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TMI Blog2019 (4) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance on account of bogus purchases to 25%. The Tribunal has not disturbed such finding of fact recorded by the Commissioner (Appeals). A perusal of the proposed questions shows that the appellant has neither challenged the concurrent finding of fact recorded by the Commissioner (Appeals) and the Tribunal, nor has it been pleaded that the findings of fact recorded by the Tribunal are perverse. In the facts of the present case, the Tribunal, having concurrently found that there were corresponding sales in respect of the bogus purchases, was wholly justified in confirming the order passed by the Commissioner (Appeals) in restricting the bogus purchases to 25% of the bogus purchases. Since the Tribunal as well as the Commissioner (Appeals), have merely followed the decision of the jurisdictional High Court, no infirmity can be found in the impugned order passed by the Tribunal warranting interference. However, it may be clarified that the quantum of deduction, namely, 25% cannot be said to be a fixed standard, inasmuch as, in the case of Sanjay Oilcake Industries v. Commissioner of Income tax [ 2008 (3) TMI 323 - GUJARAT HIGH COURT] what the court has held was that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases ignoring the fact that in that case, this Hon'ble Court observed that taxing only 25% of these bogus claim goes against the principles of section 68 and 69C of the Income Tax Act? 3. For the sake of convenience, reference is made to the facts of Tax Appeal No.1213 of 2018, which relates to assessment year 1993-94. 4. The assessee is engaged in the business of manufacturing and marketing of various bulk drugs and pharmaceutical preparations. Search came to be carried out at the business as well as residential premises of Shri F.H. Rizvi on 8.12.1998 and it was found that Shri Rizvi was running ten concerns which were mainly used for issuing bogus bills. Shri Rizvi admitted that for a nominal commission they used to issue bogus bills to various parties and the amount received by way of sale consideration by cheque was returned to them in cash. Since the entire transaction was only on paper, no actual movement of goods had taken place. From the statement of Shri Rizvi, the Assessing Officer found that he had confirmed that the firms named therein were nonexistent and were created by him in various names only to issue bogus sale bills to various Pharmaceutical Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of yield ratio, the consumption of raw material has not been satisfactorily explained by the assessee which proves that the purchased quantity of tetracycline from Rizvi Group never reached the assessee company in physical form and this fact has been admitted by the supplier of the goods. 8. The assessee also submitted that if the purchases are held to be bogus, the corresponding sales be excluded. The Assessing Officer did not accept the plea on the ground that the purchase from M/s. R.V. Chem was just 4.0% of the total cost of material consumed. The assessee company had not provided the reason for decrease in gross profit ratio and details of yield as called for. He, accordingly, held that the assessee had accounted a meagre amount of bogus purchases in its books of account and there was no actual purchase of goods. He further held that looking to the variation in yield, it could not be proved that without receipt of material shown as purchased, production was not possible, and rejected the assessee s contention regarding corresponding set off of sales. 9. From the suppliers ledger control account, the Assessing Officer found that up to 31.3.1993, out of the purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the balance disallowance be deleted. 11. Revenue went in appeal before the Tribunal. By the common impugned order passed in respect of assessment years 1992-93 to 1997-98, the Tribunal dismissed the appeals. The Tribunal found that the Assessing Officer had treated certain purchases as bogus but, at the same time, he had accepted the corresponding sales made out of such bogus purchases. The Tribunal further observed that the general principle of accounting says that all expenses have to be debited and all income has to be credited and since the purchases are debit entries, it failed to understand as to how the debit entries have been treated as income of the assessee. The Tribunal found that an identical issue was considered by the jurisdictional High Court in N. K. Industries Limited v. DCIT , 292 CTR 354 (Guj) . Following the said decision the Tribunal did not interfere with the findings of the Commissioner (Appeals) in restricting the addition/disallowances to 25% of the bogus purchase and dismissed all the appeals. 12. Mr. Varun Patel, learned senior standing counsel for the appellant submitted that the Tribunal had erred in upholding the order of the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on the question as to whether the Appellate Tribunal had erred in law and on facts of the case in restricting the addition of 25% of the value of alleged purchases after categorically finding it to be bogus. It was submitted that the question involved in the present case being similar to the question involved in that case, the appeals deserve to be admitted on such question of law. 12.5 It was, accordingly, urged that the appeals do give rise to a substantial question of law as proposed or as may be deemed fit by this court. 13. Opposing the appeal, Mr. B. S. Soparkar, learned advocate for the respondent assessee tried to address the court on the merits of the findings of the authorities as regards the purchase being bogus. However, since the assessee has not preferred any appeal against the order of the Commissioner (Appeals), the finding regarding the purchases not being genuine has become final. Hence, it is not permissible for this court to go into the merits of such finding. 13.1 The learned advocate further invited the attention of this court to the decision of this court in the case of Vijay Proteins Ltd. v. Commissioner of Income Tax (supra) to submit that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al scenario, the Tribunal was justified in disallowing 25% of the purchase price. 16. This court in Sanjay Oilcake Industries v. CIT , (2009) 316 ITR 274 (Gujarat), on which reliance has been placed in the case of Vijay Proteins Ltd. v. Commissioner of Income-tax (supra), recorded the findings of the Tribunal, wherein the Tribunal had concurred with the action of the Commissioner (Appeals) for confirming 25% of the amount claimed as fair and reasonable. The Tribunal found that the parties from whom the purchases were shown to have been made 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 said 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. The Tribunal, accordingly, held that an addition of 25% for extra price paid by the assessee than over and above the prevalent price is fair and reasonable and, accordingly, confirmed the findings of the Commissioner (Appeals). This court concurred with the findings of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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