The Principal Commissioner Of Income Tax, Gandhinagar v. M/S. Tirupati Cotton And Grinning Factory

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 705 of 2019 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX, GANDHINAGAR Versus M/S. TIRUPATI COTTON AND GRINNING FACTORY ========================================================== Appearance:MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANIand HONOURABLE MS. JUSTICE SANGEETA K. VISHEN Date : 11/11/2019 ORAL ORDER (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1.By this appeal under section 260A of the Income Tax Act, 1960 (hereinafter referred to as “the Act”), the appellant revenue has called in question the order dated 29.3.2019 made by the Income Tax Appellate Tribunal Ahmedabad ‘B’ Bench, Ahmedabad (hereinafter referred to as “the Tribunal”) in ITA No.949/Ahd/2012 by proposing the following two questions stated to be substantial questions of law:- “(A) Whether the Appellate Tribunal has erred in law and on facts by confirming the decision of CIT(A) restricting the addition on account of bogus purchases to 25% of total addition of Rs.5,67,49,767/-?facts by confirming the decision of CIT(A) restricting the addition on account of bogus purchases to 25% of total addition of Rs.5,67,49,767/-? (B)Whether the Appellate Tribunal has erred in law and on facts by confirming the decision of CIT(A) in deleting the facts by confirming the decision of CIT(A) in deleting the addition of Rs.1,13,84,071/- on account of undisclosed income admitted during the course of survey proceedings?” 2.The assessment year is 2008-09 and the corresponding accounting period is the previous year 2007-08. 3.During the course of search/survey action in the case of edible oil group and agents, it was found that M/s. Vishal Traders, Virpur, District Kheda had issued bogus/adjustment bills to various parties including the assessee. Shri Dharmendra Pandya, proprietor of M/s. Vishal Traders in his statement admitted that M/s. Vishal Traders was not in existence and that they used to issue adjustment/bogus bills to various parties including the assessee, without delivering the goods mentioned in the bill. The statement of Shri Dharmendra Pandya was also corroborated by the continuous pattern of deposits by cheques and immediate cash withdrawals in the various bank accounts of M/s. Vishal Traders. The statement of Shri Dharmendra Pandya was also confirmed in the statement of Shri Madanlal L. Chandak (Shah) who introduced various parties to Shri Dharmendra Pandya. The statement of a partner of the assessee firm Shri Bhagwanbhai Patel also came to be recorded during the course of survey wherein he had admitted that only the bills are obtained from M/s. Vishal Traders. 4.During the year under consideration, the respondent assessee had shown purchases of Rs.5,67,49,767/- from M/s. Vishal Traders. During the course of assessment proceedings, the assessee was asked to produce the supplier and all the transporters involved in the delivery of goods. However, the assessee failed to do so. In view of the fact that the assessee could not produce any independent/third party evidence to substantiate its claim of purchases from M/s. Vishal Traders, the Assessing Officer, after discussing the facts and placing reliance on judicial pronouncements, made addition of Rs.5,67,49,767/- to the total claim of the assessee under the head bogus purchases. Being aggrieved, the assessee went in appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred to as “the Commissioner (Appeals)] wherein the addition came to be restricted to 25% of the alleged bogus purchases. Revenue went in appeal before the Tribunal, but did not succeed. could not produce any independent/third party evidence to substantiate its claim of purchases from M/s. Vishal Traders, the Assessing Officer, after discussing the facts and placing reliance on judicial pronouncements, made addition of Rs.5,67,49,767/- to the total claim of the assessee under the head bogus purchases. Being aggrieved, the assessee went in appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred to as “the Commissioner (Appeals)] wherein the addition came to be restricted to 25% of the alleged bogus purchases. Revenue went in appeal before the Tribunal, but did not succeed. 5.Insofar as the proposed question (B) is concerned, in the statement recorded during the course of survey, the partner of the assessee had admitted undisclosed income of Rs.1,13,84,071/- for assessment year 2008-09. However, the assessee did not include the same in the return of income. During the course of assessment proceedings, the assessee did not offer any explanation for not offering this amount in the return. However, taking into consideration the admission of the partner of the assessee firm during the survey, the addition of Rs.1,13,84,071/- was made. The assessee carried the matter in appeal before the Commissioner (Appeals), who deleted the addition by holding that the undisclosed income admitted by the assessee during the course of survey was on account of bogus purchases from M/s. Vishal Traders. The Commissioner (Appeals) held that this addition gets telescoped in the addition of Rs.1,41,87,441/- sustained on account of bogus purchases. The revenue carried the matter in appeal before the Tribunal but did not succeed. 6.Mrs. Mauna Bhatt, learned senior standing counsel for the appellant, assailed the impugned order by submitting that the onus of proving that the purchases were genuine lay on the assessee and that the assessee could not substantiate the purchases with supporting evidence like lorry receipts, manufacturing ratio, yield percentage, power consumption, etc. It was submitted that the partner of the assessee firm had, in the statement recorded during the course of survey, admitted that the purchases from Vishal Traders were bogus. It was submitted that in the absence of the assessee being able to establish that it had actually made such purchases, the Commissioner (Appeals) was not justified in disallowing only 25% of such purchases and that the Tribunal was not justified in upholding the order passed by the Commissioner (Appeals). 