M/S. SHRI RAJENDRA SINGH RAJPAL, Sendhwa v. THE DY. COMMISSIONER OF INCOME TAX RANGE, Khandwa

ITA 132/IND/2016 | 2011-2012
Pronouncement Date: 17-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 13222714 RSA 2016
Assessee PAN AAEHB4692M
Bench Indore
Appeal Number ITA 132/IND/2016
Duration Of Justice 7 month(s) 29 day(s)
Appellant M/S. SHRI RAJENDRA SINGH RAJPAL, Sendhwa
Respondent THE DY. COMMISSIONER OF INCOME TAX RANGE, Khandwa
Appeal Type Income Tax Appeal
Pronouncement Date 17-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 17-10-2016
Date Of Final Hearing 07-09-2016
Next Hearing Date 07-09-2016
Assessment Year 2011-2012
Appeal Filed On 18-02-2016
Judgment Text
BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE .. ..!' #$ # !% BEFORE SHRI D.T. GARASIA JUDICIAL MEMBER AND SHRI O.P. MEENA ACCOUNTANT MEMBER I.T.A. NO. 131/IND/2016 ASSESSMENT YEAR: 2011-12 BHUPENDRA SINGH RAJENDRA SINGH RAJPUT HUF KUDAGAON DISTT.BEED PAN AAEHB 4692M :: APPELLANT VS JCIT RANGE KHANDWA :: RESPONDENT I.T.A. NO. 132/IND/2016 ASSESSMENT YEAR: 2011-12 RAJENDRA SINGH RAJPAL SENDHWA PAN ABAPR 6790P :: APPELLANT VS DCIT RANGE KHANDWA :: RESPONDENT BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 2 /APPELLANTS BY SHRI P.D. NAGAR RESPONDENT BY SHRI K.G. GOYAL ! DATE OF HEARING 14.9.2016 '#$% ! DATE OF PRONOUNCEMENT 17.10.2016 ' O R D E R PER SHRI D.T. GARASIA JM THESE DIFFERENT APPEALS ARE FILED BY DIFFERENT ASSESS EES. SINCE THE ISSUE INVOLVED IN THESE APPEALS IS IDENTICAL THESE APPEALS ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDE R FOR THE SAKE OF CONVENIENCE. ITA NO.131/IND/2016 2. THE SHORT FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS INFORMATION WAS RECEI VED FROM DGIT BHOPAL IN THE CASE OF THE ASSESSEE THAT THI S CONCERN HAS MADE PURCHASES FROM M/S NIRMA TRADING COMPANY AND SHRI OMKAR ENTERPRISES WITHOUT TAKING BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 3 DELIVERY OF THE GOODS. ON THE BASIS OF THIS THE ASSE SSING OFFICER HAS GIVEN SHOW CAUSE NOTICE THAT DURING THE Y EAR UNDER CONSIDERATION THE ASSESSEE HAS MADE PURCHASES FROM M/S NIRMA TRADING COMPANY AND SHRI OMKAR ENTERPRISES FOR A TOTAL SUM OF RS. 2 46 08 762/- WITH OUT TAKING DELIVERY OF THE GOODS. M/S NIRMA TRADING COMPAN Y AND SHRI OMKAR ENTERPRISES HAVE PROVIDED FREIGHT PAID BILLS WITHOUT DELIVERY OF GOODS. THEREFORE THE ASSE SSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE TRANSACTION AND TO FILE THE COPY OF THE BILLS TRANSPORT RECEIPT RETUR N FILED IN COMMERCIAL TAX DEPARTMENT AND COPY OF THE ASSESSMENT ORDER PASSED BY THE COMMERCIAL TAX DEPARTMENT AND CONFIRM THE COPY OF ACCOUNT FROM M/S NIRMA TRADING COMPANY AND SHRI OMKAR ENTERPRISES. THE ASSESSEE WAS ALSO REQUESTED TO FURNISH BOOKS OF ACCOUNTS WITH STOCK REGISTER SO THAT THE TRANSACTION MAY BE VERIFIED. IN R ESPONSE TO THE NOTICE THE ASSESSEE HAS FILED CONFIRMED COPY OF BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 4 ACCOUNT COPY OF BILLS LORRY RECEIPT COPY OF ACKNOWLEDGEMENT OF VAT TAX