The Principal Commissioner Of Income Tax-2 v. Sandeepkumar S Chandak

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 210 of 2020 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX-2 VersusSANDEEPKUMAR S CHANDAK ========================================================== Appearance:MRS MAUNA M BHATT, SENIOR STANDING COUNSEL(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE THE CHIEF JUSTICE MR. VIKRAM NATHandHONOURABLE MR. JUSTICE J.B.PARDIWALA Date : 18/09/2020 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 260A of the IncomeTax Act, 1961 (for short “the Act, 1961”) is at theinstance of the Revenue and is directed against theorder passed by the Income Tax Appellate Tribunal,Ahmedabad “C” Bench, Ahmedabad dated 22.10.2019 in ITA No. 3024/AHD/2015 for A.Y. 2011- 12. 2. The Revenue has proposed the following substantialquestion of law for the consideration of this Court:-question of law for the consideration of this Court:- “Whether the Appellate Tribunal has erred inlaw and on facts in restricting the addition of Rs.55,61,085/- made on account of boguspurchases to the extent of 5% of the total boguspurchases despite the fact that the assesseefailed to establish genuineness of purchases? “law and on facts in restricting the addition of Rs.55,61,085/- made on account of boguspurchases to the extent of 5% of the total boguspurchases despite the fact that the assesseefailed to establish genuineness of purchases? “ 3. It appears from the materials on record that theassessee filed his return of income for the A.Y. 2011-12 on 29.09.2011 declaring the total income ofRs.7,66,360/-. On the basis of the informationreceived from the Maharashtra Sales Tax Departmentthat the assessee had made bogus purchases fromM/s. Fasto Traders Pvt.Ltd.of Rs. 8,54,010/-, the casewas re-opened under Section 147 of the Act, 1961.assessee filed his return of income for the A.Y. 2011-12 on 29.09.2011 declaring the total income ofRs.7,66,360/-. On the basis of the informationreceived from the Maharashtra Sales Tax Departmentthat the assessee had made bogus purchases fromM/s. Fasto Traders Pvt.Ltd.of Rs. 8,54,010/-, the casewas re-opened under Section 147 of the Act, 1961. 4. During the course of the assessment proceedings,further information was received that the assesseehad made bogus purchases from 5 other parties tothe tune of Rs.55,60,085/-. The Assessing Officer alsonoticed that the assessee had obtained unsecuredloan. The Assessing Officer also noticed thedifference in the amount of VAT paid by the assesseefurther information was received that the assesseehad made bogus purchases from 5 other parties tothe tune of Rs.55,60,085/-. The Assessing Officer alsonoticed that the assessee had obtained unsecuredloan. The Assessing Officer also noticed thedifference in the amount of VAT paid by the assessee compared to the taxable purchases. The AssessingOfficer took the view that the genuineness of suchpurchases could not be established as theparties/suppliers were not found or rather non-existing at the addresses furnished by the assessee.In such circumstances, the Assessing Officer madeaddition of Rs.55,61,085/- on account of the boguspurchases and added it to the total income of theassessee. 5. The assessee being dissatisfied with the assessmentorder, preferred appeal before the Commisisoner ofIncome Tax (A) (for short “CIT(A)”). The CIT(A)dismissed the appeal of the assessee.order, preferred appeal before the Commisisoner ofIncome Tax (A) (for short “CIT(A)”). The CIT(A)dismissed the appeal of the assessee. compared to the taxable purchases. The AssessingOfficer took the view that the genuineness of suchpurchases could not be established as theparties/suppliers were not found or rather non-existing at the addresses furnished by the assessee.In such circumstances, the Assessing Officer madeaddition of Rs.55,61,085/- on account of the boguspurchases and added it to the total income of theassessee. 5. The assessee being dissatisfied with the assessmentorder, preferred appeal before the Commisisoner ofIncome Tax (A) (for short “CIT(A)”). The CIT(A)dismissed the appeal of the assessee.order, preferred appeal before the Commisisoner ofIncome Tax (A) (for short “CIT(A)”). The CIT(A)dismissed the appeal of the assessee. 