TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 63
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....been offered and accepted for tax? (ii) Whether, in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in law in not granting deduction for purchase expenditure at all when material is purchased from one and bill is obtained from another?" 3. At the time of admission of Tax Appeal No.936 of 2006, following questions of law were framed for our consideration:- "(i) Whether on the facts and circumstances of the case the ITAT was right in upholding the addition on account of unexplained fictitious purchase/creditor of Rs. 10,82,450/- ? (ii) Whether, in the facts and circumstances of the case the ITAT was right in law in disallowing the purchase expenditure amounting to Rs. 10,82,450/- by treating the same as bogus when admittedly corresponding sales against these very purchases have been offered and accepted for tax?" 4. Mr.Soparkar, learned advocate for the appellant submitted that the impugned orders are contrary to law. He submitted that the Tribunal has committed an error in disallowing the purchase expenditure by treating the same as bogus when admittedly corresponding sales against these very purchases have been offered and accepted for tax....
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....ases with bills were not feasible. The Tribunal therefore, observed that such parties became conduit pipes between the assessee-firm and the sellers of the raw materials. It was on this basis that 25% of the purchase price was added by way of income of the assessee observing that possibility of inflating the price of the raw material cannot be ruled out. It was this decision that this Court upheld. In the present case, though it may appear that the purchases have been shown to have been made through M/s. Vishal Traders but supplied by some other agency, in absence of other additional facts noted by this Court in case of Sanjay Oilcake Industries [Supra] gross ad hoc addition of 25% may not be justified. In the present case, the assessee could produce before the authorities the precise rate at which the purchases were made from M/s. Vishal Traders and other suppliers to demonstrate that the purchases made on the same day carried the same price. This would substantially eliminate the angle of the purchase price being artificially inflated. Additionally, the Tribunal also noted other parameters such as higher net and gross profit rates of the present year compared to the earlier yea....
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....efore, not required to be considered." 6. He has relied upon the decision of this Court in Tax Appeal No.679 of 2010 decided on 16.8.2011, wherein it was observed as under:- "7.0 In the present case also, the Commissioner of Income-tax (Appeals) had observed that, it can be logically presumed that the assessee was motivated to produce goods from unidentified parties who were not ready to account for the sales to save various levies and taxes, includint income tax to share the advantages. It was further observed that in absence of good and reliable evidence the plea, if raised, that the goods had to be purchased in this manner because they were not otherwise available could not have been discarded as out of total purchases of about Rs. 5.15 crores, purchases of Rs. 1.75 crores which is about 1/4th of the total purchases were procured in dubious manner. It is view of the CIT (Appeals) which to the above extent came to be confirmed by the Tribunal. The Tribunal, of course, modified the order of the CIT (Appeals) and reinstated additions to the extent of 25% relying on the decision in the case of Sanjay Oilcake Industries (supra). 8.0 In the present case also there was evidence on....
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....l Jain and the amounts were withdrawn. If the purchases were really effected from M/s Kalpana Enterprises it is not understood as to how some other person namely Inder Sain Jain (HUF) accepted that the materials were supplied by it. The question before the Tribunal was not whether purchases were made from another concern. What was under consideration was whether the purchases were made from M/s Kalpana Enterprises as was claimed by the assessed. Ample material has been brought on record by the Revenue to show that the purchases were in fact not made from M/s Kalpana Enterprises. These are some of the relevant materials which have not been considered by the Tribunal. Tribunal's conclusion that even if it is accepted that Chedi Lal was only an instrument used by Satya Pal Jain, assessed was not involved in it, is a conclusion arrived at without any foundation. On the contrary it has been established by materials on record that assessed knew that the whole thing was a fictitious arrangement. Once it is accepted that the supplies were not made by Kalpana Enterprises to whom payments were alleged to have been made, the question whether the purchases were made from some other source ....
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.... has been received back to the assessee from the suppliers of which expenditure on account of purchases accounted for in the books of account. In view of the consistent decisions of this Court, referred to herein above, in our opinion, ends of justice would be met if we grant deduction at 25% for purchase expenditure, as admittedly corresponding sales against these very purchases have been offered and accepted for tax. Accordingly, we modify both the impugned orders and hold that the Tribunal has committed an error in disallowing the purchase expenditure and direct that deduction at 25% of the purchase expenditure may be allowed in both these cases. We answer the questions posed for our consideration accordingly. Both the questions are answered in favour of the assesee and against the revenue. Accordingly, both these appeals are allowed to the aforesaid extent. 1. Both these appeals are placed before this Court in view of the note filed by the learned advocate for the appellant stating that in paragraph 10 of judgment dated 16.6.2016, by mistake, instead of 75%, figure is mentioned as 25%, as the disallowance was to be restricted to 25% of purchases. 2. Considering the averments ....