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TMI Blog2017 (11) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... onclude that during the search, purchase bills and other papers found were verified against the records as per books maintained. The Ld. CIT(A) had sought remand report from the AO and found that in the remand proceedings, the details filed by the assessee were examined. The Ld. CIT(A) after relying upon the judgments of different judicial authority had rightly concluded that section 145(3) of the I.T. Act applies. Disallowance being 15% of the total purchases - Held that:- Considering the profit element embedded in these purchase transactions to factorize profit earned by assessee against purchase of material in the grey market and undue benefit of VAT against bogus purchases, we are of the considered view that restricting the additions @ 15% of purchases by Ld. CIT(A) is unreasonable. The ends of justice would be met in case the additions are restricted @ 12.5 % of purchased. Consequently orders passed by Ld. CIT(A) are set aside and hence we direct the AO to restrict the additions to the extent of 12.5% of the bogus purchases made from the parties. Accordingly this ground raised by the assessee is partly allowed. Addition on account of unsecured loans - assessee has not ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2005-06) 3. First of all we take up assessee s appeal in ITA No. 2415/Mum/2015 for assessment year 2005-06 as lead case. The grounds of appeal are as under:- 1. On the facts and circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the action of Ld. A.O. in passing the assessment order by invoking the provisions of Sec. 144 of the Income Tax Act, 1961 as per the ground/s contained in the appellate order or otherwise. 2. On the facts and circumstances of the appellant's case and in law the Ld. CJT(A) erred in confirming the action of Ld. A.O. in rejecting the book results u/s 145(3) of the Act as per the ground/s contained in the appellate order or otherwise. 3. On the facts and circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the disallowance to the extent of ₹ 44,89,830/- being 15% of the total purchases of ₹ 2,99,32, 190/- made by AO as per the ground/s contained in the appellate order or otherwise. 4. The Appellant crave leaves to add, amend, alter, modify and or withdraw any of the above grounds of appeal, which are without prejudice to one another. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer, granting opportunity to the appellant to file rejoinder to the remand report, any grievance on this issue does not survive. This ground is accordingly dismissed. After having gone through the facts of the present case as well as considering orders passed by revenue authorities and hearing the parties at length, we find that Ld. CIT(A) while deciding this grounds have taken into consideration the facts of the present case and had rightly held that in the assessment order, the AO has already narrated in detail the various opportunities given to the assessee and non-compliance on the part of the assessee. Even before Ld. CIT(A) the necessary opportunity was granted to the assessee and the written submissions as well as additional evidence was also considered by Ld. CIT(A). The Ld. CIT(A) also called for the remand report from the AO and assessee was further provided opportunity to file rejoinder to the remand report, therefore in our view, sufficient opportunities have already been availed by the assessee at every stage, therefore this ground raised by the assessee contains no merits. Moreover, no new facts or contrary judgments have been brought on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s maintained. All the hard discs, CDs and lap top were seized and back up of all the computer data was taken from office and residence. Printouts were also taken. The assessing officer has not made any reference to these in the assessment order. He has only repeated that books were not produced. In the remand proceedings details filed are examined. The only point mentioned in the remand report is that the purchases are not substantially proved. Though the AO has not stated it in the remand report, the reference is apparently to non production of delivery challans in respect purchases from BGPPL. What action has to be taken as regards the suspect purchases gets covered in a subsequent ground of appeal. Taking the totality of facts, I do find that AO 10 has questioned the purchases from BGPPL and therefore that section 145(3) applies. I rely on the decisions in the case of Kesri Chand Jaisukhlal vs CIT (248 ITR 47(Gauhati), Ratan Lai Om Prakash vs CIT (1981) 132 ITR 640 (Orissa), CIT vs Uttaram Churma Pattar Udyog 116 Taxman 524 (Raj). This ground of appeal is dismissed. After having gone through the facts of the present case as well as considering orders passed by revenue autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g their commission. One of the recipient of sales bills from BGPPL is the appellant The AO made verification by issue of notices u/s 133(6) in respect of purchases claimed by the appellant No reply was received in response to the notices The supporting evidences were not filed by the 'appellant proving the genuineness of the purchase claims The AO therefore disallowed purchases to the extent of ₹ 2,99,32,190/-. The appellant submitted that details of purchases made from BGPPL, its bank statements showing payments made, and details of sales to third parties of the material purchased from BGPPL was submitted. The evidence regarding sales and purchase can be used in the case of BGPPL but not in the case of the appellant. The sales tax assessments in the case of BGPPL is subjected to appeals and has not been finally concluded. The AO has rejected the purchases of the appellant based on failure to produce challans but has not disputed the sales made by the appellant. The appellant company never admitted to any bogus purchases in the course of search. The evidence relied upon by appellant was never supplied to appellant. If the purchases are treated as bogus, the sales ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered that BGPPL did not supply the material, it means that appellant purchased the same from someone else. The purchases from BGPPL is quite small as a proportion of total purchases for most of the years. In the case of CIT I v/s M/s Nikunj Eximp Enterprises (P) Ltd. -ITA No 5604 of 2010 decided on 17/1212012, the Hon'ble Bombay High Court upheld the decision of the Honble ITAT that the purchases were not bogus. In this case, the AO had disallowed the entire amount of purchases held to be bogus since the parties did not confirm the purchases and one party denied any transaction. The fact that sales were not disputed found favour with the ITAT and the High Court. On a similar reasoning of sales not being disputed, the disallowance of purchases were deleted in the case of Balaji Textiles Industries (P) Ltd. v/s 3rd ITO 49 lTD (Bom)177 In the case of Sagar Bose v/s ITO 56 lTD (Kol) 561, the Hon'ble ITAT deleted the disallowance of