Principal Commissioner Of Income Tax, Indore v. Bhupendra Singh Rajendra Singh Rajput, Huf13.04.2018 (Indore

-1- HIGH COURT OF M.P: BENCH AT INDORE ITA NO.64/17 & ITA No.65/17 Principal Commissioner of Income Tax, Indore vs. Bhupendra Singh Rajendra Singh Rajput, HUF13.04.2018 (INDORE): Ms.Veena Mandlik, learned counsel for the appellant.Heard on the question of admission. This order shall also govern disposal of ITA No.65/17. It is not in dispute that respondent/assessee has purchased600 & 500 cotton bales from M/s Nirma Trading Company andShri Omkar Enterprises respectively. The information wasreceived by the appellant regarding bogus purchases from thesetwo suppliers on the ground that these parties are giving only thebills and they not given delivery of goods. The above twoparties were not found at their address, therefore, it wasconcluded that they have given accommodation entries by givingpurchase invoices. The assessee has submitted the statement ofM/s Nirma Trading Company and Shri Omkar Enterprises. Thestatement of account of Shri Omkar Enterprises in the books ofthe assessee, statement of account of M/s Nirma TradingCompany in the books of the assessee, payment details of AxisBank in support of the payment made by account payee chequesto Shri Omkar Enterprises and M/s Nirma Trading Company,purchase invoice issued by Shri Omkar Enterprises and M/sNirma Trading company along with copy of lorry receipt andcorresponding sale invoices, copies of sales tax returns filed bythe assessee. Considering the aforesaid, learned Tribunal has observedthat Assessing Officer has not issued any summons to bothparties for their presence during the assessment proceedings. TheTribunal relying on the decision of the Delhi High Court in thecase of CIT vs. Hi Lux Automative Pvt. Ltd, 183 taxmann260, Bombay High Court in the case of Babulal C.Borana vs.ITO,282 ITR 251 and Hindustan Equipment, 22 ITJ 555wherein it has been held that where the summons could not beserved and where the summons were served but there was nocompliance, the Assessing Officer should verify the genuinenessof the transaction from the books of the assessee and bankaccount or bills. In the case in hand, the cotton bales are sold byidentifying the same lot numbers to various manufacturers byidentifying press numbers, the goods have been purchased andultimately sold, quantity details are maintained and they arereflected in tax audit report u/s 44AB of the Act, all thepurchases are not found to have been made from these twoparties and treated as bogus purchases because the entire relevantdocuments have been given to the Assessing Officer. LearnedTribunal has held that the entire addition cannot be made and theonly addition which can be made is only NP addition andallowed the appeal of the assessee in part. Para-10 & 11 of theTribunal's order is relevant which reads as under:- 10.We have heard the rival contentions of both the parties.Looking to the facts and circumstances of the case, in theinstant case it is not disputed that the assessee has purchased600 and 500 cotton bales from M/s Nirma Trading Companyand Shri Omkar Enterprises respectively. The informationwas received regarding bogus purchases from these twosuppliers on the ground that these parties are giving bills andthey not giving delivery of goods. The above two parties werenot found at their address, therefore, it was concluded that 10.We have heard the rival contentions of both the parties.Looking to the facts and circumstances of the case, in theinstant case it is not disputed that the assessee has purchased600 and 500 cotton bales from M/s Nirma Trading Companyand Shri Omkar Enterprises respectively. The informationwas received regarding bogus purchases from these twosuppliers on the ground that these parties are giving bills andthey not giving delivery of goods. The above two parties werenot found at their address, therefore, it was concluded that they have given accommodation entries by giving purchaseinvoices. The assessee has submitted the statement of M/sNirma Trading Company and Shri Omkar Enterprises. Thestatement of account of Shri Omkar Enterprises in the booksof the assessee, statement of account of M/s Nirma TradingCompany in the books of the assessee, payment details ofAXIS Bank in support of the payment made by account payeecheques to Shri Omkar Enterprises and M/s Nirma