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TMI Blog2022 (10) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... facts & circumstances of the case, the Ld.CIT(A) was justified in deleting the addition Rs. 30,55,700/- made by the AO on account of peak purchases credit without appreciating the fact of the case that outstanding expenditure at the end of the year relating the alleged concerns are also bogus and non-genuine?" 3. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition Rs. 10,39,700/- made by the on account of short yield in comparison to the percentage of yield as mentioned in contract executed with Chhattisgarh State Government Authority?" 4. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition Rs. 11,07,64,618/- out of total addition of Rs.11,55,49,250/- made by the AO on account of unaccounted sales by applying the ratio of GP @ 2.62% without appreciation the fact of the case that the assessee has shown the goods in the name of bogus concerns?" 5. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition Rs. 84,91,733/- out of total addition of Rs. 1,59,41,676/ - made by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO.?" 11. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in accepting the fresh evidence produced by the assessee, if any without allowing the AO, proper opportunity to examine the same, thereby violating the provision on law under Rule 46A of I T Rules?" 12. "Whether on points of law and on facts & circumstances of the case, the ld. CIT(A) was justified in restricting the addition in the ratio of GP of current year which is contrary to the evidence on record as the alleged concerns have not sold any items to the assessee, indulgence of such concerns providing of bogus bills only in lieu of commission, as relied upon by the AO in his assessment order a finding which is factually incorrect thereby rendering a decision, which is perverse?" 13. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) has erred in law by holding the decision in favour of the assessee and against the revenue though there is no nexus between the conclusion of fact and primary fact upon which without conclusion is based? 14. The order of the Ld. CIT(A) is erroneous both in law and on facts? 15. Any other ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Eden Rice Mill 1,73,75,000/- 5. M/s. Balaji Rice Mill 1,81,41,000/- 6. M/s. Balaji Grain Processing Unit 1,10,15,000/- 7. M/s. Balaji Rice Industries 1,07,18,700/- Total 9,42,87,200/- 4. The A.O considering the fact that the assessee had admittedly procured goods in question not from the aforementioned seven parties but from the open/grey market, thus, rejected his books of account u/s.145(3) of the Act. The AO further holding a conviction that the assessee by procuring bogus purchase bills would have booked purchases at an inflated value, i.e, at an amount higher than that at which the same would have been actually procured by him, thus, disallowed 25% of the value of the impugned purchases and made a consequential disallowance of Rs.2,35,71,800/- ( 25% of Rs.9,42,87,200/-). Also the A.O after referring to the modus operandi that would have been adopted by the assessee for procuring bogus purchases bills from various entry operators, therein, made an addition of peak amount of purchases that were claimed by the assessee to have been made from the aforementioned bogus parties aggregating to an amount of Rs.30,55,700/-, as under: S. No. Name of the party T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further claimed by the assessee that 82615 quintals were loaded by the buyers who had made payments for the corresponding transportation charges. Accordingly, the assessee came forth with an explanation as regards 106180 quintals [23565 quintals + 82615 quintals] of rice/broken rice that was over the year loaded in the railway rakes. The AO considering the aforesaid explanation of the assessee called upon him to explain the balance unaccounted sales of 303080 quintals of rice[409260 quintals (-) 106180 quintals]. In his reply the assessee filed with the A.O rake details which, inter alia, revealed that in the list of parties who were claimed to have dispatched/transported their goods through railway rakes booked by the assessee there were four such parties which were admittedly bogus firms from whom bogus bills were procured by the assessee. The A.O on the basis of the aforesaid facts called upon the assessee to explain as to why the value of goods that were allegedly dispatched by the aforesaid four bogus firms amounting to Rs. 16,10,44,860/- may not be treated as his suppressed sales. In reply it was the claim of the assessee that the possibility of goods being sent through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied the value of the unaccounted sales at an amount of Rs.46,21,97,000/- (303080 quintals X Rs. 1525 per quintal). Thereafter, the AO relying on the order of the ITAT, Ahmadabad in the case of Vijay Proteins Vs. ACIT, (1996) 58 ITD 428 (Ahd.) worked out the addition as regards the suppressed sales @ 25% of value of the unaccounted sales and made a consequential addition of Rs.11,55,49,250/-(46,21,97,000 X 25%). Also, the A.O made an addition of an amount aggregating to Rs.1,59,41,676/- that was shown by the assessee in the name of four sundry creditors, viz. (i) M/s. Shivshankar Chawal Udyog : Rs.65,00,000/-; (ii) M/s. Amira Pure Foods Pvt. Ltd. : 16,60,433/-; (iii) M/s. Lal Mahal Ltd. :Rs. 9,49,943/-; and (iv) M/s. Shri Shyamji Rice Industries: Rs.68,31,300/-, as the unexplained income of the assessee. After, inter alia, making the aforesaid additions/disallowances the A.O vide his order passed u/s.143(3), dated 31.03.2016 determined the income of the assessee at Rs.16,04,24,940/-. