The Prin. Commissioner Of Income Tax - 6 v. Nilesh Rameshchandra Shah

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 888 of 2019 ========================================================== THE PRIN. COMMISSIONER OF INCOME TAX - 6 VersusNILESH RAMESHCHANDRA SHAH ==========================================================Appearance:MR M.R.SHAH, Ld.Sr.Adv. for MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALAand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 20/01/2020 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1.This Tax Appeal, under Section 260A of the Income-tax Act, 1961 (for short ‘the Act, 1961’), is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, “B” Bench, Ahmedabad dated 15.07.2019, in the ITA No.2248/Ahd/2017 for the A.Y.2010-11. 2.The substantial question of law, as proposed by the Revenue arising in this Tax Appeal, reads thus: “Whether the Appellate Tribunal has erred in law and on the facts in reversing the decision of CIT(A) and restricting the disallowance of Rs.63,44,324/- made on account of bogus purchases to the extent of 5% of the bogus purchases?” 3.It appears from the materials on record that the assessee filed his original return of income declaring total income at Rs.18,50,640/-. The return was proposed u/s 143(1) of the Act. Later, the case was re-opened by issuance of notice dated 06.05.2014 under Section 148 of the Act. 4.The case was re-opened on the basis of the information received from DGIT (Investigation), Mumbai, which was gathered during the course of search action conducted by Maharashtra Sales Tax Department. The information contained details of bogus purchases by beneficiary firms from Hawala billers in the F.Y. 2008-09, 2009-10 and 2010-11. According to the information, the assessee Shri Nilesh Rameshchandra Shah, Proprietor of Shagun Art, was involved in such bogus purchases in the F.Y.2009-10 relevant to A.Y. 2010-11 to the tune of Rs.63,44,326/-. 5.It also appears that in the statement recorded during the course of search conducted by the Sales Tax department, Mumbai u/s 14 of the Maharashtra Value Added Tax 2002, in the case of all the eight parties, they have confessed that they had given bogus entries/bills to various persons and never entered into actual purchase/sales transaction with any person. 6.Ultimately, the Assessing Officer took a view that the parties concerned had provided only bogus entries/bills and no actual delivery of goods had taken place. The Assessing Officer has also noticed that the assessee had shown total purchases during the year at Rs.2,72,72,367/-. The assessee had entered into bogus purchases transactions to the tune of Rs.63,44,326/- with various parties and therefore, out of total purchases shown by the assessee, the transaction worth Rs.63,44,326/- were evidently bogus. 7.Being aggrieved and dis-satisfied with the order passed by the Assessing officer, the assessee preferred an Appeal before Appellate Tribunal. The Appellate Tribunal placed reliance on the decision rendered in ITA No.313/Ahd/2015 in the assessee’s case for the A.Y.2009-10 and affirmed the addition made by the assessing officer. 8.The Appellate Tribunal allowed the appeal of the assessee, restricting the dis-allowance to the extent of 5% of the total bogus purchases. The Revenue, being dis-satisfied by such order, has come up before this Court with the present Appeal. 7.Being aggrieved and dis-satisfied with the order passed by the Assessing officer, the assessee preferred an Appeal before Appellate Tribunal. The Appellate Tribunal placed reliance on the decision rendered in ITA No.313/Ahd/2015 in the assessee’s case for the A.Y.2009-10 and affirmed the addition made by the assessing officer. 8.The Appellate Tribunal allowed the appeal of the assessee, restricting the dis-allowance to the extent of 5% of the total bogus purchases. The Revenue, being dis-satisfied by such order, has come up before this Court with the present Appeal. 9.Having heard the learned Senior Advocate Mr.M.R.Bhatt appearing for the Revenue and having gone through the materials on record, we take notice of the fact that the Appellate Tribunal has relied upon its earlier order, so far as the A.Y.2009-10 is concerned. Paragraph No.7 of the said order has been reproduced in the impugned order, which reads thus: C/TAXAP/888/2019 ORDER “7.We have carefully considered the rival submissions and the orders of the authorities below. The maintainability of estimated disallowance out of alleged bogus purchases is in controversy. In this regard, we notice that the assessee is engaged in trading of goods and therefore every purchase gets matched by corresponding sales/closing stock. Thus, the scope of manipulation in bills towards purchase quantity is nearly non-existance. What at best thus can be manipulated is the price/value of the goods purchase. In other words, while it may be possible that purchases might have beenmadefrombogusparties, nevertheless, the purchases themselves cannot be treated as bogus. The sale recorded in books is not in question. Contextually, the assessee had declared 7.31% towards profit on such alleged bogus purchases. As stated, the relevant documents including invoice, payment through banking channel, quantity tally were made available to the Revenue authorities. The cross examination of the suppliers was not provided despite requests. In these circumstances, we find considerable merit in the case of the assessee in the light of the decision of the Hon’ble Gujarat High Court in Gujarat Ambuja Exports (Supra); CIT Vs. Bholanath Poly Fab Pvt. Ltd. 355 ITR 290 (Guj) and the decision of the Hon’ble Supreme Court in the case of PCIT Vs. Tejua Rohitkumar Kapadia arising out of the decision of the Hon’ble Gujarat High Court in Tax Appeal No.691 of 2017, judgment dated 18.09.2017. In view of the facts recorded, it is difficult to dispute the quantitative aspects of the purchases made. This leaves us to the limited aspect of pricing of alleged bogus purchase. Having regard to the facts and circumstances of the case and more particularly in view of profits already declared on alleged bogus purchases in the vicinity of 7%, we are of the view that an estimated disallowance of 5% alleged bogus purchases over and above the profits already declared would cover possible suppression in profit and will balance the equity. Such estimation would also be in tune with the judgment of Hon’ble Gujarat High Court in Gujarat C/TAXAP/888/2019 ORDER Ambuja Exports (Supra). Accordingly, we direct the AO to restrict the estimated disallowance to Rs.6,42,657/- on account of alleged bogus purchase.” C/TAXAP/888/2019 ORDER Ambuja Exports (Supra). Accordingly, we direct the AO to restrict the estimated disallowance to Rs.6,42,657/- on account of alleged bogus purchase.” 10.What is relevant in the aforesaid paragraph of the order passed by the Tribunal is that the assessee had declared 7.31% towards profit on such alleged bogus purchases. The Tribunal took a view that in view of the profits already declared in the alleged bogus purchases in the vicinity of 7% and an estimated dis-allowance of 5% alleged bogus purchases over and above the profits already declared would cover possible suppression in profits and will balance the equity. The Tribunal also relied upon the decision of this Court in the case of CIT V/s Bholanath Poly Fab Pvt. Ltd. 355 ITR 290 (Guj). 11.We are of the view that, we should not interfere with the impugned order passed by the Tribunal as the view taken by the Tribunal is quite reasonable. 12.In such circumstances, this Appeal fails and is hereby, dismissed. (J. B. PARDIWALA, J) PALAK (BHARGAV D. KARIA, J)