9911796707
TMI Blog2019 (4) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of law:- "(a) Whether on the facts and in the circumstances of the case, the learned ITAT has erred in law and on facts in upholding order of the CIT(A) in restricting the addition/disallowances on account of bogus purchases to 25% Instead of entire amount of bogus purchase ignoring the fact that Shri F. H. Rizvi and his associates are only paper concerns and there was no physical movement of goods relating to bogus purchase bill? (b) Whether on the facts and in the circumstances of the case, the learned ITAT has erred in law and on facts in relying upon the decision of this Hon'ble Court in the case of N.K. Industries Ltd. vs. DCIT, 292 CTR 354 (Guj) in restricting the addition of bogus purchases 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years 1992-93 to 1997-98, there was a big variation in actual yield achieved from 94.75% to 108.12% and that the actual yield achieved by the assessee company for assessment year 1994-95 is 107.95%. According to the Assessing Officer, it is impossible to generate anything from thin air and that the assessee had not explained this abnormal output. That there are standard formulas for pharmaceutical companies as per which such big variation is not possible. 7. The assessee submitted that if the purchases are considered bogus, this would result in a situation of abnormal input-output ratio and in some cases the output would be more than the input. The Assessing Officer held that in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us formulations. The Commissioner (Appeals) after appreciating the material on record came to the conclusion that the purchases shown by the assessee as having been made from the concerns of Shri Rizvi are not genuine. He, however, was of the view that at the same time, the fact remains that the assessee had produced goods by utilizing such bulk drugs, and hence, the entire purchases cannot be disallowed. Following the ratio of the decision of the Tribunal in Themis Medicare, the Commissioner (Appeals) directed that the disallowance made by the Assessing Officer be restricted to 25% of the total purchases made by the assessee from the concerns of Shri F.H. Rizvi and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Central-I, (2018) 98 taxmann.com 234 (Bombay), where on the basis of information received from Sales Tax authorities, the Assessing Officer found that the assessee was the beneficiary of bogus purchase bills and the assessee could not produce any material purchased by it nor could it ensure presence of the supplier, the court held that the Assessing Officer was unjustified in limiting addition under section 69C on the basis of GP ratio. 12.4 Reliance was also placed upon the order dated 18.6.2018 made by a coordinate Bench in Tax Appeal No.606 of 2018 and allied matters, wherein the tax appeals came to be admitted 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. Sopark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts earlier decision in Vijay Proteins Ltd. v. Commissioner of Income Tax (supra), wherein it has been held thus:- "16. It is a matter of fact that the goods were not received from the parties from whom it is shown to have been purchased but, such material was received from a different source which is exclusively within the knowledge of the assessee and none else. Therefore, it is evident that the assessee had inflated the expenditure in question by showing higher amount of purchase price through the fictitious invoices in the names of 33 bogus suppliers. Considering the overall factual 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 purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
