TMI Blog2024 (12) TMI 701X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices in the names of the 2 entities bogus suppliers. As per settled law no sale of goods can take place without purchase, and in a case an assessee is found to have indulged into bogus purchases, a percentage of the bogus purchases can be added to arrive at the net income of the assessee-appellant. Taking into consideration aspect of inflation of purchases and saving of taxes, duties, compliance costs etc. by both buyer and seller etc., when we have not taken on record the documents sought to be produced for the first time in the course of hearing, for being considered on the aspect of percentage of bogus purchases of goods and/or Gross profit, in the interest of justice, we find it to be a fit case where matter needs to be remanded to the AO for the purposes of recalculations in view of the findings recorded above and having regard to the well settled law on the point of percentage of bogus purchases and/or Gross Profits of course, after providing opportunity to the assessee-appellant to produce there all the relevant and admissible material, in accordance with law. As a result, the appeal is disposed of, and the matter is remanded to the Assessing Officer for the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases were found to have been found out of books. Accordingly, the Assessing Officer made 2 additions regarding said unexplained expenditure, while resorting to the provisions of section 69C of I.T. Act. Assessment order is challenged before ld. CIT(A) 6. Due to the above said assessment order, the assessee felt aggrieved and as such, it filed appeal before Learned CIT(A) thereby challenging the additions made u/s 69C of the Act on the grounds of appeal mentioned in Form 35. After providing opportunities of being heard to the assessee and going through its submissions, Learned CIT(A) dismissed the appeal filed by the assessee by observing in para 4.3 as under:- 4.3 I have gone through the grounds of appeal, assessment order and statement of facts submitted by the appellant. It is seen from the investigation report of Directorate General of the Goods Services tax Intelligence, Jaipur Zonal unit that a case of issuance of fake invoices without supply of goods was booked against persons namely Shri Sandeep Goyal, Shri Rajesh Aroraand Ms. Himani Munjal, who had created firms with fake / stolen Ids, for purpose of passing the Input Tax credit to their clients on commission basis. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR-I of fake firms and created and operated by above said three persons, certain business consumers were found in the first layer who had availed of fraudulently ITC on the basis of invoices issued by the said three persons/fake firms. One of said business consumers was found to be the assessee-Ms Shri Prem Industries(GSTIN: 08ABYFS7744J1Z4). 11. Assessee was found to have fraudulently availed of ITC to the tune of Rs. 10,31,354/-, during the Financial Year 2017-18 on the basis of invoices issued by the above named two entities, namely, M/s Sweekar Udyog (GSTIN 08ASJPD3992M1Z6) and M/s Shiv Agro Sales (GSTIN 08BBHPK0251N1Z6) of Shri Ganganagar. 12. Incident report No. 21 further revealed that on 17.01.2020 Sh. Rakesh Bansal, partner of the assessee firm, in his statement recorded by the Assessing Officer u/s 70 174 of GST Act, 2017 admitted to have availed of ITC wrongly on the based of invoices issued by the above said fake firms created and operated by Sandeep Goyal, Shri Rajesh Arora MS. Himani Munjal. 13. Incident report further revealed that Sh. Rakesh Bansal made payment/deposited Rs. 10,31,354/- towards ineligible ITC availed of by the said firm-assessee, on the basis of inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, information, documents which has been collected by you for re-opening of the assessment and thereafter till date for the purpose of re[1] assessment which is going on, but you have not provided us the same so far. Again Vide our e-response dt. 10.01.2023 we have requested you to please provide us The copy of sanction of Ld.PCIT, Jaipur-1 dt. 29/03/2022 for re-opening of the assessment, The exact specific information (which was flagged as per Risk Management Strategy) which has been used for re-opening of the assessment, Copies of the statements of Shn Rakesh Bansal, partner of the assessee firm M/s Prem Industries recorded u/s 70 174 of the CGST Act, 2017, which has been used for re-opening of the assessment, Copies of All other relevant material, details, information, documents which has been collected by you for re-opening of the assessment and thereafter till date for the purpose of re[1]assessment which is going on, but you have not provided us the same so far. And you have choosen for not to provide the above required information and statements till date due to god known reasons, which is denying opportunity of cross examination to the assessee, who has prima facie discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited this amount to M/s Shiva Agro sales srigangangar. Our firm has debited this amount in M/s. Shiva Agro Sales Sriganganagar. Thus the assessee itself admitted that the GST armount is deposited by them as seller has not deposited the same. This fact corroborates the finding of the report of the Directorate General of Goods Service Tax dated 30.04.2021 F. No. DGGI/INV/GST/1251/2021-Gr/781 that the assessee has availed wrong ITC on the basis of the invoices issued by the fake firm of Shri Sandeep Goyal, Rajesh Arora and Ms. Himani Munjal. 4.2.3 Further, during the course of assessment proceedings, notices u/s 133(5) was issued to both parties to verify the purchase transactions. However, both the parties did not respond to the mail sent. The fact of the non replies of notices issued to the parties was already brought to the notice of the assessee in the show cause. However the assessee chooses to remain silence on this issue. 