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TMI Blog2017 (8) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... advancing arguments, which is identical to the ground raised. Reliance was placed upon the decision from Hon'ble Gujarat High Court in the case of N.K. Industries Ltd. vs DCIT (IT Appeal No.240 of 2003 & etc.). Reliance was also placed upon the decision in the cse of N.K. Proteins Ltd. vs DCIT (SLP No.769 of 2017), which was dismissed confirming the decision of the Hon'ble High Court for making the addition of entire income on account of bogus purchases. 2.1. On the other hand, the ld. counsel for the assessee Ms. Keyuri Desai, contended that in the case of N.K. Industries Ltd., relied upon by the Ld. DR is on different facts as search was conducted in that case and incriminating documents were found. The impugned order was defended by contending that the Hon'ble Gujarat High Court has taken the view on the basis of different facts, therefore, the order of the Ld. Commissioner of Income Tax (Appeal) has to be confirmed. It was pleaded that delivery chalans were produced and the assessee was not provided cross examination. Plea was also raised that the assessee has already paid the taxes. Reliance was placed upon the decision in ITA No.5194/Mum/2014, ITA No.4299/2009 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Hon'ble Gujarat High Court in the case of Simit P. Seth (2013) 356 ITR 451 (Guj.), CIT vs Vijay M. Mistry Construction Ltd. (2013) 355 ITR 498 (Guj.), CIT vs Bhola Nath Poly Fab. (P.) Ltd. (2013) 355 ITR 290 (Guj.) and various other decisions of the Tribunal, the aggregate disallowance was restricted to 15%, which is under challenge before this Tribunal. 2.4. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the case of the Revenue is that there is bogus nature of purchases made from suppliers and the notices issued u/s 133(6) of the Act were either not served or refused unclaimed. The suspecting purchases of the impugned amounts. Undisputedly, the assessee provided the necessary details for such purchases, vouchers, bills, bank statement, etc. The books of the assessee were not rejected by the Assessing Officer and thus even during scrutiny proceedings, no defects were pointed out by the Assessing Officer. Broadly, it can be said that it may be case of purchase from bogus part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrently accepted the finding of the Assessing Officer that the apparent sellers who had issued sale bills were not traceable. That goods were received from the parties other than the persons who had issued bills for such goods. Though the purchases are shown to have been made by making payment thereof by account payee cheques, the cheques have been deposited in bank accounts ostensibly in the name of the apparent sellers, thereafter the entire amounts have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount from the bank accounts. In the light of the aforesaid nature of evidence it is not possible to record a different conclusion, different from the one recorded by the Commissioner (Appeals) and the Tribunal concurrently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Gujarat High Court in CIT vs Bholanath Poly Fab. Pvt. Ltd. (2013) 355 ITR 290 (Guj.) held/observed as under:- "5. Having come to such a conclusion, however, the Tribunal was of the opinion that the purchases may have been made from bogus parties, nevertheless, the purchases themselves were not bogus. The Tribunal adverted to the facts and data on record and came to the conclusion that the entire quantity of opening stock, purchases and the quantity manufactured during the year under consideration were sold by the assessee. Therefore, the purchases of the entire 1,02,514 metres of cloth were sold during the year under consideration. The Tribunal, therefore, accepted the assessee's contention that the finished goods were purchased by the assessee, may be not from the parties shown in the accounts, but from other sources. In that view of the matter, the Tribunal was of the opinion that not the entire amount, but the profit margin embedded in such amount would be subjected to tax. The Tribunal relied on its earlier decision in the case of Sanket Steel Traders and also made reference to the Tribunal's decision in the case of Vijay Proteins Ltd. v. Asst. CIT [1996] 58 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the present case in the light of the aforesaid decisions, the decision of the Tribunal, being based on an estimate, does not give rise to any question of law so as to warrant interference. 