AI Drafter 
TaxTMI 
TaxTMI 
2023 (10) TMI 400
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....ing that all these cases involve identical set of facts since the learned lower authorities had taken recourse to sec. 148/147 reopening mechanism to disallow their respective cash purchases based on various departmental and alleged CBI investigation(s) that one M/s. Blue Bird India Ltd., had entered into bogus sale purchase transactions with many other parties involving these twin assessees. We further note from a combined perusal of all these case files with the able assistance coming from both the learned representatives that the Assessing Officer(s) three re-assessments herein treated their respective trading business turnovers as bougs; being accommodation entries only and also disallowed the corresponding purchases u/sec.40A(3); involving varying sums, respectively. 3. Coming to the CIT(A)'s orders, what we find is that he has assessed these twin assessee's turnovers as liable for gross profit addition(s) only since involving accommodation entries on the one hand followed by his impugned action deleting sec. 40A(3) disallowance as no more maintainable once the corresponding books of account stand rejected. This leaves both the sides aggrieved who have preferred thei....
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....es Rs. 21,53,65,479/- (iv) M/s. Laukik Paper Industries Pvt. Ltd. Rs.230,60,48,860/- TOTAL Rs.253,73,26,939/- 3. The AO recorded the statements of the Managing Director/Proprietors of M/s. Nairs Distributors Pvt. Ltd., M/s. Dhanshree Enterprises and M/s. Laukik Paper Industries Pvt. Ltd.. He noted that the above 3 parties have made purchases in cash in the similar way as discussed in the case of M/s. Swapnil Distributors Pvt. Ltd. These 3 suppliers have made payments in cash in contravention of provisions of section 40(A)(3). These 3 suppliers have made payments after getting the LCs discounted in the similar way as M/s. SDPL. These 3 parties have supplied goods directly to the assessee and they have not stored it. He further noted that these 3 parties except M/s. Laukik Paper Industries Pvt. Ltd. are new in this trade and are not aware of brands/quality of goods purchased and sold to the assessee. The AO confronted the modus operandi adopted by the assessee and asked the assessee to explain why its books of accounts should not be treated as incorrect and incomplete. It was explained by the assessee that it had made purchases from various other ....
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.... are not verifiable, therefore, in the view of the reasons stated above, the sales of the assessee is estimated at Rs. 360 Crores instead of net sale of Rs. 330.79 Crores shown by the assessee. 3.4 The profit shown in the books of accounts are not acceptable. The actual gross profit rate shown by the assessee is 12.97% though it has shown @ 13.02% in the audit report submitted in form 3CD. The gross profit ratio in this range varies from 12% - 20%. The gross profit ratio of Sundaram Multi Pap. Ltd. as seen on e-net is 19.80% for the relevant period. The assessee was so caused to explain that why the gross profit ratio of 19.80% in the case of Sundaram Multi Pap. Ltd. for A.Y. 2005-06 may not be applied. In response to this query the assessee has submitted a reply that its case is quite different than Sundaram Multi Pap Ltd. for A.Y. 2005-06. The facts of these two cases are not worth to compare. The facts of Sundaram Multi Pap Ltd. for A.Y. 2005-06 as mentioned in the assessee's reply are extracted below : (a) "Turnover of our company is 330.79 Crores as against the turnover of Sundaram Multi Pap. Ltd. is 55.60 Crores. (b) Our company deals in various typ....
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....ee to submit a copy of the written reply to the AO for his verification which the assessee complied with. After considering the submissions made by the assessee as well as the AO the CIT(A) deleted the addition of Rs. 8,98,57,000/- by holding as under : " 4.3 I have carefully considered the submission of the appellant and perused material on record. From the perusal of material on record, following aspects emerge : (i) As regards the purchases the genuineness of which has been doubted by the Assessing Officer, it may be mentioned that the approach of the Assessing Officer on the issue suffers from inconsistencies and contradictions. In case of Swapnil Distributors for assessment year 2004-05, the conclusion of the Assessing Officer was that though the purchases of Swapnil Distributors Pvt. Ltd., were from parties other than those from whom purchases were shown, the fact of sale by Swapnil Distributors to Blule Bird (India) Ltd., is not questioned in the assessment proceedings of Swapnil Distributors, how can the purchase of BBIL from Swapnil Distributors Pvt. Ltd., be questioned in assessment proceedings of Blue Bird (India) Ltd? It is clear that the Assessing Off....
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....the Special Audit Report that 'similarly, the transaction of sale with the two parties referred to in our letter are genuine and does not appear to be in nature of accommodation transaction'. In view of this and in view of the comments of the Special Auditor regarding trading account and verification of sales with reference to sales tax order, it is clear that there is no material on record for coming to the conclusion that books of accounts of the appellant are not covered within the meaning of section 145(2) of the Income Tax Act, 1961. (iii) The appellant has maintained quantitative details of opening and closing stock of purchases, consumption of raw material (principal items) and sale of finished goods both in terms of quality and value. No discrepancy in this regard has been detected during the course of special audit. (iv) It is a fact that appellant has shown sales of Rs. 330.79 Crore and these sales comprise of sale to following : (i) Sales to limited companies (ii) Sales to Govt. Parties (iii) Export Sales (iv) Sales to customers from various branches Any dealers network throughout the country Thus, t....
