TaxTMI 
TaxTMI 
2017 (6) TMI 514
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...., MS. SUSHMA CHOWLA, JM Appellant by : Shri C.H. Naniwadekar, Shri M.S. Kulkarni, Shri Nilesh Khandelwal, Smt. Deepa Khare, Shri Sanket Joshi, Shri M.K. Kulkarni, Shri Pramod Shingte Respondent by : Shri Suhas Kulkarni, Shri Hitendra Ninawe ORDER PER SUSHMA CHOWLA, JM: The bunch of appeals filed by the respective assessees are against separate orders of CIT(A) relating to different assessment years against orders passed under section 143(3) / 143(3) r.w.s. 147 of the Income-tax Act, 1961 (in short 'the Act'). 2. All the appeals relating to the different assessees were heard together and are being disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts and issue in the case of M/s. Chhabi Electricals Pvt. Ltd. in ITA No.795/PUN/2014 to adjudicate the issue first. 3. The assessee in ITA No.795/PUN/2014 has raised the following grounds of appeal:- "1. The Ld. Commissioner of Income Tax (Appeals) -2, Nashik [hereinafter referred to as "Ld. CIT(A)"] erred in passing the order dated 17.02.2014 confirming the action of the Ld. A.O. in making the addition of Rs. 3,23,691/- treating the same as bogus purchases without app....
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....er the Assessing Officer, clearly shows that the transaction was fake transaction of purchases through hawala dealer. The transaction was held to be a sham transaction and addition of Rs. 3,23,691/- was made to the income of the assessee. 5. Before the CIT(A), the assessee pointed out that it was engaged in the manufacturing and trading in battery chargers & battery, accessories, L.T. Transformers, Voltage Regulators & L.T. Switch gears, DC DB etc. The assessee further pointed out that it had received physical delivery of goods from the said supplier and the payment was made by way of account payee cheque only. The VAT was collected by the said supplier from the assessee in its invoice but the same was not paid by the supplier and the assessee agreed to pay the VAT. However, that does not make the purchases to be fake. The assessee made another submission also and the said submissions were forwarded to the Assessing Officer to his comments. The Assessing Officer in the remand report dated 16.12.2013 notes that the assessee had submitted the information with regard to the goods received and material issued and the accounts statement of the concerned party. The Assessing Officer als....
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....genuine parties, then the assessee was held to have failed to discharge its responsibility and failed to substantiate its claim of genuine purchase of goods. The CIT(A) further held that where the assessee knew the transaction to be not genuine, it paid the sales tax when the scandal of sales tax (fraud) came into open. The CIT(A) upheld the order of Assessing Officer holding the above purchase transactions to be bogus. 7. The assessee is in appeal against the order of CIT(A). 8. Shri C.H. Naniwadekar, the learned Authorized Representative for the assessee appearing for M/s. Chhabi Electricals P. Ltd., pointed out that the assessee was a private limited company, which was engaged in the manufacture of battery chargers. The total turnover of the assessee company was about Rs. 18-19 crores and the assessee had declared gross profit of Rs. 70 lakhs for the year under consideration. The learned Authorized Representative for the assessee pointed out that the factory of assessee was at Jalgaon and it had purchased switches from M/s. Siddhi Vinayak Traders, which was based in Thane. All the items were of raw material. He further referred to the documentation relating to the transit of r....
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....ther, reference was made to the Pune Bench of Tribunal in ITO Vs. Shri Purushottam Shankar Kulkarni in ITA No.991/PN/2012, relating to assessment year 2009-10, order dated 07.04.2016, wherein also in the absence of any stock details, following the ratio in earlier decision, the Tribunal upheld the entire addition of bogus purchases in the hands of assessee. However, the Pune Bench of Tribunal in M/s. Chetan Enterprises Vs. ACIT in ITA Nos.365 & 366/PN/2016, relating to assessment years 2010-11 & 2011-12 and in M/s. Patco Precision Components Pvt. Ltd. Vs. ACIT in ITA No.695/PN/2009-10, relating to assessment year 2009-10, order dated 31.08.2016 had made addition on account of estimation of GP @ 10% over and above the GP declared by the said assessee, where the assessee had established the delivery of goods and its sales or consumption. However, the Tribunal held that no addition is warranted if the copy of the statement is not given to the assessee. 11. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the ratio laid down by the Hon'ble High Court of Rajasthan in Indian Woollen Carpet Factory Vs. ITAT & Ors. (2003) 260 ITR 658 (Raj). 12....
