TaxTMI 
TaxTMI 
2017 (2) TMI 72
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....stimate the profit at the rate of 15% on the total bogus purchases ignoring the fact that the seller parties were bogus bill providers. 2.1. On the other hand, the ld. counsel for the assessee, Shri Suresh N. Otwani, defended the order of the Ld. Commissioner of Income Tax (Appeal). The Bench asked the ld. counsel for the assessee whether any appeal has been filed by the assessee challenging the order of the Ld. Commissioner of Income Tax (Appeal). It was claimed by the ld. counsel that the impugned orders have been accepted by the assessee and no appeal has been filed against the order of the First Appellate Authority. 2.2. We have considered the rival submissions and perused the material available on record. Before coming to any conclusion, we are reproducing hereunder the relevant finding along with the conclusion drawn in the impugned order for ready reference and analysis:- "2.3.1 Further during the course of the subsequent hearing, the AR had furnished semi -burntcopy of bill raised in respect of the following concerns: 1. M/s M.R. Corporation 2. V.M.Udyog 3. Snehal Enterprises 4. Mauli Enterprises 5. MeetiTrade lmpex 6. Motion Tra....
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.... in May and September, 2008. The payment was found to have been made in the subsequent financial year in the month of April, 2009. The payments were made 7-11 months after the date of purchase in respect of two supplies made. 5. Rekha Trading Co. No transaction during the F.Y.2007-08. Purchases amounting to Rs. 1,19,600/- wasmade during the year on 21.03.2009 and the payment was settled on 23.05.2009. 6. Sthapna Trade lmpex Pvt. Ltd. No transaction during the F.Y.2007-08.The ledger extract of this party isavailable in page 80 & 81 of the paper book. During the year appellant had purchased material amounting to Rs. 33,45,771/-. Most of the purchases have been made in the month 'of May, 2008 to January, 2009 and some, purchases have also been made in the month of February & March, 2009. The appellant had made payment-of Rs. 11,44,282/- leaving a closing balance of Rs. 22,01,489/-. In the Subsequent financial year purchases amounting to Rs. 9,24,650/- was made. The opening balance as on 01.04.2009 along with purchases, made during the year amounting to Rs. 31,26,139/- together was settled during the subsequent Financial year 2009-10. Pa....
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.... Enterprise No transaction during the F.Y.2007-08. Out of the total purchases made of Rs. 3,95,616/- during the year, payment amounting to'Rs.2,61,768/- was made in the month of May and the balance payments have been made in the month of March, 2009. The purchases made on 13.03.2009 Rs. 1,33,848/- remained as closing balance which was paid on 23.05.2009 in the subsequent financial year. Payments have been made beyond 3 months of purchase. 12. Mihir Sates Pvt. Ltd.: No transaction during the F.Y.2007-08. During the F.Y.2008-09 relevant to the A.Y.2009-10 the appellant had purchased goods worth Rs. 1,89,8001- in the month of December, 2008 and January, 2009 which remained as closing balance. During the financial year 2009-10 purchases amounting to Rs. 11,61,754/- was made. The appellant had made payment of Rs. 12,03,054/- and the purchases made during August, 2009 amounting to Rs. 1,48,500/- remained outstanding as on 31.03.2010. During F.Y.2010-11 the outstanding balance was settled by the appellant. The payment was found to have been made beyond 6 months after the purchase. 13. K. C. Enterprise No transaction during the F.Y.2007-08. ....
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....nding was repaid by the appellant. This clearly indicates that the appellant had transaction only during the assessment year and no transaction either before or after this year. The payment for purchase was made beyond six months after the purchase. There were no transactions during F.Y.2007-08. 3. The AR of the appellant was directed to file-the ledger extract of some of the top regular suppliers to analyse the payment pattern and the details filed are available in pages 47 to 65 of the paper book. The details of purchases and the payment made are as under: 1. M/s R.T. Instruments : During the year the appellant had made purchases amounting to Rs. 1,41,68,921/- out of which a sum of Rs. 1,35,70,590/- was settled during the year itself, leaving a meager balance of Rs. 5,98,331/- as outstanding balance as on 31.03.2009 which were mostly the purchases made in the month of March, 2009. The payment pattern indicates that the appellant had settled the payments on month to month basis and, therefore, the payments were found to have been made within 30 days of the supply. 3.1. Similar is the picture with other lop suppliers ViZ LCGC Cromotography Solutions....
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....balance of Rs. 9,20,014/-. The purchases made,, on 12.07.2009 Rs. 57,684/- was settled on 05.11.2010. The pur cha ses made on 05.12.2009 41,92,722/ - was set t led on 19.02.2010. The purchases made in the month of July, 2009 was found to have been settled on 31.03.2010. The purchases made in the month of September , 2009 to February, 2010 remained outstanding. The outstanding balances were found to have been settled in the month of May to November, 2010. Therefore, the payment pattern shows that bills have been settled beyond three to six months. Copy of invoices filed by the appellant is available in pages 207 to 275 of the paper book. The perusal of the invoices indicates that order no, date and the details of lorry no were left blank. Though the appellant had filed voucher for transport paid which did not indicate the name of the concern. The payment was made by way of cash and it was self- made. 4. Abhilasha Sales Private Limited: No transaction during F.Y.2007-08 and 2008-09. During the assessment year *purchases amounting to Rs. 29,62,357/- was made from this party. The purchases amounting to Psi 52,854/- made on 07.09.2009, was paid on 31.03.2010 and rest other purc....
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....nd also in January, 2010. Copy of the invoices, delivery challan and voucher for transport are available in pages 434 to 463 of the paper book. Order no, date and the details of lorry no in the invoice were left blank. The delivery challan did not indicate the lorry no. and name of the transporter. The voucher for payment of transport charges did not indicate the name of the transporter and it was self made. 7. Ashley Traders Private Limited No transaction with this concern during F.:Y.2007-08 and 2008-09. During the assessment year purchases amounting to Rs. 16,93,953/- was made from April, 2009 to August, 2009. The entire amount was outstanding as of 31.03.2009 and it was settled in the subsequent financial year in the month of May, 2010 to December, 2010. In some instance the payment was made even beyond 1 year after the purchase. During the F.Y.2010-11 materials worth Rs. 9,13,365/- was purchased from this party all in the month of April and May, 2010 and payments have been made in the month of January to March, 2011. Copy of invoices indicates that order no, date and the details of lorry no were left blank. The delivery challan did not indicate the lorry no. and name ....
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....ses amounting to Rs. 5,64,751/- on 17 & 24.12.2010 and the entire amount remained outstanding as closing balance. During the F.Y. 2011-12 the payments have been made in the month of May & September, 2011. Therefore, the payments have been made beyond five months to eight months after the purchase. 2. Everready Marketing Private Limited: The perusal of the ledger indicates that the appellant had purchased goods worth Rs. 15,88,202/- during the year. The opening balance carried from the previous year was Rs. 9,20,014/-. During the year payment to the tune of Rs. 18,45,776/- was made leaving a closing balance of Rs. 6,62,440/-. Part of the purchases made during the month of April and May, 2010 was paid in September and January, 2011. During the F.y.2011- 12 the balance Rs. 6,62,440/- was settled in the months of June to August, 2011 which pertain to part of the purchases made in the month of May, 2010. Therefore, the appellant took more than a year to settle the payment. Invoice and delivery challan pertaining to this assessment year of this party was not furnished by the appellant. 3. Abhilasha Sales Private Limited :- During F.Y.2010-11 purchases to the tune of Rs. 15,32....
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....the year purchases amounting. to Rs. 85,53,209/- was made from this party. Opening balance of Rs. 4,39,105/- as on 01.04.2010. A sum of Rs. 74,14,174/- was paid during the year leaving a balance of Rs. 11,82,945/-. 6. Thus with regard to the regular suppliers, the appellant availed the credit limit of less than 90 days for payment, whereas in the case of al leged bogus suppliers there was an abnormal extension of credit period noticed, which in some cases had extended upto one year. Going by the market practices credit limit of 3. months is considered as normal. More over no prudent businessman would extend the credit limit beyond 6 months to 1 year in a tight market conditions. Therefore, going by this circumstantial evidence one can come to a reasonable conclusion that suppliers are bogus. The payment pattern itself indicates the bogus nature of the transact ion. Applying the human probabil ity and the circumstant ial evidence, it can be concluded that the supplies by th6above parties are bogus. 6.1 I f ind the AO did not make any independent investigat ion/enquiry by issue of notice u/s. 133(6) except in the case of Mihir Sales Pvt. Ltd. or summon u/s 131 to ascertain the ....
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....). The assessee was engaged in the business of trading in finished fabrics. The AO disallowed, purchase amounting to Rs. 40,69,540/- as bogus/unexplained. The CIT(A) confirmed the action of the AO. The issue was carried in appeal before the Hon'ble tribunal which concurred with the finding of the revenue authorities below that such purchase was made from bogus parties. After adverting to the facts and data placed before it, the Hon'ble Tribunal noted that the entire 1,02,514 metres of cloth was sold during the year and 'therefore accepted the assessee's content ion that finished goods purchased by the appellant may not be from the parties shown in the accounts but from other parties. In view of this the Hon'ble ITAT was of the view tfit only profit margin embedded in such purchases would be subjected to tax. The Hon'ble Tribunal relied Op earlier decision in the case of M/s. Saket Steel Trader s Vs. ITO ( ITA No.2801/Ahd/2008 dt . 20/5/2008) and al so made reference to the decision in the case of Vijaya Protein Vs. GIT 56 ITD 425 (Ahd.). On appeal by the Department, the Hon'ble HC of Gujarat dismissed the appeal. The head note is as under: Income from....
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....edly made were bogus was essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished fabrics. Therefore, as a natural corollary, not the entire amount covered under such purchases, but the profit element embedded therein would be subject to tax". 6.5 In the case of MIs Sanjay Oilcake Industries v. Commissioner of Income-tax reported in 316 ITR 274(Guj), the Hon'ble court had upheld the action of the CIT(A) and ITAT in determining estimated addition of 25% of the purchases in cases involving bogus purchases. The head note is as under- Assessment-Income from undisclosed sources--Additions on account of inflated purchase price--Estimate--Not a question of law--No material produced by assessee to disprove inflated purchases-Tribunal's order in accordance with law-Income-tax Act. 1961. Whether an estimate should be at a particular sum or at a different sum, can never be a question of law. For the assessment years 1984-85 and 1985-86, the Assessing Officer made additions to the income of the assessee on account of inflated purchase price of oilcakes. The Commi....
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.... Income from undisclosed sources--Assessee trading in steel-Finding that some purchases recorded by it were not bogus but from other parties not recorded in books- Estimation of profit element embedded in purchases-Tribunal justified in estimation on the basis of facts-Income-tax Act, 1961. ' The assessee was engaged in the business of trading in steel on wholesale basis. During the course of the reassessment proceedings for the year 2006-07, the Assessing Officer noticed that some of the suppliers of steel to the assessee had made their statements on oath to the effect that they had not supplied the steel to the assessee but had only provided sale bills. In turn, they were receiving a small commission. The Assessing Officer concluded that the total purchase of Rs. 41,04,903 cumulatively made from the three parties were bogus. He thus treated such purchases as bogus purchases and added the entire amount of Rs. 41,04,903 to the gross profit of the assessee. He also rejected the books of account and estimated the assessee's business profits at Rs. 5 lakhs. The Commissioner (Appeals) held that the assessee had made purchases from other parties in the open market. There....
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.....5% to 25% has been upheld by the Hon'ble Gujarat High Court depending upon the nature of the business. As held in the case of Simit P. Sheth (supra) no uniform yardsticks could be applied to 'estimate the rate of profit and it vary with, the nature of business. Taking all the facts into consideration and the findings of the Hon'ble Courts on this issue, I am of the view that estimation of 15% of profit would meet the ends of justice. Therefore, I estimate profit @ 15% of the total alleged bogus purchase as income of the appellant which is worked out as under:- Sr. No. A.Y. Total Bogus Purchases Estimated profit @ 15% of the purchases Balance Relief 1 2009-10 1,56,47,527 23,47,129 1,33,00398 2 2010-11 93,86,559 14,07,984 79,78,575 3 2011-12 68,94,851 10,34,228 58,60,623 Ground No. 1 & 2 raised in all the three years are, therefore, partly allowed." 2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analy....