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TMI Blog2019 (11) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to be disallowed in case of bogus purchases. We accordingly affirm the CIT(A) findings for making subject-matter of challenge in all these four crossappeals filed at Revenue s and assessee s behest. - I.T.A Nos.153 & 154/Kol/2018 And I.T.A Nos.155 & 156/Kol/2018 - - - Dated:- 15-11-2019 - Shri S. S. Godara, JM And Dr. A. L. Saini, AM For the Assessee : Shri Subash Agarwal, Advocate For the Revenue/Department : Shri A. K. Nayak, CIT ORDER PER SHRI S. S. GODARA: The Revenue and assessee have filed their instant cross-appeals for assessment years 2013-14 to 2014-15 arise against the Commissioner of Income Tax (A) - 2, Kolkata s separate orders; both dated 01.12.2017 passed in Case No.10147/CIT(A)-2/2016-17 No.10919/CIT(A)-2/2016-17 restricting the Assessing Officer s action disallowing the entire purchases of ₹ 4,90,30,444/- and ₹ 2,28,86,352/- to the extent of the profit element therein reading figures of ₹ 69,72,348/- and 37,22,278/-; respectively in proceedings u/s 143(3) of the Income Tax Act 1961; in short the Act . Heard both the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. Assessing Officer, your honour will notice that the appellant was alleged to evade central excise duty by concealing goods manufactured by them by them by means of trading goods to avoid central excise duty. The basis of reaching such conclusion was given in the letter dated 21.04.2014 i.e. summons issued to the suppliers of the appellant returned unserved. Therefore, it is acknowledged before your goodself that the central excise department has confirmed in its report that the entire amount of the purchase amount to ₹ 33757074/- were either manufactured or were unaccounted purchases made by the assessee and therefore, it is evident that appellant had physical goods available for sale. Further, neither the Central Excise Department nor the Ld. Assessing officer has suspected the sales made by the appellant as the entire sales was made to Coal India Ltd and its subsidiaries and the same has also been confirmed by the general manager of eastern coal fields from the copy of showcase. Therefore it can be precisely shouldered that though the purchase of the appellant may be held as bogus but the very fact that the goods were existing and the same were s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of undisclosed sales as unaccounted income of the assessee as showcased by your honour instead of applying gross profit rate on such unaccounted sales. The Hon'ble ITAT relying on the decision of the Hon'ble Gujarat High Court in the case of CIT Vs President Industries Ltd. 258 ITR (Guj) 654 in which it, was held that addition cannot be of entire undisclosed sale proceeds. Only the profit embedded in sale proceeds can be taxed , has held that the learned CIT(A) was, therefore, justified in applying gross profit rate against unaccounted sales for the purpose of making the addition on account of undisclosed income of the assessee. Against the decision of the Hon'ble ITAT/Ahmedabad the department preferred an appeal before the Hon'ble Gujarat High Court vide Tax Appeal no.1828 of 2010. The said appeal of the department was dismissed by the Hon'ble High Court by observing as under - Thus, it could be seen from the order of the Tribunal, on proper appreciation of facts and material on record, it concluded the issue in favour of the assessee and against the Revenue. It found sufficient material on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ventuality, the assessing officer could have resorted the provisions u/s 133(6) and Sec. 131 the he All the payments were made through account payee cheques which have not been doubted or challenged by assessing officer and no information from the bank was sought about the creditors which would also have proved their identity. Reliance is placed on following judgments: -CIT Vs. Ms Nikuni Exim Enterprises Pvt. Ltd. (Bom.) (ITA no. 5604 of 2010 dated 17-12-2012). -Addl CIT Vs. Bahari Bros (1985) 154 ITR 244 (Pat.); -Nemi Chand Kothari Vs. CIT (2003) 264 ITR 254 (Gau.). For the proposition that where the account books of the assessee are not rejected the addition cannot be made and the payments having been made through account payee cheques which has not been controverted by the assessing officer, cannot be disallowed Further reliance is placed on: (i) Sagar Boss Vs. ITO 56 ITD 561- holding that when the particulars and details of purchases along with payments through account payee cheque numbers; bills bearing sales-tax numbers are produced along with the addresses thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed in its report that the entire amount of the purchases amount to ₹ 3,37,57,074/- were either manufactured or were unaccounted purchases made by the assessee and therefore, it is evident that appellant had physical goods available for sale. Further, neither the Central Excise Department nor the Assessing officer has suspected the sales made by the appellant as the entire sales was made to Coal India Ltd and its subsidiaries and the same has also been confirmed by the general manager of eastern coal fields from the copy of showcase. Therefore, it can be precisely shouldered that though the purchase of the appellant may be held as bogus but the very fact that the goods were existing and the same were sold to a government enterprise cannot be ignored. The item wise summary of goods sold to South Eastern Coal Fields Ltd were also filed along with copy of bills to prove that apparently there was a sale (A-3). Further the A.O has mentioned in his assessment order than the vat registration of most suppliers has been cancelled or were about to be cancelled. In this regard it is submitted on the date on which transaction has been made, the VAT registration of the suppliers were v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. This is not a relevant factor. Though Section 133(6) notices were returned unserved and the assessee could not produce the alleged bogus hawala suppliers, the entire purchases cannot be added as undisclosed income. The addition has to be restricted by estimating Gross Profit ratio on the purchases from the alleged accommodation entry providers. Purchases cannot be treated as bogus where (i) assessee has furnished quantitative reconciliation, (ii) Gross Profit rate is comparable to earlier subsequent years, (iii) suppliers are income-tax assessees and their sales have not been treated as bogus by their A.Os, (iv) payments are by account payee cheques and other documentary evidences are available. The AR of the appellate has further placed his reliance on the Hon'ble ITAT relying on the decision of the Hon'ble Gujarat High Court in the case of CIT Vs President Industries Ltd. 258 ITR (Gui) 654 in which it was held that addition cannot be of entire undisclosed sale proceeds. Only the profit embedded in sale proceeds can be taxed , has held that the learned CIT(A) was, therefore, justified in applying gross profit rate against u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned in the report. It has mentioned that it is clear from the reasons as mentioned in the notice that all the goods cleared by the manufacturer before their clients (subsidiaries of coal India Ltd) and this is obvious because they are submitting the copy of their central excise registration certificate to their clients but on the other hand they are showing clearance as trading of spares and mis-declaring themselves as trader before the department of central excise. It is also clear from the showcase cum demand notice issued by the department of central excise that the appellate company did not made purchases and all the so called suppliers are not genuine. It is also proved from the same notice that the items were supplied by the appellate to the subsidiaries of the coal India ltd. So the issue here is that the appellate has failed to prove the identity and genuineness of the venders form where he claimed to have made purchase of materials. Keeping in view of above, I agree with the submission of the appellate for making the gross profit addition on the unverifiable purchases over and above the gross profit as declared by the appellate. Whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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