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TMI Blog2024 (4) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... tiny assessment proceeding and to pass assessment order. In absence of a valid statutory notice u/s. 143(2) by the AO, the consequential assessment order passed would be invalid and is liable to be quashed. 2) Without prejudice to ground no. 1, on the facts and in circumstances of the case CIT(A) has erred in confirming the disallowance of Rs. 55,36,900/- made by the Assessing Officer after rejecting books of account u/s. 145(3) and by taking rate of 25% on amount of alleged bogus purchases of Rs. 2,21,47,600/- without considering the facts and circumstances of the case properly and judicially. Hence, the assessee prays that the disallowance of Rs. 55,36,900/- made on account of bogus purchases be deleted. 3) Without prejudice to ground no. 1, on the facts and in circumstances of the case CIT(A) has erred in confirming the adhoc disallowance of Rs. 12,064/- made out of "Fuel Expenses" by the Assessing Officer without considering the facts and circumstances of the case properly and judicially. Hence, the assessee prays that the disallowance of Rs. 12,064/- made out of "Fuel Expenses" be deleted. 4) The assessee reserves the right to add, amend, alter or withdraw any grow-id/gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal 2,21,47,600/- 7. Survey operations u/s.133A of the Act were conducted at the business premises of Shri Sanjay Sharma, Hanuman market, Raipur, and Shri Kamlesh Kesharwani, commission Agent, Ramsagarpara, Raipur on 15.03.2016, which revealed that certain rice millers would procure bogus bills from brokers/entry operators without any actual purchase of goods. It was observed by the A.O. that substantial incriminating material evidencing the aforesaid factual position were found in the course of the survey proceedings. The A.O. also noticed that survey action was carried out in the case of Nagarik Sahakari Bank, Raipur where some of the brokers/entry operators maintained their bank accounts. It was further observed by the A.O. that brokers/entry operators had in their respective statements that were recorded on oath u/s.131 of the Act admitted of having provided bogus bills to rice traders and millers without any actual supply of goods. Also, it was noticed by the A.O. that certain rice millers had in their statements that were recorded on oath admitted of being involved in the nefarious activity of providing bogus bills without any corresponding sale of goods. After deliberatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red as regards their creditworthiness. Accordingly, the A.O being of the view that as the assessee had failed to support its claim of having made genuine purchases from the aforementioned five parties by producing supporting documentary evidence, therefore, its claim of having made genuine purchases from them did not merit acceptance, held the entire purchases of Rs. 2,21,47,600/- as bogus. 10. The A.O after treating the impugned purchases in question as bogus rejected the books of accounts of the assessee u/s.145(3) of the Act. The A.O by relying on the order of the ITAT, Ahmadabad in the case of Vijay Proteins Vs. ACIT, (1996) 58 ITD 428 (Ahd.), and impliedly being of the view that the assessee had purchased the goods in question not from the aforementioned tainted parties but had procured the same at a discounted value from the open/grey market, disallowed 25% of the value of bogus purchases and made a consequential addition of Rs. 55,36,900/- to the assessee's returned income. The A.O. on the basis of his aforesaid deliberations, vide his order passed u/s.143(3), dated 26.12.2018 determined the income of the assessee at Rs. 66,03,810/-. 11. Aggrieved the assessee carried the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT(A) confirmed the additions. These are information which are especially in the knowledge of the assessee and the onus is on the assessee to prove that purchases are genuine as these purchases are recorded in the books of accounts of the assessee. Section 106 of Indian Evidence Act, 1872 clearly stipulates as under; "106. Burden of proving fact especially within knowledge When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. The assessee was not able to discharge burden cast ills 106 of 1872 Act as the assessee did not produce the original documents before the A.O. The assessee also did not file documents for showing movement of goods from supplier to assessee and from assessee to customer as evidence although it stated in its reply that said documents are being filed. The assessee did not submitted documentary evidence to show that there was movement of goods. In such circumstances, GP ratio needs to be estimated which definitely involved some estimation/guess work but the said estimation guesswork should be fair, honest and rational keeping in view factual matrix of the case and cannot be arbitrarily applied at the disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question, therefore, it can safely be concluded that he had procured the said goods not from the said parties but at a discounted value from the open/grey market. Considering the aforesaid facts, we are principally in agreement with the lower authorities that the assessee would have procured the goods from the open/grey market at a discounted value as against the inflated value recorded on the basis of bogus bills in his books of accounts. 