RETURN COPY OF VAT AUDIT REPORT. THE ASSESSEE HAS ALSO FILED QUANTITATIVE DETAILS VALUE AND PRESS RUNNING NUMBER TO PROVE THE GENUINENE SS OF THE PHYSICAL DELIVERY OF GOODS. TO VERIFY THE GEN UINENESS OF THE TRANSPORT RECEIPT A NOTICE U/S 133(6) OF THE A CT WAS ISSUED TO AMAR JYOTI CARRIER INDORE AND ON VERIFICATI ON OF THE BILLS AND INVOICES ISSUED BY M/S NIRMA TRADING COMPANY AND SHRI OMKAR ENTERPRISES IT WAS FOUND THAT THE BILLS ARE ISSUED WITHOUT LORRY NUMBER TRUCK NUM BER AND SPOT. THEREFORE THE TRANSPORT RECEIPT DOES NOT M ENTION THE MOVEMENT OF THE GOODS. THEREAFTER THE PHYSICAL POSSESSION OF PURCHASE OF COTTON BALES WAS TAKEN WHICH RECEIPT HAS BEEN SUBMITTED AND THE PAYMENT HAS BEEN MADE. AFTER CONSIDERING THIS REPLY THE ASSESSING OF FICER WAS OF THE VIEW THAT THE DETAILED INQUIRY IN CASE OF ENT RY PROVIDERS HAS BEEN CONDUCTED BY THE DGIT MUMBAI AND IT BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 5 WAS FOUND THAT M/S NIRMA TRADING COMPANY AND SHRI OMKAR ENTERPRISES HAVE PROVIDED ONLY COPY OF BILLS WI THOUT DELIVERY OF GOODS. THEREFORE THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE DID NOT MAKE PURCHASES FROM THESE TWO PARTIES. THE ASSESSEE CLAIMED THAT EVEN IF PURCHASES WERE EFFECTED FROM OTHER PARTIES AS PER THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOLANATH POLY FAB PVT. LTD.; 355 ITR 290 ONL Y GP ADDITION HAS TO BE MADE BUT THE ASSESSING OFFICER DID NOT ACCEPT THE SAME AND HE ADDED THE ENTIRE PURCHASE AS BOGUS PURCHASE FROM UNEXPLAINED SOURCES AND ADDED TH E SAME U/S 69 OF THE ACT OF RS.2 46 08 762/-. 3. THE MATTER WAS CARRIED IN APPEAL AND THE LEARNED CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT CERTAIN INFORMATION WAS FORWARDED BY DGIT BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 6 (INV.) MUMBAI REGARDING BOGUS PURCHASES FROM THESE TW O SUPPLIERS FOR TAKING NECESSARY ACTION. IN TURN DGIT (I NV.) BHOPAL INFORMED THE ASSESSING OFFICER THAT GENUINENES S OF PURCHASES FROM THESE PARTIES WAS DOUBTED AND BASED ON SUCH INFORMATION THE ENQUIRY WAS MADE BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS . IT WAS CONTAINED THAT AFORESAID TWO PARTIES WERE FOUND TO BE SUSPICIOUS DEALER AS REPORTED BY THE ASSTT. COMMISSIONER OF SALES TAX (1-8) INVESTIGATION-A MUMBAI BECAUSE THEY WERE NOT FOUND AT THE ADDRESSES GIVEN HENCE THE CONCLUSION WAS DRAWN THAT THOSE DEALERS HAVE ACCOMMODATED OTHER PARTIES BY GIVING PURCHASE INVOICES. THE APPELLANT PROVED THAT ALL TRANSACTIONS WERE EFFECTED IN NORMAL COURSE OF BUSINES S BY SUBMITTING FOLLOWING DOCUMENTS TO PROVE THE GENUINE NESS OF ENTIRE PURCHASES :- A) STATEMENT OF ACCOUNTS OF M/S B.R. COT (THE APPELLANTS PROPRIETORSHIP CONCERN) AS APPEARED IN THE BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 7 BOOKS OF M/S. SHREE OMKAR ENTERPRISES AND M/S. NIRMA TRADING CO. B) STATEMENT OF ACCOUNTS OF M/S. SHREE OMKAR ENTERPRISES IN THE BOOKS OF THE APPELLANT. C) STATEMENT OF ACCOUNT OF M/S. NIRMA TRADING CO. IN THE BOOKS OF APPELLANT. D) PAYMENTS ADVISE OF