TaxTMI 
TaxTMI 
2017 (8) TMI 322
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....tire amount of bogus purchases as assessee's income. In the assessment year 2009-10, addition was made to the tune of Rs. 16,05,936/- whereas in the assessment year 2011-12 addition was made to the tune of Rs. 24,90,080/- u/s.69C of the Income Tax Act. 4. By the impugned order, CIT(A) restricted the addition to the extent of 12.5% of such purchases after observing as under:- "10. I have carefully considered the facts of the case, findings of the AO, submissions of the Ld AR and material placed on record. The Ld. A.R, instead of justifying the genuineness of purchases made from hawala parties, by filing confirmation, other related details etc., he has merely reiterated the fact that the payments have been made through banking channels and against purchases, the corresponding sales have been made. In order to arrive at logical conclusion, the undersigned try to collect the relevant information from the appellant, in the light of decision of the Hon'ble Delhi High Court in the Case of CIT vis Jansampark Advertising And Marketing (P) Ltd, wherein, the Hon'ble Court, inter-alia, held as under:- The AO here may have failed to discharge his obligation to conduct a prop....
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....urchases. c. As regards the appellant's claim that there cannot be any sales without there being corresponding purchases, is also not tenable as the appellant could not reconcile the quantity wise details of purchases from these hawala parties vis. a vis. sales thereof. d. The appellant could not produce proper verifiable documents which could prove physical delivery of goods vis. a vis. corresponding consumption / sales thereof. On the other hand, in the case of regular purchases, on the same set of circumstances, the department had accepted such purchases without questioning their genuineness, as all relevant documents / records have duly been maintained by the appellant. e. If, the practice of booking of bogus bills is legalized, by disallowing nominal percentage or estimating nominal rate of GP / NP of a particular trade, then this may lead to provide an easy weapon in the hands of the manipulative assessee to suppress / manipulate their profit, as and when so warranted. f. The practice of obtaining of fake bills to support the claim of bogus / unverified purchase being followed by the large number of assesses. This malpractice is in the ....
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....onsidering the facts of the cases under consideration, it can safely be concluded that assessee had failed in their efforts in discharging the onus cast upon them. Merely filing name, address, PAN & payments by cheque will not discharge him from the onus especially when the department had received specific material/information from the Sales-tax / VAT department, wherein these suppliers, on oath had admitted the fact that they have merely provided entry I issued bills without physically delivering any goods. In the case of CIT VIs Golcha Properties (Pvt.) Ltd. 227 ITR 39] (Raj) it was held that the genuineness of transaction could be decided on the basis of primary facts on records. The department is not required to lead a clinching evidence to prove that purchases are bogus . In the case of CIT Vs Motor General Finance Ltd. 254 ITR 449 (Del), it was held that since the assessee, despite several opportunities granted, did not produce the relevant documents, an adverse inference had to be drawn against the assessee. As the assessee could not produce any document, an adverse inference in terms of section 114 of the Evidence Act, 1872, had to be drawn to the effect t....
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....required details, the AO could not verify the genuineness of purchases. * Assessee was asked to produce the so-called hawala parties from whom bills were obtained - However failed to do so - sufficient opportunities were given during assessment proceedings as well as during appeal. notices issued u/s. 133(6) - None appeared or could not be served because of defective address. The assessee could not furnish current mailing addresses nor produce any party for examination. I. Estimation of income - Best Judgement assessment - It is held by the Hon'ble Supreme Court in the case of H M Esufali H Abdulla 90 ITR 271 (Sc) :hat if the estimation made by the Assessing Authority is a bonafide estimate and based on a rationable basis, the fact that there is no good proof in support of that estimate is immaterial. Apex court has further held in the case of M/s. Kanchwala Gems Pvt, Ltd. vs JCIT 288 ITR 10 (Se) that it is well settled that in a best judgment assessment, there is always a certain amount of "guess work". There are number of decisions by the various courts, where 25% to 100% disallowance of bogus purchases, have been upheld. Some of t....
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.... (1) Sanjay Oil Cake Industries Vs CIT (2008) 316 ITR 274 (Guj) (2) Vijay Proteins Ltd Vs ACIT 58 ITD 428 (Abad) (3) M/s Nand Kishore Meghraj Jewellers, Jaipur CO. No. lOSIJP/09 arising out of ITA No. 433/JP/2009 by ITAT Jaipur (4) M/s. Trident Jewellers ITAT Jaipur ITA No. 552/JP/2013. Disallowance @ 25% out of Bogus purchases, held as a reasonable in the case of Vijay Proteins Ltd., in view of the fact that the savings occurred to the suppliers on account of sales tax, duties and Income-tax (having MMR of 30%), by buying the goods from grey market at lower rates and booking the purchases at normal rate. the assessee got the benefit of this proportion. In view of this, the disallowance @ 25% is fully justified. Further in the case of M/s. Trident Jewellers Vs. ITO, ITA o. 552iJP/2013, on account of bogus purchases, an addition of 25% of such purchases was confirmed by the Hon'ble ITAT, Jaipur Bench. 10.3 As regards, the case laws cited by the Ld. AR, it is noticed that the facts of the each case are not identical and also not similar to the facts of the case under appeal, The decisions in these cases, are based on the fact....
