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2017 (11) TMI 1143
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....der of the CIT(A) by raising the following grounds of appeal before us: "1. The learned Commissioner of Income Tax (Appeals) erred in confirming disallowance of purchases to the extent of 25% of Rs. 1,07,13,732/- i.e. to the extent of Rs. 26,78,433/- and in not deleting the entire disallowance as prayed for. 2. The learned Commissioner of Income Tax (Appeals) erred in not appreciating the factual matrix of the case. 3. Without prejudice to the above and in the alternative the learned Commissioner of Income Tax (Appeals) erred in not restricting the addition with reference to the gross profit of the appellant. 4. The appellant craves to add, alter or amend any of the grounds of appeal at any time of hearing." The revenue on the other hand had challenged the order of the CIT(A) on the following grounds: "1. On the facts and circumstances of the case and in law, whether, Ld. CIT(A) was justified in sustaining only an addition @ 25% profit rate on total purchases of Rs. 1,07,13,732/-made from 20 parties. 2. The appellant prays that the order of the Learned CIT(A) on the above grounds be set aside and that of the A.O be restored. ....
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....of invoices; (iii) copy of delivery challans; (iv) evidence in respect of transportation of goods; (v) copy of the bank statement; (vi) chart correlating the purchases and sales of the goods involved in the transactions made with the aforementioned parties; and (vii) details of the stock inventory. The assessee in compliance to the aforesaid directions of the A.O, though placed on his record the copies of the ledger accounts and the bank statements reflecting the payments made to the aforementioned parties for the purchases claimed to have been made from them, but however failed to produce either of the aforesaid parties for examination before the A.O. The A.O being of the view that as neither the assessee had produced the parties for necessary examination, nor the documentary evidence placed on record by the assessee in order to substantiate the genuineness and veracity of the purchase transactions did inspire any confidence, therefore, observed that the assessee had failed to discharge the onus as was so cast upon him. The A.O after deliberating on the facts of the case concluded that in the absence of the relevant supporting documents which could go to evidence the genuineness o....
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....site the name of entities which are invoiced in giving bogus bills only after it carried out detailed enquiry and investigation. (x) If all evidences point to the fact no actual goods were supplied by the above parties, then the argument of the assessee that it purchased goods in good faith is not tenable." The A.O on the basis of his aforesaid observations, held that on the basis of his independent inquiries, findings of the sales tax department and the details submitted by the assessee, it could fairly be concluded that the assessee had not purchased goods from the aforementioned parties and had only taken accommodation bills from them to inflate the expenses and scale down the profitability in order to reduce his tax burden. Thus, the A.O being of the view that the purchases claimed by the assessee were unverifiable, therefore, rejected the books of account under Sec. 145(3). 4. The A.O further observed that the assessee who was engaged in the business of painting, renovation and civil construction as a contractor had failed to demonstrate beyond doubt that the material claimed to have been purchased from the aforementioned parties was consumed in the course of hi....
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....ason for not producing the register of consumption and proof of transportation of the goods, therein submitted that as its business of repair and renovation, which remained under the supervision of the site engineers was during the year under consideration spread at about 20 sites all over the city, therefore, the requisite information could not be consolidated and furnished to the A.O. It was submitted by the assessee that the observations of the A.O that no actual delivery of the goods had taken place was beyond comprehension, because if that would had been so, then it would not had been possible to have carried out the extensive repair and renovation work of various societies during the year under consideration. The assessee further submitted that even if the books of account were to be rejected, the A.O remained under a statutory obligation to have made a fair estimate on the basis of the past records of the assessee. Thus, taking support of his aforesaid contentions the assessee submitted before the CIT(A) that the entire addition made by the A.O was liable to be deleted. Alternatively, it was submitted by the assessee that even if the purchases made by the assessee remained u....
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....s bills from the aforementioned parties with the intent to inflate the purchase price. The CIT(A) holding a conviction that the assessee had made the purchase of the goods, though not from the aforementioned parties, but from certain unknown entities operating in the open/grey market, therefore, concluded that the additions in the hands of the assessee were liable to be restricted only to the extent of the profit element involved in making of such purchases from the unknown entities. 7. That deliberating on the facts which had a bearing on the estimation of the profit percentage in the business of contract work of repairs and renovation of buildings, it was observed by the CIT(A) that the profit involved in the trade line of the assessee was found to be more than the profit percentage as was declared by the assessee. The CIT(A) further observed that the assessee had by way of an alternative contention requested that the addition in its case may be restricted by estimating the profit percentage ranging from 12.5% to 25%. The CIT(A) on the basis of his aforesaid observations concluded that the profit percentage in respect of the bogus purchases in the hands of the assessee could f....