9. In so far as the proposed questions (C), (D) and (E) are concerned, the same are similar to the proposed question (A) wherein the Tribunal has restricted the addition to 25 per cent. on similar facts. In the circumstances, for the reasons stated hereinabove, the said grounds of appeal do not give rise to any question of law. 10. As regards the proposed question (B) which pertains to the deletion of addition of Rs. 7,88,590 made on account of inflation of expenses paid to Metal and Machine Trading Co. (MMTC), the Assessing Officer has found that MMTC was a partnership firm of Shri Nitin Gajjar along with his father and brother operating from Bhavnagar. A perusal of their transactions with the assessee indicated that there is some inflation of expenses as detailed in paragraph 6.1 of the assessment order. After considering the evidence on record, the Assessing Officer disallowed the amount Rs. 7,88,590 on account of payment made to MMTC. 11. The assessee preferred an appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In relation to the proposed question (F) which relates to the deletion of addition of Rs. 44,54,426 made on account of purchase of crane and allowing depreciation on the same, the Assessing Officer observed that the assessee had purchased a crawler crane for an amount of Rs. 24,61,000 excluding the cost of spare parts of Rs. 14,98,490. The Assessing Officer after examining the evidence on record and considering the explanation given by the assessee, made addition of Rs. 44,54,426, Rs. 39,59,490 being the purchase price of the crane along with its spare parts and Rs. 4,94,936 being depreciation claimed by the assessee. The Commissioner (Appeals), upon appreciation of evidence on record, was of the view that the Assessing Officer has not appreciated the facts of the case properly and had made disallowance which was not permitted by the Incometax Act. It was held that disallowance could only have been made in respect of expenses debited to the profit and loss account whereas in the present case the purchase of crane and spare parts of the crane and other machineries were in the nature of acquisition of capital asset. According to the Commissioner (Appeals), the disallowance could have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law, much less, a substantial question of law, the appeal is dismissed." 2.7. The Hon'ble jurisdictional High Court in CIT vs Nikunj Exim Enterprises Pvt. Ltd. (2015) 372 ITR 619 (Bom.) held/observed as under:- "7. We have considered the submission on behalf of the Revenue. However, from the order of the Tribunal dated April 30, 2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement, i.e., reconciliation statement but also in view of the other facts. The Tribunal records that the books of account of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, i.e., Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the Commissioner of Income-tax (Appeals), one cannot con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the assessee was given credit facilities for a short duration and the payments were given by cheques. When that is so, it cannot be said that the entries for the purchases of the goods made in the books of account were bogus entries. We, therefore, do not find that the conclusion arrived at by the Tribunal is against the weight of evidence. In that view of the matter, we answer the question in the affirmative, that is, in favour of the assessee and against the Revenue. Accordingly, the reference stands disposed of with no order as to costs." 2.9. The Mumbai Bench of the Tribunal in the case of DCIT vs Rajeev G. Kalathil (2015) 67 SOT 52 (Mum. Trib.)(URO), identically, held as under:- "2.2.Aggrieved by the order of the AO, assessee preferred an appeal before the First Appellate Authority(FAA).Before him it was argued that assessee had filed copies of bills of purchase from DKE and NBE, that both the suppliers were registered dealers and were carrying proper VAT and registration No.s, that ledger accounts of the parties in assessee's books showed bills accounted for, that payment was made by cheques, that a certificate from the banker giving details of cheque payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. As far as the case of Western Extrusion Industries. (supra)is concerned, we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But, in the case before us, there is nothing, in the order of the AO, about the cash traial. Secondly, proof of movement of goods is not in doubt. Thererfore, considering the peculiar facts and circumstances of the case under appeal, we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on file to endorse the view taken by the AO. So, confirming the order of the FAA, we decide ground no.1 against the AO." 2.10. The ratio laid down in the case of M/s Neeta Textiles vs Income Tax Officer 6138/Mum/2013, order dated 27/05/2013, Shri Jigar V. Shah vs Income Tax Officer (ITA No.1223/M/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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