Pr. Commissioner Of Income Tax v. Nitin Ramdeoji Lohia, }

Digitallysigned byRUSHIKESHRUSHIKESHV PATILV PATILDate:2022.11.0910:39:27+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 673 OF 2018 Pr. Commissioner of Income Tax -1,}Kendriya Rajaswa Bhavan,}Gadkari Chowk, Old Agra Road,}Taluka & District Nashik}..Appellant Versus Nitin Ramdeoji Lohia, }Prop. M/s. Karan Enterprises, 2A,}Yadukul Co-op. Housing Society }Gangapur Road Nashik}..Respondent Nitin Ramdeoji Lohia, Prop. M/s. Karan Enterprises, 2A,Yadukul Co-op. Housing Society Gangapur Road Nashik WITH INCOME TAX APPEAL NO. 750 OF 2018 Pr. Commissioner of Income Tax -1,}Kendriya Rajaswa Bhavan,}Gadkari Chowk, Old Agra Road,}Taluka & District Nashik}..Appellant Versus Nitin Ramdeoji Lohia, Prop. M/s. Karan Enterprises, 2A,Yadukul Co-op. Housing Society Gangapur Road Nashik }}}}..Respondent **** Mr. Suresh Kumar, Advocate for the Appellant.Mr. Mihir C. Naniwadekar a/w Mr. Ruturaj H. Gurjar,Advocates for the Respondent. **** CORAM : DHIRAJ SINGH THAKUR AND ABHAY AHUJA, JJ. RESERVED ON : 04[th] AUGUST, 2022 PRONOUNCED ON : 21[st] OCTOBER, 2022 :JUDGMENT: [PER DHIRAJ SINGH THAKUR, J.]: . Both these appeals under Section 260A of the Income TaxAct, 1961 (“the Act”) challenge the order dated 05[th] July, 2017,passed by the Income Tax Appellate Tribunal, Bench “B”, Pune(“ITAT”) in Income Tax Appeal No. 1408/PUN/2015 relevantto the assessment year 2010-11 and Income Tax Appeal No.1409/PUN/2015 relevant to the assessment year 2011-12,respectively, whereby the appeals fled by the Revenue havebeen dismissed. 2.The facts and issues arising in both these appeals areidentical, however, for the sake of deciding the issue, referenceis being made to the facts in ITA No. 673 of 2018. 3.The following questions of law have been proposed for ourconsideration: a.Whether in the facts and circumstances of the caseand in law, the ITAT was justifed in directing the A.O. todelete the addition made on account of bogus purchaseignoring the fact that the addition was made by the A.O.on the basis of credible information from the Sales TaxDepartment and on the fact that the assessee did notsubstantiate/confrm the veracity of the impugnedpurchases in the assessment proceedings? b. Whether in the facts and circumstances of the case,the ITAT was justifed in directing the A.O. to delete theaddition made on account of bogus purchase ignoring thefact that the absolute burden of proof tosubstantiate/confrm the veracity of the impugnedpurchases was cast on the assesse, which was notdischarged by cogent, relevant and reliable evidence,during the course of the assessment proceedings? c.Whether in the facts and circumstances of the caseand in law, the ITAT was justifed in directing the A.O. todelete the addition made on account of bogus purchaseignoring the fact that the parties from whom theimpugned purchases were claimed to be made were notavailable on their given addresses and further theassessee did not produce such parties before the A.O. toconfrm the veracity of the impugned purchases? d.Whether in the facts and circumstances of the case,and in view of the Hon’ble Supreme Court’s judgmentdated 16.01.2017 in the case of N.K. Proteins Ltd. Vs DCIT[2017] 84 taxmann.com 195 (SC), it was incumbent onthe ITAT to restrict the addition made on account of‘Bogus Purchases’, it having once come to a categoricalfnding that such total amount of addition maderepresented alleged purchases from bogus suppliers? 4.Briefy stated the material facts are as under: 929 & 37 ITXA.673 & 750 of 2018.doc d.Whether in the facts and circumstances of the case,and in view of the Hon’ble Supreme Court’s judgmentdated 16.01.2017 in the case of N.K. Proteins Ltd. Vs DCIT[2017] 84 taxmann.com 195 (SC), it was incumbent onthe ITAT to restrict the addition made on account of‘Bogus Purchases’, it having once come to a categoricalfnding that such total amount of addition maderepresented alleged purchases from bogus suppliers? 4.Briefy stated the material facts are as under: 929 & 37 ITXA.673 & 750 of 2018.doc The Respondent assessee is engaged in the business oftrading in industrial oil and transport services. A return ofincome was fled by the assessee declaring a total income atRs.4,47,970/-. The Sales Tax Department of the Governmentof Maharashtra provided information to the Assessing Offcer(A.O.) giving names, addresses and details of persons, who hadprovided entries of bogus purchases. The said information alsocontained details of benefciaries of such bogus bills. Basedupon the information so received, the A.O. issued notice underSection 148 of the Act, followed by the statutory notices underSection 143(2) and 142(1) of the Act and the order ofassessment under Section 143(3) r/w Section 147 of the Actwas passed on 30[th] March, 2015 and total income assessed atRs.1,46,82,548/-. The A.O. thus made an addition ofRs.1,42,34,578/- on account of alleged bogus purchases fromHawala dealers/parties. 