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....tead of correcting the aforesaid mistake of the A.O, had rather gravely erred in allowing the same to perpetuate. The Ld. A.R. in support of his aforesaid contention that non production of the parties for cross examination would be sufficient to discard the statement of a party on the basis of which adverse inferences are drawn in the hands of the assessee, relied on the judgment of Hon'ble High Court of Delhi in the case of Principal Commissioner of Income Tax Vs. Best Infrastructure (India) P. Ltd. (2017) 397 ITR 82 (Del). The Ld. A.R. further submitted that though the CIT(A) had rightly appreciated that now when the sales/receipts of the assessee had not been dislodged, therefore, the purchase of the goods involved in the said purchase transactions could not be doubted, but however, despite so observing, had erred in sustaining an addition to the extent of 25% of the aggregate value of the purchases made by the assessee from the aforementioned parties. Per contra, the Learned Departmental representative (for short 'D.R') submitted that as observed by the A.O, the inquiries made during the course of the assessment proceeding by way of notices sent u/s 133(6) therein revealed that....
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....oubts raised as regards the veracity of the same, viz. transportation receipts, delivery challans and confirmations of the supplier parties. We are of the considered view that now when the assessee had claimed to have made purchases from the aforementioned supplier parties and had debited its profit and loss account to the said extent, then the onus was cast upon the assessee to place on record documents which could go to evidence the genuineness and veracity of the purchase transactions. We are further of the view that now when there were serious allegations in respect of the purchase transactions claimed by the assessee to have been made from the aforementioned parties, therefore a much more heavy onus was liable to be discharged by the assessee in order to irrebutably evidence the genuineness and veracity of the purchase transactions under consideration. We find that the assessee had failed to substantiate the authenticity of the purchase transactions, and to the extent the material was placed on record by him, the same to our considered view was seriously falling short of the quality of onus which was required to be discharged by him. We further find that our aforesaid view tha....
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....see was liable to be restricted to the extent of the profit involved in making of such bogus purchase, was thus left with no other alternative but to fairly estimate such profit in the hands of the assessee. We have deliberated on the facts involved in the present case and find that the estimation of the profit element involved in making of the purchase under consideration had fairly been adopted by the CIT(A) @25% after considering certain important factors, viz. (i). the gross profit declared by the assessee as deliberated upon by the CIT(A) in the backdrop of the profit percentage involved in the trade line of the assessee did not inspire much of confidence; and (ii). the assessee had himself offered that addition within the range of 12.5% to 25% of the aggregate value of the purchase transactions under consideration may be made as regards the profit embedded in respect of the purchase transactions under consideration. We have given a thoughtful consideration to the estimation of the profit element as regards the bogus purchases under consideration at 25% by the CIT(A), and are persuaded to be in agreement with him. We are of the considered view that the CIT(A) after rejecting t....
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....e hands of an assessee by relying on the statement of a third party, then not affording of cross examination of the said person despite request by the assessee would be fatal to the validity of the assessment proceedings. However, we are of the considered view that the case of the assessee before us does not fall within the all fours of the proposition as had been canvassed before us. We find that in the case of the present assessee, though the proceedings had been initiated by the A.O on the basis of the information gathered from the MVAT authorities that the assessee had taken accommodation entries from the aforementioned parties, but then, the A.O had not merely proceeded with and based the addition in the hands of the assessee on the basis of the said stand alone information itself. We find that the A.O after making independent inquiries and conclusively proving that the assessee had failed to substantiate the genuineness and veracity of the purchase transactions and therein discharge the onus as stood cast upon him, had only thereafter concluded that the purchase transactions under consideration were found to be ingenuine. We are of the considered view that no infirmity as reg....
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....me of hearing." The revenue on the other hand had challenged the order of the CIT(A) on the following grounds: "1. On the facts and circumstances of the case and in law, whether, Ld. CIT(A) was justified in sustaining only an addition @ 25% profit rate on total purchases of Rs. 68,97,619/-made from 10 parties. 2. The appellant prays that the order of the Learned CIT(A) on the above grounds be set aside and that of the A.O be restored. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing officer be restored." 12. Briefly stated, the facts of the case are that the assessee had filed his return of income on 30.09.2011, declaring total income of Rs. 61,25,234/-. The return of income filed by the assessee was processed as such u/s 143(1) of the 'Act'. The case of the assessee was reopened under Sec. 147, on the basis of the information received from the DGIT (Inv.), Mumbai that the assessee was one of the beneficiaries of the accommodation entries provided by some of the MVAT dealers who were indul....