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TMI Blog2016 (5) TMI 1463X X X X Extracts X X X X X X X X Extracts X X X X ..... d against revenue. - I.T.A.No.497/Ind/2010, I.T.A. No. 501/Ind/2010 - - - Dated:- 17-5-2016 - SHRI D.T. GARASIA, JUDICIAL MEMBER And SHRI B.C. MEENA, ACCOUNTANT MEMBER Assessee by: Shri P.D. Nagar, CA Department by: Shri Rajeev Varshaney, CIT DR ORDER PER D.T. GARASIA, J.M. Appeal by the assessee and Department are directed against the order of CIT(A)-II, Indore, dated 30.04.2010 for the assessment year 2007-08. 2. The short facts of the case are as under. 3. The assessee has filed the return of income declaring total income of ₹ 2,51,51,370/-. During the year the assessee has made purchases of ₹ 3,11,72,462/- from M/s. Jaideep Trading Company, Sendhwa. The assessee was asked to explain as to why the purchases should not be treated as bogus. The assessee has filed the written submission that the assessee has purchased the goods from Jaideep Trading Company and were sold to various parties, hence it was treated as genuine. The AO was of the view that the assessee has shown purchases to M/s. Anuj Enterprises, M/s. Shrikrishna Trading and M/s. Jaideep Trading Company amounting to ₹ 32,36,601/-, ₹ 8,04,471/- and ₹ 3,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or taxation during the year under consideration and further amount of ₹ 83.83 lakh for A.Y. 2006-07. The AO has also noted that the same modus operandi, as adopted by RDR HUF in making purchases from M/s. Anuj Enterprises, was adopted in respect of purchase transactions from the appellant's proprietary concern M/s. Jaideep Trading Co. He has very clearly and categorically recorded findings that the bills issued by the appellant did not contain any mode of transportation of goods ' from the business premises of the appellant to the business premises of RDR HUF while making the addition of ₹ 311.72 lakhs as bogus purchases in the case of RDR HUF on SUBSTANTIVE BASIS. 4.2.3 Once there is so clear and categorical finding that the amount of bogus purchases was liable to be considered in the hands of the actual beneficiary RDR HUF there was absolutely no case for making similar addition in the hands of the appellant, that too on substantive basis, when it was very clearly proved on records that the appellant was used as a conduit for facilitating such bogus transactions to be recorded in the books of RDR HUF. It is again a broadly undisputed and admitted fact on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant s contention in this behalf are found to be acceptable being verifiable from the account of M/s. Anuj Enterprises and the AO has taken note of the fact in assessment order which is as extracted above, that the appellant admitted undisclosed income of ₹ 83.83 lakhs for bogus purchases from M/s. Anuj Enterprises for A.Y.2006-07 and accordingly the addition for bogus purchases is directed to be reduced to ₹ 62,52,248/-being the peak amount involved in financing the said unrecorded purchases after necessary verification by AO of arithmetical accuracy and position of payments etc., as available on record. Reliance in this respect is placed on the decisions of Hon'ble ITAT, Ahmedabad Bench, Ahmedabad in the case of Vijay Protein Ltd. v. ACIT 56 TTJ (Ahd.) 76/58 ITD 428(Ahd.). The Tribunal has an alternative has also upheld disallowance of 25% of such bogus purchases and the said view was confirmed by Hon'ble Gujarat High Court in the case of Sanjay Oil Cake Industries v. CIT 316 ITR 274(Guj.). The aforesaid discussion disposes off all the four grounds of appeal. 4.3 The remaining ground no.5 is directed against charging of interest u/s.234C and initiation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplier. Appeal has been preferred by the assessee against addition of ₹ 62,52,248/- whereas department has preferred an appeal against the relief granted by CIT(A) by working the amount based on theory of peak credit. It is submitted that :- There is no direct evidence that the supplies made by M/s. Jaideep Trading Company were accommodation bills except that Shri Dharmesh Purohit Prop: M/s. Shree Krishna Trading Company had stated in his affidavit dated 04.03.2008 that the appellant had also used the bills of M/s. Shree Krishna Trading company. It was just presumed by the AO that the assessee followed the same modus operandi in regard to purchases shown from M/s. Jaideep Trading company which was adopted in relation to purchases from M/s. Shree Krishna Trading Company. Addition based on such presumption is arbitrary in nature. The appellant claimed that the purchase invoices issued by M/s. Jaideep Trading Company were genuine hence no addition is called for. The bona fides are also proved from the fact that the appellant himself surrendered the purchases effected from M/s. Krishna Trading Company during the year at ₹ 40,41,072/- and offered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of