Shahaji Bhanudas Bhad,, Pune v. Deputy Commissioner of Income-tax,,

ITA 816/PUN/2016 | 2010-2011
Pronouncement Date: 08-11-2019 | Result: Partly Allowed

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Appeal Details

RSA Number 81624514 RSA 2016
Assessee PAN ABTPB8149F
Bench Pune
Appeal Number ITA 816/PUN/2016
Duration Of Justice 3 year(s) 6 month(s) 16 day(s)
Appellant Shahaji Bhanudas Bhad,, Pune
Respondent Deputy Commissioner of Income-tax,,
Appeal Type Income Tax Appeal
Pronouncement Date 08-11-2019
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 08-11-2019
Date Of Final Hearing 16-07-2019
Next Hearing Date 16-07-2019
Last Hearing Date 10-10-2018
First Hearing Date 01-05-2018
Assessment Year 2010-2011
Appeal Filed On 22-04-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI R.S. SYAL VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI JUDICIAL MEMBER . / ITA NOS. 813 TO 818/PUN/2016 / ASSESSMENT YEARS : 2007-08 TO 2012-13 SHRI SHAHAJI BHANUDAS BHAD SAMRUDDHA BUNGLOW PLOT NO.46 SHIVAJI HOUSING SOCIETY SENAPATI BAPAT ROAD PUNE 411 016 PAN : ABTPB8149F VS. DCIT CENTRAL CIRCLE-1(2) PUNE (APPELLANT) (RESPONDENT) . / ITA NOS. 950 TO 953/PUN/2016 / ASSESSMENT YEARS : 2008-09 TO 2011-12 DCIT CENTRAL CIRCLE-1(2) PUNE VS. SHRI SHAHAJI BHANUDAS BHAD PROP. M/S. S. S. ENGINEERS SAMRUDDHA BUNGLOW PLOT NO.46 SHIVAJI CHS SENAPATI BAPAT ROAD PUNE 411 016 PAN : ABTPB8149F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RATAN SAMAL RESPONDENT BY SHRI S.B. PRASAD DATE OF HEARING 07-11-2019 DATE OF PRONOUNCEMENT 08-11-2019 SHAHAJI BHANUDAS BHAD 2 / ORDER PER R.S. SYAL VP : THIS BATCH OF TEN APPEALS HAVING SIX APPEALS BY THE ASS ESSEE AND FOUR CROSS APPEALS BY THE REVENUE INVOLVING THE ASSE SSMENT YEARS 2007-08 TO 2012-13 ARISES OUT OF A CONSOLIDATED O RDER PASSED BY THE LD. CIT(A) ON 10-02-2016. SINCE COMMON ISSUES A RE RAISED IN THESE APPEALS WE ARE THEREFORE PROCEEDING TO DISPOSE THEM OFF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. A.Y. 2007-08 : ITA NO.813/PUN/2016 BY ASSESSEE 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT A SEARCH A ND SEIZURE ACTION U/S.132 OF THE INCOME-TAX ACT 1961 (HEREINA FTER ALSO CALLED THE ACT) WAS CARRIED OUT ON 09-08-2011 IN SHAHAJI BHAD GROUP OF CASES. THE ASSESSEE A PART OF THIS GROUP A S A PROPRIETOR OF M/S. S.S. ENGINEERS IS ENGAGED IN THE BUSINESS OF MANUFA CTURING OF SUGAR MACHINERY PROVIDING ERECTION AND INSTALLATION SERVICE S AND SETTING UP OF SUGAR FACTORIES AND ALSO TRADING IN SPARE PARTS. IN RESPONSE TO NOTICE U/S.153A OF THE ACT THE ASSESSEE FURNISHED HIS RETURN OF INCOME ON 29-03-2012 DECLARING TOTAL INCOME OF SHAHAJI BHANUDAS BHAD 3 RS.30 82 83 420/- (INCLUDING DISCLOSURE OF RS.99 41 075/ - MADE DURING THE COURSE OF SEARCH). THE ASSESSING OFFICER (A O) FOUND THAT THE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S.143( 3) OF THE ACT DETERMINING TOTAL INCOME AT RS.29 85 67 639/- A S AGAINST THE DECLARED TOTAL INCOME OF RS.29 81 42 340/-. HE FOUND THAT THE SEARCH ACTION DIVULGED THAT THE ASSESSEE WAS INFLATING EXPENSE S BY RECORDING BOGUS STEEL PURCHASE BILLS FROM MUMBAI BASED PA RTIES. PRIOR TO SEARCH A SURVEY U/S.133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE WHICH WAS CONVERTED INTO THE INS TANT SEARCH ACTION. IN THE STATEMENT U/S.133A OF THE ACT THE AS SESSEE