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TMI Blog2022 (1) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... nowhere been rejected till date. The Revenue's sole substantive grievance is therefore rejected. - ITA No. 41/Hyd/2020 - - - Dated:- 14-12-2021 - A.M. Alankamony, Member (A) And S.S. Godara, Member (J) For the Appellant : Hema Kataria, Adv. For the Respondents : Rajendra Kumar, CIT (DR) ORDER Per S. S. Godara, JM This Revenue's appeal for the A.Y. 2011-12 against the order of the CIT(A)-1, Hyderabad in Appeal No. 10534/CIT(A)-1/Hyd/2018-19, dated 23.10.2019 in proceedings u/s. 143(3) r.w.s. 147 of the Income Tax Act 1961; in short the Act. Heard both the parties. Case file perused. 2. The Revenue's sole substantive ground raised in the instant appeal challenges correctness of the CIT(A)'s action restricting the Assessing Officer's action disallowing the assessee's 25% of aggregate purchases involving M/s. Highland Industries Ltd. of ₹ 57,69,36,164/-, coming to ₹ 14,42,34,041/- to the extent of net profits declared in the books of account of ₹ 11,54,448/- only. The CIT(A)'s lower appellate discussion to this fact reads as under: 6.1 During the assessment proceedings, the Assessment Officer stated 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only. The assessee has not made any purchases from the parties but has used the entities for making layers and ultimate beneficiary is assessee company. Though the assessee denied of having taken any benefit from the aforesaid party, however, the information from bank statements revealed and the non-attendance of entities cannot be ignored. 14. Assessee had not supported his claim with any extra evidence or parties for verification. In the interest of natural justice, assessee has given a chance to produce these parties and submit the details viz., delivery challans, details of transport, vehicle numbers used for transporting the goods etc., vide order sheet entry dated 24.12.2018. On the appointed date, assessee failed to produce these parties. He was again requested to give if there is any change of address of these parties and to produce these parties along with the books of accounts, complete bank statement along with necessary bills/vouchers, delivery challans etc. to prove the identity, genuineness and creditworthiness of these parties. On the appointed date the assessee has failed to produce the parties for verification nor furnished any of the details as called for. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation from the assessee and as there was no compliance to notices issued u/s. 133(6) to the said parties, it is clear that the purchases from the above parties are bogus purchase. This view is also supported by the following decisions: (i) Navkar Enterprises vs ACIT (ITA No. 4722/Mum/2017) (ii) N.K. Industries vs DCIT (Appeal No. 240 of 2013). (iii) The above High Court decision is sustained by Hon'ble Apex Court in the case of M/s. Vijay Proteins Ltd. vs CIT Respectfully following the judicial pronouncements, since the assesses has not produced any documentary evidences for the transactions held between assessee company and Highland Industries Ltd. and has not produced the parties for verification, it is proposed to disallow 25% of the purchases which works out to ₹ 14,42,34,041/-. The same is now added back to the income returned. 6.2. The appellant has submitted as under: 2.2.1. The ITO disallowed a sum of ₹ 14,42,34,041/, @ 25% of the purchases, on the ground that the Appellant failed to prove the genuineness of such purchases. In this regard, this is to submit that in response to a specific query in this regard, raised during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO himself observed in para 13 of the order that as per the bank account of the Appellant the funds were received from Nimbus Industries Ltd. and were transferred to High Land Industries Ltd. However, he made a strange observation that such flow of funds reveals that Nimbus Industries Ltd. received amounts from the Appellant only and the Appellant is the actual beneficiary. It is absolutely incomprehensible as to how the officer arrived at such inference which is contradictory to his own admission that the funds received from Nimbus Industries Ltd. were transferred to High Land Industries Ltd. Further, as the sales were made to Nimbus Industries Ltd., amounts were received from such concern and the same were utilized for making payment for purchases made from High Land Industries Ltd. and there was nothing unusual or unbelievable in these transactions. The Appellant was a beneficiary only to the extent of profit from these transactions which was already included in the Total income returned. The observation of the ITO that the person, from whom purchases were made, denied the transaction is also factually incorrect and mere return of letter u/s. 133(6) unserved cannot lead to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine. Thus, non-genuineness of a transaction cannot be lightly inferred by the assessing officer and his findings should be based on cogent reasons, supported by positive facts/evidences but not by mere negative inferences driven by suspicion, assumptions, conjectures and surmises. However, no such enquiry was conducted in the case of the Appellant by the ITO and the addition was solely based on suspicion, presumptions and conjectures. Thus, the summary rejection of the evidences filed by the Appellant, without spelling out the reasons based on cogent material, is legally unsustainable and as such the impugned disallowance deserves to be deleted. Reliance is placed on the decision of the jurisdictional High Court in the case of CIT Vs Rajiv Kumar Mittal in ITTA No. 407 of 2014 (AP HC). The relevant portion of the decision is extracted hereunder for the perusal of CIT(A): The issue was whether the transaction took place between the assessee and third party was genuine. The laws consistently say that initial burden to establish genuineness of the transaction lies on the assessee first. If the assessee discharges his/its onus, then the burden shifts to the Revenue to produce co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the department. It further approved the decision of ITAT to restrict the addition in such cases to the extent of normal GP on its other purchases. Copies of the above decisions are submitted as Annexure-6. In the instant case, quantitative sales and purchase registers and relevant invoices were submitted during the reassessment proceedings and it was amply evident from such documents that all the products purchased during the year were sold and the resultant profit was duly accounted for. The respective payments were made through banking channels and no evidence, to the effect that the Appellant Company received back such amounts, was found/gathered either by the investigation wing or by the ITO. Further, he had accepted the sales affected by the Appellant which would not have been possible without purchase of corresponding quantity of steel and, as such, the impugned disallowance of a portion of purchases was legally unsustainable. In view of the above factual and judicial position, no disallowance is warranted on account of unverifiable purchases. The ITO further failed to appreciate that the rate of profit in steel trading, especially on a back-to-back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the sale instead of depending solely on the statement of the Rajendra Jain Group. In view of the same, we deem it fit and proper to remit the issue to the file of the AO for verification of the documents filed by the assessee and if it is found that the payment has been made by the assessee through banking channels and the purchases and sales have also been recorded in the books and the net profit has been offered to tax, then there cannot be any disallowance of the purchases . Further the ITAT, Mumbai in the case of Cannon Industries (P) Ltd. Vs. DCIT (2015) (59 taxmann.com 65), stated that AO has not disputed the sales of the assessee and has also not disputed the quantitative figures regarding opening stock, purchases and closing stock as well as sales. Therefore, when there is no dispute or discrepancy in the quantitative figures of purchase, stock, sales including closing stock, then the purchases can not be treated as bogus. 7.1 The appellant also accepted that the steel trading was back-to-back basis transaction. When there is back to back transaction, difference between sales and purchases is to be treated as profit. Therefore, the difference between ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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