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....t or suppression of sales. The learned Assessing Officer has failed to adduce any cogent material on both the aspects. The conclusion of the learned Assessing Officer in this regard have no cogent and relevant basis. The learned Assessing Officer himself points out that the G.P. In this line of business ranges from 12-20%. If this is so and appellant has shown G.P. of 12.97%, there is no justification for increasing it to 15%. According to the Assessing Officer, the G.P. of Sundaram Multi Pap Ltd. is 19.80% though such G.P. is found to be lower much lower at 6.4% as is clear from the figures submitted from the various financial websites extract of which is reproduced hereinbefore. However, the learned Assessing Officer himself impliedly accepts that there is difference between the nature of business of the appellant and that of Sundaram Multi Pap Ltd. when he does not apply higher gross profit of 19% which has been shown by Sundaram Multi Pap Ltd. though it is a different matter that according to appellant the G.P. rate of Sundaram Multi Pap Ltd. is much lower as is clear from the data taken from the financial websites 'rediffmoneywiz and moneycontrol.com'. 4.3.3 ....
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....mparable cases given by the AO, therefore, the AO was justified in rejecting the book results and thereby enhancing the turnover to Rs. 360 crores and adopting the GP rate @ 15%. 8. The learned counsel for the assessee on the other hand reiterated the same submissions as made before the AO and the CIT(A). He submitted that the main allegation of the AO for rejecting the purchases from various concerns is due to his order passed in the case of Swapnil Distributors Pvt. Ltd. He submitted that in the case of Swapnil Distributors Pvt. Ltd. the sales to Blue Bird India Pvt. Ltd. was never questioned by the AO. Therefore, now questioning the purchases by Blue Bird India Pvt. Ltd. from Swapnil Distributors (P) Ltd. is not justified. He submitted that the special auditors appointed by the AO u/s.142(2A) have mentioned that the rate at which the assessee company has purchased the goods and sold them in the market are comparable and in line with the existing rates of similar commodities in the market. Nothing adverse has been mentioned by the special auditors appointed by the AO to suggest that the books maintained by the assessee are defective. He submitted that the assessee has ma....
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....e AO came to the conclusion that the purchases from various parties made by the assessee should be held as non genuine because of the same modus operandi. However, we find that against the order passed by the AO in the case of Swapnil Distributors Pvt. Ltd. the CIT(A) had deleted the additions made by the AO on account of investment in unexplained purchases. When the revenue filed appeal before the Tribunal the Tribunal vide ITA No. 675/PN/2009 order dated 31-03-2012 has dismissed the appeal filed by the revenue by holding as under : "12. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the voluminous Paper Book filed on behalf of the assessee. We find the AO disbelieved the purchase of papers by the assessee company from the two firms, namely Komal Enterprises and M/s. Pritam Enterprises on the ground that : (a) all these purchases have been done only in two days; (b) Payments have been done in cash after the purchases, i.e.29-03-05 and 30-03-05; (c) All expenditure including sales tax, freight, handling changes etc. have not been properly accounted for and (d) since sales ha....
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.... find that the assessee has made sales to Government agencies and Limited Companies apart from export sales and sales to various customers from different branches. Most of the payments have been received by account payee cheques. 12. We find merit in the submission of the learned counsel for the assessee that sales cannot be enhanced unless the AO has got any corroborative evidence. Nothing has been brought on record to show that the assessee has received any extra money outside the books against such unaccounted sales. Similarly, nothing has been brought on record to show that assessee has inflated the purchases or made bogus purchases for which payments have been made and the same has come back to the assessee. 13. So far as the adoption of GP@15% we find the AO himself in the body of the assessment order has mentioned that GP in this line of business ranges from 12% to 20%. Since the assessee in the instant case has shown GP @ 12.97% which is more than 12%, therefore, we find no justification to adopt higher rate of GP at 15%. We further find the AO has not brought anything on record to show that the various expenses declared by the assessee in the profit & los....
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....as well as various other entities to have sourced their purchases from, and to, as the case may be, M/s. Blue Bird India Ltd., which in turn, was found to be engaged in providing accommodation entries. We further wish to reiterate that this so-called accommodation entry provider entity's book results as well as turnover have been found to be genuine in this tribunal's learned coordinate bench's order. The necessary corollary that flows therefrom is that once M/s. Blue Bird India Ltd., has been held to be a genuine entity which was seriously doubted so as to give rise to all these sec. 148/147 proceedings, we must necessarily hold that all the corresponding sale/purchase book results of these assessees must also deserve to be accepted in toto since not based on any other independent finding. That being the case, we must also hold that the learned lower authorities action, more particularly, that of the Assessing Officer rejecting books as well as disallowing sec. 40A(3) cash purchases deserve to be upheld qua the latter issue only as these twin assessee's had themselves recorded the same in their returns submitted but also there is no justification of their part in justifying the re....