CIT vs. La Medica, (2001) 117 Taxman 628 (Del), wherein the Hon'ble High Court has held that when the assessee did not produce the seller, it would be the basis of doubting the genuineness of the purchases and it was fictitious purchase. In that case, the assessee was manufacturing allopathic medicines and claimed to have purchased raw material from KE on credit. The ITO found that purchases were made was high. These purchases were only purchases from the said seller. The ITO asked the assessee to produce the seller alongwith the books of accounts. Despite a number of opp0ortunity given to the assessee, seller could not be produced. Therefore, ITO treated the value of the raw material as income from undisclosed sources. The Hon'ble High Court held that the whole purchase is undisclosed income of the assessee. Similarly, in this case, the assessee has not produced the purchaser and it is admitted that only bills were produced. Therefore, in this case, the facts are similar. Therefore, the ld. CIT(A) is not justified in his action to sustain the addition of peak credit only. 8. We have heard the rival contentions of both the parties. Looking to the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to route transaction through books of accounts of M/s. Jaideep Trading Company. Shri Paramjeet Singh Rajpal is dealing in purchasing and selling of cotton. Paramjeet Singh Rajpal has excluded the transaction with the assessee of ₹ 3.11 crores. The assessee has also taken the contention that lots of ready cotton bales which contains lot no., P.R.Nos. duly mentioned in supply bill, which can be verified from the chart of purchasing the goods from Jai Deep Trading Company. They have supplied to OLAM Exports India Limited, I. C. Textiles, Laxmi Vishnu Textiles others. The enclosed chart shows that P. R. No. of the bales which is mentioned in the bales supplied by the Jai Deep Trading Company and weight of lot and lot nos. are same. The material was also transported through Vidarbh Queen Transport Company and they have deducted the TDS on freight payments to them. The assessee has also reported these sales to the Sales Tax Department and TDS deducted was also deposited in Income Tax Department. Therefore, simply on the basis of revised return filed by Paramjeet Singh cannot be said as bogus, as factual position of the transaction is verified from Sales Tax, Income Tax and Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 274 (Guj), wherein it was held that 25% of such bogus purchases was confirmed. The ld. CIT(A) has also added the peak amount in his order in para 4.2. 11. We have also considered the decision of Jurisdictional High Court in the case of CIT vs. Jagdishchandra Vishwakarma, (2011) 059 DTR 0415, wherein the Jurisdictional high Court has held that the genuineness of the purchase has to be examined at the time of purchase and not years thereafter. When the Tribunal has recorded a categorical finding that the assessee has satisfactorily explained the details and mode of payment of raw material, then it cannot be taken as bogus purchases. Hon'ble High Court has also observed that the transaction of purchase by way of regular sale bills and subsequent payment discharge the onus of genuineness of purchase as far as assessee is concerned. An investigation by the purchaser as to who operates the bank account of the seller or the group of sellers is not in the domain of the purchasers. The rules regarding onus of proof as laid down by the Courts are quite flexible. The payment through banking channel is the essence of transaction so as to decide genuineness while deciding upon the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, we modify the order of ld. CIT(A) and we direct the AO to apply the gross profit @ 10% on such bogus purchases. As per the decision of Jurisdictional High Court, even when the AO could not prove that the assessee has made the bogus purchases and the payment made through account payee cheques as returned back to the assessee, it cannot be termed as bogus purchases as per the decision of Jurisdictional High Court in the case of CIT vs. Jagdish Chandra Vishwakarma. Therefore, we delete the addition on account of the peak credit. We are of the view that the AO and ld. CIT(A) is not justified in treating this as bogus purchases. We modify the order of CIT(A) and direct the AO to apply gross profit @ 10% on purchases of ₹ 3,11,72,462/-. 12. During the course of hearing of the appeal, the ld. Departmental Representative has relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. La Medica, (2001) 117 Taxman 628 (Del). In that case, the assessee was manufacturing allopathic medicines and he was asked to produce the seller from whom he has made the purchase despite the number of opportunities given to the assessee, seller could not be produced. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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