9911796707
TMI Blog2019 (12) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... egal grounds and do not require appreciation of new facts and hence, taken on record as per the ratio of decision of Hon'ble Supreme Court rendered in National Thermal Power Co. Ltd. V/s CIT [229 ITR 383]. First, we take up cross-appeals for AY 2009-10. Cross-Appeals for AY 2009-10 2.1 The assessee's grounds of appeal as well as additional grounds of appeal would read as under: - 1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal) erred in confirming addition of Rs. 7620833/- under Section 69C of the Act on account of unexplained purchases made during the year, calculated on the basis of peak credit. 2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal) erred in not deleting observation made by Assessing Officer that payment received by purchase parties are returned to the applicant in cash after deducting small commission. 3. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) failed to appreciate that (a) Proceeding initiated under section 147 /148 of the Act is on the basis of reason to sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case and in law, the Ld. CIT(A) failed to see that the decision of the Hon'ble High Court in the case of N.K.Proteins Ltd. V/s DCIT, holding that addition cannot be restricted to certain percentage when entire transaction is bogus, had become final with dismissal of assessee's SLP & is squarely applicable. 2.2 Facts in brief are that the assessee being resident HUF stated to be engaged in the business of trading in ferrous / non-ferrous metals under proprietorship concern namely M/s Rikita Metals, was assessed for impugned AY u/s. 143(3) r.w.s. 147 on 26/02/2014 wherein income of the assessee was determined at Rs. 248.11 Lacs after sole addition of alleged bogus purchases u/s 69C for Rs. 246.79 Lacs as against returned income of Rs. 1.31 Lacs filed by the assessee on 25/09/2009 which was processed u/s.143(1). 2.3 Pursuant to receipt of certain information from DGIT(Investigation), Mumbai/Sales tax Department, Govt. of Maharashtra, it transpired that the assessee obtained bogus accommodation entries of purchases amounting to Rs. 246.79 Lacs from 5 suspicious parties. The details of the suppliers along with amount of respective purchases have already bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material such as copies of purchase invoice, bank statements reflecting payment made to the suppliers through banking channels, corresponding sales invoices and therefore, the additions were made in a summary manner merely by relying upon the information received from Sales Tax Department, Maharashtra and relying upon depositions made by the suspected sellers in their affidavits filed during the sales tax proceedings that they have not made any sales during the year under consideration. It was also pleaded that the copies of information / documents received from VAT department which were used against the assessee were neither provided to the assessee nor any opportunity of cross examining the said suppliers was ever provided to the assessee which was in violation of principle of natural justice. The said submissions were duly considered in the appellate proceedings. 3.3 During appellate proceedings, keeping in view the submissions made by the assessee, the assessee was directed to produce the documents submitted before Ld. AO in support of the transactions along with proof of delivery of goods by the dealers to the assessee along with the details of incidental expenses incurred o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in CIT vs. Durgaprasad More (82 ITR 540) to arrive at a conclusion that the transactions could not be considered as genuine. 3.6 Coming to the merits of the case, it was noted that similar additions, on peak credit basis, were made by Ld. AO for AY 2010-11 which was approved by first appellate authority and therefore, facts being the same, the addition in impugned AY were to be made on the same basis. Finally, the additions were confirmed partially by observing as under: - 8.3.23 It observed that for AY 2010-11, the AO has made an addition by applying peak credit, and the appeal filed by the appellant against the addition made has been dismissed by the CIT (A). There is no change in the facts of the case vis-a-vis AY 2010- 11. The Hon'ble ITAT, Ahmedabad 'C' Bench has upheld addition made on the basis of peak credit in the case of Vijay Proteins Ltd. Vs. Assistant Commissioner of Income Tax(1996) 58 ITD 0428 affirmed by the Hon'ble High Court of Gujarat in the case of Vijay Proteins Ltd. v.CIT in ITR No. 139 of 1996 dated 09/12/2014 [ Petitions for Special Leave to Appeal (C) No(S). 8956/2015 dismissed on 06/04/2015J. Hence, it would be appropriat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases transactions @ 12.5% out of purchase price accounted through bogus invoices have been upheld as the fair profit rate out of the bogus purchases by the Hon'ble Courts and Tribunals. 8.3.26 In the case of CIT v. Simit P Sheth (2013) 356 ITR 451 (Guj)(HC), the Hon'ble High Court has upheld disallowance @12.5% of such purchases. 8.3.27 The appellant company is a trader in goods i.e. dealers in ferrous and non ferrous metals and under identical facts, the Hon'ble ITAT, Bombay Tribunal (H) has upheld disallowance @12.5% of such purchases in the decision date 4th April, 2017 in the case of Ratnagiri Stainless Pvt. Ltd. vs. Income Tax Officer in ITA No. 4463/Mum/2016 as well as in Income Tax Officer 5 (3) (1) vs. M/s RBS Copper Products Pvt. Ltd. in ITA Nos. 1057 & 1058 dated 04/07/2017. 