WAS CONFRONTED WITH THE FACT THAT IT HAD SHOWN STEEL PURCHASE S FROM 30 PARTIES IN RESPECT OF WHICH THE RELEVANT BILLS PURCHASE OR DERS GOODS RECEIVED NOTE DELIVERY CHALLANS ETC. WERE NOT FULLY AVAILABLE. IN MANY CASES CONTACT NUMBERS GIVEN ON THE BILLS WERE FOU ND TO BE NON-EXISTING. ON FIELD INVESTIGATION AT THE ADDRESSES OF THE 3 0 PARTIES IT WAS FOUND THAT THERE WAS NO ACTIVITY OF SALE OF STEE L AND THE PARTIES WERE NON-EXISTING ENTITIES. IN RESPONSE TO QUESTION NO. 22 THE ASSESSEE SUBMITTED THAT THE GOODS WERE PURCHASED F ROM THESE PARTIES THROUGH SOME AGENT; GOODS WERE RECEIVED DIREC TLY AT THE FACTORY OR PROJECT SITES; BILLS/DELIVERY CHALLANS LORRY/OTROI SHAHAJI BHANUDAS BHAD 4 RECEIPTS WERE SUBMITTED AFTER RECEIPT OF MATERIAL; PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUES TO THE CONCERNED PARTIES A ND HENCE THE TRANSACTIONS WERE GENUINE. HOWEVER IN VIEW OF LACK OF OR SOME WEAKNESSES IN THE DOCUMENTATION THE ASSESSEE AD MITTED TO THE DISALLOWANCE OF THE EXPENSES OF RS.36 01 34 587/- CLA IMED ON ACCOUNT OF SUCH PURCHASES OVER THE YEARS AND ALSO AGRE ED TO OFFER THE SAME AS AN ADDITIONAL INCOME. IN THE STATEMENT U/S.132(4 ) THE ASSESSEE WAS CONFRONTED WITH HIS STATEMENT RECORDED U/S.13 3A OF THE ACT IN WHICH HE MADE DISCLOSURE OF RS.36.01 CRORE ON ACCOUNT OF DISALLOWANCE OF PURCHASES. IN RESPONSE TO QUESTION N O.18 IN THE STATEMENT U/S.132(4) THE ASSESSEE AGREED WITH SUCH SURRE NDER AND AGREED TO OFFER DISALLOWANCE IN THE CONCERNED YEARS. THE AMOUNT OF SUCH PURCHASES RELATING TO THE A.Y. 2007-08 STOOD AT RS.99 41 075/-. THE ASSESSEE FILED RETURN U/S.153A OF TH E ACT FOR THE YEAR UNDER CONSIDERATION BY INCLUDING THE SAID AMOUNT OF RS.99.41 LAKH IN THE TOTAL INCOME DECLARED. HOWEVER DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE CONTENDE D THAT ALL THE PURCHASES WERE GENUINE AND HENCE NO ADDITION SHOULD BE MADE. IT WAS FURTHER SUBMITTED THAT IN CASE OF CERTAIN PURC HASES THE PAYMENT OF SALES-TAX WAS NOT MADE BY SUCH PARTIES AND IF THE SHAHAJI BHANUDAS BHAD 5 SAID SUPPLIERS HAD DEFAULTED IN MAKING PAYMENT OF SALES-TAX THEN THE ASSESSEE SHOULD NOT BE CONSIDERED TO HAVE RECORDED BOGUS PURCHASES. HE FURTHER STATED THAT WHEN THE STATEMENT WAS RE CORDED AT THE TIME OF SEARCH THE SUPPLIERS WERE NOT TRACEABLE. HO WEVER LATER ON THE ASSESSEE MANAGED TO GET ALL THE NECESSARY DOC UMENTS FROM THE PARTIES WHO SUPPLIED THE GOODS TO THE ASSESSEE. T HE AO FOUND CERTAIN FLAWS IN THE PURCHASE DOCUMENTS FILED BY THE A SSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN VIEW OF THE FACT THAT THE ASSESSEE HAD HIMSELF OFFERED RS.99 41 075/- AS ADDITIONAL INCOME ON ACCOUNT OF BOGUS PURCHASES IN THE COURSE OF S EARCH RELATING TO THE YEAR UNDER CONSIDERATION AND INCLUDED THE SA ME IN HIS RETURN OF INCOME THE AO DISREGARDED THE ASSESSEES COMPUTATION AND ADDED RS.99 41 075/- TO THE INCOME ORIGINA LLY DETERMINED U/S.143(3) OF THE ACT BY REJECTING THE ASSESSEES CONTENTION FOR REDUCTION IN THE AMOUNT OF INCOME OFFERED IN TH E RETURN U/S.153A ON ACCOUNT OF SUCH A MISTAKEN NOTION. 