Ajayan Gangadharan, Nashik V. Income-tax Officer, Nashik

MA 57/PUN/2022

AI Insights

The case involves Shri Ajayan Gangadharan, the proprietor of M/s. Aathira Engineering Works, who filed three miscellaneous applications against the Income Tax Officer, Ward -1 (2), Nashik, seeking recall/rectification of a previous tribunal order concerning additions made to his income due to alleged bogus purchases. The tribunal had previously granted partial relief to the assessee by upholding a disallowance of 25% of the bogus purchases. The assessee argued that the entire sales from these purchases were accepted by the Revenue and supported by evidence, and that similar cases had seen lower disallowances. However, the tribunal, referencing a similar case involving the assessee's family member, upheld a 10% addition to the bogus purchases and dismissed the applications for rectification.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137058 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-07-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-07-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 10-09-2020
• Other Referred Cases: Mr. Vishnu Vitthaldas Gujarathi in ITA No.533/PUN/2015, M/s. Chhabi Electricals Pvt. Ltd. Vs. Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI GD PADMAHSHALI, ACCOUNTANT MEMBER M.A.Nos.57, 58 & 59/PUN./2022 Arising out of I.T.A.Nos.1994, 1995 & 1996/PUN./2016 Assessment Years 2009-2010, 2010-2011 & 2011-2012 Shri Ajayan Gangadharan, Prop. M/s. Aathira Engineering Works, C/o. Aruna Rajendra Shrisath, Flat No.3, Amrdu Tirdh Apartment, Sr.No.10/3A/1, Kamathwada, Nashik. PAN AGHPG4292P vs. The Income Tax Officer, Ward -1 (2), Nashik. (Applicant) (Respondent) For Assessee : Smt. Sanket Joshi For Revenue : Shri Ramnath P. Murkunde Date of Hearing : 21.07.2023 Date of Pronouncement : 24.07.2023 ORDER PER SATBEER SINGH GODARA, J.M. : These assessee’s three miscellaneous applications M.A.Nos.57, 58 & 59/PUN./2022 filed u/sec.254(2) of the Income Tax Act, 1961 (in short "the Act"). seek to recall/rectify the tribunal’s common order dated 22.10.2018 in the corresponding main appeals I.T.A.Nos.1994, 1995 & 1996/ PUN./2016, granting him part relief on the issue of bogus purchases as under : 2 M.A.Nos.57, 58 & 59/PUN./2022 7. “Though, assessee and Revenue raised various grounds but the sole controversy is with respect to the relief granted by Ld.CIT(A) on the addition made by AO on account of bogus purchases. 8. Assessing Officer noted that assessee had made purchases aggregating to Rs.66,88,471/- from various parties (listed at page 2 of the assessment order). AO noted that Sales Tax Department on the basis on enquiries made at their end had concluded the aforesaid suppliers to be bogus. AO noted that to verify the genuineness of purchases made by assessee from the aforesaid parties, notices issued u/s 133(6) of the Act to the parties for furnishing certain details was sent but were returned by the Postal Authorities. AO noted that though assessee was given an opportunity and asked to produce the relevant parties but assessee failed to produce the parties before him. The submission of the assessee that the purchases were genuine was not found acceptable to AO. He held the aggregate purchases of Rs.66,88,471/- to be bogus and made its addition. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who 3 M.A.Nos.57, 58 & 59/PUN./2022 granted partial relief to the assessee by upholding the disallowance to the extent of 25% of bogus purchases. Aggrieved by the order of Ld.CIT(A), assessee and Revenue are now in appeal before us. Assessee is aggrieved for upholding the disallowance to the extent of 25% and Revenue is aggrieved for the relief granted by Ld.CIT(A). 9. Before us, Ld. A.R. reiterated the submissions made before AO and Ld.CIT(A) and further submitted that assessee had asked the AO to grant cross-examination of the persons which was the basis for proposed addition. He submitted that AO did not grant cross- examination of the alleged bogus suppliers. He further submitted that the entire sales arising out of bogus purchases were accepted by Revenue and the sales are supported by evidence of challans etc. He further submitted that the payment for purchases have been made by banking channels. He therefore submitted that Ld.CIT(A) has erred in upholding disallowance to the extent of 25%. He further submitted that on identical facts in the case of Mr. Vishnu Vitthaldas Gujarathi in ITA No.533/PUN/2015 dt. 4 M.A.Nos.57, 58 & 59/PUN./2022 18.08.2017, the family members of assessee, the Co-ordinate Bench of the Tribunal has upheld the addition to the extent of 10% of the total bogus purchases. He submitted that as the facts of the present case are identical to the case of Vishnu Vitthaldas Gujarathi, the matter in the case of assessee be decided similarly by making addition of 10% of bogus purchases. Ld.D.R. on the other hand, supported the order of lower authorities. 10. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to making of addition of Rs.66,88,471/- to the total income of the assessee on account of bogus purchases. We find that AO in the order has noted that assessee had failed to establish the genuineness of the purchases amounting to Rs.66,88,471/- and therefore AO treated the entire purchases as bogus purchases and disallowed the entire purchases of Rs.66,88,471/- by treating it as bogus. When the matter was carried before Ld.CIT(A), Ld.CIT(A) upheld the disallowance to the extent of 25% of bogus purchases. We find that on 5 M.A.Nos.57, 58 & 59/PUN./2022 identical facts, in the case of Mr. Vishnu Vitthaldas Gujarathi in ITA No.533/PUN/2015 for A.Y. 2010- 11, the Co-ordinate Bench of the Tribunal has upheld the addition to the extent of 10% of purchases by observing as under : 6. