9911796707
TMI Blog2021 (12) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Mahavir Singh, Vice President And Shri S. Rifaur Rahman, Accountant Member For the Assessee : Ms. Morvi Chaturvedi For the Revenue : Shri Bharat Andhele ORDER PER S. RIFAUR RAHMAN, A.M. The captioned appeal has been filed by the assessee challenging the order dated 9th October 2019, passed by the learned Commissioner of Income Tax (Appeals)-30, Mumbai, pertaining to the assessment year 2010-11. 2. The assessee has filed the present appeal on the following grounds:- "1. That on the facts and circumstances of the case and in law, the reopening proceedings initiated by the Assessing Officer u/s 147 is bad in law and liable to be quashed. a) The Ld. A.O. erred in re-opening the assessment u/s 147 solely on the basis of information received from DGIT (Inv.), Mumbai, without any application of mind and as such, the re-opening is bad-in-law and liable to be quashed. b) The Ld. A.O. erred in re-opening the assessment under section 147 based on suspicion and surmises without any tangible material showing escapement of income and as such, the re-opening is bad-in-law and liable to be quashed. 2. That on the facts and in the circumstances of the case and in law, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer was not satisfied with the evidences furnished by the assessee to establish the genuineness of purchases. Thus, ultimately, the Assessing Officer rejected the books of account of the assessee under section 145(3) of the Act and held that the purchases aggregating to ₹ 4,70,89,512, from the dealers were merely accommodation entries and such purchases were made to inflate the purchases / expenses and hence disallowed ₹ 58,86,189 (being 12.5% of ₹ 4,70,89,512). 7. The learned CIT(A) enhanced the entire amount of bogus purchase by observing as follows:- "5. DECISION 5.1 This appeal is decided on merit, after carefully considering the material on record, the factual matrix and the legal position. 5.2 Grounds of appeal "a" to "d" is with respect to the addition made by the Ld. A.O. on account of non-genuine purchases amounting to ₹ 58,86,189, being 12.5% of the total non-genuine purchases of ₹ 4,70,89,512 by reopening of the assessment. 5.2.1 The relevant extract of the Assessing Officer is reproduced as under:- "…… 3. In respect of the above mentioned parties, information was received from Maharashtra Sales Tax Department t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexure-A. 7. Similarly, details of corresponding sales of goods were also called for as per annexure-II and link the purchase with sales supported by bills and vouchers and reflection in the stock register of its entry and exit item by item. The assessee was also asked to produce books of accounts, bills and vouchers for verification. 8. The submission / details furnished by the assessee have been carefully perused and considered. From the above discussions and the details so filed, the followings facts emerge - (i) The Sale Tax Department has conducted independent enquires in each of the Mail parties mind conclusively proved that these parties are engaged in the business of providing accommodation entries only. The parties art, issuing bills without delivering any goods amid services. (ii) The assessee could not produce any evidence during the course of hearing also that the assessee did not accept the findings of the Sales Tax Department and that the Sales Tax Authority has accepted the objection made by the Assessee. (iii) Independent enquiries/investigations have been carried out by this office under section 133(6) of LT Act. But ill the cases the notice returned uns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this tangible information, the Ld AO had reason to believe that income had escaped assessment on account of claim ot bogus purchases. However, the addition was made on account of the appellant not discharging the onus of proving the claim of purchase to the satisfaction of the ljd. A() who held that mere filing of evidences in support of purchases and payments made through account payee cheques cannot be conclusive ill case where genuineness of delivery and transaction is doubted. The addition is made oil basis of purchase which are not substantiate. 6. During appellate proceedings, a notice for enhancement u/s 251(1)(a) was issued wherein the assessee appellant was asked to show cause why the income should not be enhanced to 100% of the bogus purchases as against the addition made by the A() of 12.5 % of the bogus purchases. It was pointed out that there was failure to produce parties from whom purchases were made (Para 8 (iv) of the assessment order) vital documents like delivery challans, transport receipt, goods inward register maintained at the godown etc. were not furnished (Para 8 (v) of the assessment order). There was no compliance to this notice of enhancement u/s 271(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails. The A() also issued notice u/s 133(6) of the I.T. Act, 1961 and these notices were returned back by the postal authorities. The AU recorded that assessee failed to furnish relevant information with respect to non genuine purchases and also failed to disclose true and fair affairs of its business and proceeded to estimate the gross profit at 15%. The CIT in action u/s 263 held that once the assessee could not produce any material nor could he ensure the presence of the supplier, before the AU, it would mean that the AU was expected to complete the exercise in accordance with the law. The action of the CIT u/s 263 to estimate the entire unsubstantiated purchases as bogus purchases was upheld. 6.5 The Hon'ble ITAT, Pune, in Kolte Path, in ITA Nos.1411 to 1415/PN/2013 for A. Vs 2003-04, 2005-06 & 2007-08 to 2009-10 and ITA Nos.1478 to 1483/PN/2013 for AY 200405 to 2009-10 held that, where suppliers have been unable to produce even the primary evidence to show movement of goods from supplier to assessee or any other form of evidence of delivery, even though payment was made through cheques and purchases are evidenced by suppliers bills, the purchases are liable to be disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which he asserts, must prove that those facts exists. Accordingly, when a claim for deduction towards expenditure, arising from purchase of goods, is made by the assessee appellant, the burden of proving that claim lies with the assessee appellant. This has not been discharged to the satisfaction of the Act. 6.10 The onus of proof is upon the assessee to prove each of the following ingredients - (a) the item of expenditure must not be of the nature described under sections 30 to 36 of the Act; (h) the item of expenditure must not be in the nature of capital or personal expenses of the assessee; (c) the expenditure must be laid out wholly and exclusively for the purpose of business or profession. If the assessee fails to satisfy any of these tests, the expenditure claimed is not allowable. The Hon'ble Bombay HC held so in the case of Ramanand Sagar (256 ITR 134). 6.11 The argument that the sales could not have been made without purchases is addressed below. The onus is on the appellant to establish the purchases. When this onus is not discharged, the purchases are disallowed to the extent these are not substantiated. It is not for the Department to doubt sales. The prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have been the case. Even if such a claim of grey market purchases were to be made, the onus is on the assessee to establish how these grey market purchases were made, from whom these were made and how these are reflected in the books of account, stock register and also as to how the payments were made for these said grey market purchases. In the absence of the appellant establishing this, the bogus purchases have to upheld in toto to the extent not substantiated as per Sec 37(1). Again, if the appellant claims that in the event of disallowance of purchases as bogus, his sales too should he reduced, the onus is Oil assessee to establish which of the sales are bogus. A bald claim that the sales have not been doubted by Department cannot be advanced as all to hold unsubstantiated purchases per Sec. 37(1) as an expenditure. It is pertinent to note that the oft cited I Hon'ble Gujarat high Court decision in the case of Simit P. Sheth ((2013) 356 ITR 451) is based on the fact that where purchases were made from grey market, only profit element embedded in such purchase could be added to assessee's income and accordingly upheld ITAT's estimation of profit @' 15 % ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g considered the submissions of the learned Departmental Representative, we find that, though, the assessee may not have been able to prove the genuineness of purchases from the declared source, however, it is a fact on record that the Assessing Officer has not disputed the sales effected by the assessee. Therefore, it goes to prove that the assessee must have purchased goods from some other undisclosed source. In such circumstances, it is the settled legal position that the entire purchases cannot be disallowed, but only the profit element embedded in such purchases can be considered for addition. Therefore, keeping in view the decisions of the Tribunal in identical nature of cases, the decision of the Assessing Officer to restrict the disallowance to 12.5% of the non-genuine purchase is fair and reasonable requiring no interference from this forum. Accordingly, we set aside the impugned order passed by the learned CIT(A) and uphold the order of the Assessing Officer. Second issue is decided in favour of the assessee. 9. Now coming to the first issue i.e., re-opening of assessment under section 147 of the Act is concerned, since we have decided the second issue i.e., enhancement ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
