TaxTMI 
TaxTMI 
2025 (10) TMI 808
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....By the present appeal, the Revenue has raised the following of law:- A. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in restricting GP to 15% and in turn calculating the GP on amount of bogus purchases? B. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in treating the purchases form M/s Entech Enterprises only at Rs. 11,63,175/- instead of considering the contentions put forth by the Revenue and considering the certificate of assessee's own VAT Auditor when MAH VAT department, had considered the party itself to the bogus? C. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in accepting the bogus purchase parties to the mere providers of bills without actual purchase. In such a case the usage of banking channels/payments channels was merely for siphoning funds and whether the Hon'ble ITAT was justified in accepting it? 3. Briefly the facts are:- a) The Respondent - Assessee is a Company engaged in the business of power sector in the transmission and distribution sec....
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....stand. Contents of the letter are reproduced below:- 1) We have already submitted most of the desired information in our submission of 10th October 2014. We attach herewith the copy of acknowledgment of said submission for your good selves' kind reference. 2) We also enclose herewith a certificate of Assessee Companies VAT auditor, who has carried out the VAT audit of the Assessee Company for FY 2008-2009. As per said certificate, there is typing error in regard with supplier Viz. Entech Enterprise, where the actual annual purchase amount is only Rs. 11,63,175/- as against wrongly stated as Rs. 1, 16,53,175/-. The total error is of Rs. 1,04,90,000/- We kindly request your goods elves to consider the said error, and reduce the so called Hawala Purchase amount by that much error amount. 3) The VAT assessment of the Assessee Company for the FY 2008-2009 is still under progress and not concluded by the VAT authorities. The so called Hawala purchases are not accepted by the Assessee Company. Hence, before conclusion of VAT assessment, confirming these so called Hawala Purchases and completing the income tax assessment will certainly create lot of hardship ....
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....s on which the reopening was initiated was on going. Hence before reaching any conclusion, before the completion of the VAT assessments and making additions to the income of the Respondent-Assessee, merely on the information from Sales Tax Department would lead to hardship to the Respondent-Assessee. The Respondent-Assessee also contended that in so far as the alleged purchase of Rs. 1,16,53,175/- from one of the supplier namely M/s. Entech Enterprises was concerned, the Respondent-Assessee had only made a purchase of Rs. 11,63,175/- and not of an amount of Rs. 1,16,53,175/-. The Respondent-Assessee also contended that its sales cannot be denied and for the earlier assessment year i.e 2008-2009, the Respondent-Assessee had recorded same range of gross profits and net profit ratios i.e 45.16%/ 21.26%. 8. The Respondent-Assessee also further contended that the Asssessing Officer had not pointed out any defect or irregularity in the purchase invoices submitted by the Respondent-Assessee before him. It was therefore submitted that even though no irregularity was pointed out by the Assessing Officer in so far as the purchase invoices were concerned, the Assessing Officer treated the ....
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....ed bogus purchases. 6.3.5 Accordingly, the addition of Rs. 15,12,713/- on this score is hereby confirmed and the appellant gets relief of Rs. 2,05,74,750/-. Ground 2 as raised by the appellant is partly allowed. 10. The revenue being aggrieved by the said order dated 1st December 2016 passed by the CIT(A) filed an appeal before the ITAT, which has been dismissed by the order dated 28th September 2020 (hereinafter referred as 'impugned order'. In dismissing the department's appeal. The ITAT upheld the CIT(A)'s findings in so far as it restricted the addition at 15% of the hawala purchases. The ITAT further held that in regard to the mistake in figures of transaction with M/s. Entech Enterprises was concerned the Respondent-Assessee had pointed out the mistake of purchases of Rs. 11,63,175/- made by the Assessee from M/s. Entech Enterprises and not Rs. 1,16,53,175/- and hence held that the CIT(A) had rightly restricted the amount to the correct purchase amount. The ITAT held that the Respondent-Assessee had submitted all the details in respect thereof. The ITAT further held that Respondent-Assessee had placed reliance on the various ITAT decisions restricting the addition....
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....he hands of the Respondent-Assessee, was on the basis of information received by the Assessing Officer from the Sales Tax Department. The assessment of the Respondent-Assessee was primarily re-opened on the basis of the aforesaid information. This information on the basis of which the addition of bogus purchases was to be made in the hands of the Respondent-Assessee was never furnished by the Assessing Officer to the Respondent-Assessee and further there is nothing on record to indicate that the Respondent-Assessee had accepted such material or the investigation as undertaken by the Assessing Officer accepting their purchases to be bogus. Further in the course of the assessment proceedings, the Respondent-Assessee had categorically submitted that it had not accepted the so called hawala purchases. The VAT assesments for the Respondent-Assessee company for the financial year 2008-2009 corresponding to assessment year 2009-2010, which is the relevant assessment year in the present appeal were pending adjudication and hence before conclusion of the VAT assessment confirming the so called hawala purchases and adding the same to the income of Respondent-Assessee was an inappropriate and....
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....f strong documentary evidence, including a statement of the Sales Tax Department that qua the actual purchases as undertaken by the assessee from such suppliers the transactions are bogus. Such information, if available, was required to be supplied to the assessee to invite the response on the same and thereafter take an appropriate decision. Unless such specific information was available on record, it is difficult to accept that the Assessing Officer was correct in his approach to question such purchases, on such general information as may be available from the Sales Tax Department, in making the impugned additions. This for the reason that the same supplier could have acted differently so as to generate bogus purchases qua some parties, whereas this may not be the position qua the others. Thus, unless there is a case to case verification, it would be difficult to paint all transactions of such supplier to all the parties as bogus transactions. 12. In our opinion, a full addition could be made only on the basis of proper proof of bogus purchases being available as the law would recognise before the Assessing Officer, of a nature which would unequivocally indicate that the....
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....en case if the Income-tax Authorities are of the view that there are questionable and/or bogus purchases, in that event, it is the solemn obligation and duty of the Income-tax Authorities and more particularly of the A.O. to undertake all necessary enquiry including to procure all the information on such transactions from the other departments/authorities so as to ascertain the correct facts and bring such transactions to tax. If such approach is not adopted, it may also lead to assessee getting away with a bonanza of tax evasion and the real income would remain to be taxed on account of a defective approach being followed by the department." [emphasis Supplied] 15. Further it is seen from the orders of the CIT(A) and ITAT that the Respondent assessee had given detailed explanation regarding the alleged Hawala purchasers and also submitted that they had documents like copies of purchase bills, ledger account and proof of all Bank payments. The Respondnet-assesse also submitted that all the payments were made by account payee cheques, thereby justifying genuineness of the transaction and further there was no defect pointed out in the invoices which were furnished before the asses....