Pr.commissioner Of Income Tax-26 v. Yog Oil Traders

TRUSHATUSHARMOHITEDigitally signed byTRUSHA TUSHARMOHITEDate: 2023.07.1114:25:17 +0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.496 OF 2018 Pr.Commissioner of Income Tax-26 ….. Appellant Vs. Yog Oil Traders ….. Respondent Ms.Sushma Nagaraj a/w Ms.Kinjal Patel, Ms.Shreya Singhi andMs.Sakshi Kapadia for the appellant Mr.Vipul Joshi a/w Ms.Simoni Chouhan for the Respondent CORAM:K.R. SHRIRAM, J &FIRDOSH P. POONIWALLA, J. DATED :5TH JULY 2023 P.C. 1.Appeal impugns an order dated 17[th] February 2017 passed bythe Income Tax Appellate Tribunal (ITAT) by which the ITAT deletedthe addition made by CIT(A) and allowed the Appeal filed by theAssessee. 2.Assessee was engaged in the business of importing oil in bulk,packing the same in different packs in its premises and selling thesame. Assessee had filed its return of income on 24[th] September2010 for Assessment Year 2010-2011 declaring total income ofRs.7,14,506/-. Assessee’s case was selected for scrutiny and notices, under section 143(2) and 142(1) of the Income Tax Act, 1961 (theAct), were issued. A survey was also conducted in the premises ofassessee following information that assessee had made boguspurchases of packaging materials to the tune of Rs.4,67,30,577/-from eight parties. 3.During the course of the survey, a partner in the assessee firmallegedly admitted bogus purchase of Rs.4.67 crores out of Rs.5.60crores purchased from eight parties. But that statement wasretracted later. 4.During the assessment proceeding, the Assessing Officer (AO)added the amount of Rs.4.67 crores to the income of the assessee onthe basis of the statement made by the partner which statement, asnoted earlier had been retracted. There was no furthercorroborative material or incriminating material found by thesurvey team. The books of accounts were also duly maintained byassessee with all records in the form of stock register, consumptionregister etc. The AO has also confirmed the purchases andconsumption of material in packing of oil in the assessment report. 5.CIT (A) after hearing the parties deleted the addition made byAO by factually finding that there was no question of any purchasemade by assessee that could be termed as bogus. CIT (A) has alsocome to a factual finding that confirmation of the availability of packaging materials by the AO has been made and the AO hasverified the consumption of the packaging material vis-a-vis thesales and gave categorical finding that there was no discrepancy inthe consumption pattern of the packaging material and that thepackaging material was used by assessee through out the year. Butby deleting the addition made, CIT (A) strangely stated that a part ofthe purchase of packaging material have to be disallowed anddisallowed 7% of the purchases. Paragraph 53 and 54 of order ofCIT(A) read as under: “53.Once the sales of the appellant firm, whichcannot be made without the packaging materials,are not questioned by the AO and are accepted asgenuine, then there is no question of any purchasesmade by the appellant being termed as bogus. Thepurchases of packaging materials have been madeto effect the sales of about 144 crores by theappellant for the year under consideration. “53.Once the sales of the appellant firm, whichcannot be made without the packaging materials,are not questioned by the AO and are accepted asgenuine, then there is no question of any purchasesmade by the appellant being termed as bogus. Thepurchases of packaging materials have been madeto effect the sales of about 144 crores by theappellant for the year under consideration. 54.From the facts stated in the precedingpara, it is established that the genuineness of thepurchases made by the appellant firm are not indoubt. What is in doubt at this stage, is thepurchase price shown on the invoices issued by theabove parties. As stated above, since the bills havebeen arranged and the parties who have issuedthese bills are not available for verification, thepurchase price shown on the invoice issued by theparties in question cannot be accepted in theabsence of verification. It may be the case that thepurchases are made by the appellant from the greymarket and such purchases can be over-invoiced toreduce the profits resulting in lowering down of thegross profits. Since the appellant firm is not tradingin the packaging materials, therefore, no grossprofits rate theory can be applied to the purchase ofsuch packaging materials. In such a situation theonly way left would be to disallow part of suchpurchases of packaging materials. It would be fair and just, if out of the total the packaging materialsof Rs.4.67 crores treated as bogus. 7% of thepurchases are disallowed. Accordingly 7% of thepurchases out of the alleged bogus purchasesamounting to Rs.4.67 crores, is disallowed andadded back to the income of the appellant firm forthe period under consideration. Therefore, out ofthe total addition for bogus purchases of packagingmaterials made by the AO amounting toRs.4,67,30,577/- the additions to the extent ofRs.32,71,140/- is upheld and the balance additionmade is deleted. This will also take care of theexcess wastage of packaging materials shown by theappellant firm during the period underconsideration.” 6. ITAT has therefore, come to a conclusion that there was nomaterial whatsoever before CIT(A) as to why 7% on the totalpurchase of packing material from 8 parties should be disallowed.Even we find the decision of the CIT(A) rather strange because inparagraph 53 of the order concluded above, he says there is noquestion of any purchase made by the appellant being termed asbogus. 7.In the circumstances, in our view ITAT was correct to deletethe addition of Rs.32,71,140/- made by CIT(A). 8.Appeal dismissed. (FIRDOSH P.POONIWALLA, J.) (K.R. SHRIRAM, J.)