AI OCR 
TaxTMI 
TaxTMI 
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2017 (8) TMI 1319
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....o be applicable to the connected appeals. 2. Grounds of appeal in ITA No.563(Asr)/2016 for A.Y.2008-09 filed by the Revenue Department are reproduced as under: "1. Whether on the facts and in the circumstances of the case & in law, CIT(A) is justified in restricting the addition of Rs. 82,01,493/- made by the AO on account of bogus/fictitious purchases made by the assessee to Rs. 4,10,074/-, being profit at rate of 5% of the bogus/fictitious purchases made. 2. Whether on the facts and in the circumstances of the case & law CIT(A) is justified in restricting the addition of Rs. 82,01,493/- made by the AO on account of bogus/fictitious purchases made by the assessee to Rs. 4,10,074/-, ignoring the decision of ITAT Bench, Mumbai in the case of M/s Lifeline Drugs and Intermediates as per which the onus is on the assessee to prove that the purchases debited to trading account are genuine and correct in nature, and if the assessee fails to discharge the onus, the AO is correct in making the addition of entire bogus/fictitious purchases." And Grounds of appeal of ITA No.571(Asr)/2016 for A.Y.2008-09 filed by the assessee are reproduced as under: "1. That the notice u/s 148 and t....
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....76 8201493 To verify the above said purchases, information was called u/s 133(6) of the Act from the aforesaid parties and thereafter, to verify the actual existence of the parties. In response, the reply was received by the Ld. Assessing Officer and thereafter to verify the actual existence of the parties commission was sent u/s 131(1)(d) of the Act to the ITO, Ward-2(3)(7), Surat in pursuance to which, a field enquiry was conducted by Inspector Sh. Jadgish Parmar on dated 03.02.2016 and he had reported that the premises is found to be open once in a two and three months only for cleaning purposes and no business or other activities have been carried our from the said premises and thereafter, show cause notice was also issued to the assessee on 14.03.2016 requiring him to prove that purchases made by him from the above parties are not bogus and further to verify the same and to prove the identity of the broker and genuineness of the transaction. In response, the assessee had submitted his reply dated 16.03.2016 by mentioning that he has furnished complete stock tally to prove that without there being purchased goods could not have been sold. He also confirmed copies of account....
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....y the appellant is that speaking order has not been passed to dispose off the objections. However on going through the order of the AO It is clear that the speaking order was passed on 04.01.2016. Thus this ground of assessee is dismissed as well. Ground No.8, 9 & 10 The AO has made addition of bogus purchases of Rs. 82,01,493/- without rejecting the books of accounts of assessee. Similar addition was made by the AO in A.Y 2012-13 in the case of assessee which was decided by CIT(A)-1, Amritsar as under : "The AO has made an addition on account of bogus purchases to the tune of Rs. 1,59,67,475/- without rejecting the books of accounts of the assessee. Further the sales of the assessee have not been doubted. The sales of the appellant have been accepted as it is. Purchases cannot be held to be bogus without doubting the sales as held by Bombay High Court in the case of C1T vs Nikunj Exim Enterprises Pvt. Ltd. Assessee has also provided complete quantitative details. The Gujarat High Court in the case of CIT vs Bhola Nath Poly Fab (P) Ltd. (2013) 355 ITR 290 held as under, "Assessee is engaged in business of trading in furnished fabrics. Assessee officer disallowed the purcha....
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....gaged in the business of diamond. These are bogus/fictitious concerns and an agent in sending replies u/s 133(6) of the Act on behalf of all the bogus /fictitious concern. Further the Ld. AO tried to confirm the genuineness of the parties from whom the alleged bogus purchases were made. In response the assessee has provided death certificate of Sh. Paresh Bhai and purchase bills from the above mentioned parties. But merely production of the death certificate of the broker (Sh. Paresh Bhai) does not prove the identity of the person whom he is referring to. Although the assessee has produced purchase bills but this does not prove the genuineness of the transactions as assessee himself never visited these parties personally and moreover, as per information available with the Department, the assessee got bogus purchase bills through accommodation entries. In real fact the assessee has failed to discharge his onus to prove the genuineness of the parties although produced his bank account statements and on perusal of the Bank Statement it has been found that the payments were made to the aforesaid parties through RTGS/Cheques and on enquiry from the banks it is clear that payments were m....
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....o grant relief to the assessee in view of the above factual matrix and hence, the order passed by the CIT(A) is liable to the set aside to the extent as challenged by the Revenue Department. 7. On the contrary, the Ld. AR submitted that all the transactions have been made through RTGS/Cheques and the same have been confirmed by the Assessing Officer and it was rightly submitted before the Assessing Officer that the broker namely Sh. Paresh Bhai through whom the assessee had made the purchases, had died and once the assessee duly produced the death certificate, therefore it was upon the Revenue Authorities to find out where abouts , business activity and/or occupation of the said person by holding enquiry which certainly the Revenue Authorities failed to do so. The Ld. AR urther submitted that the assessee was maintaining the complete books of accounts and verified the said purchases under challenge through vouchers and there was complete tally of each and every grams, items and pieces and even otherwise produced the original vouchers with acknowledgement of receiving goods and all the purchases have been confirmed and the statement of a person on whom the Assessing Officer relied ....
