The Extend Of 5% Of Such Purchases And In Thatthe Tribunal Has Overlooked The Decision Of Thehigh Court In The Case Of M/S N. K Industriesltd v. Deputy Commissioner Of Income Taxreported In [2017] 292 Ctr 354 Gujarat

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 388 of 2022 ==========================================================THE PRINCIPAL COMMISSIONER OF INCOME TAX 1 VersusJIGISHA SATISHKUMAR MEHTA ========================================================== Appearance: MR MR BHATT SENIOR ADVOCATE WITH MR KARAN SANGHANI WITH MR MUNJAAL BHATT FOR M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIAandHONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 29/08/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) The present appeal under section 260A of theIncome Tax Act, 1961 is directed against thejudgment and order dated 17.11.2021 of the IncomeTax Appellate Tribunal, Ahmedabad delivered incommon ITA No. 1798 of 2019 to ITA No. 1800 of2019, in so far as the said common judgmentrelates to ITA No. 1800 of 2019 for theassessment year 2010-11. 2.The revenue has proposed that substantialquestion of law arises in respect of the issuewhere the Appellate Tribunal has restricted theaddition made on account of bogus purchases to the extend of 5% of such purchases and in thatthe Tribunal has overlooked the decision of theHigh Court in the case of M/s N. K IndustriesLtd. V/s Deputy Commissioner of Income Taxreported in [2017] 292 CTR 354 Gujarat. 3.The assessee has filed return of income forthe assessment year 2010-2011 on 30.9.2011declaring total income of Rs.10,80,530/-. Theassessee is an individual running a proprietoryconcern being a dealer of Chemicals. The case ofthe assessee was reopened under section 147 ofthe Act, 1961 (for short “the Act”) on the basisof the information received from MaharashtraSales Tax Authority relating to bogus purchasesby the assessee from Hawala biller namely, NinaEnterprise. 3.1The Assessing Officer therefore, on thebasis of reason to believe that income to thetune of Rs.15,38,784/- has escaped assessment asthe assessee made bogus purchases from theaforesaid dealer, issued notice under section 148of the Act on 01.04.2014 and notices undersection 142(1) of the Act were issued on12.06.2014 and 24.06.2014. The assessee did notattend the assessment proceedings nor made anysubmissions inspite of sufficient opportunity being given by the Assessing Officer. TheAssessing Officer therefore, made addition ofRs.15,38,784/- under section 68 of the Act forthe bogus purchases made by the assessee on thebasis of the information received fromMaharashtra Sales Tax Authority and passed theassessment order under section 144 read withsection 147 of the Act. 3.2The assessee being aggrieved preferredappeal before CIT(Appeals) and submitted theexplanation that the assessment was reopened onthe basis of borrowed satisfaction from theinformation of Maharashtra Sales Tax Authorityand except general information nothing was beforethe Assessing Officer for making the addition.The assessee also submitted that the accounts ofthe assessee were audited under section 44AB ofthe Act, quantitative details were maintained andthe alleged bogus biller have valid sales taxnumbers and goods purchased from them were soldby the assessee which is not in dispute. It wasalso submitted before CIT(Appeals) that for thefinancial years 2007-2008,2008-2009 and 2009-2010Gross Profit Ratio was 3.08%, 4.71% and 3.87%respectively. It was also pointed out thatprevious year Gross Profit Ratio and current yearGross Profit Ratio did not show any material variation so as to doubt the alleged boguspurchases. 3.3 CIT(Appeals) after considering thesubmissions made by the assessee and relying uponvarious judgments restricted the addition byestimating 5% of the alleged bogus purchases i.e.5% of Rs. 15,38,784/-. variation so as to doubt the alleged boguspurchases. 3.3 CIT(Appeals) after considering thesubmissions made by the assessee and relying uponvarious judgments restricted the addition byestimating 5% of the alleged bogus purchases i.e.5% of Rs. 15,38,784/-. 3.4 Revenue being aggrieved by the decisionof the CIT(Appeals) preferred appeal before theIncome Tax Appellate Tribunal (For short “theTribunal”). 