AXIS BANK IN SUPPORT OF PAYMENTS MADE BY A/C PAYEE CHEQUE/RTGS TO SHREE OMKAR ENTERPRISES AND M/S. NIRMA TRADING CO. E) PURCHASE INVOICES ISSUED BY M/S. SHREE OMKAR ENTERPRISES AND M/S. NIRMA TRADING CO. ALONG WITH COPIES OF LORRY RECEIPTS AND SALES INVOICES ISSUED B Y THE APPELLANT I.E. M/S B.R. COT AGAINST SUCH PURCHASES. F) COPIES OF SALES TAX RETURNS FILED BY THE APPELLANT IN FORM-231 ALONG WITH THEIR ACKNOWLEDGMENTS SHOWING PURCHASES OF COTTON AND SALES THEREOF. THE LEARNED COUNSEL FURTHER STATED THAT COMPLETE DETAILS SHOWING PURCHASES EFFECTED BY THE ASSESSEE FROM AFORESAID TWO PARTIES I.E. THEIR TIN LOT NO. C OTTON BALES PURCHASED NET WEIGHT VALUE OF THE GOODS TAX CHARGED AND CORRESPONDING SALES OF SAME COTTON BALES BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 8 TO VARIOUS PARTIES WHEREIN THE ASSESSEE EARNED GROSS PROFIT OF RS.37 55 227/- AGAINST PURCHASES EFFECTED FROM ABOVE TWO PARTIES MAINLY DUE TO HOLDING THE STOCK IN ANTICIPATION OF PRICE INCREASE WHICH WAS OFFERED FO R TAX AND ASSESSED ACCORDINGLY. HE ARGUED THAT SAID PURCHASES WERE DIRECTLY LINKED WITH THE SALES EFFECTE D BY THE ASSESSEE AND IDENTITY OF THE SELLING DEALERS WAS DISCLOSED. JUST BECAUSE SALES TAX WAS NOT PAID BY TWO SUPPLIERS ADVERSE INFERENCE CANNOT BE DRAWN AS TO GENUINENESS OF THE TRANSACTION AND THE APPELLANT CANNOT BE PENALIZED AS HELD BY BOMBAY HIGH COURT IN THE CASE OF BABULAL C. BORANA VS. ITO (2006) 282 ITR 251. HE STATED THAT WHEN SALES THEREOF WERE NOT DOUBTED PAYMENTS WERE MADE BY CHEQUES AGAINST DELIVERY TAKEN FROM CONCERNED SUPPLIERS AND ALL TRANSACTIONS ARE RECORDED IN THE BOOKS HAVING QUANTITATIVE TALLY THE PRESUMPTION WOULD BE THAT WHEN SALES WERE GENUINE THE PURCHASES SHOULD ALSO BE GENUINE AS HELD IN FOLLOWING CASES :- I) CIT VS. JAGDISH CHANDRA VISWAKARMA (2011) 18 ITJ 51 (MPHC) BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 9 II) ACIT VS. BHASKAR TRADING CORPN. (2007) 9 ITJ 141 (ITAT- INDORE) III) CIT VS. NIKUNJEXIMP ENTERPRISES P. LTD (2013) 216 TAXMAN 171 (BOM.HC) IV) ITO VS. SURANA TRADERS (2005) 92 ITD 212 (MUM.TRIB) V) CIT VS. ADINATH INDUSTRIES (2001) 252 ITR 476 (GUJ) VI) CIT VS. HI LUX AUTOMATIVE P. LTD (2009) 183 TAXMAN 260 (DEL) VII) MARUTI IMPEX VS. JCIT (ITAT-MUMBAI BENCH - ORDER DT. 09.03.2016)[ENCLOSED] ACCORDING TO HIM THE TRANSACTION CANNOT BE CONSIDERED AS NON-GENUINE BASED ON THE SUSPICION ESPECIALLY WHEN VARIOUS DOCUMENTS PLACED SUBSTANTIATES THE GENUINENESS THEREOF. IF SOME OF TH E DEALERS WERE BRANDED BY MAHARASHTRA VAT DEPARTMENT AS HAWALA DEALERS JUST BECAUSE THEY WERE NOT TRACEABLE AT GIVEN ADDRESS THE INCOME TAX DEPARTMENT CANNOT TREAT THE PURCHASES EFFECTED BY THE ASSESSEE FROM SUCH DEALERS AS BOGUS WITHOUT MAKING ANY BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 10 ENQUIRY. HE POINTED OUT THAT THE SALES TAX OFFICER (INVESTIGATION WING) HAD OBSERVED THAT THE DEALER MAY BE BOGUS OR FICTITIOUS HAVING LARGE TURNOVER HENC E ENQUIRY IS REQUIRED IN THE MATTER. ACCORDING TO HIM IT IS JUST A POSSIBILITY