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....he entire undisclosed income generated out of bogus transactions, deserves to be added to total income, as held by Ahmedabad High Court and further affirmed by the Apex Court in N. K. Industries Ltd. Vs. DCIT, 2016-TIOL-3165-HC-AHM-IT , as relied upon by Ld. D.R. It was stressed upon by the Ld D.R. that now it is not resintegra that the entire undisclosed income generated out of bogus transactions , deserves to be added in total income in view of decision of Apex Court in the aforesaid case and the judgment passed by Apex Court has binding effect. We feel it appropriate to consider the issue raised by the Ld. D.R. that whether dismissal of SLP, has binding effect or not. In our considered view as relied upon by Mr Salil Kapoor, Ld Advoctate, the judgment passed in the case of Kunhayammed and Ors. Vs. State of Kerala & Ors. (245 ITR 360) squarely dealt with the aforesaid situation and laid down the ratio qua dismissal of SLP. Relevant part of Judgment is reproduced herein below for the sake of brevity and convenience:- Thus, a petition seeking grant of special leave to appeal and the appeal itself, though both dealt with by Article 136 of the Constitution, are two clearly disti....
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....oes not constitute res judicata. All that can be said to have been decided by the Court is that it was not a fit case where special leave should be granted. That may be due to various reasons. During the course of the judgement, their Lordships have observed that dismissal of a special leave petition under Article 136 against the order of a Tribunal did not necessarily bar the entertainment of a writ petition under Article 226 against the order of the Tribunal. The decision of Madras High Court in The Management of W. India Match Co. Ltd. Vs. Industrial Tribunal, AIR 1958 Mad 398, 403 was cited before their Lordships. The High Court had taken the view that the right to apply for leave to appeal to Supreme Court under Article 136, if it could be called a right at all, cannot be equated to a right to appeal and that a High Court could not refuse to entertain an application under Article 226 of the Constitution on the ground that the aggrieved party could move Supreme Court under Article 136 of the Constitution. Their Lordships observed that such a broad statement of law is not quite accurate, although substantially it is correct. To sum up our conclusions are :- (i) Where an ap....
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.... thereto by way of judicial discipline, the Supreme Court being the apex court of the country. But, this does not amount to saying that the order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties. (vi) Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation. (vii) On an appeal having been preferred or a petition seeking leave to appeal having been converted into an appeal before Supreme Court the jurisdiction of High Court to entertain a revew petition is lost thereafter as provided by sub-rule (1) of Rule (1) of Order 47 of the C.P.C. From the perusal of the aforesaid judgment we feel that contention of Ld. D R to the effect that controversy has been settled by Apex Court in the case of N. K. Industries Ltd. Vs. DCIT, 2016- TIOL-3165-HC-AHM-IT, that the entire undisclosed income generated out of bogus tr....
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....of which would indicate that the purchases were infact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs. 1.33 Crores was not bogus. No fault can be found with the order dated 30-04-2010 of the Tribunal." Further in the case of CIT vs. Bholanath Poly Fab.(Pvt.) Ltd. (2013) 40 taxman 494 (Guj), the Hon'ble High Court of Gujrat while dealing with the same and identical issue held as under: "5. Having come to such a conclusion, however, the Tribunal was of the opinion that the purchases may have been made from the bogus parties, nevertheless, the purchase themselves were not bogus. The Tribunal adverted to the fact and data on record and came to the conclusion that the entire quan....
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....r embedded therein would only subject to tax which has already been done in the instant case. The judgments relied upon by the ld. DR does not support the case of the Revenue, because of the aforesaid judgments and consideration of facts and circumstances discussed above. The apprehension /suspicion of the ld. Assessing Officer as well as Ld. DR is not correct that after making purchase, the assessee transferred the amount through RTGS thereafter, the said amount was transferred to outside/ three parties and thereafter, in lieu of the bogus purchases, the cash has been received by the assessee. It is not in controversy that the Department has not produced any evidence by which it can be said that the assessee got the benefit of cash while enrouting the purchase price of the alleged bogus purchase. Even otherwise it is settled law that no addition can be made on the basis of third party statement until and unless opportunity of cross examination given to the Assessee as in the instant case , the Assessing officer relied upon the statement of Sh. Lankaran Parasmal Kothari , however reason best known to the Ld. Assessing Officer , no opportunity of cross examination of the same was....