3.5The Tribunal after considering the orderof CIT(Appeals) and the documentary evidenceproduced by the assessee before the appellateauthority held as under : “8. After hearing, the ld.DR, we have gonethrough the record carefully and also ordersof the Revenue authorities. We find that theimpugned addition on account of allegedbogus purchased was made by the 1d.AO onaccount of information received fromMaharashtra Sales Tax Authorities. There isno other material with the Revenue tocorroborate the information so received fromthe Sales Tax Department in order to makethe impugned addition nor established thatthe so-called bogus purchase or the sumequivalent thereof was returned to the assessee in any manner. It appears from therecord that no internal inquiry has beencarried out by the Revenue to vouch the factof bogus purchases. The ld.CIT(A) hasrecorded that the appellant has submitteddocumentary evidence to establish thegenuineness of purchase made from theparties, but the factum of the said billingsparties being engaged in the bogus bills wasnot ruled out. Accordingly, after examiningall the facts and circumstances and alsorelying upon decision on the ITAT, MumbaiBenches cited (supra) on similar issue, herestricted the impugned addition andestimated the same at 10% of alleged boguspurchases i.e. Rs.14,91,767/-. We do notfind any infirmity in the approach of theld.CIT(A) in restricting the impugnedadditions, and therefore, his order does notwarrant our intervention in this score. Weconfirm the order of the 1ld.CIT(A) anddismiss this ground of appeal of theRevenue.” 4. Learned Senior Advocate Mr. Manish Bhatt forthe Revenue submitted that the decision ofCIT(Appeals) as well as the Tribunal areerroneous and perverse in view of the ratio laiddown in case of M/s N. K Industries Ltd.(supra),wherein it is held by this Court that addition onbasis of bogus purchases could not be restrictedto certain percentage when the entire transactionwas found as bogus. 5. On going through the orders of the Assessing Officer, CIT(Appeals) and the Tribunal, itappears that the Assessing Officer has madeaddition only on the basis of informationreceived from the the Sales Tax Department ofState of Maharashtra without any further inquirybeing carried out whether the purchases made bythe assessee were genuine or not so as to come tothe conclusion that the assessee was also one ofthe beneficiaries of bogus billing of the saiddealer and therefore, addition under section 68of the Act made by the Assessing Officer on thatbasis was rightly not held to be justified by theCIT(Appeals) as well as by the Tribunal byarriving at concurrent findings of the fact onthe basis of the documentary evidence madeavailable by the assessee to establishgenuineness of the purchases made from the saiddealer. 5.1.CIT(Appeals) and the Tribunal howeverhas not ruled out the factum of said dealer beingengaged in bogus billing and therefore, for theyear under consideration has made addition byestimating 5% of the alleged bogus purchases i.e.5% of Rs.15,38,784/- in the total facts andcircumstances which emerged before it by way ofmaterial on record. 5.1.CIT(Appeals) and the Tribunal howeverhas not ruled out the factum of said dealer beingengaged in bogus billing and therefore, for theyear under consideration has made addition byestimating 5% of the alleged bogus purchases i.e.5% of Rs.15,38,784/- in the total facts andcircumstances which emerged before it by way ofmaterial on record. 5.2In the decision in the case of N. K.Industries Limited (Supra) sought to be reliedupon would hardly come to the rescue of theappellant department since therein the materialwas available during the course of search whichexposed the falsity of entries made in theregular books of account. The unexplainedexpenditure that is bogus purchases were on thebasis of the fictitious invoices debited in thetrading account. The Tribunal made 25% of thetotal purchase on the ground that the purchasewas from bogus suppliers. It was held by the HighCourt that the Tribunal should have made additionof total purchase and not 25%. 5.3 However, the facts of the present case areentirely different in absence of any dependablematerial for the Assessing Officer to come to theconclusion about the bogus purchases made by theassessee to make addition of the entire purchasesunder section 68 of the Act as income for theyear under consideration. CIT(Appeals) and theTribunal therefore, considering the possibilityof bogus purchases on the basis of documentaryevidence produced before the appellate authorityhave arrived at the concurrent findings of factby holding that factum of said dealer alreadybeing engaged in bogus billing was not ruled out and therefore, sustained the addition byestimating 5% of alleged bogus proceedings i.e.5% of Rs.15,38,784/- by the assessee for theyear under consideration. 6. In view of above concurrent findings of thefact arrived at by the CIT(Appeals) and theTribunal, we do not find any error with theimpugned order giving rise to any question of lawmuch-less substantial question of law forconsideration. 7. The appeal is meritless and liable to bedismissed and is accordingly dismissed. (N.V.ANJARIA, J) RAGHUNATH R NAIR (BHARGAV D. KARIA, J)