TaxTMI 
TaxTMI 
2017 (11) TMI 375
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....8/-, on account of bogus purchases. 3. 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, current mailing addresses, other related details etc., he has merely reiterated the fact that the payments have been made through banking channels and material purchased was consumed vis-a-vis 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 v/s Jansampark Advertising And Marketing (P) Ltd, wherein, Hon'ble Court, inter-alia, held as under:- The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT(Appeals), having noticed want of proper inquiry, could not have closed the chapter simly by allowing the ....
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.... d. The perusal of hawala bills reveals that these are plain bills without any marking or signature of either of receipt clerk or of cashier, who has issued the payment. In the case of regular bills / parties, the payments have been made on regular basis, immediately after purchases, whereas in the case of hawala parties, the purchases have been shown on various dates but the payments have not been made in the manner / pattern, as paid to the regular suppliers. e. 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. f. 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....
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.... name, address, PAN. (ii) By claiming that payments were through banking channels (iii) By claiming that the purchases are reflected in the books of accounts. Considering 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 / issued bills without physically delivering any goods. t _ Case laws relied to support the stand of the department: In the case of CIT V/s Golcha Properties (Pvt.) Ltd. 227 ITR 391 (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. , . The onus of proof at all relevant times rests upon the assessee. It is for the assessee to establish by evidence that a particular a....
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.... 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. j. Estimation of income - Best Judgement assessment - It is held by the Hon'ble Supreme Court in the case of H M Esufali H M Abdulla 90 ITR 271 (SC) that 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 (SC) 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. So. me of them are listed, here as under; 100% disallowance of bogus / unverifiable purchases was upheld, in following cases (i) CIT Vs LaMedica(2001)250ITR575(Del) . (ii) Sri Ganesh Rice Mills VsCIT (2007) 294 ITR 316 ....
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....yITATJaipur (4) M/s. Trident Jewellers ITAT Jaipur ITA No. 552/JP/2013 Disallowance (a), 25% out of Bogus purchases, held as a reasonable in the case of Viiav 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%), bv 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 (a), 25% is fully justified. Further in the case of M/s. Trident Jewellers Vs. ITO, ITA No. 552/JP/2013, on account of bogus purchases, an addition of 25% of such purchases was confirmed bv 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 facts of each case, hence, cannot be applied to the facts of the case under appeal. The ratio of decisions in the cases of Ramesh kumar & Co. vs.ACIT [2959/Mum/2014], DCIT v. Shree Rajeev Kalathil,[67 SOT 52], ITAT Mumbai, ITO v. Pr....
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.... "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 to 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 the commission agents had procured any order for the assessee. No correspondence ............" 10.5 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, has to be based on the facts of each case, hence the same ....
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....lable in the regular market, as has been held in the case of M/s. Kanchwala Gems Pvt. Ltd. vs. JCIT 288 ITR 10 (SC). 10.8 Keeping in view the facts in entirely, as discussed above and appellants failure to furnish the confirmed copy of ledger account/current mailing addresses of the hawala parties, item wise quantitative tally's etc. the books of the appellant are not tenable as per provisions of section 145(3) of the Act, therefore rejected. 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 effective enquiry was carried out to arrive at logical conclusion. Accordingly, the necessary details were called for, examined and summarised here, as under. YEAR WISE GROSS PROFIT & NET PROFIT RATIO ASSESSMENT YEAR 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 SALES 10482104 21897420 27827955 38736255 49227713 67307398 56065898 51351407 PURCHASE 9290770 18764492 23427560 31749475 43692204 55969815 43577549 40770579 PURCHAS....
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....s tax audit report. The appellant during the assessment proceedings furnished all the details along-with quantitative analysis before the AO and the same has been duly incorporated by the AO in the body of the assessment order. The AO has, for the only reason that the appellant could not produce the parties or confirmations there from and on the basis of information received from the sales tax authorities disallowed the entire disputed purchases of Rs. 68,08,698/-. 10.11 From the above facts it is clear that this is not the case where the profit has been siphoned off by booking of hawala purchases. Secondly, it is not possible to harvest the turnover of Rs. 1,07,70,909/-. from the manufactured goods, out of remaining purchases raw-material of Rs. 14,12,269/-, Therefore, this is a case where at the most the appellant might have inflated its purchases by booking the hawala purchases. This according to me is not appropriate. This would leave purchases of only Rs. 14,12,269/- (Rs.82,20,967 -Rs68,08,698) for manufacturing of HDPE pipes which have been ultimately sold for Rs. 1,07,70,909/-. On the other hand, it is also the case that the appellant could not produce the disputed ....