THAT THE SELLING DEALERS WITH A MALAFIDE INTENTION TO AVOID THE TAX LIABILITY UNDER MAHARASHTRA VAT ACT DID NOT DISCLOSE THE SALES EFFECTED IN THEIR RETURN. THE SALES TAX DEPARTMENT OF MAHARASHTRA DID NOT MENTION ANYWHERE IN THE REPORT THAT THE SALES EFFECTED TO THE ASSESSEE BY AFORESAID PARTIES ARE IN THE NATURE OF ACCOMMODATION ENTRIES ONLY . DETAILS OF TURNOVER DISCLOSED BY SUPPLIERS IN RETURNS SUBMITTED UNDER MAHARASHTRA VAT ACT DURING A.Y. 2011-12 VIS--VIS PURCHASES EFFECTED BY THE APPELLANT FROM THEM WERE AS UNDER :- NAME OF SUPPLIER QUARTERLY RETURNS TURNOVER DISCLOSED IN PURCHASES BY BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 11 SUBMITTED RETURNS APPELLANT M/S. NIRMA TRADING CO. APRIL TO SEP 2010 RS.570.74 LACS RS.133.58 LACS M/S. OMKAR ENTERPRISES F.Y. 2010 - 11 RS.1412.20 LACS RS.112.50 LACS UNDER THE CIRCUMSTANCES IT CANNOT BE PRESUMED THAT PURCHASES EFFECTED BY THE ASSESSEE FROM THESE TWO DEALERS WERE NOT GENUINE. IT WAS JUST A FEELING OF NON - AVAILABILITY OF THE SUPPLIER AT THE LAST KNOWN ADDRESS MAY NOT BE THE SOLE BASIS TO TREAT THE PURCHASES AS BOGUS WHEN SALES AGAINST PURCHASES ARE NOT DOUBTED AS HELD IN THE CASE OF RAJESH P. SONI VS. ACIT (2006 ) 100 TTJ 892 (AHD) & M/S. YFC PROJECTS PVT LTD VS. DCIT (2010) 134 TTJ 167 (DEL). 5. IT WAS ALSO SUBMITTED BY THE LEARNED COUNSEL THAT IN CASE THE AFORESAID DOCUMENTS WERE NOT CONSIDERED AS SUFFICIENT PROOF OF GENUINE PURCHASES BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 12 BOTH THE SUPPLIERS SHOULD HAVE BEEN SUMMONED U/S 131 OF THE ACT BY THE ASSESSING AUTHORITY BY GIVING AN OPPORTUNITY TO THE APPELLANT TO CROSS-EXAMINE AND INSPECTING THEIR BOOKS OF ACCOUNTS ALONG WITH THEIR BANK STATEMENT BECAUSE THE PAYMENTS WERE MADE TO THEM BY A/C PAYEE CHEQUES ONLY. NEITHER SUMMONS WERE ISSUED NOR ANY OPPORTUNITY WAS GIVEN TO THE APPELLANT AND JUST ON THE BASIS OF INFORMATION FROM SALES TAX DEPARTMENT MUMBAI THE ADDITION WAS MADE. 6. THE LEARNED COUNSEL FURTHER ARGUED THAT COTTON BALES ARE BEING SOLD BY IDENTIFYING THE SAME THROUGH PRESS NOS. AND SALES WERE ALSO EFFECTED TO VARIOUS MANUFACTURERS BY IDENTIFY PRESS NUMBERS. THE ASSESSING AUTHORITY ALSO OBSERVED THE FACT THAT THE GOODS PURCHASED WERE ULTIMATELY SOLD AND ALSO STATED THAT PURCHASES WERE MADE FROM UNKNOWN PARTIES BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 13 INSTEAD OF ABOVE TWO SUPPLIERS. THE FACT REMAINS THAT GOODS WERE PURCHASED AND THEY WERE SOLD. QUANTITATIVE DETAILS ARE MAINTAINED AND THE SAME WERE CERTIFIED IN TAX AUDIT REPORT U/S 44AB OF THE ACT. HENCE EVEN IF THE PURCHASES ARE FOUND TO HAVE BEEN EFFECTED FROM BOGUS SUPPLIERS ENTIRE ADDITION CANNOT BE MADE UNLESS THERE IS SOME EVIDENCE IN SUPPORT OF THE CLAIM THAT THE MONEY REACHED BACK TO THE ASSESSEE. SUSPICION ALONE HOWEVER STRONG IS NOT SUFFICIENT. GROSS PROFIT EARNED WAS ALSO SUBSTANTIAL ON SUCH PURCHASES HENCE AT THE MOST FURTHER ESTIMATION OF PROFIT MAY BE JUSTIFIED INSTEAD OF CONSIDERING EN TIRE PURCHASES AS BOGUS AND ITS ASSESSMENT U/S 69C