purchases in case of untraceable sellers for the reason that the AO did not pursue the trail of money. In the case of Free India Assurance Services Ltd. v/s DOlT 132 ITO (Mum) 60, the facts were that purchases were disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O estimated the additions @ 28% of the bogus purchases and on appeal the Ld. CIT(A) restricted the disallowance @ 15% of the impugned purchases. After appreciating the facts of the present case, we found that Ld. CIT(A) while deciding this ground has also admitted the factual position that the confirmation of sales by the parties was proved. Even the AO had disputed or disproved positively, the sales made by the assessee. Qua these purchases the assessee had submitted the quantitative details which were not rebutted or disproved by the AO. The only basis for making disallowance by the AO rest of the premise that the cash trail is establishes between K. K. Gupta and B. G. P. P. L. The AO further held that since the purchases made by B.G.P.P.L were bogus, therefore sales made by them must also be bogus. At this stage, we would like to point out that AO cannot make disallowance on the basis of assumption and presumption, but the disallowance can only be made on concrete evidence /rebuttal by disproving the evidence produced by the assessee. The Ld. CIT(A) had correctly held that the cash trail between BGPPL and the assessee has not been proved by the AO, therefore, it cannot be pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2419/Mum/2015 (AYs 2006-07, 2007-08 2008-09 respectively) filed by assessee for decision:- 15. Since we have already decided the merits of the orders passed by Ld.CIT(A) in the appeal filed by assessee in ITA No. 2415/Mum/15 for AY 2005-06 on all grounds raised by the assessee. 16. Since all the grounds raised by the assessee in all the above appeals i.e. ITA Nos. 2417, 2418 2419/Mum/2015 (AYs 2006-07, 2007-08 2008-09 respectively, are identical to that of the ground raised by the assessee in ITA No. 2415/Mum/15 for AY 2005-06. Therefore, following our own decision in the aforementioned appeal in ITA No. 2415/Mum/15 for AY 2005-06, we apply the same findings in the present appeals which are applicable mutatis mutandi. Resultantly the above appeals filed by the assessee are also partly allowed. I.T.A. No. 2920/Mum/2015 (AY 2004-05) 17. Now we take up revenue s appeal in I.T.A. No. 2920/Mum/2015 (AY 2004-05). The grounds of appeal are mentioned herein below:- (I) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of ₹ 15,63,10,689/- on account of estimation of G.P. 28% wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditworthiness of the depositors. 20. We have heard the counsels for both parties and we have also perused the material placed on record as well as orders passed by the revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). Ld. CIT(A) while dealing with the said ground has passed the detail order. The operative portion of CIT(A) s order is contained in para no. 5.6 and the same is reproduced below:- 5.6. The fifth ground is in respect of addition of ₹ 1,25,00,000/- u/s 68 as unexplained credit in respect of equity share capital. The AO made the addition on the alleged failure of assessee in establishing with documentary evidence the genuineness of credits. In the remand report, the AO has given the list of five persons who have contributed to the increase in share capital. These are family members and HUF of Lakhamshi Gala. The AO sought time to make further verification. All the amounts are received from five family members of the assessee group almost all of whom are all assessed with the same assessing officer and assessments are made u/s 153A in some of these cases such as Lakhamshi Gala, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper Private Limited and his family members? (ii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of ₹ 16,85,13,159/- on account of estimation of G.P. 28% without appreciating the fact that assessee failed to produce the documentary evidence for the purchases and business of assessee is comparable with Shruti Arts Private Limited, as both are engaged in similar trade of paper trading and have obtained accommodation entries for purchases from Bright Global Private Limited? (iii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of ₹ 1,25,00,000/- on account of equity share capital treated as unexplained cash credit u1s.68 of the Income Tax Act, 1961 without appreciating the fact that assessee has not established the source in the hands of the existing shareholders to prove genuineness of transaction, identity and creditworthiness of the shareholders? (iv) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of ₹ 3,87,53,155/- on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he counsels for both parties and we have also perused the material placed on record as well as orders passed by the revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). Ld. CIT(A) while dealing with the said ground has passed the detail order. The operative portion of CIT(A) s order is contained in para no. 5.7 and the same is reproduced below:- 5.7. The sixth ground of appeal is in respect of addition of ₹ 3,87,53,1552/- made by AO in respect of sundry creditors treating it as a case of cessation of liability u/s 41(1)(a). The seventh ground of appeal is in respect of addition of ₹ 5,39,798/- made by AO in respect of other liabilities treating it as a case of cessation of liability u/s 41(1)(a). The additions are made for the reason that the assessee did not furnish the details such as name address, PAN, confirmations, reason for non payments. On verification, the AO has not found any thing adverse in the remand report. The major amount of outstanding is from Ballarpur Industries Ltd. The amounts received have been subsequently paid. The AO has still sought more time It is not clear what more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uti Arts Private Limited, as both are engaged in similar trade of paper trading and have obtained accommodation entries for purchases from Bright Global Private Limited? (iii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs,5, 06,91,558/- on account of sundry creditors without appreciating the fact that major creditors for the year are Bright Global Paper Limited and Paper Plus Technologies Private Limited and it has been established that there has been no genuine purchase from these parties. 2. The Appellant craves leave to add, to amend and / or to alter any of the grounds of appeal, if need be. 3. The Appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-48, Mumbai may be set aside and that of the Assessing Officer restored. . Ground No. (i) (ii). 28. Since both the grounds raised by the revenue are inter-connected and inter-related and relates to challenging the order of Ld. CIT(A) in restricting disallowance of bogus purchases and estimating the same, therefore we thought it fit to dispose of the same by this consolidated order. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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