TradingCompany, purchases invoices issued by Shri OmkarEnterprises and M/s Nirma Trading Company along with copyof lorry receipt and corresponding sale invoices, copies ofsales tax returns filed by the assessee. The assessee has filedcomplete details showing purchases effected by the assesseefrom the above parties, TIN number, lot number, cotton balespurchases, net value, value of goods, tax charged andcorresponding sales of same cotton bales to various parties.The assessee has erned grosds profit on Rs.37,55,227/- againstthese purchases. In this case the assessee has also filed copiesof VAT audit report and returns submitted underMaharashtra VAT Act of Shri Omkar Enterprises and M/sNirma Trading Company vide paper book page nos.96 to 129and pages 132 to 135. We find that in thise case the additionhas been made only on the ground that both the parties arenot traceable. We find from the order of the Assessing Officerthat the Assessing Officer has not issued any summons to boththe parties for their presence during the assessmentproceedings. As per the decision of the Hon'ble Delhi HighCourt in the case of CIT vs. Hi Lux Automative pvt. Ltd, 183taxmann 260, the Hon'ble High Court has held that where thesummons could not be served and where the summons wereserved but there was no complaince, the Assessing Officershould verify the genuineness of the transaction from thebooks of the assessee and bank account or bills. TheAssessing Officer should also make inquiry from bak todetermine whether or not the amounts were credited in theaccounts of respective parties. We find that in this case theAssessing Officer has not issued any notice for the presence ofM/s Nirma Trading Company and Shri Omkar Enterprises.Therefore, we are of the view that the Assessing Officer hasnot doubted the bank transaction and the Assessing Officerhas not made any inquiry whether the bank transaction wasgenuine or not. Similar issued had also come up before theHon'ble Bombay High Court in the case of Babulal C.Boranavs. ITO, 282 ITR 251 wherein the Bombay High Court hasheld that if any purchase has been made and payment of thesame were made by the assessee by cheque and the same hasbeen duly credited in the bank account of that party and thispurchase is reflected in the books of accounts maintained bythe assessee and the value of these goods are reflected in the books of accounts, hence the identity of the persons fromwhom the goods were purchases and source of investment insuch goods have been explained, therefore, no addition can bemade u/s 69 of the Act. Similarly, we find that the Hon'blejurisdictional High Court in the case of HindustanEquipment; 22 ITJ 555 held that if there is bogus purchasehaving corresponding actual sales, the only profit can beadded. WE also get support from the decision of the Hon'bleGujarat High Court in the case of CIT vs. M.K. Brothers; 163ITR 249; CIT vs. Bholanath Poly Fab Pvt. Ltd; 83 CCH 275;CIT vs. Simit P.Sheth; 84 CCH 339, Sanjay Oil CakesIndustries vs. CIT; 316 ITR 274. We find that in this case thecotton bales are sold by identifying the same lot numbers tovarious manufacturers by identifying press numbers, thegoods have been purchases and ultimately sold, quantitydetails are maintained and they are reflected in tax auditreport u/s 44AB of the Act, hence, it at all the purchases arenot found to have been made from these two parties andtreated as bogus purchases, the entire addition cannot bemade unless there is some evidence in support of the claimthat money reached back to the assessee. We find that in theinstant case, the Assessing Officer has not doubted the banktransaction. Therefore, we are of the view that the entireaddition cannot be made. The only addition which can bemade is only NP addition. In the instant case, the assesseehas shown NP rate of 1.62% of total turnover. Therefore, wedirect to apply net profit on above purchases at the rate of 6%.10.In the result, the appeal of the assessee stands partlyallowed. On due consideration of the aforesaid, we are of the viewthat the findings recorded by the learned ITAT are based onproper appreciation of evidence and material available on recordand no substantial question of law arises in this appeal.Accordingly, the appeal stands dismissed. (P.K.JAISWAL) (S.K.AWASTHI) J U D G E Digitally signed by Hari Kumar Nair Date: 2018.04.16 10:31:39 -07'00'