OF THE ACT. RELIANCE IS PLACED ON FOLLOWING JUDGMENTS :- A) CIT VS. BHOLANATH POLY FAB PVT LTD (2013) 355 ITR 290 (GUJ.HC) B) CIT VS. SIMIT P SHETH (2013) 356 ITR 451 (GUJ.HC) C) CIT VS. HINDUSTAN EQUIPMENT P. LTD (2013) 22 ITJ 555 (MP). BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 14 D) SANJAY OIL CAKES INDUSTRIES VS. CIT (2009) 316 ITR 274 (GUJ.) E) G.G DIAMOND INTERNATIONAL VS. DCIT (2006) 104 TTJ 809 (MUMBAI) F) DCIT VS. NARENDRA KUMAR LUNAWAT(2004) 90 TTJ 467 (JAIPUR) 7. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO ARGUED THAT THIS CASE IS COVERED BY THE DECISION OF THE HON' BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HI LUX AUTOMATIVE P. LTD. (2009) 183 TAXMAN 260(DEL.) WHEREI N THE HON'BLE HIGH COURT HAS CATEGORICALLY SUMMARIZED TH E ISSUE REGARDING THE GENUINENESS OF THE TRANSACTION WHE RE THE PARTY WAS NOT TRACEABLE AND WHAT CAN BE HELD IN SUCH TYPE OF CASES REGARDING THE GENUINENESS OF PURCHASE AND ALLOWABILITY. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE ARE THREE CATEGORIES (A) WHERE A SUMMONS COULD BE SERVED (B) WHERE SUMMONS WERE SERVED BUT NO COMPLIANCE AND (C) WHERE STATEMENT BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 15 WAS RECORDED. WHERE THOSE PARTIES ON WHOM THE SUMMONS COULD NOT BE SERVED THE ASSESSING OFFICER HAS TO MAKE ATTEMPT TO VERIFY THE GENUINENESS OF THE TRANSACTION FROM THE BOOKS OF THE ASSESSEE HIS BANK ACCOUNTS OR BILLS. THE ASSESSING OFFICER DID NOT MAKE ANY INQUIRY FROM THE ACCOUNT OF BANK TO DETERMINE WHETHER OR NOT THE AMOUNTS WERE CREDITED IN THE ACCOUNTS OF T HE RESPECTIVE PARTY. SO FAR AS THE SECOND CATEGORY OF CASES IS CONCERNED THE ASSESSING OFFICER DID NOT ATTEMPT TO ENFORCE THE ATTENDANCE OF THOSE PARTIES ON SUMMONS ISSUED BY HIM. OTHER INQUIRIES IN RESPECT OF FIRST C ATEGORY OF CASES WERE MADE BY HIM AND THE THIRD CATEGORY WHERE THE PARTY HAS ATTENDED BUT NO FAULT WITH THE BILLS THE N NO ADDITION CAN BE MADE. THEREFORE IN THIS CASE THE SECO ND CATEGORY COMES AS NO SUMMONS WAS ISSUED BY THE ASSESSING OFFICER TO THE SELLER. THE ASSESSING OFFI CER DID NOT FIND FAULT WITH THE BILLS OR BANK STATEMENT FILED BY BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 16 THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE AL SO SUBMITTED THAT IN THAT JUDGMENT THE HON'BLE HIGH COUR T HAS CONSIDERED THE DECISION OF CIT VS. LOWER AUTHORIT IES MEDICA REPORTED IN 250 ITR 575 (DELHI) AND HELD THAT I N THIS CASE THE PAYMENT HAS BEEN MADE TO FICTITIOUS PARTY . 8. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO REL IED UPON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF BABU LAL C. BORANA VS. ITO; 282 ITR 251 WHEREIN IT WAS HELD THAT WHERE THE STOCK OF HDPE POWDER BELONGING TO THE ASSE SSEE FOUND IN GODOWN OF THIRD PARTY WHICH FORMS PART OF GENUINE PURCHASE AND ALSO PART OF CLOSING STOCK RECORD ED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE COUL D NOT BE TREATED AS UNEXPLAINED INVESTMENT U/S 69 OF TH E ACT. SIMILARLY IN THE CASE OF CIT VS. NIKUNJ EXIMP; 83 CCH 298 (BOM) MERELY BECAUSE THE SUPPLIER DID NOT APP EAR BEFORE THE ASSESSING OFFICER WE COULD NOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. SIMILARLY BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 17 HON'BLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. AD INATH INDUSTRIES; 252 ITR 476 WHEREIN THE ASSESSEE PRODUCE D ALL THE MATERIAL TO SHOW THAT THE PURCHASE OF MATERIAL FROM T HE PARTY WAS NOT PRODUCTION AND THE ASSESSING OFFICER ACCEPTED THE EXISTENCE OF THE PARTY IN ANOTHER CASE NO ADDITION CAN BE MADE. IN THE CASE OF ACIT VS. BHASKAR TRADING CORPN.; 9 ITJ 141 WHEREIN THE INDORE BENCH O F THE TRIBUNAL HAS DEALT WITH THIS ISSUE AND HELD THAT WHEN TH E PAYMENTS HAVE BEEN RECEIVED BY ACCOUNT PAYEE CHEQUE IF THE SALES ARE GENUINE AND NOT DOUBTED THE PURCHASES CAN ALSO BE GENUINE. THE COUNSEL ALSO RELIED UPON THE DEC ISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. M.K. BROS.; 163 ITR 249 WHEREIN IT WAS HELD THAT WHEN THE ASSESSEE HAS MADE PURCHASES FROM CERTAIN PARTY WHICH WERE HELD TO BE BOGUS BY THE SALES TAX AUTHORITY AND I F THE PAYMENT WAS GIVEN BY CHEQUE ADDITION CANNOT BE MADE ON ACCOUNT OF INCOME FROM UNDISCLOSED SOURCES. SIMILARLY IN BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 18 THE CASE OF CIT VS. BHOLANATH POLY FAB PVT. LTD.; 355 I TR 290 THE HON'BLE GUJARAT HIGH COURT HELD THAT WHERE PURCHASES WERE BOGUS THEN NOT THE ENTIRE PURCHASES B UT THE PROFIT ELEMENT EMBEDED THEREIN CAN BE SUBJECTED TO TAX. SIMILARLY IN THE CASE OF CIT VS. SIMIT P SHETH; 356 I TR 451 THE HON'BLE GUJARAT HIGH COURT HELD THAT NOT THE PURCH ASE PRICE BUT ONLY PROFIT ELEMENT EMBEDED IN SUCH PURCH ASES LEARNED CIT(A) OULD BE ADDED TO THE INCOME OF THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN EQUIPMENT P. L TD.; 22 ITJ 555 WHEREIN THE HON'BLE HIGH COURT HELD THAT 6% OF NET PROFIT APPLIED IN BOGUS PURCHASES IS JUSTIFIED. 9. ON THE OTHER HAND THE LEARNED DR RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. LA MEDICA; 250 ITR 575 WITH THE SUBMISSION THAT IN CASE OF BOGUS PURCHASES IF THE DETAILED I NQUIRY REVEALED THAT THE BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 19 ALLEGED SUPPLIER DID NOT EXIST AND ONE WAS OPERATING BAN K ACCOUNT OPENED BY HIM WITH INTRODUCTION BY THE PARTNE R OF THE CONCERNED ASSESSEE AND THE AMOUNTS PAID WERE WITHDRAWN BY THE SISTER CONCERN AND IF IT IS PROVED THAT THE PURCHASES WERE NOT MADE FROM THAT PARTY WHOLE OF THE ADDITION HAS TO BE MADE AS INCOME FROM UNDISCLOSED SOURCES. COMING TO THE FACTS OF THE CASE THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS MADE PURCHASES FROM M/S NIRMA TRADING COMPANY AND SHRI OMKAR ENTERPRISES BOTH ARE NOT TRACEABLE AND THEY ARE NOT IN EXISTENCE THEREF ORE WHATEVER PURCHASES ARE MADE FROM THESE PARTIES ARE TO BE TREATED AS BOGUS PURCHASES AND THE ADDITION MADE BY THE ASSESSING OFFICER DESERVES TO BE SUSTAINED. THE LEARN ED DR SUBMITTED THAT THE CASES RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE ON FACTS. THEREFORE