3. THE ASSESSEE APPROACHED THE LD. CIT(A) AND FURNISHE D THE RELEVANT DOCUMENTS IN SUPPORT OF THE GENUINENESS OF PURCH ASES. IT WAS CONTENDED THAT ALL THE PURCHASES WERE GENUINE AND PAYM ENTS WERE MADE BY CHEQUES IN RESPECT OF THE GOODS RECEIVED PURSUANT TO SHAHAJI BHANUDAS BHAD 6 SUCH BILLS. THE ASSESSEE FURNISHED DETAILS OF PURCHASES A LONG WITH OCTROI RECEIPTS ETC. FOR ALL THE YEARS UNDER CONSIDERATION. FO R SOME OF THE OLD TRANSACTIONS OCTROI RECEIPTS WERE MISPLACED WHICH COULD NOT BE PRODUCED BEFORE THE LD. CIT(A). THE LD. FIRST APP ELLATE AUTHORITY FORWARDED SUCH DETAILS TO THE AO VIDE HIS LETTER DATED 07- 09-2015 AND INSTRUCTED HIM TO MAKE MORE DETAILED ENQUIRIES. THE AO VIDE HIS REMAND REPORT DATED 10-12-2015 REITERATED THE STAND TAKEN IN THE COURSE OF ASSESSMENT MADE BY HIM U/S.153A. THE LD. CIT(A) FORWARDED THE REMAND REPORT TO THE ADDL.CIT AS W ELL VIDE HIS LETTER DATED 11-12-2015 WHO REPORTED THAT THE ASSESSEE DID NOT MAKE ANY RETRACTION OF THE STATEMENT MADE DURING THE COURS E OF SEARCH REGARDING ADDITIONAL INCOME ON ACCOUNT OF BOGUS PU RCHASES. HE FURTHER SUBMITTED THAT THE ADDITIONAL EVIDENCE SHOULD NOT BE ENTERTAINED AND IF IT WAS TO BE ACCEPTED THEN AN OPPORTUNITY SHOULD BE GIVEN TO THE AO . THE LD. CIT(A) RECORDED IN PARA 5.4 ONWARDS OF THE IMPUGNED ORDER THAT THE ADDL. CIT VIRTUALLY ADMITTED THAT THE ASSESSMENT WAS COMPLETED WITHOUT MAKING PROPER ENQUIRIE S FROM THE SO CALLED BOGUS VENDORS AND FURTHER THERE WAS NO EXPLANATION BY THE AO OR THE ADDL. CIT AS TO WHY NO ENQUIR IES WERE MADE REGARDING THESE PURCHASES. HE HOWEVER RE FUSED TO SHAHAJI BHANUDAS BHAD 7 ADMIT ANY ADDITIONAL EVIDENCE AND CONFIRMED THE ADDITION MADE BY THE AO. THE ASSESSEE IS AGGRIEVED BY THE CONFIRMATION OF THE ADDITION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH TH E RELEVANT MATERIAL ON RECORD. IT IS TRUE THAT THE ASSESSEE DURING THE COURSE OF SURVEY U/S.133A WHICH GOT CONVERTED INTO SEARC H ADMITTED IN HIS STATEMENT U/S.132(4) THAT THE PURCHASES FROM 3 0 PARTIES WERE NOT PROPERLY DOCUMENTED AND ALSO OFFERED THE TOTAL AMOUNT OF SUCH PURCHASES FOR DISALLOWANCE. IT IS ON THE B ASIS OF SUCH A STATEMENT MADE DURING THE COURSE OF SEARCH THAT TH E ASSESSEE INCLUDED THE SURRENDERED INCOME IN THE RETURN OF INCOME FILED U/S.153A OF THE ACT BUT AGITATED BEFORE THE AO THAT NO ADDITION SHOULD BE MADE ON THIS SCORE. 5. THE CASE OF THE REVENUE IS THAT ONCE THE ASSESSEE M ADE A STATEMENT U/S 132(4) OF THE ACT DECLARING BOGUS BILLS AND OF FERING EQUAL AMOUNT FOR TAXATION THE SAME CANNOT BE RETRACTED AS IT CONSTITUTES `EVIDENCE. IN ORDER TO APPRECIATE THIS CONTENTION LET US HAVE A LOOK AT THE MANDATE OF SUB-SECTION (4) OF SECTION 13 2 WHICH PROVIDES THAT : `THE AUTHORISED OFFICER MAY DURING THE COU RSE OF SHAHAJI BHANUDAS BHAD 8 THE SEARCH OR SEIZURE EXAMINE ON OATH ANY PERSON WHO IS FOUND TO BE IN POSSESSION OR CONTROL OF ANY BOOKS OF ACCOUNT DOC UMENTS MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION MAY THEREAFTER BE USED IN EVIDENCE IN ANY PROCEEDING UNDER THIS ACT. IT IS OSTENSIBLE FROM THE LANGUAGE OF THE PROVISION T HAT THE STATEMENT MADE BY THE ASSESSEE DURING THE COURSE OF SEARC H MAY BE USED IN THE ASSESSMENT PROCEEDINGS AS `EVIDENCE. 