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TMI Blog2020 (3) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of peak credit is also upheld. 4. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the alleged transactions with three parties were mere book entries and were not supported by movement of goods nor of funds and therefore the same cannot be treated as income. 5. The appellant prays that: i) Addition of Rs. 13,02,88,386/- may be deleted; ii) Proceedings for recovery of disputed demand may be stayed till hearing and final disposal of the appeal; iii) The appeal may be fixed for out of turn hearing; iv) Any other relief your Honours may deem fit. 1.2 The Ld. Authorized Representative for Assessee (AR), vide letter dated 07/02/2020, filed additional ground of appeal which read as under:- The learned CIT(A) ought to have held that the addition made by the Assessing Officer in respect of peak credit is beyond the scope of reassessment and hence, unsustainable. The Ld. AR pleaded for admission of the same by submitting that the adjudication of the said ground does not require appreciation of new facts and raises pure question of law. For the said submissions, reliance has been placed on the decision of Hon'ble Supreme Court in National T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd 157.45 Lacs 2010-11 3. Tulsiani Trading Pvt. Ltd. 117.95 Lacs 2010-11 4. Prateek Enterprises 1.02 Lacs 2010-11 5. H.S.Trading Co. 0.29 Lacs 2010-11 6. Shri Vallabh Traders 0.93 Lacs 2011-12 Total 1548.84 Lacs These 6 concerns were stated to be figuring in the list of entities which were proclaimed by the Sales Tax Department as providers of accommodation bill and their names featured in the list of hawala / suspicious dealers as enlisted by the Maharashtra Sales tax Department. 2.4 During survey proceedings, the statement of one of the directors of the assessee company, Shri Samir Ashwin Sagar, was recorded. The relevant portions of the statements have already been extracted on page nos. 4 to 6 of the quantum assessment order. The said director admitted that bullion was purchased from entities listed at serial nos. 1 to 3 whereas packing material was purchased from the other 3 entities. In response to question nos. 46 & 51, it was admitted that the bills were received from parties listed at serial nos. 1 to 3 whereas some purchase of bullion was made in the open market. In response to question no.51, the assessee admitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary evidences such as stock register, purchase bills, sales bill, ledger extracts etc. However, the assessee failed to produce any of the parties for verification of the transactions. 2.8 Vide submissions dated 26/03/2015, the assessee inter-alia, submitted that due to tension and anxiety, it remained to be brought to the notice that purchases to the extent of Rs. 1163.89 Lacs were reversed in books of accounts in subsequent financial year by issuing sales bills to same 3 entities. The details of the purported sale have already been extracted on page nos. 7 & 8 of the quantum assessment order. Therefore, it was submitted that net purchases made from the said parties would be as follows: - No. Name of the Parties Total Purchases (Rs.) Less Transactions Reversed Net Purchases made from the said parties 1. Saileela Trading Pvt. Ltd. 12,71,20,169/- 8,88,48,169/- 3,82,72,000/- 2. Niddish Impex Pvt. Ltd 1,57,45,395/- 1,57,45,395/- Nil 3. Tulsiani Trading Pvt. Ltd. 1,17,95,790/- 1,17,95,790/- Nil 4. Prateek Enterprises 1,02,402/- Nil 1,02,402/- 5. H.S.Trading Co. 29,250/- Nil 29,250/- 6. Shri Vallabh Traders 93,499/- Nil 93,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Peak calculation was made on the following basis: - (i) Cash has been paid on the date on which the bogus purchase bill has been entered in the books of account. (ii) Cash has been received back by the assessee on the date on which the cheque has been issued by it to the bogus parties. (iii) Ledger account of all the 6 parties have been merged to work out the actual cash receipt or payment made by the assessee on day to day basis. Accordingly, Ld.AO worked out incremental credit to the extent of Rs. 1302.88 Lacs and disallowed the same u/s 69C. 3.1 Before Ld. CIT(A), the assessee assailed the stand of Ld. AO by way of elaborate submissions but the same could not find favor with Ld. CIT(A). The Ld. CIT(A) summarily rejected the retraction of statement made by one person by another person. 3.2 During the course of appellate proceedings, remand proceedings were initiated which was duly confronted to the assessee. The assessee reiterated that there were circular transactions for Rs. 1163.89 Lacs, a fact which was duly accepted by Ld. AO and therefore, the additions should be based on remaining suspicious purchases. However, the same could not convince Ld. CIT(A) who uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-12 as unaccounted income. 4. During the course of the survey on 13.12.2012 Shri Samir Ashwin Sagar, director of assessee company deposed voluntarily under oath confirming the figures of bogus purchases by the assessee totaling to Rs. 12,08,86,505/- for various years as mentioned above in answer to query no.54 in his statement. 5.There is no doubt whatsoever that by booking bogus purchase in excess of Rs. 12.07 crore during the F.Y.2009-10 as mentioned above, assessee has inflated its expenses and has shown less Income in return of income. 6. In view of the foregoing discussion, I am satisfied that it is a fit case for re-opening of assessment u/s 147 of the Act as the income chargeable to tax has escaped assessment for A.Y. 2020-11. After going through the contents of quantum assessment order vis-à-vis recorded reasons, we find that the quantum assessment order has not travelled beyond the facts which led to formation of belief that certain income escaped in the hands of the assessee. As rightly pointed out by revenue, the sole subject matter of reassessment proceedings was booking of bogus purchases by the assessee and ultimately the additions have been made on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence on our part since the retraction, in our opinion, should be by the same particular person only, who made the statement. Therefore, the retraction has rightly been disregarded, for all purposes. 5.2 At the same time, additions merely on the basis of statements made during survey proceedings u/s 133A would not hold much evidentiary value unless the same were backed up by some cogent corroborative material. For the same, we draw strength from the decision of Hon'ble Supreme Court in CIT V/s S.Khader Khan & Sons (35 Taxmann.com 413). We find that the additions as made by Ld. AO primarily stem out of the statement made by the director of the assessee coupled with information from Sales Tax Department that the assessee obtained bogus purchase bills from certain entities. 5.3 Proceeding further, it is noted that additions have been made u/s 69C on the conclusion that the material was purchased in cash from market by utilizing undisclosed income and accommodations bills were procured from hawala parties to regularize the said cash purchases. As observed by Hon'ble Delhi High Court in CIT V/s Lubtec India Ltd. (311 ITR 175) that what is postulated in Section 69C is that first of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enerated and the material was purchased in cash from the open market. To regularize the cash purchases, bills were procured from stated entities. Going by the same, we are of the considered opinion that the additions, which were to be sustained in the hands of the assessee against these purchases, would be to account for profit element embedded in such purchase transactions to factorize for profit earned by assessee by procuring goods from grey / unorganized market. The method of peak credit as adopted by Ld. AO would not be a suitable method under the circumstances rather an adhoc estimated addition would meet the cause of justice. Keeping in view the assessee's nature of business, we estimate the additions at 5% of balance purchases of Rs. 3,84,03,652/- which comes to Rs. 19,20,183/-. The balance addition stands deleted. The method of estimation would be in line with the recent decision of Hon'ble Bombay High Court rendered in Pr.CIT V/s Rishabhdev Tachnocable Ltd. (ITA NO. 1330 of 2017 dated 10/02/2020) wherein Hon'ble Court has approved the estimated additions on similar lines, as sustained by Tribunal. 5.6 To summarize, the addition to the extent of Rs. 19,20,183/- stand conf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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