4.2.4. The assessee relied upon the decision in the case of Odeon Builders P Ltd 418 ITR 315 wherein it was held that the assessee discharged its initial burden by producing various documentation including purchase bills, transport bill, confirmed copy of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s does not ipso facto prove that these payments were for the purpose of purchases only. Copies of GST return provided by the assessee do not establish the genuineness of the purchases especially in view of the fact that the assessee paid the corresponding GST when confronted by the GST authorities. The assessee submitted that there was a corresponding sale and therefore purchases had to be there. The assessee's contention is acceptable but the fact remains that the genuineness of purchases from the impugned parties could not be established. It only proves that the assessee made the purchases out of books which were regularized by obtaining bills from the impugned parties, Therefore the sources of the payments for purchases which was done out of books, remained unexplained within the meaning of section 69C of the I. T. Act 1961. Hence, the same is added as unexplained expenditure u/s 69C of the 1. T. Act 1961. Penalty proceeding u/s. 271AAC(1) of the I. T. Act 1961 is initiated. Dismissal of appeal by ld. CIT(A) 20. As noticed above, the appeal filed by the assessee challenging the impugned assessment came to be dismissed vide order dated 10.06.2024 and due to the reasons given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified that most of the details, sought for by the assessee in the submission uploaded on 7-10-2023 and 10-01-2023, had already been provided to the assessee in the form of order u/s 148A(b) dated 29-03-2023 and also during the assessment proceedings, by way of annexure to the notice u/s 142(1) of the Act. As regards the supply of copy of statement of Shri Rakesh Bansal, recorded by GST Authority, the AO specifically mentioned in para 4.2.1 of the assessment order that said particular statement of Shri Rakesh Bansal was not being used against the assessee for the purpose of drawing final conclusion in the reassessment proceedings. It is significant to note that at no stage the assessee has come up with the plea that any such statement attributed to its partner was ever retracted by any communication to the GST authorities. Rather, the assessee immediately reversed the ITC availed of. 24. In view of the observations made by the AO, and the above discussion, Learned DR for the Revenue has rightly submitted that non-supply of statement of Shri Rakesh Bansal made before the GST Authorities, does not come to the aid of the assessee, and it cannot be said that no reasonable opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half of the assessee appellant that the assessee in its wisdom deemed it appropriate to deposit the amount by way of reversal of ITC claimed by it, and that no adverse inference be drawn against the assessee from the said deposit. No response from two entities namely M/s. Shiv Agro Sales and M/s.Sweekar Udyog-Its impact 31. It is available from the assessment order that after submissions were received from the assessee during the assessment proceedings, notices u/s 133(6) of the I.T. Act were issued by the AO to the above named two entities for the purpose of verification of transactions of purchases from them. In para 4.2.3 of the assessment order, AO has mentioned that two entities did not respond to the mails sent to them. Confronted with this observation by us during hearing, Learned AR for the assessee has submitted that since both the said entities were registered under GST Act, their presence could be easily secured to have their response. The Revenue does not dispute registration of the above said two entities under GST Act. In the assessment order, Assessing Officer specifically observed that when there was no response from the said two entities as regards notices u/s 133( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it, and that the two entities from whom goods were claimed to have been purchases, were bogus parties. Assessing Officer observed that the assessee did not provide him confirmed copy of accounts or ITRs of above named two sellers. When the assessee did not lead cogent and convincing evidence to prove the documents relied on by it, the Assessing Officer was justified in observing so. The AO also did not find any merit in the request for cross examination of the parties by observing that no such question arose as no statement of any of the said sellers was being made basis or being considered for the purposes of framing of the assessment. The AO clarified that reassessment proceedings were being conducted on the basis of independent enquiries. 34. From the material available on record, we find that the Assessing Officer framed assessment mainly on the ground that the assessee had failed to discharge its onus to establish its case as regards the genuineness of the purchase transactions, in having not got proved the documents relied on in support of its claim. Documents relied on behalf of the appellant to prove purchase transactions 35. On behalf of the appellant, it has been argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and fake purchase transactions by the two entities shown to have been made to the assessee. The contention is that in the given circumstasnces, when the alleged sellers did not participate in the proceedings before the Assessing Officer and none of them was produced there by the assessee, the documents relied on behalf of the assessee have been rightly rejected by the authorities