17. As we have concured with the view taken by the lower authorities that the assessee had not made any genuine purchases from the aforementioned five parties in question, therefore, we shall now deal with the quantification of the profit which he would have made by procuring the goods under consideration at a discounted value from the open/grey market. 18. We find on a careful perusal of the order of the A.O that he has not given any cogent reason for working out the disallowance @25% of the value of the impugned bogus/unsubstantiated purchases. In fact, the only reason which can be gathered from a perusal of the assessment order is the reliance placed by the A.O on the order of ITAT, Ahmadabad in the case of Vijay Proteins Vs. ACIT, (1996) 58 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sale declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trade. 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 131(1) of the Act by the A.O, wherein, they had categorically denied of having carried out genuine business and had admitted of having provided bogus/accommodation bills, thus, leaves no scope of doubt that the assessee had not carried out any genuine purchases of goods from them. We, thus, in terms of our aforesaid observation have no hesitation to uphold the view taken by the A.O that the assessee had not made any genuine purchases from the aforementioned parties and had only procured bogus/accommodation bills from them. 15. We, though have concurred with the view taken by the lower authorities that the assessee had not made any genuine purchases from the aforesaid 8 tainted parties in question, and had only procured bogus bills from them, but at the same time are unable to persuade ourselves to subscribe to the addition of the entire amount of impugned purchases of Rs. 2.97 crore (approx.) made by the A.O. As stated by the Ld. AR, and, rightly so, the purchases of the rice/broken rice which the assessee firm had claimed to have made from the aforementioned tainted parties was duly entered in its stock register for the year under consideration, Page 56 to 73 of APB. The Ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the closing stock of rice and broken rice as on 31.03.2014 as per the respective stock register(s), Page 64 & 73 of APB, duly tallies with the details of the "closing stock" of the said respective goods i.e. rice/ broken rice available as "Annexure No.9" of the audit report in "Form No. 3CD", Page 112 of APB. 16. Apart from that, a perusal of the assessment order reveals that the A.O while framing the assessment had himself observed that the bogus/unverified purchase of Rs. 2.97 crore (approx.) had found its way in the total sales of Rs. 10.99 crore (approx.) of the assessee for the year under consideration. On the said basis, the A.O had disallowed corresponding GP of 7.52% of the impugned purchases of Rs. 2.97 Crore (approx.) and thus, had made an addition on the said count of Rs. 22.39 lac (approx.). Also, the CIT(Appeals) while vacating the aforesaid addition of Rs. 22.39 lac (supra), had observed that as all the purchases and sales have duly been recorded by the assessee, therefore, there was no justification for sustaining the said addition. 17. Be that as it may, it is matter of fact which is evidenced from record that the impugned bogus/unverified purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax-17 Vs. M/s. Mohhomad Haji Adam & Company, ITA No1004 of 2016, dated 11.02.2019, while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate of other genuine purchases. The Hon'ble High Court while concluding as hereinabove had observed as under: "8. In the present case, as noted above, the assessee was a trader of brics. The A.O found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sale declared. That being the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O, with a direction to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchased by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. Accordingly, we set-aside the order of the CIT(Appeals) to the said extent and restore the matter to the file of the A.O to give effect to our aforesaid observations." Considering the parity of the issue involved in the present case as was involved in the aforesaid case, we, respectfully follow the same. Accordingly, in terms of the observations recorded in the aforesaid order we restore the matter to the file of the A.O, with a direction to him to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchases by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. 22. Before parting, we may herein observe that the assessee had placed on record the bifurcated details of average purchase rates of rice/rice bran/broken rice, i.e bogus/unverified purchases vis-à-vis purchases other than bogus/unverified purchases, as under: As the aforesaid details filed by the assessee befo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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