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. The only issue raised by the assessee in appeal is against confirming of addition of Rs.7,54,883/- i.e. to the extent of 30% of alleged bogus purchases. The Assessing Officer had made addition of Rs.25,49,609/- on account of bogus purchases. The assessee had allegedly purchased goods from Shri Jayesh M. Mashru, Proprietor M/s. Pioneer Trading Company to be supplied to MSETCL. Shri Jayesh M. Mashru in his statement recorded u/s. 14 of the Maharashtra Value Added Tax Act, 2002 during investigation conducted by Sales Tax Department admitted that he has not done any business of sales and purchase of goods in the said firm and had issued 6 M.A.Nos.57, 58 & 59/PUN./2022 bogus sales bills on commission basis. As per the contentions of assessee, the goods were transported by M/s. Swastik Transport Co. The assessee was asked to furnish proof of transportation of goods. The assessee filed copies of lorry receipts issued by the transporter. However, to further substantiate his claim and to rebut the allegations leveled by the Department no confirmation letters either from Shri Jayesh M. Mashru or M/s. Swastik Transport Co. were filed by the assessee. 7. It is an undisputed fact that M/s. Pioneer Trading Company is a notified Hawala dealer. A perusal of the impugned order shows that supply of goods to MSETCL has not been disputed. At the same time the assessee has not furnished cogent evidence to show trail of goods purchased from M/s. Pioneer Trading Company. The Commissioner of Income Tax (Appeals) has opined that assessee might have purchased goods from grey market and thereafter supplied the same to MSETCL. We find merit in the reasoning 7 M.A.Nos.57, 58 & 59/PUN./2022 given by Commissioner of Income Tax (Appeals). So far as the objection raised by the assessee that addition has been made on the basis of statement of Shri Jayesh M. Mashru recorded at the back of assessee and no opportunity to cross-examine was afforded, we find that copy of statement of Shri Jayesh M. Mashru was provided to the assessee on 13-03-2013. To rebut the said statement, assessee has failed to file any confirmation letter from Shri Jayesh M. Mashru. 8. The Pune Bench of Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. Vs. Deputy Commissioner of Income Tax (supra) had occasion to deal with various set of Hawala purchase cases. The Tribunal while dealing with the cases where statements recorded by the Sales Tax Department were provided to the assessee and the assessee has been able to establish that the goods were supplied, the addition was made by estimating GP @ 10% of the alleged Hawala 8 M.A.Nos.57, 58 & 59/PUN./2022 purchases. The relevant extract of the findings of Tribunal on this issue are as under : “V. Another set of cases where the statements recorded by the Sales Tax Department have been handed over to the assessee and the copies of same have been supplied to the assessee, then where the assessee established the case of receipt of goods and its onward transmission, then the factum of purchases by the assessee stands established in such circumstances. However, estimation is to be made in the hands of assessee because of purchases from the grey market and following the above said ratio, addition is to be made by estimating the same @ 7 10% of the alleged hawala purchases, over and above the net profit shown by the assessee.” Taking into consideration the totality of facts, we are of considered opinion that disallowance @ 10% of the total bogus 9 M.A.Nos.57, 58 & 59/PUN./2022 purchases would meet the ends of justice. We direct and hold, accordingly.” Before us, Revenue has not pointed out any distinguishing feature in the facts of the present case of assessee and that of Vishnu Vitthaldas Gujarathi (supra). We therefore relying on the decision of Co-ordinate Bench of the Tribunal in the case of Vishnu Vitthaldas Gujarathi (supra), and for similar reasons uphold the addition to the extent of 10% of such bogus purchases. We thus direct accordingly. Thus, the ground of the assessee is partly allowed and the appeal of Revenue is dismissed. 11. In the result, the appeal of the assessee in ITA No.1994/PUN/2016 for A.Y. 2009-10 is partly allowed and the appeal of Revenue in ITA No.2202/PUN/2016 is dismissed.” 2. Learned counsel vehemently argued during the course of hearing that not only our impugned order suffers from an apparent mistake on record since having relied on his concessional statement which was never made but also it has not followed catena of case law deleting such a disallowance of 10 M.A.Nos.57, 58 & 59/PUN./2022 alleged bogus purchases and therefore, we need to exercise our rectification jurisdiction u/sec.254(2) of the Act. 3. We find no merit in the assessee’s foregoing contentions once our order has estimated the impugned bogus purchases disallowance going by the relevant peculiar facts and circumstances in these three cases. We wish to make it clear that various landmark judicial precedents viz., [2008] 305 ITR 277 (SC) ACIT vs. Saurashtra Kutch Stock Exchange Ltd.; [2021] 133 taxmann.com 41 (SC) CIT vs. Reliance Telecom Ltd.; and [1993] 203 ITR 497 (Bom.) CIT vs. Ramesh Electric and Trading Co. have settled the law that the purpose of sec.254(2) rectification is only to correct apparent mistakes than adopting long drawn process of roving enquiries. Rejected accordingly. 4. These assessee’s three miscellaneous applications 57, 58 & 59/PUN./2022 are dismissed. A copy of this common order be placed in the respective case files. Order pronounced in the open Court on 24.07.2023. Sd/- Sd/- [GD PADMAHSHALI] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 24 th July, 2023 VBP/- 11 M.A.Nos.57, 58 & 59/PUN./2022 Copy to 1. The applicant 2. The respondent 3. The CIT(A)-V, Pune 4. The CIT, Nashik 5. D.R. ITAT, Pune “A” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches, Pune.