TaxTMI 
TaxTMI 
2023 (12) TMI 1502
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....he assessment year 20010-11, declared total income of Rs. 16,31,260/- by e-filling its return of income on 28/09/2010, which was processed under section 143(1) of the Act . Subsequently information was received by the AO from the Salestax Authorities, Mumbai regarding certain parties who were engaged in the activity of issuing accommodation bills without actually supplying the goods and the Assessee Company had also made purchases from some of these bill racketeers. The assessment of the Assessee for the assessment year 2010-11 was accordingly reopened under section 147 of the I.T. Act, 1961 by issuing the notice under section 148 with the prior approval of erstwhile Addl.CIT-10(2), Mumbai. Vide order dated 25-03-2014 under section 143(3) read with section 143(3) read with section 147 of the I.T. Act, the re-assessment assessing the total income at Rs. 4,76,14,520/- was completed. 4. The Assessee carried the matter before the then CIT(A), who partly allowed the appeal by holding as under:- "Following the above decision of the Hon'ble Gujarat High Court that "not the entire purchase price but only the profit element embedded in such purchases can be added to the incom....
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....er confirmed the addition by impugned order. Further aggrieved, the Assessee is in appeal before the Tribunal. 8. Ld. Counsel of the Assessee at the outset mainly claimed that the Assessing Officer inspite of directions by the Hon'ble Co-ordinate Bench of the Tribunal dated 30/01/2018 failed to give an opportunity of cross examination to the Assessee and, therefore, the assessment order itself is liable to be quashed and / or has to adhere to the directions of the higher Judicial Form. The Assessee also relied on a slew of judicial precedents to buttress its point that failure to produce parties for cross examination amounted to violation of principles of natural justice and, therefore, the order rendered by the Assessing Officer stands vitiated. The Assessee also claimed that in any case the addition is un-sustainable. 9. On the contrary the Ld. DR vehemently supported the orders passed by the authorities below. 10. Heard the parties and perused the material available on record. We observe that the Assessing Officer in order to adhere with the directions of the Hon'ble co-ordinate bench of the Tribunal issued summons under section 131 of the Act to the parties from whom A....
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....ions, we are in concurrence with the determination made by the authorities below that the Assessee has defaulted in discharging the primary onus of proving the genuineness of the alleged bogus purchases and consequently the alleged purchases are correctly held as bogus by the authorities below. However, coming to the addition made by the authorities below wherein they have considered entire amount of the alleged bogus purchases to the tune of Rs. 4,59,83,257/- as unexplained expenses and added the same to the alleged bogus purchases under section 69C of the Act, we observe that various courts have dealt with the identical issue and wherein the sale has been accepted then the entire bogus purchases cannot be subjected to the disallowance /addition. In fact, the profit element embedded in the alleged bogus purchases can be considered for disallowance/addition. The Assessee, in support of aforesaid dictum relied upon various judgments including by the Hon'ble co-ordinate bench of the Tribunal in the case of M/s Ratnagiri Stainless Pvt Ltd vs ITO, Mumbai (ITA No. 4463/Mum/2016 decided on 4th April, 2017, which in our considered opinion seems to be most relevant, in the facts and cir....
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.... operators in favour of the assessee to the tune of Rs. 2,39,83,261/-, wherein the assessee made alleged bogus purchases to the tune of Rs. 2,39,83,261/- through these bogus bills issued by hawala entry providers in favour of the assessee. These dealers were surveyed by the Sales Tax Investigation Department whereby the directors of these dealers have admitted in a deposition vide statements/affidavits made before the Sales Tax Department that they were involved in issuing bogus purchase bills without delivery of any material. There is a list of 28 such parties wherein the assessee is stated to be beneficiary of bogus purchase bills to the tune of Rs. 2,39,83,261/-. It was observed by AO that these parties just issue bogus bills in lieu for earning commission without actual supply of goods. In an sworn Affidavit Cum Declaration filed before Sales Tax Investigation Branch, Mumbai and in deposition before the Assistant Commissioner of Sales tax, Investigation Branch, Mumbai,the directors of the said 28 entities have admitted of issuing only invoices for sake of entry without delivery of goods. The Directors of the said 28 entities stated in their sworn affidavit that they had only su....
