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TMI Blog2019 (4) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO as well as before the CIT (Appeal) is that the goods were consumed in the manufacturing process. Considering the suppressed profit to the tune of the ₹ 7,72,583/- (being 20% of purchases of ₹ 38,62,915) for Assessment Year 2010-11 and ₹ 8,86,064/- (being 20% of bogus purchases of ₹ 44,30,321/-) for Assessment Year 2009- 10, the addition was made. Admittedly, there cannot be sale without purchases or manufacturing without consumption but at the same time, the assessee being a manufacturer has to prove the consumption. The assessee has intentionally inflated the value of purchases by taking accommodation bills to reduced the gross profit and thereby reduced the taxable income. Thus the appeals of the assessee having no merit, therefore, dismissed. - ITA Nos.1818 And 1819/Mum/2018 - - - Dated:- 8-1-2019 - Shri Joginder Singh, Vice President For the Assessee : None For the Revenue : Shri Chaitnya Anjaria-DR ORDER These two appeals are by the assessee against the impugned orders dated 28/02/2017 and 31/05/2017 of the Ld. First Appellate Authority, Mumbai, confirming the disallowance @ 20% of the bogus purchases. 2. During heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate delay calls of cautious approach. This means that there should be no malafide or dilatory tactics. Sufficient cause should receive liberal construction to advance substantial justice. The Hon ble Apex Court in 167 ITR 471 observed as under:- 3. The legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits. The expression sufficient cause employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the others courts in the hierarchy. 2.3. Furthermore, the Hon'ble Supreme Court in the case of Vedabai Alia Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil 253 ITR 798 held that the court has to exercise the discretion on the facts of each case keeping in mind that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 25 per cent. was called for. It is established that the parties were not traceable ; they opened the bank accounts in which the cheques were credited but soon thereafter the amounts were withdrawn by bearer cheques. That fairly leads to the conclusion that these parties were perhaps creation of the assessee itself for the purpose of banking purchases into books of account because the purchases with bills were not feasible. Thus, the abovenoted parties become conduit pipes between the assessee-firm and the sellers of the raw materials. Under the circumstances, it was not impossible for the assessee to inflate the prices of raw materials. Accordingly, an addition at the rate of 25 per cent. for extra price paid by the assessee than over and above the prevalent price is fair and reasonable and we accordingly confirm the finding of the Commis sioner of Income-tax (Appeals). 12. Thus, it is apparent that both the Commissioner (Appeals) and the Tribunal have concurrently 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arranted. 3.2 The Hon'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 Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... best judgment assessment. 8. Examining the facts 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 ₹ 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 ₹ 7,88,590 on account of paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law in so far as the present ground of appeal is concerned. 14. In relation to the proposed question (F) which relates to the deletion of addition of ₹ 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 ₹ 24,61,000 excluding the cost of spare parts of ₹ 14,98,490. The Assessing Officer after examining the evidence on record and considering the explanation given by the assessee, made addition of ₹ 44,54,426, ₹ 39,59,490 being the purchase price of the crane along with its spare parts and ₹ 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 Income-tax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmity in the impugned order made by the Tribunal so as to warrant interference. In the absence of any question of law, much less, a substantial question of law, the appeal is dismissed. 3.4 The Hon'ble jurisdictional High Court in the case of CIT vs Ashish International Ltd. (ITA No.4299/2009) order dated 22/02/2011, observed/held as under:- The question raised in this appeal is, whether the Tribunal was justified in deleting the addition on account of bogus purchases allegedly made by the assessee from M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. According to the revenue, the Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. in his statement had stated that there were no sales / purchases but the transactions were only accommodation bills not involving any transactions. The Tribunal has recorded a finding of fact that the assessee had disputed the correctness of the above statement and admittedly the assessee was not given any opportunity to cross examine the concerned Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. who had made the above statement. The appellate authority had sought remand report and even at that stage the genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods 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. 3.6 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 to the said parties was also furnished. Copies of the consignment, received from the Government approved transport contractors showing that material purchased was actually delivered at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 3.7. 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 purch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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