THE SAME ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 20 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INSTANT CASE IT IS NOT DISPUTED THAT THE ASSESSEE HAS PURCHASED 600 AND 500 COTTON BALES FROM M/S NIRMA TRADING COMPANY AND SHRI OMKAR ENTERPRISES RESPECTIVELY. THE INFORMATION WAS RECEIVED REGARDING B OGUS PURCHASES FROM THESE TWO SUPPLIERS ON THE GROUND THAT THESE PARTIES ARE GIVING BILLS ONLY AND THEY NOT GIVIN G DELIVERY OF GOODS. THE ABOVE TWO PARTIES WERE NOT FOU ND AT THEIR ADDRESS THEREFORE IT WAS CONCLUDED THAT THEY H AVE GIVEN ACCOMMODATION ENTRIES BY GIVING PURCHASE INVOICE S. THE ASSESSEE HAS SUBMITTED THE STATEMENT OF M/S NIRMA TRADING COMPANY AND SHRI OMKAR ENTERPRISES. THE STATEMENT OF ACCOUNT OF SHRI OMKAR ENTERPRISES IN THE BOOKS OF THE ASSESSEE STATEMENT OF ACCOUNT OF M/S NIR MA TRADING COMPANY IN THE BOOKS OF THE ASSESSEE PAYMENT DETAILS OF AXIS BANK IN SUPPORT OF THE PAYMENT MADE BY BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 21 ACCOUNT PAYEE CHEQUES TO SHRI OMKAR ENTERPRISES AND M/S NIRMA TRADING COMPANY PURCHASES INVOICE ISSUED B Y SHRI OMKAR ENTERPRISES AND M/S NIRMA TRADING COMPANY ALONG WITH COPY OF LORRY RECEIPT AND CORRESPONDING SAL E INVOICES COPIES OF SALES TAX RETURNS FILED BY THE AS SESSEE. THE ASSESSEE HAS FILED COMPLETE DETAILS SHOWING PURCHAS ES EFFECTED BY THE ASSESSEE FROM THE ABOVE PARTIES TIN NUMBER LOT NUMBER COTTON BALES PURCHASES NET VALUE VALUE OF GOODS TAX CHARGED AND CORRESPONDING SALES OF SAME COTTON BALES TO VARIOUS PARTIES. THE ASSESSEE HAS EARNED GROSS PROFIT ON RS. 37 55 227/- AGAINST THESE PURCHASES. IN THIS CASE THE ASSESSEE HAS ALSO FILED CO PIES OF VAT AUDIT REPORT AND RETURNS SUBMITTED UNDER MAHARASHTRA VAT ACT OF SHRI OMKAR ENTERPRISES AND M/S NIRMA TRADING COMPANY VIDE PAPER BOOK PAGE NOS. 96 TO 129 AND PAGES 132 TO 135. WE FIND THAT IN THIS CASE THE BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 22 ADDITION HAS BEEN MADE ONLY ON THE GROUND THAT BOTH THE PARTIES ARE NOT TRACEABLE. WE FIND FROM THE ORDER OF TH E ASSESSING OFFICER THAT THE ASSESSING OFFICER HAS NOT ISSUED ANY SUMMONS TO BOTH THE PARTIES FOR THEIR PRESENCE DU RING THE ASSESSMENT PROCEEDINGS. AS PER THE DECISION OF T HE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HI L UX AUTOMATIVE PVT. LTD.; 183 TAXMANN 260 THE HON'BLE HI GH COURT HAS HELD THAT WHERE THE SUMMONS COULD NOT BE SERVED AND WHERE THE SUMMONS WERE SERVED BUT THERE W AS NO COMPLIANCE THE ASSESSING OFFICER SHOULD VERIFY T HE GENUINENESS OF THE TRANSACTION FROM THE BOOKS OF THE ASSESSEE AND BANK ACCOUNT OR BILLS. THE ASSESSING OFFI CER SHOULD ALSO MAKE INQUIRY FROM BANK TO DETERMINE WHETHE R OR NOT THE AMOUNTS WERE CREDITED IN THE ACCOUNTS OF RESPECTIVE PARTIES. WE FIND THAT IN THIS CASE THE ASSE SSING OFFICER HAS NOT ISSUED ANY NOTICE FOR THE PRESENCE OF M/S BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 23 NIRMA TRADING COMPANY AND SHRI OMKAR ENTERPRISES. THEREFORE WE ARE OF THE VIEW THAT THE ASSESSING OFF ICER HAS