6. SECTION 3 OF THE INDIAN EVIDENCE ACT 1872 DEFINES 'EVIDENCE' TO MEAN AND INCLUDE - `(1) ALL STATEMENTS WHICH TH E COURT PERMITS OR REQUIRES TO BE MADE BEFORE IT BY WITNESSES IN RELATION TO MATTERS OF FACT UNDER INQUIRY; SUCH STATEMENTS ARE CALLED ORAL EVIDENCE. (2) ALL DOCUMENTS PRODUCED FOR THE INSPECTION OF THE COURT; SUCH DOCUMENTS ARE CALLED DOCUMENTARY EVIDENCE. WH EN WE READ SUB-SECTION (4) OF SECTION 132 IN JUXTAPOSITION TO SE CTION 3 OF THE INDIAN EVIDENCE ACT IT CLEARLY TRANSPIRES THAT THE STATE MENT MADE BY AN ASSESSEE U/S 132(4) OF THE ACT CAN BE CONST RUED AS AN ORAL EVIDENCE OR AT THE MOST A SUBSTITUTION OF DOCUMENTARY EVIDENCE. TO PUT IT SIMPLY IF AN ASSESSEE STATES IN HIS STATE MENT U/S 132(4) THAT HE PURCHASED CERTAIN ASSET FROM UNDISCLOSED IN COME SHAHAJI BHANUDAS BHAD 9 AND GIFTED IT SOMEONE ELSE OR EARNED INCOME FROM A CLANDE STINE TRANSACTION SUCH A STATEMENT IN THE CONTEXT OF SECTION 132 BY VIRTUE OF SUB-SECTION (4) WOULD DISPENSE WITH THE NEED FOR ANY DOCUMENTARY EVIDENCE TO CORROBORATE THE VERSION SO GIVEN. IN THAT CASE EVEN IF THE BILL FOR THE PURCHASE OF THE ASSET IS NOT F OUND OR NO OTHER DOCUMENT FOR EARNING INCOME FROM CLANDESTINE TRANSAC TION IS UNEARTHED IN THE COURSE OF SEARCH HIS STATEMENT WOULD BE C ONSTRUED AS EVIDENCE OF HAVING PURCHASED THE ASSET OR EARNED THE INCOME. IN THAT CASE THE DEPARTMENT CAN RIGHTLY PROCEED AS IF THE ASSE SSEE PURCHASED SUCH AN ASSET OR EARNED SUCH AN INCOME WITHOU T BRINGING ON RECORD ANY PRIMARY EVIDENCE OF THESE TRANSACTIONS. 7. AT THIS JUNCTURE IT IS RELEVANT TO DRAW A LINE BETWEEN THE STATEMENT U/S 132(4) OF THE ACT ON FACTUAL ASPECTS ON ONE HA ND AND ON LEGAL ASPECTS ON THE OTHER. EVEN ON THE FACTUAL ASPECTS ONE NEEDS TO APPRECIATE DISTINCTION BETWEEN THE FACTUAL STATEMENT AS SUCH AND THE LEGAL CONSEQUENCES OF SUCH FACTUAL STATEMENT S. IN SO FAR AS THE STATEMENT ON FACTUAL ASPECTS AS SUCH IS CONCER NED THAT BECOMES FINAL AND CONSTITUTES `EVIDENCE AGAINST THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS. HOWEVER THE LEGAL CONSEQUENCES OF SUCH A FACTUAL STATEMENT HAVE TO BE DECIDED AS PER LAW. PROCEEDIN G WITH SHAHAJI BHANUDAS BHAD 10 THE ABOVE EXAMPLE OF THE ASSESSEE ADMITTING TO HAVE PURCHA SED A CERTAIN ASSET OUTSIDE HIS BOOKS OF ACCOUNT HIS STATEMENT WOULD BE AN EVIDENCE OF HAVING PURCHASED THE ASSET BUT THAT PER SE WOULD NOT LEAD TO ADDITION. THE LEGAL CONSEQUENCES OF SUCH A STATEM ENT WOULD HAVE TO BE SEPARATELY LOOKED INTO. IF THE ASSESSEE PROVES THAT HE EARNED SOME UNDISCLOSED INCOME FOR WHICH HE HAD M ADE A DECLARATION AND THEN CLAIMS THAT THE SAID ASSET WAS PURCHASED OUT OF SUCH AN UNDISCLOSED INCOME THEN NO ADDITION WOULD BE WARRA NTED FOR THE PURCHASE OF THE ASSET BECAUSE THE INFLOW OF THE UN DISCLOSED INCOME HAS BEEN TAXED AND THERE CANNOT BE TAX ON THE OUTF LOW OF SUCH TAXED UNDISCLOSED INCOME. IN THAT SITUATION THOUGH THE F ACTUAL ASPECT OF HAVING PURCHASED AN ASSET OUTSIDE THE BOOKS OF ACCOUNTS WOULD BE TREATED AS EVIDENCE BUT THERE WILL BE NO FURTHER AD DITION ON ACCOUNT OF THE LEGAL CONSEQUENCE OF THE MATTER. 8. THE SECOND CATEGORY COMPRISES OF THE STATEMENT OF TH E ASSESSEE MADE U/S 132(4) ON LEGAL ASPECTS. IT GOES WITHOU T SAYING THAT THERE CAN BE NO ESTOPPEL AGAINST THE PROVISIONS OF THE A CT. IF AN ASSESSEE MAKES A SELF-ADVERSE LEGAL STATEMENT U/S 132(4) OF THE ACT THEN IT WILL HAVE TO BE TESTED ON THE TOUCHSTONE OF LEGAL PRINCIPLES AS TO WHETHER OR NOT IT CAN BE ACTED UPON. IF SUCH A STATEM ENT CAN SHAHAJI BHANUDAS BHAD 11 BE LEGALLY ACTED UPON ONLY THEN THE SAME WILL BE BINDING ON TH E ASSESSEE. IF ON THE OTHER HAND IT IS FULLY OR PARTLY CONTR ARY TO THE LEGAL PRINCIPLES THEN IT WILL BE IGNORED TO THE EXTENT OF SUCH A N ILLEGALITY. FOR INSTANCE IF AN ASSESSEE AGREES TO FOREGO THE CLAIM OF DEPRECIATION DE HORS THE GENUINENESS OF SUCH A CLAIM SUCH A STATEMENT BEING CONTRARY TO LAW CANNOT BE ACTED UPON BECA USE THE GENUINE DEPRECIATION HAS TO BE ALLOWED AS DEDUCTION. SUCH A STATEMENT WHICH IS CONTRARY TO LAW CANNOT BE ACTED UPON AS AN EVIDENCE AGAINST THE ASSESSEE. 