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....y namely M/s Ranakpur Sales Corporation, categorically stated that they have not supplied any material to the assessee concern. The A.O. asked the assessee to produce the parties but the assessee failed to produce the parties. The parties were not produce even before learned CIT(A). The assessee also failed to produce suppliers, transporters or brokers before the AO for verification and enquiry. The assessee did not ask for the cross examination of Ranakpur Sales Corporation. The assessee was specifically asked to produce original bills and vouchers, all original documentary evidence of movement of goods for verification, details and documentary evidence of delivery challans, vehicle numbers, weighment slips, details of godowns, details of octroi payment etc. . However, the assessee did not produce the original documents before the A.O. The assessee also did not file documents for showing movement of goods from supplier to assessee and from assessee to customer as evidence although it stated in its reply that said documents are being filed. The assessee did not submitted documentary evidence to show that there was movement of goods. The AO observed that the assessee filed delivery ....
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....nowledge When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. Illustrations (a)**** (b) A is charged with traveling on a railway without a ticket. The burden of proving that he had a ticket is on him." The assessee was not able to discharge burden cast u/s 106 of 1872 Act as the assessee did not produce the original documents before the A.O. The assessee also did not file documents for showing movement of goods from supplier to assessee and from assessee to customer as evidence although it stated in its reply that said documents are being filed. The assessee did not submitted documentary evidence to show that there was movement of goods. The assessee filed delivery challan in one case only and that too there was no mention of transportation details. The assessee did not file confirmations from these parties nor transportation details of the material purported to be purchased from these suppliers were furnished. The parties were also not produced before the authorities below. The only party who responded to notice u/s 133(6) of 1961 Act issued by the AO namely Ranakpur Sales Corporation deposed against the assessee. Th....
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.... of account maintained, purchase bills & Sale Invoices. 3. Provisions of section 145(3) are clearly attracted in this case. 4. The genuineness of purchases to the extent of Rs. 42 lakhs (approx.) is not proved without any doubt. 5. The GP rate declared by the assessee at 13.49 per cent during the assessment year is not a match to the result declared by the itself in the previous assessment years. 6. M/s. Gem Plaza, engaged in local sales of similar goods declared voluntarily rate of 35 per cent in its assessment for the assessment year 1997-98. 7. M/s. Dhadda Exports, another assessee dealing in same items, but doing export business declared GP rate of 43.8 per cent (even without considering the value of export incentives) in assessment year 1997- 98." 5. Thereafter, the books of account of the assessee were rejected by the Assessing Officer and he resorted to best judgment assessment under section 144 of the Income-tax Act. The Assessing Officer in the assessment order mentioned some comparable cases and was of the view that the case of the assessee is more or less having similar facts as that of M/s. Gem Plaza where the Gross ....
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....ocuring material from grey market. The authorities below relied upon decision of Hon'ble Gujarat High Court in the case of Simit P Sheth (2013) 356 ITR 451 (Guj. HC), which has estimated disallowance @12.5% of the disputed bogus purchases to meet the end of justice. The authorities below has not brought on record industry comparables nor any rational comparability vis-a-vis preceding years GP ratio are brought on record. There is no allegation brought on record by learned DR that similar additions were also made in the immediately preceding year The assessee earned GP ratio as detailed hereunder for last three years : Financial Year % GP 2007-08 4.3% 2008-09 5.45% 2009-10 4.9% The books of accounts were not rejected u/s 145(3) of 1961 Act by the Revenue. In the immediately preceding year i.e. assessment year 2008-09, the assessee earned GP ratio of 4.3% on total turnover, while for the year under consideration GP ratio earned was 5.45%. In our considered view and based on facts and circumstances of the case as discussed by us in details above, end of justice will be met in this case if GP ratio of 12.5% on alleged bogus purchases is added to income ....