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....furnished at pages 5 onwards, wherein the copy of bills and the delivery challans are attached. The learned Authorized Representative for the assessee pointed out that the assessee had complete information in respect of trail of so called purchases made from the hawala dealers and its delivery and further its utilization. The learned Authorized Representative for the assessee also admitted that all these details could not be furnished before the Assessing Officer. However, he pointed out that the matter may be sent back to the file of Assessing Officer for verification. 18. The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A). 19. In the case of Golden Crest Marketing Network P. Ltd., none appeared on behalf of the assessee. The Assessing Officer vide para 4 states that information was sought under section 133(6) of the Act, which was returned. Admittedly, no further letter was sent but the CIT(A) has added only 25% of bogus purchases as income of the assessee. The Revenue is not in appeal against the relief allowed by the CIT(A), was fairly admitted by the learned Departmental Representative for the Revenue. 20. Smt. Deepa Khare, the le....
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....ted out that this was the case where copies of statements were not supplied to the assessee, which was relied on to make the addition in the hands of assessee and hence, no merit in the aforesaid addition. He further referred to the page 9 of the Paper Book, wherein before initiating proceedings under section 148 of the Act, a detailed note was submitted, thereafter, notice under section 148 of the Act was issued and the assessee asked for information on which basis the said notice under section 148 of the Act was issued. The Assessing Officer at page 6 points out that information cannot be provided to the assessee. The assessee points out that during the course of assessment proceedings, the assessee again asked for the information and made repeated requests for confronting the evidence relied upon, which has not been furnished to the assessee. He stressed that where the copy of statement relied upon has not been provided, then such material cannot be used against the assessee. Reliance in this regard, was placed on the ratio laid down by the Hon'ble High Court of Bombay in H.R. Mehta Vs. ACIT in Income Tax Appeal No.58 of 2001, judgement dated 30.06.2016. 25. The learned Departm....
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....in appeal in the said case. 30. In the case of Shri Kailash Radheshyam Sharma, Shri Pramod Shingte appeared for the assessee and pointed out that though the assessee is trader in goods but the exact trail of purchases made and consumed are available. He further pointed out that the assessee had filed confirmation of the said party, which is placed at page 29 of the Paper Book. He further referred to purchase bills along with lorry receipts and also the sale bills, wherein some truck numbers were mentioned. The learned Authorized Representative for the assessee stressed that where the assessee was maintaining complete details, then there is no merit in making any addition in the hands of assessee. He also pointed out that VAT amount which was not paid by the said dealer has been paid by the assessee. He relied on the decision of the Pune Bench of Tribunal in Siddarth Engineering Corporation Vs. ACIT in ITA No.1502/PN/2013, relating to assessment year 2009-10, order dated 29.12.2015 31. Shri M.K. Kulkarni, learned Authorized Representative for the assessee appearing in the case of Flow Control Pumps & Systems Pvt. Ltd., pointed out that the so called bogus purchases has duly been c....
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....la dealers, where the assessee had failed to furnish any evidence of delivery of goods or produce any confirmation whatsoever was decided and then the purchases were held to be non-genuine by the Pune Bench of Tribunal in Shri Mukeshkumar Pukhraj Mehta Vs. ITO (supra), wherein it was held as under:- "10. We have heard the rival contentions and perused the record. The assessee for the year under consideration was engaged in the business of trading in hardware and fittings. The total turnover declared 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 sai....
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....d inaccurate particulars of income and also concealed the particulars of income, penalty proceedings under section 271(1)(c) of the Act were separately initiated by the Assessing Officer. 11. In the facts and circumstances of the present case, when the assessee at first instance was confronted by the Assessing Officer to prove the genuineness of its purchases made from the parties, who were listed as bogus parties by the Sales Tax Department for non-payment of VAT, the assessee showed his inability 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 p....
