Pooja Paper Trading Co. Pvt. Ltd v. Notice Of Motion

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1972 OF 2018 Pooja Paper Trading Co. Pvt. Ltd.: AppellantversusIncome Tax Officer-4(3)(1), Mumbai: Respondent. WITH NOTICE OF MOTION NO.948 OF 2018 Pooja Paper Trading Co. Pvt. Ltd.In the matter betweenPooja Paper Trading Co. Pvt. Ltd.versusIncome Tax Officer-4(3)(1), Mumbai : Applicant. : Appellant : Respondent. ALONG WITH INCOME TAX APPEAL NO.1932 OF 2018 Pooja Paper Trading Co. Pvt. Ltd.: AppellantversusIncome Tax Officer-4(3)(1), Mumbai: Respondent. WITH NOTICE OF MOTION NO.949 OF 2018 Pooja Paper Trading Co. Pvt. Ltd. In the matter betweenPooja Paper Trading Co. Pvt. Ltd.versusIncome Tax Officer-4(3)(1), Mumbai : Applicant. : Appellant : Respondent. ................... Mr. Jayan Gaikwad a/w Mr. Rakesh P Saroj for the Appellant/Applicant.Mr. Suresh Kumar for the Respondent. ................... (66&67) itxa-1972.18&1932.18.doc M.S.SANKLECHA, JJ. DATE : FEBRUARY 25, 2019. P.C.: 1These two Appeals are take up out of turn for admission as the AppellantAssessee had taken out Motions seeking a stay of the order dated 26[th] October 2017 ofthe Income Tax Appellate Tribunal. This as a revenue is adopting coercive proceedingsfor recovery. 2These Appeals under Section 260A of the Income Tax Act, 1961 (for short“Act”) challenge the common order dated 26[th] October 2017 of the Income Tax AppellateTribunal (for short “Tribunal”) partly allowing the Appeals filed by the Revenue. Thecommon impugned order relates to Assessment Years 2010-2011 and 2011-2012.Hence the two Appeals filed by the Appellant against the impugned order. 3Although numerous questions are raised in the Appeal Memos, theAppellant urges only the following basic identical re-framed questions of law for ourconsideration :- “Whether on the facts and circumstance of the case and inlaw, was the Appellate Tribunal justified in disallowing 12.5%of the bogus purchases for the subject Assessment Years?” 4It is an admitted position between the parties that the facts and law asapplicable in both the Appeals are identical. Therefore for the purpose of considering theaforesaid question, which is common in both the Appeals, we are taking the facts as setout in Income Tax Appeal No.1932 of 2018 which is relating to Assessment Year 2011-2012. 5The Respondent Company is engaged in the business of trading in paperand paper products. For the Assessment Year 2011-2012 the Respondent declared theincome of Rs.5.81,692/-. The return was processed under Section 143 (1) of the Act.Thereafter the Assessing Officer on re-opening of assessment found that theRespondent made bogus purchases to the tune of Rs.4.17 crores during the subjectassessment year. This was on a finding that the Respondent had made purchases fromvarious parties which were Hawala parties who were indulging in hawala businesswithout actual transacting in any goods. The basis of the re-opening of the assessmentwas the information received from the Sale Tax Authorities. In the aforesaidcircumstances, the Assessing Officer disallowed the purchases to the extent ofRs.4.17,57,005/- and added the same as unexplained expenditure under Section 69C ofthe Act in the order dated 24[th] March, 2014 passed by the Assessing Officer underSection 143(3) read with Section 147 of the Act. 6Being aggrieved, the Respondent filed an Appeal to the Commissioner ofIncome Tax (Appeals) [CIT(A)]. By order dated 7[th] October, 2015 the CIT (A) found that 6Being aggrieved, the Respondent filed an Appeal to the Commissioner ofIncome Tax (Appeals) [CIT(A)]. By order dated 7[th] October, 2015 the CIT (A) found that (66&67) itxa-1972.18&1932.18.doceven if the purchase transactions are not verifiable what is taxable is only the incomecomponent and not the entire purchase. Therefore on finding that the gross profit ratiofor the subject Assessment Year was much less than the average gross profit of earlierthree assessment years it adopted the average gross profit for the earlier theseassessments years at 3.67%. Thus, the CIT(A) sustained the addition of Rs.5,69,087/-being the profit/income element and deleted the remaining amount of Rs.4,11,87,918.Thus partly allowing the Appeals of the Respondent. 