NOT DOUBTED THE BANK TRANSACTION AND THE ASSESSING OFFICER HAS NOT MADE ANY INQUIRY WHETHER THE BANK TRANSACTION WAS GENUINE OR NOT. SIMILAR ISSUE HAD ALSO COME UP BEFORE THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BABULAL C. BORANA VS. ITO; 282 ITR 251 WHEREIN THE BOMBAY HIGH COURT HAS HELD THAT IF ANY PURCHASE HAS BEEN MADE AND PAYMENT OF THE SAME WERE MADE BY THE ASSESSEE BY CHEQUE AND THE SAME HAS BEEN DULY CREDITED IN THE BANK ACCOUNT OF THAT PARTY AND THIS PURCHASE IS REFLECTED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND THE VALUE OF THESE GOODS ARE REFLECTED IN THE BOOKS OF ACCOUNTS HENCE THE IDENTITY OF THE PERSON S FROM WHOM THE GOODS WERE PURCHASED AND SOURCE OF INVESTMEN T IN SUCH GOODS HAVE BEEN EXPLAINED THEREFORE NO ADDIT ION BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 24 CAN BE MADE U/S 69 OF THE ACT. SIMILARLY WE FIND THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF HIND USTAN EQUIPMENT; 22 ITJ 555 HELD THAT IF THERE IS BOGUS PURCHASE HAVING CORRESPONDING ACTUAL SALES THE ONLY PROFIT CAN BE ADDED. WE ALSO GET SUPPORT FROM THE DEC ISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M.K. BROTHERS; 163 ITR 249; CIT VS. BHOLANATH POLY FA B PVT. LTD.; 83 CCH 275; CIT VS. SIMIT P. SHETH; 84 C CH 339 SANJAY OIL CAKES INDUSTRIES VS. CIT; 316 ITR 27 4. WE FIND THAT IN THIS CASE THE COTTON BALES ARE SOLD BY IDENTIFYING THE SAME LOT NUMBERS TO VARIOUS MANUFACTUR ERS BY IDENTIFYING PRESS NUMBERS THE GOODS HAVE BEEN PURCHASED AND ULTIMATELY SOLD QUANTITY DETAILS ARE MAINTAINED AND THEY ARE REFLECTED IN TAX AUDIT REPORT U/ S 44AB OF THE ACT HENCE IF AT ALL THE PURCHASES ARE NOT FOUND TO HAVE BEEN MADE FROM THESE TWO PARTIES AND BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 25 TREATED AS BOGUS PURCHASES THE ENTIRE ADDITION CANNOT B E MADE UNLESS THERE IS SOME EVIDENCE IN SUPPORT OF THE CLAIM THAT MONEY REACHED BACK TO THE ASSESSEE. WE FIND THAT IN THE INSTANT CASE THE ASSESSING OFFICER HAS NOT DOUBTED THE BANK TRANSACTION. THEREFORE WE ARE OF THE VIEW THAT THE ENTIRE ADDITION CANNOT BE MADE. THE ONLY ADDITION WHICH CAN BE MADE IS ONLY NP ADDITION. IN THE INSTANT CASE THE ASSESSEE HAS SHOWN NP RATE OF 1.62% OF TOTAL TURNOVER. THEREFORE WE DIRECT TO APPLY NET PRO FIT ON ABOVE PURCHASES AT THE RATE OF 6%. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. ITA NO.132/IND/2016 12. SINCE THE FACTS AND CIRCUMSTANCES EXCEPT THE FIGURES INVOLVED IN THIS APPEAL ARE EXACTLY IDENTICAL W ITH BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 26 THE ABOVE CASE I.E. ITA NO.131/IND/2016 WE FOLLOWIN G THE REASONINGS GIVEN THEREIN DECIDE THIS APPEAL ALSO ON SIMILARLY LINES. ACCORDINGLY THIS APPEAL OF THE ASSESS EE IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 17 TH OCTOBER 2016. SD/- SD/- ( ..!') (..) #$ ( (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER J UDICIAL MEMBER (') / DATED : 17 TH OCTOBER 2016. DN/ BHUPENDRASINGH RAJENDRASINGH HUF & RAJENDRASINGH RAJPAL ITA NOS.131 7 132/IND/2016 27