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.... turn, were sold by the assessee. The assessee is engaged in the business of trading in hardware and fittings under the name and style of M/s. Arihant Tubes Fittings i.e. the assessee claimed to have made the purchases from certain parties, which in turn, were sold by the assessee. However, the assessee is unable to produce any evidence with regard to the movement of goods i.e. any supporting documents showing the transport of goods from the parties at Mumbai to the assessee's premises at Bhosari, Pune. 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 rais....
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.... assessee had not maintained any stock details and in the absence of complete stock details of purchases, sales, opening and closing stock being made by the assessee and in the absence of any evidence having been filed by the assessee to establish the movement of goods, mere re-conciliation of purchases with the sales on a particular date, has no evidentiary value. The assessee is unable to establish that the goods purchased by it were sold to a particular person on the given date. No reliance 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 ....
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....eedings, the assessee himself admitted that the entire purchases may be added in his hands as it was made from the bogus parties. On a later date, before the CIT(A), he for the first time raised the principle of matching concept, but does not furnish any details. Before us, he claims all the bills were filed with him, under which, he has tried to match the purchases effected from the hawala dealers to the corresponding sales, but no other evidence of how he has matched the two is brought 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....
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....d by the Tribunal, in view of the following factual positions:- (i) Letters of confirmation from suppliers were filed (ii) Copies of Bank statement showing entries of payment through A/c payee cheques to the suppliers. (iii) Stock statements with complete details of opening stock, purchases, sales and closing stock were filed. (iv) Substantial amount of sales were made to the Government Departments like Defence Research and Development Laboratory, Hyderabad. 18. The Hon'ble 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 non-genuineness 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 Offic....
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....entative for the assessee before us was that where the payments to the selling dealer were made by cheque, then in the absence of any evidence being available with the Assessing Officer to show that the cheques issued in favour of the selling dealers for purchases effected by them, have come back to the assessee, no addition could be made. As pointed out by us, in the facts of the present case, the assessee had admitted to the addition of the purchases made from the aforesaid parties before 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....
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.... payee cheque to the suppliers was filed along with stock statements with complete details of opening stock, purchases, sales and closing stock were filed and where substantial amount of sales were made to the Government Department, merely because the parties could not be produced, the addition could not be upheld in the hands of assessee. Since in the facts of the case before the Tribunal, the assessee had not maintained any stock details nor produced any evidence of goods delivery to him and further, where the assessee when confronted had admitted before the Assessing Officer that the purchases may be treated as bogus and amount may be added in his hands, the Tribunal applying the ratio of Shri Mukeshkumar Pukhraj Mehta Vs. ITO (supra), had upheld the addition in the hands of assessee. Retraction of the statement made by the assessee before the Assessing Officer was not allowed where the assessee has failed to discharge the onus. 37. The issue of bogus purchases further arose before the Tribunal in M/s. Chetan Enterprises Vs. ACIT (supra) and in M/s. Patco Precision Components Pvt. Ltd. Vs. ACIT (supra), wherein the case of the assessee was that in the absence of the Assessing O....
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....rchases which were backed by purchase bills and evidence of transportation, where the assessee had also made available the evidence of sale of the said goods and where the assessee had claimed the benefit of VAT, then the Tribunal held that addition is to be made to the extent of 10% of the alleged hawala purchases over and above the GP shown by the assessee in its books of account. The Tribunal also referred to its earlier decision in M/s. Kolte Patil Developers Ltd. Vs. DCIT (supra) and Shri Mukeshkumar Pukhraj Mehta Vs. ITO (supra) held that in view of the facts of the case, the said principles were not applicable. The relevant findings of the Tribunal are as order:- "9. On perusal of record and after hearing both the learned Authorized Representatives, the issue which needs adjudication in the present appeal is in relation to the purchases made by the assessee. The assessee claims that the purchases were made in the regular course of carrying on the business from parties who were registered with the Sales Tax Department and had VAT number. However, the Sales Tax Department had declared them to be hawala dealers i.e. parties who were registered with the Sales Tax Departm....