6.1Insofar as the proposed question (B) is concerned, it was submitted that the Tribunal has not given any finding on this issue. It was, accordingly, urged that the matter requires consideration on the questions as proposed or as may be deemed fit by this court. 7.This court has considered the submissions advanced by the learned senior standing counsel. 8.A perusal of the assessment order reveals that before the Assessing Officer, the assessee had not given any explanation in respect of the bogus purchases. However, during the course of appellate proceedings, before the Commissioner (Appeals) the assessee had submitted its explanation and the report of the Assessing Officer was called for in that regard. After considering the remand report, the Commissioner (Appeals) 6.1Insofar as the proposed question (B) is concerned, it was submitted that the Tribunal has not given any finding on this issue. It was, accordingly, urged that the matter requires consideration on the questions as proposed or as may be deemed fit by this court. 7.This court has considered the submissions advanced by the learned senior standing counsel. 8.A perusal of the assessment order reveals that before the Assessing Officer, the assessee had not given any explanation in respect of the bogus purchases. However, during the course of appellate proceedings, before the Commissioner (Appeals) the assessee had submitted its explanation and the report of the Assessing Officer was called for in that regard. After considering the remand report, the Commissioner (Appeals) found as a matter of fact that the purchases shown from Vishal Traders were not actual purchases but only bills had been obtained from Vishal Traders. The cheques issued to Vishal Traders were only an eye wash because the cash was returned back to the assessee which was obvious from the analysis of the bank accounts of Vishal Traders as well as the assessee maintained with Harij Nagrik Sahakari Bank. The Commissioner (Appeals) further noted that during the course of appellate proceedings, a letter dated 15.3.2012 had been received from the assessee wherein it had confessed that to regularise the billing, the accountant had obtained bills from Vishal Traders; whereas the goods were purchased from farmers/cultivators. The Commissioner (Appeals) found that the Assessing Officer had neither disputed the sales nor the stock position and, therefore, accepted the contention of the assessee that it had made purchases from farmers who did not issue the bills and to regularise those purchases had obtained bills from Vishal Traders. The Commissioner (Appeals) thereafter placed reliance upon the decision of the jurisdictional High Court in the case of Sanjay Oil Cake Industries v. Commissioner of Income-tax, 316 ITR 274, and directed the Assessing Officer to restrict the addition made on account of bogus purchases from Vishal Traders to 25% of Rs.5,67,49,767/- which comes to Rs.1,41,87,441/- and further directed the balance to be deleted. 9.The Tribunal in the impugned order has concurred with the findings of fact recorded by the Commissioner (Appeals) and has upheld the order passed by him. 10.From the facts noted hereinabove, it is evident that while the purchases shown to be made from Vishal Traders were bogus, the respondent - assessee had in fact made purchases, which were duly reflected in the stock and there were corresponding sales. The Assessing Officer in the remand report has not been able to dispute that sales and the stock position. It is in these circumstances that the Commissioner (Appeals) has placed reliance upon the decision of this court in the case of Sanjay Oil Cake Industries v. Commissioner of Income-tax (supra) and restricted the addition on account of bogus purchases from Vishal Traders to 25%. The Tribunal has concurred with the findings of fact recorded by the Commissioner (Appeals). 11.In the light of the concurrent findings of fact recorded by the Tribunal that the sales had not been disputed by the revenue authorities, no infirmity can be found in the approach adopted by the Commissioner (Appeals) as well as the Tribunal in restricting the addition made on account of bogus purchases to 25% of Rs.5,67,49,767/- which comes to Rs.1,41,87,441/-. Under the circumstances, no question of law can be said to arise insofar as the said issue is concerned. 11.In the light of the concurrent findings of fact recorded by the Tribunal that the sales had not been disputed by the revenue authorities, no infirmity can be found in the approach adopted by the Commissioner (Appeals) as well as the Tribunal in restricting the addition made on account of bogus purchases to 25% of Rs.5,67,49,767/- which comes to Rs.1,41,87,441/-. Under the circumstances, no question of law can be said to arise insofar as the said issue is concerned. 12.Insofar as the proposed question (B) is concerned, the Commissioner (Appeals) has found that the assessee had accepted taking bills from Vishal Traders. The addition made on account of bogus purchases came to Rs.1,41,87,441/- whereas the addition on account of undisclosed income was to the extent of Rs.1,13,84,071/-. The Commissioner (Appeals) has found that this amount would get telescoped in the addition of Rs.1,41,87,441/- sustained on account of bogus purchases. In the opinion of this court, there is no infirmity in the approach adopted by the Commissioner (Appeals). While it is true that the Tribunal has not given any categorical finding on this issue, nevertheless having regard to the approach adopted by the Commissioner (Appeals), no question of law can be said to arise insofar as this issue is concerned, so as to warrant interference. 13.In the light of the above discussion, this court does not find any legal infirmity in the impugned order passed by the Tribunal so as to give rise to any question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, summarily dismissed. (HARSHA DEVANI, J) Z.G. SHAIKH (SANGEETA K. VISHEN,J)