TaxTMI 
TaxTMI 
2014 (12) TMI 1440
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....de from M/s M/s Rohit Ispat (India) was liable to be added whereas no expenditure had been claimed by the appellant. 4 That he was further not justified to uphold an addition of RS. 650,000/- on account of alleged extra profit in respect of purchases made by the appellant from Grey Market. 5 That he was further not justified to uphold an addition of Rs. 18,68,995/- payable to M/s M/s Rohit Ispat (India) as an alleged bogus liability. 6 That he further gravely erred in upholding the disallowance of Rs. 158,382/- by restricting the claim of interest at 12% as against paid at 15% by resort to provisions of section 40A(2)(b)." 3 Ground No. 1 - After hearing both the parties we find that during assessment proceedings the Assessing officer noticed that the assessee had made purchases of pig iron amounting to Rs. 39,18,995/- from M/s Rohit Ispat (India), Mandi Gobindgarh. It was noticed that central excise authorities conducted certain investigations and a report was received by the department through Regional Economic Intelligence Council, Chandigarh and it was revealed that Shri Suresh Yadav Proprietor of M/s Rohit Ispat (India) was indu....
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.... business to purchase the Pig Iron. Further he did not have the type of infrastructure required to handle huge consignments of Pig Iron and that too at places away from Mandi Gobindgarh i.e. at Batala and Dhandari Kalan. It did not have a single employee like clerks, chowkidars, accountant as etc. It implies that there were forces behind the Rohit Ispat (India) which were using it, to actually obtain and consume pig iron at Batala by consigning the same in the name of the M/s Rohit Ispat (India) further issuing Cenvatable invoices by indulging in paper transactions only. Sh. Yadav denied having any active role in running of the Rohit Ispat and named Sh. Subash as the person who was running and managing the firm by paying him Rs. 15,000/- per month. Sh. Jagdish Aggarwal of Bharat Foundaryman Association (BFA), Batala also stated that he did not know Sh. Suresh Yadav as he had dealt only with Sh. Subash both regarding the booking of orders for the M/s Rohit Ispat (India). Further, the filling of deposit forms and cheques of different parties issued are in the handwriting of Sh. Subash, confirms that Sh. Subhash was actually running Rohit Ispat (India). Thus involvement of Sh. Su....
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....from the open market and covered up the same by receiving Cenvatable invoices from the Rohit Ispat and other similar sources. (xi) None of the furnace units that had availed the Cenvat Credit on the invoices issued by the Rohit Ispat, had verified the address and business premises of the M/s Rohit Ispat. They even did not know the name of the Prop. Further, they could not even provide the telephone Nos. of the said M/s Rohit Ispat (India). They merely shifted the responsibility on some "unknown brokers" by saying that the deal were struck through brokers whose names and addresses they could not recollect. (xii) None of the furnace units could tell the grade and composition of the Pig Iron received by them from the Rohit Ispat (India). None of them had maintained separate stock account of the Pig Iron and the same had been accounted for by them in their raw material register alongwith the duty paid scrap. This seems to have been done deliberately to avoid detection by the law enforcing agencies and appears to be a modus operandi for substitution of Pig Iron with non-duty paid scrap, in which Cenvatable Invoices of Pig Iron were obtained from Rohit Ispat but ac....
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....d its records before the investigating officers and had falsely alleged the same to have been taken away be the Sale Tax / Police Department, which was denied by both the Departments." 4 In this background and after making further enquiries by the department the books were rejected. The action of the Assessing officer was confirmed by the Ld. CIT(A). 5 Before us, the Ld. Counsel for the assessee submitted that no specific defect has been pointed and therefore rejection of books is not correct. 6 On the other hand, the Ld. DR for the revenue strongly supported the order of the Assessing officer 7 After considering the rival submissions we find no force in the submissions of the Ld. Counsel for the assessee because detailed enquiries clearly revealed that the assessee has indulged in showing purchase from M/s Rohit Ispat (India) which are bogus. Further the entries of cenvat credit has been reversed by the assessee itself and therefore that charge of revenue is correct. Therefore in our opinion, books have been rightly rejected. 8 Ground No. 2 - In respect of this ground that opportunity of natural justice has not been provided to the assessee, no contentions were....
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.... production records. The sales of end products are duly verifiable. The major sales have been made in the local market." The Assessing officer did not accept the submissions and observed that it is established beyond doubt that M/s Rohit Ispat (India) was indulging only in paper transactions. It was concluded in this background that cenvat credit amounting to Rs. 4,95,239/- on such bogus purchase would raise income of the assessee and accordingly a sum of Rs. 4,95,239/- was added to the income of the assessee. 10 On appeal the Ld. CIT (A) adjudicated the issue vide para 4.6 which is as under: "I have considered the submissions made. As regard ground No. 2 to 5 the facts of the case shows that he appellant has shown bogus purchase from M/s M/s Rohit Ispat (India). The facts marshaled by the Assessing officer is discussed in the preceding paragraphs amply proves that the entire purchases from M/s Rohit Ispat (India) is bogus. During the assessment proceedings, the assessee was confronted with the report of the Excise Authorities including the statement of Sr. Yadav, Sr. Subhas and Sr. Raj Kumar Goyal, Director of the assessee-company. The assessee was fu....
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....which was declared at 2.4% was enhanced to 2.55% and a sum of Rs. 6,94,283/- was added to the income of the assessee. 15 On appeal after considering the submissions, the Ld. CIT (A) restricted this addition to Rs. 6,50,000/-. 16 Before us, it was submitted that gross profit rate in this year was better than earlier year. Further in any case the Assessing officer has made separate addition of Rs. 18,68,995/- on account of outstanding balance in the account of M/s Rohit Ispat (India) as a bogus liability. Therefore at least this trading addition should have been set off against that addition i.e. telescoping should have been allowed. 17 On the other hand, the Ld. DR for the revenue supported the order of the Ld. CIT(A). 18 After considering the rival submissions we find force in the submissions of the Ld. Counsel for the assessee. Further we have confirmed the addition on account of bogus liability in the latter paragraphs of this order. Therefore in our opinion, the addition on account of gross profit should not have been made particularly in view of the fact that the assessee has shown better gross profit than earlier years. Therefore we set aside the ord....
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....s M/s Rohit Ispat (India) thus actually is a bogus credit representing assessee's own income from undisclosed sources. The assessee has failed to establish the genuineness of transaction by not producing prop of M/s Rohit Ispat (India) for personal examination. These facts when seen against the backdrop of findings of Excise Department as well as enquiries conducted by this department proves beyond any doubt that the said credit of Rs. 18,68,995/- is not genuine and that M/s Rohit Ispat (India) was never credit worthy for such transaction. Accordingly this amount of Rs. 18,68,995/- is added back to the income of the assessee as its income from undisclosed sources being bogus credit. (Addition of Rs. 18,68,995/-.) In our opinion, the Ld. CIT (A) has correctly decided the issue particularly when it was established beyond doubt that M/s Rohit Ispat (India) was indulging only in paper transaction. We have already taken care of the alternative contention of the Ld. Counsel for the assessee that telescoping should be allowed and that is why we have deleted the trading addition on account of gross profit vide para 18. Therefore we find nothing wrong with the ord....