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....ssee to explain the purchases from six parties on the basis of information received from the Sales Tax Department. The list of parties totaling Rs. 31,98,665/- is as under:- Name of the Party mount 1) Sandoz Steel 10,79,483 2) Adijin Enterprises 2,39,460 3) Hiten Enterprises 2,30,583 4) Bhavani Trade Link 3,42,417 5) Mercury Enterprises 3,76,239 6) Amar Enterprises 9,30,483 Total 31,98,665 10. However, the Assessing Officer except for providing the statements of three parties i.e. proprietor of Hiten Enterprises, proprietor of Mercury Enterprises and proprietor of Bhavani Trade Link, wherein the purchases totaled to Rs. 9,49,240/-. No documents or papers in respect of purchases from Amar Enterprises of Rs. 9,30,483/-, Sandoz Steel of Rs. 10,79,483/- and Adijin Enterprises of Rs. 2,39,460/- has been confronted to the assessee. In the frist instance, the basic principle of natural justice demand that in case any document is to be used against the assessee, then the same should be confronted to the assessee before it can be relied upon. The assessee admittedly, had asked for statements and / or any other documents which have not been supplied to the assessee.....
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....ighbridge bills, copies of transportation bills and further, where the assessee has also made available the evidence of sale of said goods which were purchased from six parties, then prima facie the assessee has established its case. Another aspect to be kept in mind is that the assessee has also on its own motion not claimed the benefit of VAT which has not been deposited by hawala dealers and has revised its return of income filed under MVAT Act. The factum of purchases being made by the assessee stands established in view of such circumstances. However, the benefit of purchases being made from grey market, needs estimation in the hands of assessee. In this regard, the order of CIT(A) is confirmed in estimating the addition @ 10% of alleged hawala purchases. The quantum of hawala purchases would be worked out by the Assessing Officer after giving reasonable opportunity of hearing to the assessee, in line with the directions hereinabove. 12. Now, coming to the ratio laid down by the Tribunal in Kolte Patil Developers Ltd. Vs. DCIT (supra), wherein the statements of hawala suppliers were recorded by the Assessing Officer and were confronted to the assessee and the opportunity of ....
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.... the purchases are admittedly made from hawala parties. The Assessing Officer is directed to compute the quantum in respect of evidences furnished by him to the assessee in the form of statements recorded of the other persons. Where no such statements or any other evidence in respect of any person is made available to the assessee, then such quantum is not to be included in the hands of assessee for computing addition on this count. The grounds of appeal raised by the assessee in both the appeals are allowed as indicated above. ITA No.695/PN/2016 (Assessment Year : 2009-10) 14. The present appeal was also heard along with other two appeals. The learned Authorized Representative for the assessee fairly pointed out that the issue arising in the present appeal is identical to the issue in the said appeals except for the fact that in the present case, the alleged purchases were made from one party M/s. Vitrag Traders Pvt. Ltd., Mumbai to the tune of Rs. 13,48,537/-. The assessee had asked for copies of statements recorded by the Sales Tax Department of the suppliers and to allow cross-examination. The Assessing Officer in the present case has also not supplied the said statements t....
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.... the other evidences were filed and merely because the parties were not produced by the assessee, addition could not be upheld in the hands of assessee. 40. In view of the above said ratios, the present issue of bogus purchases is to be decided on the basis of facts of each case. The first aspect is the information received by the Assessing Officer from the Sales Tax Department in respect of alleged hawala dealers. In many cases, the Assessing Officer has not even received the copy of statement recorded or any other evidence from the Sales Tax Department, except the list of hawala dealers and on the basis of the said list, the assessment proceedings have been completed in the hands of assessee, who had made the purchases from the said parties. In case, no such evidence has been received by the Assessing Officer before making addition, then there is no warrant in making aforesaid addition in the hands of assessee merely on the basis of so called list of hawala dealers. There are other cases, where the Assessing Officer had received the statement of the persons who were hawala dealers and who had admitted to have just issued bills of sale without delivery of goods. In such circumsta....