5.An appeal was preferred by the assessee before the CIT(Appeals). The appeal was allowed inter alia on the groundthat the A.O. having not disputed the sales, it was not a case of 929 & 37 ITXA.673 & 750 of 2018.doc bogus purchases and that it was at best a case of infatedpurchases. The CIT (Appeals), however, was of the opinionthat the gross proft shown by the assessee at0.69%was verylow in that particular kind of trade and, therefore, estimatedthe gross proft at 5% and further directed the A.O. to make anaddition in the gross proft ratio and delete the balanceaddition made. 6.Both the Revenue as also the assessee preferred appealsagainst the order passed by the CIT (Appeals), whereas theRevenue in its appeal challenged the deletion of Rs.2.45 croreson account of alleged bogus purchases, the assessee questionedthe order to the extent the gross proft rate was calculated at5% as against 0.69% declared by the assessee, which hadresulted in an addition of Rs.10,59,974/-. The Tribunaldismissed the appeal fled by the Revenue and allowed theappeal preferred by the assessee. It was held that the case ofthe Revenue was based on the investigation carried out by theSales Tax Department only and that no cross-examination ofthe persons, whose names had fgured in the list so prepared by the Sales Tax Department, was allowed. It was held that theA.O. had failed to complete the investigation in the case andthat the affdavits and the confrmation letters fled by theassessee from three dealers from whom it had madepurchases, were not inquired into at all and that the assesseehad discharged the onus of proving the factum of makingpurchases from the respective parties and that there was nocontrary evidence brought on record by the A.O. in thatregard. It, therefore, while allowing the appeal of the assessee,directed the A.O. to delete the addition on account of boguspurchases. 7.From the above facts it is thus clear that the CIT(Appeals) partially allowed the appeal of the assessee on theground that the A.O. had not disputed the sales and, therefore,this was not a case of bogus purchases, inasmuch as if thepurchase was bogus, it would not be possible for assessee tocomplete the transaction by way of sale, unless it could beshown from the record that the corresponding sale was also asham transaction. 7.From the above facts it is thus clear that the CIT(Appeals) partially allowed the appeal of the assessee on theground that the A.O. had not disputed the sales and, therefore,this was not a case of bogus purchases, inasmuch as if thepurchase was bogus, it would not be possible for assessee tocomplete the transaction by way of sale, unless it could beshown from the record that the corresponding sale was also asham transaction. We are in agreement with the view expressed by the CIT(Appeals) that, if the purchases are bogus, it would beimpossible for the assessee to complete the businesstransaction and that if the purchase is bogus, thecorresponding sale also must be bogus or else the transactionwould be impossible to complete and as a necessary corollary,unless the corresponding sale is held to be bogus, the purchasealso cannot be held to be bogus, rather it would be a case ofpurchase from bogus entities/parties. That view has beenupheld by the Tribunal in principal while dismissing the appealof the Revenue. In view of the above, we are of the opinion thatthe questions of law proposed as (a), (b), and (c) in the appealcannot be said to be substantial questions of law. Insofar as the question of law framed as (d) is concerned,we fnd that the Tribunal has not addressed the issue ofadopting the gross proft rate of 5% on the alleged Hawalapurchase of Rs.2.45 crores as against the rate of 0.69%declared by the assessee, despite the fact that the CIT(Appeals) had specifcally gone into that question in its orderdated 18[th] August, 2015 and had directed the A.O. to make 5%R.V. Patil7 of 8 7 of 8 addition in the gross proft ratio, while deleting the balanceaddition. We, therefore, deem it appropriate to remand the matterback to the Tribunal only to the limited extent of going intothat issue. Parties to appear before the Tribunal on 05[th]December, 2022 and orders to be passed thereupon, preferablywithin a period of three months thereafter. The decision taken above in ITA No. 673 of 2018 shallapply mutatis and mutandis to ITA No. 750 of 2018. In theresult, both the appeals are, accordingly, disposed of. (ABHAY AHUJA, J.) (DHIRAJ SINGH THAKUR, J.)