TaxTMI 
TaxTMI 
2017 (10) TMI 1250
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....s tax department that certain dealers are indulging in providing only accommodation bills without actually supplying materials and upon noticing that the assessee has purchased goods from such dealers during the years relevant to AY 2009-10 and 2010-11, the assessing officer reopened the assessments of both the years. It was noticed that the assessee has purchased goods to the tune of Rs. 1,40,13,513/- and Rs. 3,77,91,277/- respectively during the years relevant to AY 2009-10 and 2010-11. 3. During the course of assessment proceedings, the assessing officer issued notices u/s 133(6) of the Act and also summons u/s 131 of the Act to the suppliers, but all of them were returned back unserved. The assessee was asked to produce the suppliers, but the assessee also could not produce them. However, the assessee submitted the details available with it like purchase bills and payment details and contended that the purchases were genuine. The AO noticed that the assessee has paid the VAT tax liability arising out of accommodation bills by accepting the same, since the suppliers had failed to remit the same. The AO also noticed that the above said suppliers have also confessed before the sa....
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....ed that the AO has not found fault with the evidences furnished by the assessee to prove the genuineness of purchases. It was also contended that there was no evidence to show that the money given for purchases has flown back to the assessee. It was further submitted that the Gross profit rate of the assessee disclosed at 13.77% would also increase to a very high figure of 23.53%, if the addition made by the AO is sustained. He submitted that the addition may, at the most, be sustained to the extent of VAT rate of 4%. The assessee also placed his reliance on the following decisions to support its contentions:- (a) CIT Vs.Nikunj Eximp Enterprises P Ltd (2013-TIOL-04-HC-MUM-IT) (b) Shri Rajeev G Kalathi (ITA Nos.6727/Mum/2012 & 06/Mum/2014) (c) Jagdamba Trading Company (ITAT Jodhpur 107 TTJ 398) (d) ITO Vs. Permanand (107 TTJ 395)(Jodhpur) (e) Dy. CIT Vs. Adinath Industries (252 ITR 476)(Guj). The assessee also relied upon certain other case laws to buttress its contentions. Accordingly it was prayed that the addition made by the AO should be deleted. 5. In AY 2010-11, the assessee, in addition to the contentions made in AY 2009-10, contended before the Ld CIT(A) that the....
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....so not correct. He submitted that the sales tax department has written a letter to the assessing officer, which has also been incorporated in the assessment order passed for AY 2009-10. In that letter, the sales tax department has pointed out only about the default committed by the suppliers in payment of tax. It nowhere states about nonsupply of goods or non-existence of parties. He further submitted that the statement given by the suppliers before the sales tax authorities is a self serving statement given by them in order to escape from the tax liability and hence the same cannot be used against the assessee. He further submitted that the suppliers have not responded to the notices as well as summons issued by the AO. The assessee has been purchasing materials from many persons through his purchase department and he does not have direct relationships with them. When the suppliers could not be located by the assessing officer, how the assessee could ensure their presence. He submitted that the Hon'ble Bombay High Court has held in the case of Nikunj Eximp Enterprises p Ltd (supra) that the addition could not be simply on the reason that the assessee could not produce suppliers. A....
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....made from them as bogus or non-genuine. The Assessing Officer has primarily relied on the conclusions drawn by the Sales Tax Authorities on the basis of the statements given before these authorities and reliance on such statements only to treat purchases made from the above parties as bogus, cannot be held to be justified. The information received from the sales tax authorities was a piece of evidence to initiate in-depth independent investigation on the issue, which the Assessing Officer did not carry out. The Assessing Officer has simply proceeded to add back the purchases made from the above parties on the basis of the information received from Sales Tax Authorities without making further enquiry on the given set of facts and circumstances and without appreciating the evidences submitted by the appellant in respect of the purchases made from the 10 alleged bogus parties. 28. It is an admitted fact that the Sales Tax Department has categorized certain parties who have failed to pay sales tax/VAT as 'suspicious dealer'. But categorizing these parties as 'suspicious dealer and the non-payment of VAT by such parties would not automatically lead to the conclusion that ....
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....hese purchases are suo-motto bogus. The appellant has shown these purchases in its regular books of accounts which are audited and the Assessing Officer has not found any faults with the maintenance of the books of accounts of the appellant and has also not rejected these books of accounts. In the absence of the existence of any defects in the books of accounts, the purchases entered in these books of accounts under the name of such parties cannot be treated entirely as bogus purchases. 31. Further the evidences placed on record by the appellant such as bills/invoices, ledger account of these parties, cannot be set aside summarily without making any independent investigations in respect of these evidences submitted The inquiries could have been made from the area around the addresses given by the such parties from where they were carrying their businesses regarding the existence of these parties at the given addresses. No such enquiries were made by the AG to prove the non-existence of these parties. In view of the above fact, even if the parties issuing these bills/invoices are not available for verification at the addresses mentioned on the bills, it cannot lead to the conclus....
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....le nature of transactions of these purchases from the parties in question as they were not found available at the given addresses at present. Thus the purchases prices shown on these invoices are not subjected to verification and as such it was difficult to establish the correctness of the purchase prices paid for the materials purchased from them. Such verification of the sale price shown on the invoices/bills was necessary to-ascertain the correctness of the profits shown by the appellant for the period under consideration. This verification was also vital to determine as to whether the purchase prices shown on the bills/invoices, are as per prevailing market prices of the materials purchased and to ascertain that the price paid for the materials purchased from these parties is not over invoiced. In the absence of any such verification of the correctness of the price paid for the materials purchased by the appellant, the purchase price paid as mentioned on the invoices/bills cannot be accepted as the correct price paid for the goods purchased from such parties In view of the same, the possibility of overinvoicing of the materials purchased to reduce the profits, cannot be ruled o....
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....s from suspicious/declared hawala dealer is worked out for the period 2006-07 to 2009-10. The tax liability including interest which is worked out at the time of visit is attached herewith. Dealer has accepted the tax liability communicated by this office and paid the same after adjusting refund amount." (* trade name of the assessee) A perusal of the reply given by the sales tax officials would show, that the same talks about the tax liability, meaning thereby, it was a case of non-payment of tax collected by the suspicious/declared hawala dealers. The sales tax official has, nowhere, stated that the suspicious/declared hawala dealers have not supplied goods or they were non-existent. The contention of the assessee is that the suppliers have given general statement before the sales tax authorities in order to escape from the tax liability, meaning thereby, the case of the assessee is that the suppliers have supplied goods to the assessee and further there is no specific statement given by the suppliers against the assessee. 14. The Ld A.R placed his reliance on the decision rendered by the coordinate bench in the case of M/s Geolife Organics & others (ITA No.3699/Mum/2016 & ....
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....that it could correlate purchases with sales. Hence the observations made by the co-ordinate bench would apply to the facts of the present case also. Under these set of facts, we agree with the view taken by Ld CIT(A) that the addition should be restricted to the profit element, if any, embedded in the purchase transactions. 15. The Ld A.R has contended that no addition is called for. In the alternative he submitted that the co-ordinate bench has estimated profit at 2% in the case of M/s Geolife Organics (supra) and accordingly prayed that the addition may be restricted to 2%. In our view, the quantum of addition would depend upon facts available in each case. In our view, the entire addition cannot be deleted in view of the fact that the assessee could not produce the parties before the AO and hence it cannot be said that the assessee has conclusively proved the genuineness of purchases. Hence, we are of the view that the assessee might have made some profit in the impugned purchases, which would call for an addition. 16. We have noticed that the Sales tax official has written a reply to the AO, wherein, he was mentioning about the failure of the suppliers to remit the sales tax....