TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 707
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....f to assessee on the basis of incorrect facts filed by assessee before the Honorable CIT(A) regarding utilization of the alleged purchases made from M/s. R.K. Ispat. 4. On the facts and in the circumstances of the case the Honorable CIT(A)-I, Nashik erred in granting relief to assessee in respect of the commission expenses on the basis of incorrect facts filed by assessee before the Honorable CIT(A) regarding the purpose for which the commission expenses was incurred. 5. On the facts and in the circumstances of the case sit is therefore requested to cancel the order of the Honorable CIT(A)-I, Nashik and restore the order of the Assessing Officer. 6. The appellant craves leave to add, amend, modify the grounds of appeal, if considered necessary subsequently. 3. The issue arising in the present appeal is against the order of CIT(A) in deleting the addition made on account of bogus purchases totaling Rs. 43,62,275/- from R.K. Ispat. The second issued raised by the Revenue is against the deletion of addition of Rs. 1,50,000/- made on account of commission expenses. 4. Briefly, in the facts of the present case, the assessee was an electrical contractor. For the year under consi....
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....chases to be bogus and booked only to reduce business income. Further, the assessee had claimed to have incurred expenditure on account of commission to various persons totaling Rs. 1,50,000/-, which was stated to be outstanding as on 31.03.2009. The assessee claimed that the same was paid subsequently on various dates from 30.06.2009 to 18.02.2010. The vouchers in respect of payment of the said dues were filed. However, in the absence of assessee having clarified the nature of expenses and the payments having been made to the labour classes and in the absence of assessee producing the said persons for verification, the Assessing Officer held the expenditure to be not genuine and added sum of Rs. 1,50,000/- to the total income of the assessee. 5. The CIT(A) after considering the factual aspects and proceeding before the Assessing Officer and the fact that the payment to M/s. R.K. Ispat was outstanding for substantial period, noted the plea of the assessee that since the material supplied by M/s. R.K. Ispat was not found to be of requisite standard by the contractee, the payment to the said party was delayed. The assessee further claimed that he shall be in a position to make the p....
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....T(A) has deleted the additions. 9. The learned Departmental Representative for the Revenue on the other hand, pointed out that the issue raised in the present appeal is of bogus purchases is clearly covered by the order of Tribunal in Shri Mukeshkumar Pukhraj Mehta Vs. ITO in ITA No.2026/PN/2014, relating to assessment year 2010-11, order dated 03.11.2015 . Further, the learned Departmental Representative for the Revenue placed reliance on the ratio laid down by Pune Bench of Tribunal in M/s. Kolte Patil Developers Ltd. Vs. DCIT in ITA Nos.1411 to 1415/PN/2013, relating to assessment years 2003-04, 2005-06 & 2007-08 to 2009-10 and in DCIT Vs. M/s. Kolte Patil Developers Ltd. in ITA Nos.1478 to 1483/PN/2013, relating to assessment years 2004-05 to 2009-10, order dated 20.02.2015 10. We have heard the rival contentions and perused the record. The first issue arising in the present appeal is with regard to purchases made by the assessee totaling Rs. 43,62,275/- from a concern named M/s. R.K. Ispat. The assessee admittedly, for the year under consideration had booked the said expenditure on account of purchases made from the said concern. The Assessing Officer noted that the assessee....
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....d by the assessee for the year was Rs. 1.98 crores. The assessee had declared gross profit of Rs. 28,95,578/- in the trading account, in turn declaring GP rate at 14.58%. There was information with the Assessing Officer that some of the parties from whom the assessee had made the purchases were named in the list of hawala dealers published by the Sales Tax Department. The total purchases from the said parties worked out to Rs. 74,73,020/- as per the list at page 2 of the assessment order. All the above said parties from whom purchases were made were located in Mumbai i.e. outside the area of operation of the assessee in Bhosari, Pune. The case of the Sales Tax Department against the said parties was that they were providing accommodation entries and though there was a TIN number allotted to each of them, but they had not paid any VAT alleged to have been collected from the respective persons to whom sales had been made. The assessee was one such person to whom the sales were made by the said parties who were enlisted by the Sales Tax Department. The Sales Tax Department also found that the said parties were not available at the given addresses and hence, these were treated as hawal....
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.... to produce the said parties. Further, no confirmation was filed by the assessee to prove that it had made the purchases from the said parties. The parties were based in Mumbai and the assessee was based in Pune, had made purchases from Mumbai parties and the assessee was asked to produce any corroborative evidence of movement of goods from Mumbai to Pune. The assessee was asked to produce octroi receipts and / or any other corroborative evidence in support to the movement of goods. However, the assessee categorically before the Assessing Officer admitted that he was not in a position to produce any of the above. 12. Before the CIT(A), the assessee though had first admitted that the purchases should be added as its income, changed its stand that the entire purchases could not be disallowed as bogus, once it was held that the sales were genuinely effected. The case of the assessee before the CIT(A) and even before us is that the said purchases could not be disallowed on the basis of matching principles. Another plea raised by the assessee in this regard was that one of the parties i.e. M/s. Sidhivinayak Enterprises, Mumbai from whom purchases of Rs. 12,73,892/- had been made were ....