9. THERE CAN BE STILL A THIRD HYBRID CATEGORY IN WHICH THE STATEMENT OF THE ASSESSEE U/S 132(4) HAS CERTAIN FACTUAL ADM ISSIONS AND ALSO ITS CONSEQUENTIAL LEGAL ADMISSIONS. IN SUCH A SITUATION THE FACTUAL ADMISSIONS WILL BE USED AS AN EVIDENCE BUT THE CONSEQUENTIAL LEGAL ADMISSIONS WILL HAVE TO BE CONSIDERED AND DECIDED AS PER LAW. CONTINUING WITH THE EARLIER EXAMPLE IF TH E ASSESSEE ACCEPTS IN THE COURSE OF SEARCH THAT HE PURCHA SED CERTAIN ASSET OUTSIDE THE BOOKS OF ACCOUNT AND ALSO AGREES TO OFFE R IT FOR TAXATION IN THE STATEMENT U/S 132(4) OF THE ACT THEN THE FIRS T PART OF THE STATEMENT OF HAVING PURCHASED AN ASSET OUTSIDE THE BO OKS OF ACCOUNT BEING A FACTUAL ASPECT WOULD CONSTITUTE EVIDENCE AGA INST SHAHAJI BHANUDAS BHAD 12 HIM AND HE CANNOT LATER ON RETRACT FROM THE SAME. HOWEVE R THE SECOND PART OF THE STATEMENT U/S 132(4) OF AGREEING TO OFFE R IT FOR TAXATION WOULD NOT BIND HIM. IF HE SUCCEEDS IN PROVING THA T THE ASSET WAS PURCHASED OUT OF SOME OTHER SOURCES DISCLOSED OR UNDISCLOSED WHICH HAS ALREADY SUFFERED TAXATION THEN SUCH A SECOND PART OF THE STATEMENT WOULD NOT BIND HIM. THE AUTHOR ITIES BEFORE PUTTING SUCH AN AMOUNT TO TAX WILL HAVE TO INDEPENDEN TLY REBUT THE CONTENTION OF THE ASSESSEE AND PROVE THAT THE SAID ASSET WAS PURCHASED FROM UNDISCLOSED INCOME. THAT IS RAISON D ETRE FOR THE LEGISLATURE TO HAVE EMPLOYED THE WORD MAY IN THE LANGUA GE OF SECTION 132(4) WHICH DELINEATES THAT THE STATEMENT MADE BY THE ASSESSEE MAY OR MAY NOT BE USED AS EVIDENCE IN THE ASSE SSMENT PROCEEDINGS. THE NITTY GRITTY OF THE MATTER IS THAT THOUGH A STATEMENT MADE U/S 132(4) CARRIES IMMENSE WEIGHT AND WORKS AS AN EVIDENCE BUT THE SAME IS NOT CONCLUSIVE IN SO FAR AS THE LE GAL ASSERTIONS OR THE LEGAL CONSEQUENCES OF THE FACTUAL ASSER TIONS AS STATED IN SUCH A STATEMENT ARE CONCERNED. 10. ADVERTING TO THE FACTS OF THE INSTANT CASE WE FIND TH AT THE STATEMENT OF THE ASSESSEE MADE U/S 132(4) OF THE ACT IS IN TWO PARTS VIZ. THAT HE RECORDED BOGUS BILLS IN HIS BOOKS OF A CCOUNT AND SHAHAJI BHANUDAS BHAD 13 ALSO OFFERED THE AMOUNT OF SUCH BOGUS BILLS TO TAX. SUCH A STATEMENT FALLS IN THE THIRD CATEGORY AS DISCUSSED ABOVE. THE FIRST PART BEING A FACTUAL ASPECT CANNOT BE RESILED BY THE ASSE SSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND WILL HAV E TO BE ACCEPTED AS CORRECT AND BINDING ON THE ASSESSEE AS CONSTITU TING EVIDENCE. HOWEVER THE SECOND PART BEING AGREEING FOR DISALLOWANCE OF THE FULL AMOUNT OF SUCH BOGUS PURCHASES IS A LEGAL STATEMENT AND ALSO A LEGAL CONSEQUENCE OF THE FACTUAL ASSERTIO N MADE WHICH WILL HAVE TO BE EXAMINED INDEPENDENTLY FOR FINDI NG OUT IF THE RECORDING OF BOGUS BILLS WOULD LEAD TO THE ADDITION OF EQUAL AMOUNT OR ONLY THE PROFIT ELEMENT EMBEDDED THEREIN. TO CUT SHORT THE CONTROVERSY IT IS SUFFICE TO SAY AT THIS STAGE THAT O NCE THE ASSESSEE ADMITTED THAT THE BILLS OF PURCHASE OF STEEL WERE NOT PROPER HE CANNOT LATER ON RETRACT FROM THE SAME. BUT IN S O FAR AS HIS STATEMENT