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). The CIT(Appeals) though principally approved the view taken by the A.O that the assessee had not made any genuine purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isted and signed by the person who had booked the railway rake. It was observed by the CIT(Appeals) that the aforementioned person had clearly stated that loading of the goods was the full responsibility of the person who had booked the railway rake. It was further observed by the CIT(Appeals) that the claim of the assessee that as a matter of trade practice the goods of certain other persons were also transported in the railway rakes which were booked by him was supported by the very fact that the assessee himself had during the year transported 56876.75 quintals of rice valued at Rs.10.09 crore through railway wagons which were booked by a total of 18 third parties. Also, it was observed by the CIT(Appeals) that the assessee had transported 80131 quintals of broken rice valued at Rs.11.52 crore through the wagons which were booked by third parties during the year under consideration. As the aforesaid details were in the nature of additional documentary evidence which were filed by the assessee before him for the very first time under Rule 46A of the Income-tax Rules, 1962, therefore, the CIT(Appeals) after affording an opportunity to the A.O, who raised a general objection to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has sought our indulgence for adjudicating five issues, viz. (i). deletion by the CIT(Appeals) of an addition of Rs.2,11,01,475/- (out of total addition of Rs.2,35,71,800/-) that was made by the AO in respect of bogus purchases; (ii).deletion by the CIT(Appeals) of an addition of Rs.30,55,700/- that was made by the A.O towards peak amount of purchases that were claimed by the assessee to have been made from 7 bogus parties; (iii). deletion by the CIT(Appeals) of an addition of Rs. 10,39,700/- that was made by the AO towards low yield of rice; (iv). deletion by the CIT(Appeals) of an addition of Rs.11,07,64,618/- (out of total addition of Rs.11,55,49,250/-) that was made by the A.O towards unaccounted sales that were detected on the basis of details gathered by him from the railway authorities about the rice transported by the assessee; and (v). deletion by the CIT(Appeals) of an addition of Rs.84,91,733/- (out of the total addition of Rs.1,59,41,676/-) that was made by the A.O on account of bogus sundry creditors. 12. As the order of the CIT(Appeals) has been assailed by the department on the basis of multi-facet contentions before us, therefore, we shall deal with the same in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his books of accounts. Although the aforesaid process of estimation can by no means lead to total accuracy, but there should be some logical basis/reasoning behind such estimation. We would, however, on a perusal of the basis adopted by both the lower authorities for estimating the profit/discount which the assessee would have made/received by purchasing the goods from the open/grey market, mince no words in observing that the same in both the cases is totally devoid and bereft of any logical basis/reasoning. Admittedly, in a case where the assessee had purchased goods not from the organized sector but from open/grey market, then, it can safely be concluded that he would have procured such goods at a discounted value by making savings on manifold factors i.e. sales tax, other government levies, cash discounts etc., as in comparison to the price at which such goods would otherwise be available in the organized sector. As our indulgence in the present case is confined to the quantification of the profit which the assessee would have made by procuring the goods in question at a discounted value from the open/grey market, therefore, we restrict our adjudication to the said aspect al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.20,98,62 1.88 we think it fit to direct the revenue to add Rs.20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue." 9. In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order at costs." It was observed by the Hon'ble High Court that the addition in respect of purchases which were found to be bogus/unproved in the case of the assessee before them, who was a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of