7Being aggrieved by the order dated 7[th] October, 2015 of the CIT (A), theRevenue has filed Appeals before the Tribunal. The impugned order dated 26[th] October2017 the Tribunal while partly allowing the Appeals of the Revenue held that in mattersof bogus purchases the profit element has to be estimated. It upheld the view of CIT (A)that the dis-allowance could only be of the income/profit attributable to the boguspurchases. The Tribunal found fault with the CIT (A) blindly applying the gross profitratio declared by the assessee for the earlier assessment years, ignoring the factualaspect in the subject Assessment Year, where it is found that the Respondent wasinvolved in hawala transactions. This fact of the Respondent being engaged in hawalatransaction was also supported by the statement on oath made by one Shri ParasGandhi, the director of the companies, who were declared as bogus billers and on whichthe Assessing Officer has placed reliance. The Tribunal recorded a finding that theAppellant – Assessee had not produced any evidence to show that the purchases madeby them were genuine. Thus considering the overall facts, the impugned order of thelgc 4 of 7 Tribunal enhanced the disallowance from 3.67% to 12.5% of the bogus purchases anddirected the Assessing Officer to calculate the income of the Respondent-Assesseeaccordingly. 8Mr. Jayant Gaikwad, the learned counsel appearing for the Appellantherein submits that the impugned order of the Appellate Tribunal is bad in law as it didnot consider various evidences produced by the Appellant-Assessee and relied uponthird party information to hold that the Appellant-Assessee's purchases were bogus.This is without having been given any opportunity to the Appellant-Assessee to crossexamine the person on whose statement the Revenue was relying upon. 9We find that all the authorities under the Act have come to a finding of factthat substantial purchases made by the Appellant – Assessee were bogus in nature.Only issue on which there is a divergence of views between the authorities is in respectof extent of disallowance. This conclusion of the purchases being bogus by Authoritiesunder the Act is on the basis of appreciation of entire evidence on record. It is importantto bear in mind that the Appelllant Assessee had not filed any Appeal from the order ofthe CIT (A), holding that disallowance on account of bogus purchases has to be 3.67%.The Appellant accepted the findings of facts by the CIT (A) that there was boguspurchases. Therefore the grievance now raised of no cross examination being offered tothe Appellant-Assesssee, when the order of CIT(A) is not challenged before theTribunal, could not have been raised by the Appellant Assessee. Moreover, there is nolgc 5 of 7 (66&67) itxa-1972.18&1932.18.doc (66&67) itxa-1972.18&1932.18.doc mention of this grievance by the Appellant-Assessee or even with regard to non-consideration of various documents such as Sales Ledger, Purchase Ledger etc. by theAssessing Officer in the order of sthe Tribunal. The submission of Mr. Jayant Gaikwadon behalf of the Appellant-Assessee that the same was urged before the AppellateTribunal, but was not considered, cannot be accepted. This is particularly so if theTribunal had failed to make a note of the submission of a party in its order, then theappropriate remedy for the party was to move the Tribunal for rectification of the orderensuring it that the submissions made by it are recorded in the order. However, giventhe factual matrix that the Appellant had not challenge the finding of bogus purchases,the above issue could not have been raised by it before the Tribunal. 10In the above circumstances, we are of the view that extent of disallowancein the present facts do not give rise to any substantial question of law. The view takenby the Tribunal is a plausible view and does not require any interference at the hands ofthis Court. Therefore the question as proposed does not give any rise to the substantialquestion of law. Thus not entertained. 11The reasons indicated herein to dismiss the Appeal No.1932 0f 2018would equally apply to Income Tax Appeal No.1972 of 2018. 12For the aforesaid reasons, the question that is proposed does not give riseto any substantial question of law. The above Appeals are accordingly dismissed. 13In view of the dismissal of the above Appeals, Notice of Motion Nos.948 of2018 and 949 of 2018 taken out by the Appellant-Assessee for stay of the impugnedorder dated 26[th] October 2017 do not survive and the same to accordingly standdisposed of as such. [ M.S.SANKLECHA,J.] [ AKIL KURESHI, J ]