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....sessee's business. In this case, the Supreme Court observed as under :- "Although there might be such an agreement in existence and the payments might have been made. it is still open to the Income-tax Officer to consider the relevant factors and determine for himself whether the commission said 10 have been paid is properly deductible. In this case absolutely no material on record has been brought by the assessee to suggest that the commission agents had procured any orders for the assessee. The production of bills or payments having been made by account-payee cheques cannot by itself show that (he commission agents had procured any order for the assessee. No correspondence " 10.7 In the above case, the Hon'ble Supreme Court has made it very clear that by creating documents and making payment through banking channel to give colour, does not sacrosanct/establishes the genuineness of the transaction. From the above discussion, it is seen that the various courts have upheld the disallowances of bogus purchases, ranging from 12.5% to 100%, based on the facts of each case. In view of the foregoing discussion, the percentage of disallowance of bogus purchases, ....
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....Pvt. Ltd. vs . .fCIT 288 ITR 10 (SC). 10.10 Considering the above facts and in view of the decision of the Hon. Delhi High Court in the case of CIT Vs. Jansampark Advertising and Marketing (p) Ltd, it is also an obligation on the part of the first appellate authority to ensure that the effective enquiry is carried out, to arrive at logical conclusion. Therefore, the Ld AR was required to furnish the comparative details of GP/NP and GP/NP rates for hawala years, preceding two years and subsequent two years. In compliance, the appellant has submitted the details, which are tabulated, here, as under:- AY 07-08 AY 08-09 AY 09-10 AY 10-11 AY 11-12 AY 12-13 AY 13-14 Sales 38,04,061 57,11,72 3 1,02,43,322 1,31,49,623 1,22,55,601 1,16,48,332 1,55,85,100 Purchases 16,83,681 44,48,30 1 99,45,081 1,14,34,317 97,92,372 78,11,259 80,47,383 Gross profit 5,74,867 6,58,201 9,54,831 13,03,045 15,18,970 15,03,061 16,55,723 % of GP to sales 15.11% 11.52% 9.32% 9.92% 13.50% 12.90% 10.62% Add: Bogus Purchase 0 0 16,05,936 53,42,540 24,90,080 0 ....
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.....5% of the hawala purchases/suppressed GP, in the light of decision of the Hon'ble Gujarat High Court in the case of Simit P Seth, 356 ITR 451. 10.12 In order to ascertain the impact of bogus purchases on GP rate, the appellant was required to furnish the comparative trading details - sales GP, GP rate in respect of regular parties vis-a-vis alleged hawala parties. In compliance, the appellant has submitted as under: A.Y.09-10 Particulars Total Sales Affected Gr. Profit GP Ratio (%) Sales against purchases from regular parties 84,47,322 21,13,640 25.02 Sales against purchases from alleged parties 17,96,000 3,73,780 20.81 Total Sales 1,02,43,322 24,87,420 24.28 Suppressed GP=17,96,OOO x 25.02/100 - GP declared (3,73,780)=Rs.75,579/- A.Y.10-11 Particulars Total Sales Gr. Profit GP Ratio Affected (%) Sales against purchases from regular parties 72,79,966 22,77,241 31.28 Sales against purchases from alleged parties 39,75,635 ....
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.... 12.5% of the total alleged bogus purchase or to the extent the GP fall. The contention of the Ld. AR has been considered and accordingly the year wise appeals of the appellant are decided as under:- A Yr 2009-10 By booking alleged bogus purchases, as compared to the A.Y. 2007-08, the appellant has suppressed its profit by Rs. 5,93,088/- ( 1,02,43,322 x 5.79%). In compliance, the Ld. AR could not offer any valid reasons for fall in the GP rate. Considering the facts in entirety / the appellant being wholesale trader and relying on decisions in the case of M/s. Kanchwala Gems Pvt. Ltd. Vis JCIT 288 ITR 10 (SC), etc, as quoted above, in my considered opinion, the estimation of [email protected]% will be reasonable. The disallowance @ 12.5% of bogus purchases, as requested by the Ld. AR, is worked out at Rs. 2,00,742/- (16,05,936 x 12.5/100), which is less than suppressed GP of Rs. 5,93,088/-, therefore, the disallowance to the extent of Rs. 5,93,088/-(suppressed GP), out of hawala purchases of Rs. 16,05,936/-, is sustained, and balance amount of Rs. 10,12,8481- (Rs 16,05,936/-.,Less Rs. 5,93,088/-), is hereby deleted. Accordingly, all the grounds of appeal, are partly allowe....