other genuine purchases. We, thus, on the basis of the aforesaid observation of the Hon'ble High Court, are of the considered view that on the same lines the profit which the present assessee before us would have made by procuring the goods at a discounted value from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee @1719.24 per quintal (average rate), as against the purchase of the genuine rice that was made by him @ 1729.86 per quintal (average rate). On the basis of the aforesaid facts, now when the purchase rate of the bogus purchase of rice (average rate) is of a lower value than that at which he had made genuine purchases of rice (average rate), therefore, as per the ratio of the judgment of the Hon'ble High Court of Bombay in the case of M/s. Mohhomad Haji Adam & Company (supra) there could be no justification for making any addition on the said count in the hands of the assessee. We, say so, for the reason that the Hon'ble High Court in the case of M/s. Mohhomad Haji Adam & Company (supra), had held, that for the purpose of quantifying the profit which the assessee would have made by carrying out bogus/unproved purchases the addition is to be made to the extent that the GP rate of the bogus/unproved purchases is brought to the same rate as that of other genuine purchases. Accordingly, now when in the case of the present assessee before us as the rate of bogus purchases of rice i.e Rs. 1,719.24 per quintal (average rate) is already lower than the rate of genuine purchase of ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stained the addition @ 2.62% of the value of the impugned bogus purchases of broken rice, the same, thus, brings the purchase price (average rate) of the bogus purchase of broken rice to an amount of Rs.1363.32 (average rate), i.e., lower than the purchase value (average rate) of the genuine purchase of broken rice of Rs.1370.80 per quintal (supra). Although the addition sustained by the CIT(Appeals) i.e @2.62% as regards 4000 quintals of broken rice (valued at Rs.56 lacs) in the backdrop of our aforesaid deliberations is found to be pitched on the higher side by an amount of Rs. 7.42 per quintal [Rs. 1370.80 per quintal (-) Rs. 1363.32 per quintal], but then considering the fact that the assessee has not assailed the order of the CIT(Appeals) any further in appeal before us, therefore, we refrain from dislodging the addition to the extent the same had been so sustained i.e @2.62% of the value of bogus purchases of broken rice. We, thus, in terms of our aforesaid observations uphold the order of the CIT(Appeals) as regards the addition of the impugned bogus purchases of both rice and broken rice as had been sustained by him i.e @ 2.62% of the value of the impugned purchases in ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see in order to satisfy the demand of funds under such circumstances would either manage to show some bogus liability or some advance payments suiting to his need. On the basis of his aforesaid deliberations the A.O had made an addition of the peak credit running through the accounts of all the seven parties aggregating to an amount of Rs.30,55,700/-. 24. On appeal, the CIT(Appeals) after deliberating on the issue in hand did not concur with the view taken by the A.O. It was observed by the CIT(Appeals) that it was not a case where the assessee has made certain purchases out of unaccounted cash which would justify the addition of peak of purchases. Accordingly, the CIT(Appeals) treating the addition as devoid and bereft of any merit vacated the same. 25. After hearing the Ld. Authorized Representatives of both the parties, we find substance in the claim of the Ld. AR that as it is not a case that the assessee had made any purchases from his unaccounted money, therefore, the very basis for making the impugned addition of peak purchases cannot be sustained and had rightly been struck down. As observed by the CIT(Appeals) and, rightly so, the aforesaid addition has no legs to stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice of the assessee was 68% [65% (rice) + 3% (kanka)], but the same had wrongly been taken by the A.O at 65%. The CIT(Appeals) after considering the aforesaid issue had held as under: "4.3 Addition has been made stating that yield of the assessee's business is 65 percent of rice, whereas as per the Government norms the yield should be 67%. On going through the assessee's submission and quantitative details it is seen that yield shown by the assessee is sufficient. As per agreement with state govt the yield of rice should be 67% and if it is usna variety of paddy then the yield should be 68%. AO has found that whereas the yield of assessee should be 67%, it has shown lesser yield. Assessee's yield is 65% of rice and 3% of kanka (broken rice). Appellant has furnished copy of agreement entered with Chhattisgarh Rajya SahakariVipanan Sangh Maryadit. This agreement is executed every season between the custom millers and Vipanan Sangh on behalf of state government. As per the agreement the quality of rice should be such that the yield will be 67% and if the rice is usna the yield should be 68%. If government of India makes any changes in the yield, both the parties wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of respective scrutiny assessments for the said years, further fortifies its claim that no adverse inferences as regards its yield of rice for the year under consideration was liable to be drawn. For the sake of clarity the comparative yield position for the year under consideration as also of those for the immediately preceding two years is culled out as under: Comparative yield position is as below: Particular A.Y.2013-14 A.Y.2012-13 A.Y.2011-12 (Qty. In quintals)(Qty. In quintals)(Qty. In quintals) Paddy consumed- 28,080 84,985 1,12,598 Rice obtained- 18,252 55,250 73,189 %ge of Rice- 65% 65% 65% Broken Rice Obtained 842 2550 3378 %ge of Broken Rice- 3% 3% 3% Total %ge of Rice & Broken rice- 68% 68% 68% Bran obtained- 1,404 4249 5630 %ge of Bran 5% 5% 5% If accepted in Assessment In past Yes (P.18, 19) Yes ( P 20, 22) We, thus, in terms of our aforesaid observations, finding no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the addition of Rs.10,39,700/- made by the assessee on account of short yield of rice, uphold his order to the said extent. Thus, the Ground of appeal No.3 is dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee) we find that the entire account of the said party was squared up on 12.12.2017 and the outstanding balance was reduced to Rs. Nil. 36. We after giving a thoughtful consideration to the aforesaid facts, concur with the view taken by the CIT(Appeals) that as the authenticity of the aforesaid creditor, viz.M/s. Amira Pure Foods Pvt. Ltd. (supra) was duly substantiated by the assessee on the basis of supporting documentary evidence, therefore, there was no justification for the A.O to have drawn adverse inferences as regards the genuineness and veracity of the said party and treat the amounts shown against it as the unaccounted income of the assessee. We, thus, finding no infirmity in the view taken by the CIT(Appeals) in so far he had vacated the addition of Rs.16,60,633/- (supra) appearing in the name of the aforesaid party i.e. M/s. Amira Pure Foods Pvt. Ltd.(supra), uphold his order to the said extent. (b) M/s. Shyamji Rice Industries : Rs.68,31,300/- 37. Ostensibly, the A.O had made addition of the aforementioned amount solely for the reason that Shri Mohanlal Agrawal, proprietor of the said concern had himself admitted on oath that the aforesaid concern was a bogus conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion in the course of the proceedings was drawn by the Ld. AR to the copy of the account of the aforementioned party, viz. M/s. Shyamji rice Industries, Page 144 of APB. Also, the Ld. AR had taken us through the copy of the account of the aforementioned party for the subsequent years i.e. A.Y.2014-15 and A.Y 2015-16, which reveals purchases made by the assessee from the said part in the succeeding years a/w. payments made through cheques to the said party. However, as both the aforesaid documents, viz. copies of account of the aforesaid party, viz. M/s Shyamji Rice Industries for A.Y 2014-15 and A.Y 2015-16, had been filed most casually by the ld. AR in the course of hearing of the appeal, i.e not as per the manner prescribed in Rule 29 of the Appellate Tribunal Rules, 1963, therefore, we decline to take cognizance of the same. 39. We have considered the aforesaid observations of the CIT(Appeals), which reveals that he had proceeded with on the basis of misconceived and incorrect facts and, had wrongly assumed that the purchases claimed by the assessee to have been made from the aforementioned party had been held to be bogus by the A.O, and the same thereafter on appeal was uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration. On being queried, it was submitted by the assessee that the same were the expenses which were incurred by him for transportation of 23565 quintals of rice through railways during the year. The A.O in order to verify the factual position called for the details from Sr. Station Manager, SECR, Tilda as regards the quantitative details of rakes that were dispatched by the assessee during the year. In reply, it was intimated to the A.O that the assessee had dispatched 409260 quintals of rice/broken rice during the year for which transportation charges of Rs.3,71,19,103/- were paid by him. On the basis of the aforesaid facts the A.O called upon the assessee to explain as to why the difference of 385695 quintals of rice [409260 quintals (-) 23565 quintals] may not be treated as his suppressed sales of rice/broken rice for the year under consideration. In reply the assessee came forth with a three-fold explanation, viz. (i). expenses of Rs.38,81,114/- debited in the Profit & Loss account pertained to rice/broken rice that was loaded by him in the railway rakes during the year; (ii). that payment of transportation charges for 82615 quintals of rice that was loaded for