TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 326
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome of Rs. 7,91,520/-. Thereafter, the case has been reopened u/s 147 of the Act, on the basis of information received from DGIT, investigation, Mumbai, as per which, Sales Tax Authorities of Government of Maharashtra had taken actions against number of Hawala dealers, who had issued bogus purchase bills to various parties in Mumbai and other places. As per list of beneficiaries, the assessee is one of the beneficiary, who had taken accommodation bills of bogus purchases from various parties as listed by the AO in para 2 of his assessment order amounting to Rs. 74,52,992/-. The case was selected for scrutiny and the assessment has been completed u/s. 143(3).r.w.s. 147 of the I.T.Act, 1961 on 22/02/2016 and determined total income of Rs. 17,23,140/-, after making 12.50% additions towards alleged bogus purchase from those parties and made additions of Rs. 9,31,624/-. 4. Aggrieved by the assessment order, the assesee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assesse has filed elaborate written submissions, on the issue, which has been reproduced at Para 4.4 on pages 3 to 6 of Ld.CIT(A) order. The sum and substance of arguments of the assessee before the Ld.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he appellant and that the primary onus to establish the genuineness of purchases which lay on the appellant was not discharged (cf para 8 (v) and 6.3 When the assessee appellant has failed to substantiate the claim against impugned purchases, the entire bogus purchases are to be disallowed. There is no basis for an addition of 12.5% of such bogus purchases and consequent allowance of 87.5% of such unsubstantiated purchases. 6.4 The Hon'ble High Court of Bombay in [(2018) 98 taxmann.com 234 (Mumbai)l the case of Shoreline Hotel (P) Ltd. held that the disallowance to the extent of 100% in the case of bogus purchases was to be upheld. The facts of the case were that the AO relied upon information received from the Sales Tax Department of the Government of Maharashtra in relation to certain parties who had been issuing bills and accommodation entries so as to facilitate evasion of taxes. The AO called for supporting documentary evidence, such as copies of purchase orders and mode of dispatch of goods, copy of the ledger of the party with invoices raised, details of payment made with copy of the bank account from where the payment was made and such other and further relevant d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id out wholly and exclusively for the purpose of business or profession. If the assessee fails to satisfy any of these tests, the expenditure claimed is not allowable. The Hon'ble Bombay HC held so in the case of Ramanand Sagar( 256 ITR 134). Thus, it is settled law that the onus of proof is on the assessee-appellant to establish that the purchases claimed as expense were genuine. This has not been discharged by assessee and hence the Ld AO has rightly disallowed the same. 6.8 Sec.37 deals with the question relating to the allowability of the expenditure incurred for the purposes of business. Sec 37(1) is as under : "Any expenditure (not being expenditure of [he nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". 6.9 As per Sec. 101 and Sec. 103 of the Indian Evidence Act, 1872, whoever desires any Court to give judgment as to any legal right or liability, dependent on the existence of facts whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case of logical fallacy. Again, it is reiterated that it is not for the Department/Revenue to establish the sales or otherwise. If the appellant claims that it did indeed have the sales as claimed, then it is for the appellant to establish how the purchases were made; if these purchases were from the grey market it is for the appellant to establish from whom these purchases were made, how payments were made and how the corresponding sales took place. The Hon'ble Delhi High Court in the case of La Medica (250 1TR 575] held that when the assessee's stand was that it had not effected purchases from anybody else, then it was not open to the Tribunal to make out a third case, which was not even the case of the assessee, to hold that the transactions were real and not fictitious, as claimed by revenue. Similarly, in the case of the assessee appellant for AY 2010-11, no claim has ever been made by the assessee, either during assessment proceedings or appellate proceedings that these purchases were genuine and made from a third party in the grey market that is without bills. When such a claim has never been made by the asseseee himself, it is not for the AO to surmise that thi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n purchases at the same rate of other genuine purchases. This decision of the Hon'ble Bombay High Court was not based on an argument with respect to Sec. 37(1) or the Indian Evidence Act, as discussed above. Hence, with utmost respect, this decision, though not cited by the appellant, cannot be relied upon. 6.12 The assessee appellant has not complied with the various notices issued during the appellate proceedings, as detailed in para 8 supra, and thereby did not avail the opportunity provided of being heard. The findings of the Ld AO with respect to purchases have not been rebutted; no further material was brought on record during appellate proceedings to substantiate the purchases held to be bogus by the Ld AO. in the light of the above facts, there is no merit in the appeal. The ground of appeal 1, being the only ground of appeal, with respect to the addition by the Ld AO estimating the income to be 12.5 percent of the bogus purchases is dismissed. The income is enhanced to Rs. 74,52, 992/- being 100% of such purchases claimed as expenses in the Profit & loss account, disallowed u/s 37(1] as it does not satisfy the conditions specified therein. Consequently, the incom....