ABOUT THE TAXABILITY OF SUCH SUM IS CONCERNED IT IS A LEGAL STATEMENT AND ALSO A LEGAL CONSEQUENCE OF THE FACTUAL ASPEC T ADMITTED BY HIM WHICH NEEDS TO BE SEPARATELY EXAMINED AS P ER THE PROVISIONS OF THE LAW. WE ERGO HOLD THAT THE ASSESSEE CA NNOT RUN AWAY FROM HIS STATEMENT OF RECORDING BOGUS PURCHASE BILLS BUT CAN PROVE LEGALLY THAT THE ENTIRE AMOUNT OF BILLS SHOULD NOT BE LEGALLY SHAHAJI BHANUDAS BHAD 14 ADDED. THEREFORE THE CONTENTION OF THE LD. DR THAT ONCE THE ASSESSEE HAD ADMITTED IN HIS STATEMENT U/S 132(4) TO THE EFFE CT THAT THERE WAS NO PROPER EVIDENCE OF THE GENUINENESS OF THE BILLS OF PURCHASE OF STEEL AND OFFERED THE EQUAL AMOUNT FOR TAXAT ION THEN HE CANNOT TAKE A CONTRARY STAND IN THE ASSESSMENT PROCEEDINGS IS COUNTENANCED ONLY TO THE EXTENT OF NON-GENUINENESS OF THE B ILLS OF PURCHASE OF STEEL BUT NOT TO THE EXTENT OF OFFERING EQUAL A MOUNT FOR TAXATION WHICH WOULD BE SEPARATELY EXAMINED AS PER THE PROVISIONS OF LAW. 11. THE LD. DR HAS RAISED ONE MORE PRELIMINARY ISSUE TO TH E EFFECT THAT INCOME ONCE INCLUDED BY THE ASSESSEE IN HIS R ETURN OF INCOME BINDS HIM AND HENCE THE ASSESSEE CANNOT CLAIM FOR ITS EXCLUSION. THIS CONTENTION HAS NO LEGAL LEGS TO STAND ON AND IS LIABLE TO BE REJECTED. 12. CIRCULAR NO.14(XI-35) OF 1955 DATED 01-04-195 5 STATES THAT THE OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF THE ASSESSEE AS TO HIS RIGHTS. THE HONBLE JURISDICTIONAL HIGH COURT IN SANCHIT SOFTWARE AND SOLUTIONS (P) LTD. VS. CIT (2012) 349 ITR 404 (BOM.) HAS REITERATED THE POSITION SHAHAJI BHANUDAS BHAD 15 STATED IN THE CIRCULAR BY HOLDING THAT WHERE AN ASSESSEE OFFE RED CERTAIN INCOME WRONGLY AND THEREAFTER REALIZED THAT SUCH INCOM E WAS NOT LIABLE TO BE INCLUDED IN THE TOTAL INCOME HE WAS JUSTIFIED IN FILING APPLICATION U/S. 264 SEEKING REVISION OF THE ORDER. THE HONBLE DELHI HIGH COURT IN S.D.S. MONGIA VS. CBDT (2007) 211 CTR 357 (DELHI) HAS ALSO HELD THAT WHERE THE ASSESSEE HAS WRONGLY OFFERED FOR TAXATION CERTAIN INCOME WHICH IS OTHERWISE NOT LIABLE TO BE INCLUDED IN THE TOTAL INCOME SUCH AN AMOUNT CANNOT BE BRO UGHT TO TAX. APPLYING THE LEGAL POSITION EMANATING FROM THE ABOVE DECISIONS AND AS ACCEPTED BY THE DEPARTMENT THROUGH THE C IRCULAR IT IS APPARENT THAT EVEN IF THE ASSESSEE WRONGLY INCLUDES CER TAIN INCOME IN HIS RETURN WHICH IS OTHERWISE NOT CHARGEABLE TO TAX HE HAS A RIGHT TO LODGE A CLAIM BEFORE THE AO IN THIS REGARD D URING THE COURSE OF ASSESSMENT PROCEEDINGS. AS THE ASSESSEE IN TH E INSTANT CASE HAS CHALLENGED THE SUO MOTU INCLUSION OF SUCH AN INCOME BEFORE THE AO WE DO NOT FIND ANY FETTERS ON THE POWERS OF THE AO IN NOT EXAMINING IF THE SAME IS ACTUALLY LIABLE TO BE FULLY OR PA RTLY INCLUDED IN THE TOTAL INCOME. THE CONTENTION RAISED BY THE LD. DR IN THIS REGARD IS THEREFORE JETTISONED. SHAHAJI BHANUDAS BHAD 16 13. COMING TO THE MERITS OF THE CASE IT IS SEEN THAT THE ASSES SEE RECORDED THE ALLEGED TAINTED PURCHASES OF STEEL AMOUNTING TO RS.99 41 075/- IN HIS BOOKS OF ACCOUNT FOR THE YEAR UN DER CONSIDERATION. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF SUGAR MACHINERY. STEEL IS A RAW MATERIAL FOR THE MANUFACTURING OF THE MACHINERY. IT IS OBVIOUS THAT WITHOUT RA W- MATERIAL THERE CANNOT BE ANY FINISHED PRODUCTS. THE ASSESS EE HAS FILED STOCK DETAILS BEFORE THE AUTHORITIES WHICH SHOW THAT PUR CHASES FOR THE DISPUTED QUANTITY WERE IN FACT MADE. THE FACT THA T THE ASSESSEE MADE GENUINE SALES HAS NOT BEEN DISPUTED BY TH E REVENUE. IN SUCH A SCENARIO EVEN IF WE ACCEPT THE C ONTENTION OF THE REVENUE THAT THE PURCHASES WERE BOGUS STILL THE ENTIRE A MOUNT OF PURCHASES CANNOT BE ADDED IN VIEW OF THE FACT THAT SOME PURCHASES MUST HAVE IN FACT BEEN MADE WHICH GOT EVENTU ALLY CONSUMED IN THE PROCESS OF MANUFACTURING. THIS EVIDENCES THAT THE ASSESSEE MADE SOME CHEAPER PURCHASES OF STEEL BUT OBTA INED BOGUS PURCHASE BILLS OF HIGHER VALUE SO AS TO INFLATE THE EXPENSES AND REDUCE THE PROFIT. IN SUCH CIRCUMSTANCES ONLY THE PROFIT (E XCESSIVE COST ELEMENT) EMBEDDED IN SUCH BOGUS PURCHASES CAN BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE WHICH IN THE PECULIAR FA CTS AND SHAHAJI BHANUDAS BHAD 17 CIRCUMSTANCES OF THE INSTANT CASE IS ESTIMATED AT 10% OF TH E BILL AMOUNTS. OUR VIEW IN ESTIMATING THE NET PROFIT RATE @10% OF BOGUS PURCHASES IS FORTIFIED BY THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN PR. CIT VS. PARAMSHAKTI DISTRIBUTORS PVT. LTD. (ITA NO.413/2017 DT. 15-07-2019) IN WHICH ADDITION AT THE RATE OF 10% OF BOGUS PURCHASES HAS BEEN HELD TO BE SUSTAINABLE IN SIMILAR CIRCUMSTANCES. TO SUM UP THE ASSESSEE GETS RE LIEF BY MEANS OF DELETION OF ADDITION OF 90% OF RS.99 41 075/- A ND ACCORDINGLY THE ADDITION @10% AT RS.9 94 107/- IS SUSTAINED. 14. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE WERE NO T PRESSED BY THE LD. AR DURING THE COURSE OF HEARING WHICH ARE HEREBY DISMISSED. 15. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. A.Y. 2008-09 : ITA NO.814/PUN/2016 BY ASSESSEE ITA NO.950/PUN/2016 BY REVENUE 16. THESE TWO CROSS APPEALS HAVE BEEN FILED BY THE ASSES SEE AS WELL AS THE REVENUE. THE FIRST ISSUE RAISED BY THE ASSESS EE IN HIS APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.9 64 68 253/- SHAHAJI BHANUDAS BHAD 18 TOWARDS PURCHASES EFFECTED FROM 31 PARTIES WHICH WERE A DMITTED AS BOGUS PURCHASES DURING THE COURSE OF SEARCH AND THE AMOUNT WAS OFFERED FOR TAXATION IN THE RETURN FILED FOR THE YEAR UNDER CONSIDERATION U/S.153A OF THE ACT. THE AO MADE ADDITION FO R THE SAID AMOUNT DESPITE THE ASSESSEE REQUESTING OTHERWISE. THE LD. CIT(A) VIDE HIS COMMON ORDER FOR ALL THE YEARS UNDER CONSIDERATION SUSTAINED THE ADDITION. 17. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEV ANT MATERIAL ON RECORD WE FIND IT IS AN ADMITTED POSITION THAT THE F ACTS AND CIRCUMSTANCES OF THIS GROUND ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE ASSESSEES APPEAL FOR THE A.Y. 2007-08. FO LLOWING THE VIEW TAKEN HEREIN ABOVE WE UPHOLD ADDITION @10% OF PURCH ASE AMOUNTS WHICH COMES TO RS.96 46 825/-. 18. THE SECOND ISSUE RAISED IN THE ASSESSEES APPEAL IS A GAINST THE ESTIMATION OF INCOME AT 15% OF PURCHASES AMOUNTING TO RS.36 69 361/- WHICH WERE NOT PART OF THE BOGUS PURCHAS ES DISCOVERED DURING THE COURSE OF SEARCH BUT WERE DETECTED BY THE AO TO HAVE BEEN MADE FROM SOME OF THE BOGUS PARTIES ONLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SHAHAJI BHANUDAS BHAD 19 19. THE FACTUAL PANORAMA OF THIS GROUND IS THAT DURING THE C OURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT APART FROM MAKING SURRENDER IN RESPECT OF PURCHASES MADE FROM 31 BOGUS PARTIES THE ASSESSEE HAD RECORDED FURTHER PURCHASES FROM SOME OF THESE PARTIES WHICH FOR THE YEAR UNDER CONSIDERATION STOOD AT RS.36 69 361/-. FOLLOWING THE SAME YARDSTICK THE AO ADD ED THE AMOUNT OF PURCHASES. WHEN THE MATTER CAME UP BEFORE THE LD. CIT(A) HE REDUCED THE DISALLOWANCE TO THE PROFIT ELEMENT IN SUCH PURCHASES WHICH HE ESTIMATED AT 15%. THAT IS HOW THE AS SESSEE IS AGGRIEVED BY THE CONFIRMATION OF ADDITION AT 15% AND THE RE VENUE WANTS THE ADDITION TO BE INCREASED TO 100% OF THE BILL AMOUNTS. 20. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THOSE OF THE EAR LIER GROUND EXCEPT FOR THE FACT THAT THE ASSESSEE DID NOT MAKE S URRENDER IN SUPPORT OF THESE PURCHASES WHICH WERE FOUND BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SINCE THE SUBSTANC E OF THE MATTER IS SAME WE FOLLOWING OUR VIEW UPHOLD THE ADDITION A T 10% OF SUCH PURCHASES AT RS.3 66 936 /-. THUS THE GROUND RAISED SHAHAJI BHANUDAS BHAD 20 BY THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS PAR TLY ALLOWED. 21. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE WERE NO T PRESSED WHICH HEREBY STAND DISMISSED. 22. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED AN D THAT OF THE ASSESSEE IS PARTLY ALLOWED. A.YRS. 2009-10 2010-11 & 2011-12 : ITA NOS.815 TO 817/PUN/2016 BY ASSESSEE ITA NOS.951 TO 953/PUN/2016 BY REVENUE 23. THE FACTS AND CIRCUMSTANCES OF THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE SIMILAR TO THOSE OF THE A.Y. 2008-09. FOLLOWING THE VIEW TAKEN HEREINABOVE WE SUSTAIN TH E ADDITION AT 10% OF BOGUS PURCHASES FOR WHICH SURRENDER W AS MADE BY THE ASSESSEE AT THE TIME OF SEARCH AND ALSO AT 10% IN R ESPECT OF PURCHASES MADE FROM THE PARTIES WHICH WERE FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 24. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE WERE NO T PRESSED WHICH HEREBY STAND DISMISSED. SHAHAJI BHANUDAS BHAD 21 25. IN THE RESULT THE APPEALS OF THE REVENUE ARE DISMISSED AND THOSE OF THE ASSESSEE ARE PARTLY ALLOWED. A.Y. 2012-13 : ITA NO.818/PUN/2016 BY ASSESSEE 26. THE ASSESSEE IN HIS APPEAL IS AGGRIEVED BY THE CONFIR MATION OF ADDITION OF RS.1 40 45 734/- TOWARDS PURCHASES EFFECTE D FROM 31 PARTIES WHICH WERE SURRENDERED DURING THE COURSE OF SEAR CH. 27. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEV ANT MATERIAL ON RECORD WE FIND THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THE GROUND TAKEN IN THE APPEAL OF T HE ASSESSEE FOR THE A.Y. 2007-08. FOLLOWING THE VIEW TAKEN HEREINABOVE WE UPHOLD THE ADDITION AT RS.14 04 573/- BEING 10% OF PURC HASE AMOUNTS REPRESENTING THE PROFIT ELEMENT EMBEDDED IN THESE BILLS. REMAINING 90% OF THE AMOUNT OF PURCHASE BILLS IS DIRECTED TO B E DELETED. 28. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE WAS NOT PRESSED WHICH IS HEREBY DISMISSED. SHAHAJI BHANUDAS BHAD 22 29. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH NOVEMBER 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (R.S. SYAL) JUDICIAL MEMBER VICE PRESIDENT PUNE; DATED : 08 TH NOVEMBER 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-11 PUNE 4. THE PR. CIT (CENTRAL) PUNE 5. / DR A ITAT PUNE 6. / GUARD FILE / BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY / ITAT PUNE SHAHAJI BHANUDAS BHAD 23 DATE 1. DRAFT DICTATED ON 07-11-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 08-11-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *