AI Drafter 
TaxTMI 
TaxTMI 
2017 (3) TMI 386
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....p concerns of Shri Rakesh Gupta & family were only accommodation entries and not actual purchases. ii) On the facts and circumstances of the case, the Ld. CIT-A after having accepted the fact that the purchases made from or through Shri Rakesh Gupta and his family members are bogus, erred in law in not confirming the addition at least to the extent of peak of the purchases made from such parties on account of bogus purchases made in cash from the open market out of unaccounted cash, in view of the decisions held by the Hon'ble ITAT's C-Bench, Ahmedabad, in the case of Vijay Proteins Ltd. Vs. ACIT (58 ITD 428). iii) The appellant craves leaves to amend or alter any ground or add a new ground which may be necessary. Assessee's Appeal: The common grounds of appeal as under: On the facts and circumstances of the case, and in law, the Ld.CIT-A-25, Mumbai, erred In directing the AO to make an ad hoc addition representing 10% of the purchases alleged to be bogus by the AO to cover up the difference of GP in recording the said purchases as well as to plug any leakage of revenue" and the addition retained by him be deleted in to. The assessee-appellant craves leave ....
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.... purchase bills are prepared by themselves by getting the bill books printed in the names of fictitious firms. From the materials collected during the survey action from the premises of the above group concerns, it was found that the assessee, M/s K. Ashok Kumar & Co. has availed/ obtained accommodation (purchase) bills, for the year under consideration, as per the following details:- M/s Manoj Mills Rs. 9,44,331/- M/s Shree Ram Sales & Synthetics Rs. 2,18,589/- M/s Astha Silk Industries Rs. 18,58,845/- Rs. 30,21,765/- On the basis of the materials collected from the survey premises and on the basis of the statements received from the proprietors of the above group concerns, it is clear that the assessee, M/s K. Ashok Kumar & Co. has obtained/availed accommodation bills as shown above in order to inflate the purchases. Hence, the assessee had inflated purchases using bogus purchase bills to the extent of such amounts which has resulted in escapement of assessment of income for A. Y. 2005-06. The case is proposed for re-opening u/s. 147 of the Act, so that the amount of accommodation bills availed for inflating the purchases, without ac....
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....orded on oath u/s 131 on 23.02.2009 and 03.03.2009. The AO assumed that the appellant had availed such accommodation bills to the extent of Rs. 30,21,765/- from the aforesaid parties. The AO, by showing the modus operandi of said group concerns, stated that copies of bills are available with all customers and also cheque payment reflects in the bank statements of both sides of the parties, thus apparently nothing wrong is visible. However, during the course of survey and in statement u/s. 131, it is revealed that the above concerns are only issuing accommodation (sales) bills, and corresponding purchase bills are prepared by them after getting printed by themselves or generated from computer. There was neither any real purchases nor sales but merely issuing of hawala sales bills. The AO reproduced extracts of statement recorded during the survey action u/s. 133A of the main person, Shri Rakesh Kumar Gupta, on 13/14.0202009. The facts of said statement were later re-confirmed under oath u/s. 131, extracts of which were also reproduced by the AO. The AO further stated that there were absolutely no documents/ details in the possession of the said group concerns to prove the '....
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....it was held by AO that the assessee's purchases to the extent claimed to have made from the said group concerns are hawala purchases/ are out of the books purchases, source of which is not explained by the appellant. He concluded that the investments made for these purchases are not reflected in the books of account of assessee and accordingly, the total accommodation bill amount of Rs. 36,00,649/- availed by the assessee was treated as bogus and/ or to inflate the purchase/ accommodate the purchases made out of the books, source of which is not explained. Hence, the entire amount of Rs. 36,00,649/- was added back to the total income of the assessee as unexplained investment as per Sec. 69 of the I.T Act. 6. Up on assessee's appeal Ld. CIT-A held as under: i) I have perused the assessment order, and the facts and circumstance of the case. On plain reading of the assessment order, I find that the AO has basically relied on the statements recorded of Shri Rakesh kumar M. Gupta & others during the course of survey action u/s 133A and subsequently re-affirmed on oath u/s 131 of the Act, to make additions in hands of purchaser party i.e. the appellant in this case. However, th....
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....n which may be drawn in such situation may be that the appellant has recorded some sales in its books of accounts which materials might have been purchased by it in grey market without bills; and to regularize such purchases in grey market, the appellant might have taken accommodation bills from the said parties for purchase of specified material. In fact, the AO in Para 4.3 of the assessment order has stated as under: "In the circumstances, stances, the bills introduced in the books are nothing but colourable device adopted to cover up investment in purchase made from outside the books which attracts the provision of sec. 69 of the IT Act." The aforesaid conclusion reached by AO does not deny, and in fact gives an illusion that purchases have been made by the appellant from outside the books (i.e. in cash) and to cover up such investment in cash, the said bills are introduced in the books. One cannot deny the ground reality that goods may be available in grey market, without bill and by cash, at comparatively lesser prices. v) In such a situation, it would not be justified to make addition of the full amount of purchase made from said parties. Rather, the cause of justice....
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....ates to a sister concern of the assessee operating from the common address. That the issue was identical and was related to same search with relation to the suppliers. He submitted that on identical facts the ITAT has deleted the entire addition. 11. Ld. Counsel further submitted that assessee has submitted all the necessary documents and the payments were made by cheque. That addition has solely been made on the basis of a statement of the suppliers. He submitted that despite request the assessing officer has not granted the assessee an opportunity to cross examine them. Hence the Ld. Counsel pleaded that the addition in this case has been made without following the principles of natural justice as mandated by Hon'ble jurisdictional High Court and Hon'ble Supreme Court as mentioned above. Hence Ld. Counsel submitted that there is no justification for the addition made in this regard and the same should be totally deleted. 12. We have carefully considered the submissions and perused the records. 13. We find that in this case additions have been made on the basis of a statement of suppliers that they were only providing accommodation bills. Despite request assessee has not ....
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.... iii) The assessee submitted bills with delivery challan, the evidence of making payment through account payee cheque. The assessee also filed monthly quantitative stock reconciliation. The assessee was further asked to explain why the bogus purchases made from the aforementioned parties be not added to the income. it was explained by the assessee that the statements given by Shri Rakesh Kumar M. Gupta and his family members are not correct it was further explained that purchases and sales are duly reflected in the books of account of the assessee. it was also brought to the notice of the AO that the Affidavit of Shri Rakesh Kumar M. Gupta and his family members who have denied in the said affidavit about the activity of issuance of bogus bills. The explanation of the assessee did not find any favour from the AO who was of the opinion that the assessee has availed bogus bills amounting to Rs. 10,59.265/-. The AO went on to treat the purchases amounting to Rs. 10.59,265/- from the said Shri Rakesh kumar M. Gupta and his family members as bogus and accordingly added the some to the returned income of the assessee and completed the assessment. iv) Aggrieved by this, the assessee....
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.... the Tribunal to decide a similar issue in favour of the assessee in the case of M/s Pramit Textiles (ITA/3948 to 3953/Mum/2012 and ITA/4012 to 4015 and 4020 to 4021/ Mum/2012 dated 01.10.2013) and Neeta Textiles(ITA/6138-40/Mum/2013, dtd. 27.05.2015). In the cases of Ashish Jobanputra (ITA No.2566/Mum/2013). In the case of Nikunj Exim (supra)the Hon'ble Bombay High Court has dealt the issue of bogus purchases and corresponding sales as under:- We have considered the submission on behalf of the Revenue. However, from the order of the Tribunal dated April 30th, 2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement, i.e., reconciliation statement but also in view of the other facts. The Tribunal records that the books of account of the respondent assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, i.e. Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies o....