below. Discussion 38. In Tejua Rohitkumar Kapadia s case (supra), the Assessing Officer had disallowed purchase expenditure making the additions treating the purchases as bogus. Learned CIT(A) allowed the appeal inter-alia on the ground that all payments were made by the assessee by Account Payee Cheque; that the assessee was in fact a trader; that all purchases made from M/s Raj Impex were found to have been sold and sales were also accepted by the Assessing Officer. When the Revenue carried the matter in appeal, Tribunal dismissed the same by observing that there was no dispute that the purchases made from M/s Raj Impex were duly supported by bills and all the payments were made by account payee cheques; that there was also no dispute that M/s Raj Impex had confirmed all the transactions; that there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. In the given situation, mere payments by cheques towards the subject transactions of purchase and the copies of GST return provided by the assessee did not establish genuineness of the subject transactions of purchases and as such do not come to the aid of the assessee. In the other decision titled as PCIT v. Nanglia Fabrics (supra), the Appellate Tribunal had satisfied itself about the genuineness of purchases. Therein, the assessee had not deposited with GST authorities any amount by way of reversal of ITC availed of on account of subject purchase transactions. Therefore, said case is also distinguishable on facts and does not come to the aid of the assessee. Is it a case where gross profit rate be applied and disallowance be made accordingly? 39. Last of all, in the alternative, learned AR has submitted that GP rate of the assessee for the year under consideration is better than the GP of the previous 2 years. The contention is that as per settled law, where purchases are treated as non-verifiable, the gross profit rate is to be applied and disallowance is to be made to the extent of shortfall in the gross profit rate, and further that the addition can be made as rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance in the case of the assessee therein to the extent of 4% of the subject purchases made by the assessee from the said party, and partly allowed the appeal. 42. In Motiwala Jewellers Pvt. Ltd., v. ITO-12 , Mumbai, while dealing with case of bogus purchases, profit embedded in the transaction only needed to be brought to tax particularly when the tax authorities had itself offered gross profit of 3.95% for the year under consideration and 17.59% in the Assessment Year 2014-15. Accordingly, it was observed that only profit element of gross profit @ 2% of the purchases from the seller was just and reasonable. 43. In Simit P. Sheth s case (supra), Hon ble High Court of Gujarat, while dealing with the allegation of bogus sales, observed that the Commissioner had adopted ratio of 30% of total sales, but the Tribunal had scaled down to 12.5%. The possible profit out of purchases made through non-genuine parties, as per estimation of the Tribunal, was upheld by observing that no question of law in said estimation arose. 44. In the written submissions handed over to us at the time of final hearing, comparative chart of profitability results of the assessee firm and two other firms h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of this Court passed in Tax Appeal No.616/2005 allied matter disposed of on 05.11.2014. Paras-4 5 of the said decision read as under; 4. Heard the learned advocates appearing for the respective parties and considered the submissions. Mr. Patel learned advocate appearing for appellant Revenue in Tax Appeal No. 627/2005 has tried to distinguish the judgment on facts and argued for enhancement of disallowance on account of bogus purchase. In our view, in fact, the Tribunal has rightly assessed the disallowance at the rate of 15%. The Tribunal has observed as under in paragraph-5: The Id. AR submitted that 25% disallowance taken in the said decision of the Tribunal is excessive looking to the nature and business activities of the assessee. The assessee is dealing in iran and steel wherein sales tax rate if 4 paise in one rupee. He further submitted that the other taxes including excise duty etc. are also less than the commodities of the said decision. After considering the totality of the case, we find that it is an admitted fact that the purchase were bogus and for this purpose, we confirm the order of AO but for the purpose of calculating amount of disallowance, we follow the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases from such bogus suppliers. The above findings were recorded on the basis of the material on record of the Tribunal. 13. The question which then arises for consideration is as to whether the entire amount of the said bogus purchases and freight payments made in relation thereto should have been disallowed or the assessee should have been held to be eligible for grant of deduction of a reasonable amount of purchase price of the oil cakes in question in view of the fact that receipts of the materials in question by the assessee were supported by various registers and books of account maintained by the assessee, which the Revenue has not disputed. The Revenue has also not disputed the genuineness of said documents. .............. .... ...................... 16. It is a matter of fact that the goods were not received from the parties from whom it is shown to have been purchased but, such material was received from a different source which is exclusively within the knowledge of the assessee and none else. Therefore, it is evident that the assessee had inflated the expenditure in question by showing higher amount of purchase price through the fictitious invoices in the names of 33 b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|