6. The assessee being dissatisfied with the order passedby the CIT(A), preferred appeal before the AppellateTribunal. The Appellate Tribunal partly allowed theappeal of the assessee by holding that ad hocaddition at the rate of 5% of such purchases wouldmeet with the ends of justice and may also put aquietus to the entire litigation.by the CIT(A), preferred appeal before the AppellateTribunal. The Appellate Tribunal partly allowed theappeal of the assessee by holding that ad hocaddition at the rate of 5% of such purchases wouldmeet with the ends of justice and may also put aquietus to the entire litigation. 7. The assessee being dissatisfied with the orderpassed by the Appellate Tribunal is here before thispassed by the Appellate Tribunal is here before this Court with the present appeal. 8. We have heard Ms. Mauna Bhatt, the learned SeniorStanding Counsel appearing for the Revenue.Standing Counsel appearing for the Revenue. 9. We take notice of the findings recorded by theTribunal. The findings are as under:-Tribunal. The findings are as under:- “10.2From the preceding discussion wealso note that the assessee has claimed to havemade sales against such purchases which havebeen admitted by the Revenue. As such in ourconsidered view, such sales cannot be executedwithout having the coresponding purchases.There was no defect pointed out by theauthorities below insofar the sales made againstsuch purchases. Moreover, there is also noallegation regarding the genuiness of the booksof accounts which were duly audited under theIncome Tax Act. 10.3 However, before parting we cannotignore the practice prevailing in the business industries to purchase the goods from the greymarket and subsequently justify such purchasesby obtaining a purchase bill from the partiesengaged in providing accomodation entries. It isbecause the assessee in the present case hasclaimed to have purchased the goods from theparties not having valid VAT/CST registrationcertificate though he is claiming to havepurchased goods from the registered party.Moreover, there was no submission from theside of the assessee against the finding of theMaharashtra Sales Tax Department wherein itwas alleged that the parties are not genuine.Inview of the above, we can presume that theactual purchases were made by the assesseefrom the grey market but shown in the name ofthe impugned parties. 10.4 WE are also conscious to the fact that theassessee has already declared the GP in itsbooks of accounts by recording the sales andthe corresponding purchases. But to prevent thepossible leakage of the Revenue, as thepurchases from the local/grey market isnormally cheaper, we are inclined to make adhoc addition at the rate of 5% of such purchasesin order to meet the end of justice and to stopthe ongoing dispute. In holding so, we findsuport and guidance from the judgment of the ITAT Ahmedabad in case of ITO vs.Sun Steelreported in 92 TTJ 1126 wherein it was held asunder: 10.4 WE are also conscious to the fact that theassessee has already declared the GP in itsbooks of accounts by recording the sales andthe corresponding purchases. But to prevent thepossible leakage of the Revenue, as thepurchases from the local/grey market isnormally cheaper, we are inclined to make adhoc addition at the rate of 5% of such purchasesin order to meet the end of justice and to stopthe ongoing dispute. In holding so, we findsuport and guidance from the judgment of the ITAT Ahmedabad in case of ITO vs.Sun Steelreported in 92 TTJ 1126 wherein it was held asunder: “At the most it can be presumed that theassessee did not make purchases from theabove parties but made from otherunregistered dealer and got benefit ofmargin of purchases from unregistereddealer. We find that to that extent anestimation of profit can be made which willbe fair and reasonable under the facts andcircumstances of the case. Therefore, forthe above purposes we estimate Rs.50,000 and accordingly the order of theCIT(A) is modified and the addition to theextent of Rs.50,000 is sustained andbalance addition of Rs.26,89,407 is deletedout of the total addition made ofRs.27,39,407.” In view of the above, we direct the AO tomake the ad-hoc addition on suc purchases asdiscussed above, Hence the ground of appeal ofthe assessee is allowed.” 10.Thus, if the Appellate Tribunal in the overall facts of the case and having regard to the materialson record thought fit to make ad hoc addition at therate of 5% of such purchases, then, the Tribunalcould not be said to have committed any seriouserror warranting any interference in this appeal. 11. We are of the view that the question as proposed by the Revenue cannot be termed assubstantial question of law. substantial question of law. 12.In the result, this appeal fails and is herebydismissed.dismissed. (VIKRAM NATH, CJ) NAIR SMITA V./A.M. PIRZADA (J. B. PARDIWALA, J)