8.3.28 Thus taking into account the entirety of the facts, the profit embedded in accommodation entries of purchase of diamonds is estimated @ 12.5% of the purchase amount as under: AY Purchase Amount Profit @12.5% Peak Credit AY 2009-10 2,46,79,447/- 30,84,9317- 76,20,8337- AY 2011-12 7,31,94,3717- 91,49,2967- 1,01,72,2137- AY 2012-13 3,95,76,9627- 49,47,1207- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these estimations for AYs 2009-10 & 2011-12 were treated to have subsumed under peak credit addition since the peak credit was more than estimated addition @12.5%. However, for AY 2012-13, it appears that the learned CIT(A) has upheld addition to the extent of Rs. 10.76 Lacs, being 12.5% on alleged bogus purchases of Rs. 86.15 Lacs. The aforesaid adjudication has given rise to cross-appeals before us. 4.1 The Ld. Authorised Representative for Assessee [AR], drawing our attention to the grounds of appeal, submitted that the assessment was framed in gross violation of principle of natural justice as well as in breach of the provisions of Section 142(3) of the Act. It was pleaded that adverse material was never confronted to the assessee and no opportunity of crossexamination was ever provided to the assessee. It has further been pleaded that the additions were made as unexplained investment u/s 69C whereas all the transactions were recorded in the books of accounts and the payment were through banking channels and therefore, there was no unexplained investments made by the assessee within the meaning of Section 69C, as held by learned AO. The Ld. AR also contested the validity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during assessment proceedings, pursuant to receipt of certain information from DGIT (Investigation), the allegations were levelled by revenue against the assessee that the assessee procured bogus purchase bills from as many as 5 entities. Notices issued u/s 133(6) were issued to these suppliers to confirm the transactions, however, the same remained unserved in all the cases. The assessee was confronted with all those facts and show-caused to produce the suppliers and adduce evidences in support of purchase transactions. However, the assessee could not produce even a single supplier to confirm the transactions and therefore, the initial primary onus casted upon assessee, in this regard, remained undischarged. 5.3 The Ld. AR has pleaded that the reassessment proceedings were triggered merely on the basis of information received from DGIT (Inv.) without there being any application of mind by Ld. AO. However, upon perusal of reasons recorded as placed on page no. 16-17 of the paperbook, we find that upon receipt of specific information from DGIT (Investigation), Ld. AO formed a belief that certain income escaped assessment in the hands of the assessee. At this stage, nothing more w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal stands dismissed. 5.5 So far as the merits of the case are concerned, we are of the considered opinion that there could be no sale without actual purchase of material keeping in view the fact that the assessee was a trader. The books of accounts were subjected to Tax Audit which contained quantitative details of the items being dealt with by the assessee. The assessee was in possession of primary purchase documents. The payment to the suppliers was through banking channels and the assessee had furnished details of corresponding sales made against the impugned purchases. The sales turnover reflected by the assessee was not disturbed by the revenue. At the same time, the assessee failed to rebut the allegations levelled by revenue and could not produce even a single party to confirm the transactions particularly in the backdrop of the fact that these suppliers were major suppliers for the assessee and substantial purchases were sourced by assessee from these suppliers. Notices issued u/s 133(6) remained unresponded to in all the cases. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- "So far as the question regarding addition of Rs. 3,70,78,125/- as gross profit on sales of Rs. 37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66%. Therefore, considering 5.66% of Rs. 3,70,78,125/- which comes to Rs. 20,98,621.88 we think i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6.2 In this year, the assessee has raised one more additional ground to submit that the additions of Rs. 731.94 Lacs made by Ld. AO exceeds the total purchases of Rs. 713.97 Lacs made by the assessee during the year under consideration. Since we have restricted the additions to 2%, this ground stand partly allowed. 6.3 ITA No. 2996/Mum/2018 stands partly allowed whereas ITA No. 3224/Mum/2018 stands dismissed. Assessee's Appeal for AY 2012-13 7. The assessment has been framed u/s 143(3) on 31/03/2015 wherein the assessee has been saddled with estimated additions of Rs. 49.47 Lacs, being 12.5% of alleged bogus purchases of Rs. 395.76 Lacs. The first appellate authority has confirmed the same. From the extraction of impugned order in preceding paragraphs, it appears that Ld. CIT(A) has erred in noting the correct figures since the quantum of alleged bogus purchases is Rs. 395.76 Lacs and not Rs. 86.15 Lacs as wrongly noted by Ld. CIT(A). Nevertheless, facts and circumstances being identical, we restrict the impugned additions to 2% of alleged bogus purchases of Rs. 3,95,76,962/- which comes to Rs. 7,91,539/-. The balance addition stands deleted. The assessee's appeal stands ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
