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TMI Blog2025 (3) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... of books. If the approach of the Appellate Authorities is accepted, then the provision of Section 69C, which is an enabling provision, would become redundant. Section 69C provides that where an assessee has incurred any expenditure and offers no explanation about the source of expenditure or the explanation offered is not in the opinion of the AO satisfactory, then the amount of expenditure may be deemed to be the income of the assessee and such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income. In our view, if the approach of the CIT(A) and the Tribunal is accepted, then it would amount to endorsing outright conduct of illegality contrary to the express provisions of Section 69C of the Act, which the Appellate Authorities have entirely ignored. In the above example, by estimating 10% and thereby impliedly giving a deduction of Rs.90/-, in the teeth of the provisions of Section 69C of the Act which expressly bars the allowability of unexplained expenditure. The question of law admitted by this Court is answered against the revenue and in favour of the respondent-assessee insofar as the purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 68 of the Act. The said order was challenged by filing an appeal to the Commissioner of Income Tax (Appeals) [CIT (A)]. 4. On 29 May 2015, the CIT (A) with respect to the alleged bogus purchases deleted the additions with regard to all the suppliers except M/s Neptune Trading Co. and Hari Om Traders. With respect to these two parties, the additions made by the Assessing Officer (AO) was confirmed to the extent of only 12.5% of the purchases made from these parties. 5. The appellant-revenue challenged the order of the CIT (A) by filing an appeal to the Tribunal. In the grounds of appeal, the appellant-revenue challenged the deletion of the purchases made from various parties. With respect to M/s Neptune Trading Co. and Hari Om Traders, a specific ground was also taken by the appellant-revenue to the effect that the CIT (A) erred in estimating profit at 12.5% on the bogus purchases. It is important to note that the respondent-assessee has not challenged the additions sustained by the CIT (A) to the extent of 12.5% on the purchases made from M/s Neptune Trading Co. and Hari Om Traders. 6. The Tribunal vide its order dated 24 May 2017 upheld the order of the CIT (A) in toto ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 20 October 2021 (Bombay HC). (iv) Pr. CIT Vs. Shapoorji Pallonji and Co. Ltd. [2020] 423 ITR 220 (Bombay). (v) Pr. CIT Tejua Rohitkumar Kapadia. [2018] 94 taxmann.com 324 (Guj.)(HC). (vi) CIT Vs. Century Plyboards (I) Ltd. [2019] 103 taxmann.com 178 (Cal.)(HC). (vii) PCIT Vs. Ram Builders. ITXA/398/2018, dated 18 July 2022 (Bombay HC). (viii) PCIT-19 Vs. S V Jiwani [2022] 449 ITR 583 (Bombay) dated 3 October 2022. (ix) PCIT Vs. Chawla Interbild Construction Co. (P.) Ltd. [2019] 412 ITR 152 (Bombay). (x) PCIT Central-1 Vs. JWC Logistic Park (P.) Ltd. [2018] 100 taxmann.com 355 (Bombay). (xi) CIT-7, New Delhi Vs. Odeon Builders (P.) Ltd. [2019] 418 ITR 315 (SC). (xii) Babulal C. Borana Vs. Third Income-tax Officer. [2006] 282 ITR 251 (Bombay). 10. We have heard the learned counsel for the appellantrevenue and the respondent-assessee. Analysis and Conclusions : 11. The issue which falls for our consideration is whether the purchases made from various parties referred to in paragraph 4 of the assessment order can be said to have been proved as genuine by the respondent-assessee for the purpose of claiming deduction of these expenditures. 12. Admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red for coming to the conclusion that the purchases made from various suppliers except M/s Neptune Trading Co. and Hari Om Traders were genuine. 15. In our view, the respondent-assessee has not only provided all the details with respect to these suppliers but the AO independently in remand proceedings verified the purchases by issuing summons under Section 133 (6) of the Act. The suppliers responded to the summons and filed all the details. The AO independently verified with the respective bankers on the genuineness of the bank statements produced by these suppliers. The AO gave a finding that there was no cash withdrawal from the bank accounts of these suppliers after issuance of cheque by the respondent-assessee. Therefore, the revenue has not been able to rebutt these findings more particularly in the findings recorded by the AO in remand proceedings. 16. Although the investigation started with the names of the suppliers appearing on the portal of the Sales Tax Department as non-genuine, but in the income tax proceedings, the genuineness of the purchases has been proved, and the AO also verified the same. The revenue has not been able to show that these findings are perverse. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e findings of facts have to be held against the respondent-assessee. 20. It is also important to note that the respondent-assessee has accepted the addition of 12.5% of the purchases from these two parties. By accepting the said percentage, the respondent-assessee has impliedly accepted that the transactions with these two parties could not be proved and, therefore, the logical conclusion that both the Appellate Authorities ought to have adopted was to confirm the total additions of purchases from these two parties. The issue before both the Appellate Authorities was whether the purchases made from these two parties has passed the test of proving the genuineness. By accepting the additions of 12.5% of the purchases from these two parties, the respondent-assessee has accepted that these transactions of purchases are unproved and consequently, there was no justification, therefore, to restrict the addition to 12.5% only. 21. The Co-ordinate Bench of this Court in the case Shoreline Hotel (P.) Ltd. Vs. Commissioner of Income-tax, Central-I (2018) 98 taxmann.com 234 (Bombay) had an occasion to adjudicate a very similar issue. In that case, the Officer made an addition of 15% of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchases, still by estimating profit, impliedly deduction of purchases is given. For example, if the purchases by accommodation entries are Rs.100/- and a profit of 10% is estimated, then to the extent of Rs.90/- deduction on account of purchases is deemed to have been given by the Appellate Authorities. This approach would not be correct since it is nobody's case that the respondent-assessee has made sales out of books by purchasing the goods out of books. 25. If the approach of the Appellate Authorities is accepted, then the provision of Section 69C, which is an enabling provision, would become redundant. Section 69C provides that where an assessee has incurred any expenditure and offers no explanation about the source of expenditure or the explanation offered is not in the opinion of the AO satisfactory, then the amount of expenditure may be deemed to be the income of the assessee and such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income. In our view, if the approach of the CIT(A) and the Tribunal is accepted, then it would amount to endorsing outright conduct of illegality contrary to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot for consideration before the Court. Thirdly, the decision in the case Shoreline Hotel (P.) Ltd. (supra) was not brought to the notice of the Court and the only issue canvassed before the High Court was what should be the rate of profit. In the present case, these facts do not exist and, therefore, this decision in case of JK Surface Coatings Pvt. Ltd. (supra) is not applicable to the facts of this case. (iv) The decision relied upon in the case of Shapoorji Pallonji and Co. Ltd. (supra) is also distinguishable on facts, since in the instant case before us, the AO could not verify the bank statements of these two parties for coming to the conclusion whether there was any cash withdrawal which would have shown that the purchases are genuine. In the case of Shapoorji Pallonji and Co. Ltd. (supra), the Officer only relied on the Sales Tax Department report whereas in the present case, the Officers did independent enquiry and in the absence of bank statements of these two parties, the AO has come to the conclusion that the purchases are not genuine. Even in this case, the decision in the case of Shoreline Hotel (P.) Ltd. (supra) was not brought to the notice of the Court. (v) T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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