transporta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he railway authorities which revealed that the entire amount of payment was made by the assessee. The AO considering the explanation of the assessee that certain third parties would use the railway rake booked by the assesee for transporting their goods called upon him to substantiate the same on the basis of supporting documentary evidences. In reply, the assessee furnished the names of the parties who had loaded their goods in the railway rakes that were booked by him, quantity of the goods dispatched by the third parties and the details of payments that were made by them towards transportation of their goods, but failed to file any such documentary evidence in support of his aforesaid claim. The A.O in order to dispel all doubts summoned the concerned railway authority, viz. Shri Manjesh Kumar, Chief Goods Clerk of SECR, Raipur Division, Tilda railway station and recorded his statement u/s.131(1)(d) of the Act on 30.03.2016. Shri Manjesh Kumar clearly stated that the railways used to load the rake with the stock of the person who used to book the same. Also, it was stated by him that the person who had booked the rake would give a declaration about quantitative details of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of the assessment proceedings, but the CIT(Appeals) taking cognizance of the fact that the A.O had not allowed sufficient opportunity to the assessee to substantiate his claim and had in fact drawn adverse inferences on the basis of details gathered and statement of the railway authority viz. Shri Mangesh Kumar(supra) that was recorded at his back, therefore, admitted the same under Rule 46A of the Income Tax Rules, 1962. The A.O on being confronted with the aforesaid additional documentary evidences that were filed by the assessee before him, vide his remand report dated 08.05.2018 is stated to have raised a general objection to the admission of the fresh evidence and had not commented on the merits of the explanation that was advanced by the assessee. 45. The CIT(Appeals) after considering the issue in hand was of the view that the assessee by placing on record confirmations of certain parties was though able to substantiate his claim that 208222 quintals of rice/broken rice were loaded by them in the railway rakes that were booked by him during the year, but had failed to come forth with any supporting documents to substantiate his similar claim as regards the balance 107 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Quantity and value details of Loading in Railway Rakes allotted to assesssee - AY 2013-14", Page 35 of APB. 48. On a perusal of the aforesaid details, it transpires that the assessee had not been able to substantiate his claim that 107127.50 quintals (valued at Rs.18,26,19,512/-) of rice/broken rice was transported by third parties in the railway rakes that were booked by him during the year. Our attention was also drawn by the Ld. AR to the confirmations of the third parties as regards the transportation of rice/broken rice through the railway rakes that were booked by the assessee a/w. copies of the invoices substantiating the aforesaid factual position, Page 58 to 79C of APB. The complete details of rice/broken rice loaded by the third parties had been also filed before us, Page 38-39 of APB. We have considered the aforesaid facts; and have no hesitation to conclude that now when the assessee had duly substantiated that as a matter of trade practice certain duly identified third parties had transported/dispatched 208222 quintals of rice/broken rice in the railway rakes that were booked by him on 16 occasions during the year under consideration, therefore, no infirmity emerges f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in the railway rakes that were booked by him. Considering the fact that the assessee himself had during the year transported rice/broken rice of a substantial value through wagons booked by third parties, which claim of his had neither been doubted nor dislodged by the department, we are of the considered view that no infirmity does emerge from the order of the CIT(Appeals) who after taking cognizance of the said prevailing trade practice and supporting documentary evidence had accepted his duly substantiated claim that 208222 quintals of rice/broken rice of third parties were transported through railway rakes that were allotted to the assessee on 16 occasions during the year under consideration. 51. Adverting to the quantification of the profit that the assessee would have made by carrying out the unaccounted sales of the balance 107127.50 quintals of rice/broken rice (valued Rs.18,26,19,512/-), we find that the same was though quantified by the A.O @ 25% of the unaccounted sales, but the same thereafter on appeal was scaled down by the CIT(Appeals) to the overall GP rate of 2.62% that was disclosed by the assessee during the year. Apropos the issue in hand, we may herei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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