAL DE NOVO . 11 NEEDLESS TO STATE THAT LD.CIT(A) SHALL GRANT ADEQUATE OPP ORTUNITY OF HEARING TO THE ASSESSEE. ASSESSEE IS ALSO DIRECTED TO P ROMPTLY FURNISH ALL THE REQUIRED DETAILS AS CALLED FOR. IN CASE ASSE SSEE FAILS TO FURNISH THE REQUIRED DETAILS, THE LD.CIT(A) SHALL BE FREE TO PROCEED TO DISPOSE OF THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. WITH THESE DIRECTIONS AND WITHOUT DECIDING THE GROUNDS ON THE MERITS, WE RESTORE THE ISSUE TO THE FILE OF LD.CIT(A). THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED FOR STATIST ICAL PURPOSE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 2 ND DAY OF JUNE, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; ! DATED : 2 ND JUNE, 2017. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-1, AURANGABAD. PRL.CIT-2, THANE. #$% &&'(,* '(, / DR, ITAT, A PUNE; %+,-/ GUARD FILE. / BY ORDER, // //// // TRUE COP // /// TRUE // //COPY // TRUE COPY // . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.