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....the list prepared by the Sales Tax Department, where the assessee had asked for the said information during assessment proceedings. II. Where the Assessing Officer had received the statements of persons who had admitted to have just issued bills of sale without any delivery of goods. In view of such evidence, where the assessee had not entered into real transaction of purchase of goods and in the absence of any delivery of goods, the sales are bogus and the entire sales are to be added in the hands of assessee. Admittedly, the dealer had not even paid VAT against such passing of goods. III. The case where the Assessing Officer had confronted the information received from the Sales Tax Department and had supplied copies of statements recorded and had also issued notice under section 133(6) of the Act, where hawala dealer was not traceable and in the absence of the assessee failing to file any documentary evidence of delivery of goods, addition is to be upheld in the hands of assessee on account of such bogus purchases. IV. The next instance is the case of goods which have been admittedly sold by the hawala dealer and has been received by the assessee, who in turn had maintaine....
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....livery of goods i.e. purchase from hawala dealer and its onwards consumption in the manufacturing process of the assessee. In such circumstances, where the assessee has established the trail of goods purchased to the final consumption, then there is no merit in the addition made by the Assessing Officer. Thus, the grounds of appeal raised by the assessee, are allowed and appeal of the assessee is allowed. 43. Similarly, in the case of Maa Saraswati Steel Industries, the argument of the learned Authorized Representative for the assessee was that the copy of statement has not been supplied nor any evidence has been confronted to the assessee. The assessee was also maintaining inward records of goods purchased and their consumption in items, which are excisable in nature. Following the reasoning in M/s. Chetan Enterprises Vs. ACIT (supra), the addition is deleted. The grounds of appeal raised by the assessee are thus, allowed and hence, appeal of assessee is allowed. 44. The facts and issue in Mahendra Shantilal Chaturmutha, HUF are also similar, wherein the assessment was reopened under section 148 of the Act. The assessee time and again asked for information and also made request ....
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....on from whom the purchases were made. In the absence of the same, the addition made on account of bogus purchases is to be upheld, following the ratio laid down in Shri Mukeshkumar Pukhraj Mehta Vs. ITO (supra). Both the appeals of assessee are thus, dismissed. 48. In the case of M/s. Modern Enterprises, the learned Authorized Representative for the assessee has furnished additional evidence in respect of purchases made from hawala dealers and its delivery and further utilization, and had made a request that the matter may be sent back to the file of Assessing Officer for verification. The matter is sent back to the file of Assessing Officer who shall after verifying the evidence available with the assessee in line with the direction in para 40 decide the issue. The appeal of assessee is allowed for statistical purposes.s 49. In the case of Golden Crest Marketing Network Pvt. Ltd., the assessee failed to furnish any evidence of trail of goods and the CIT(A) has restricted the addition to 25% of the bogus purchases as income of the assessee. The assessee has failed to controvert the findings of CIT(A) and has even failed to appear on the appointed date of hearing. This is case whe....
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....baxni, the assessee is in appeal but none appeared on behalf of the assessee. However, the CIT(A) has applied GP rate at 25% on bogus purchases. This is case where the bogus purchases are to be added but the Revenue is not in appeal. The grounds of appeal raised by the assessee are thus, dismissed and appeal of assessee is dismissed. 53. The Revenue is in appeal in the case of Shri Rajesh Jayantilal Shah, wherein the CIT(A) has applied GP rate of 15% on bogus purchases. The plea of the assessee before the Tribunal was that the GP rate of 15% was higher. Since the assessee is not in appeal, order of CIT(A) is upheld and appeal of Revenue is dismissed. 54. In the case of Shri Kailash Radheshyam Sharma, where the Revenue is in appeal against the order of CIT(A) and assessee has filed Cross Objections. The facts in Shri Kailash Radheshyam Sharma are at variance, where in addition to filing the trail of purchases made from the hawala parties, the assessee claims to have filed confirmation from the said dealer, who acknowledged the amount received against the said purchases by way of different cheques on different dates. The learned Authorized Representative for the assessee in this re....