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....ne. Despite the Assessing Officer and the CIT(A) having given ample opportunity to the assessee to produce the confirmation of purchases by way of transport receipts, weigh bridge receipts, octroi receipts, etc., the assessee has not produced any evidence. On the other hand, when all these facts were confronted to the learned Authorized Representative for the assessee by the Assessing Officer and show caused by way of an order sheet notice, also issued to the learned Authorized Representative for the assessee, he admitted that the alleged purchases made from the hawala dealers should be treated as income. At no point of time during the course of assessment proceedings, the assessee raised the plea of matching principles, under which it claimed that there was tally between the purchases and sales and also the closing stock shown by it. Only before the CIT(A), the concept of matching principles was raised, but in the absence of any details whatsoever, the CIT(A) vide para 10 has given a finding that Even at this stage, the appellant is not in position to discharge the onus cast upon him by producing the parties, their confirmations, transport details, weigh bridge and octroi receipts....
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....iance can be placed on such chart prepared by the assessee, which admittedly was prepared from the available sales and purchase bills. The onus is upon the assessee that the items which it claims to have purchased should have reached him and thereafter, the same should have been transported to the respective parties to whom the sales have been made. However, the assessee has not produced any evidence in this regard and in the absence of the same and also in the absence of any stock details being maintained by the assessee, the alleged re-conciliation exercise has no basis and cannot be relied on to establish the case of the assessee on matching principles. Another aspect to be kept in mind is that the Assessing Officer had further confronted the assessee with the valuation of closing stock at the end of the year. During the course of assessment proceedings, the Assessing Officer found the assessee had not maintained any day-to-day stock register and was of the view that the valuation of stock could not be verified. When confronted on the said issue, the learned Authorized Representative for the assessee submitted that due to large number of items involved, it was not practical to m....
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....on record. The assessee is trading in the said goods from day to day and it is the case of the assessee that the items purchased from the hawala dealers are the only purchases made of the said items. Where the assessee has not maintained the stock register, which could establish datewise inflow of goods from different parties, which in turn, were sold by him to different parties on datewise, the assessee claims that he has reconciled the purchases and sales. In the absence of the said details being maintained by the assessee, the exercise of picking up of one item and matching with the another item of sales, around the same date, the data of purchases cannot be verified by any of the authorities as the assessee is a trader in the goods. He was not a manufacturer of items, wherein some kind of exercise would be established that certain items were utilized to give the desired manufactured results. In case of trading, where no quantity-wise or amount-wise or date-wise purchases have been maintained by the assessee to reconcile that a particular item purchased on a particular date, had been sold by the assessee to a particular person on a particular date, it is not only difficult, but ....
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....Bombay High Court upheld the order of Tribunal, in view of the above factual aspects and further held that the disallowance made merely, the parties were not produced, cannot be upheld. However, in the facts of the present case as pointed out by us, the assessee has not maintained any stock details i.e. the details of opening stock, purchases, sales and closing stock, nor has he produced any evidence of the goods being delivered to him. Further, when he was confronted at the first stage by the Assessing Officer of the nongenuineness of the parties and the same being declared as bogus by the Sales Tax Department, the learned Authorized Representative for the assessee admitted before the Assessing Officer that the same may be treated as bogus and amount may be added in his hands. The onus is upon the assessee to establish that it had made the said purchases from the said parties. However, where the assessee has failed to discharge his onus and has made a statement before the Assessing Officer, then the retraction of such statement is possible only if the assessee files the relevant corroborative evidence to establish the transaction. In the absence of the assessee having established ....
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....efore the Assessing Officer and in view thereof, no further verification was made by the Assessing Officer. Once the assessee had prevented the Assessing Officer from carrying on any exercise of any kind of verification, then on a later date, the assessee cannot take the stand that no such addition is warranted in the absence of any verification exercise carried out by the Assessing Officer. The assessee has failed to furnish the confirmation from the parties and the Sales Tax Department has not been able to trace the said parties. In the absence of any confirmation being filed by the said parties or the evidence of the bank statement of the said parties having been placed on record by the assessee to prove its case, merely because such view has been taken in any other decision, the same cannot be applied where the assessee has not discharged its onus. Even before us, the assessee has not furnished any evidence of payment except for making the statement that the amounts were paid by way of cheques. In view thereof, we find no merit in the said stand of the assessee. Upholding the order of CIT(A), we dismiss the ground of appeal Nos.1 to 4." 13. Further, the Tribunal in M/s. Kolte....