Income Tax Appellate Tribunal - Raipur
Nand Kishor Agrawal , Dhamtari vs Income Tax Officer, Ward - Dhamtari, ... on 9 July, 2024
आयकर अपील य अ धकरण यायपीठ "एक-सद य" मामला रायपुर म
IN THE INCOME TAX APPELLATE TRIBUNAL
RAIPUR BENCH "SMC", RAIPUR
ी रवीश सद
ू , या यक सद य के सम
BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER
आयकर अपील सं. / ITA No.144/RPR/2024
नधारण वष / Assessment Year : 2015-16
Shri Nand Kishor Agrawal
Sadar bazar, Dhamtari (C.G.)-493 773
PAN: AFYPA1296F
.......अपीलाथ / Appellant
बनाम / V/s.
The Income Tax Officer
Ward- Dhamtari (C.G.)
...... यथ / Respondent
आयकर अपील सं. / ITA No.185/RPR/2024
नधारण वष / Assessment Year : 2015-16
The Income Tax Officer
Ward- Dhamtari (C.G.)
.......अपीलाथ / Appellant
बनाम / V/s.
Shri Nand Kishor Agrawal
Sadar bazar, Dhamtari (C.G.)-493 773
PAN: AFYPA1296F
...... यथ / Respondent
2
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari
ITA Nos. 144 & 185 /RPR/2024
Assessee by : Shri S.K Agrawal, CA
Revenue by : Shri Satya Prakash Sharma, Sr. DR
सुनवाई क तार ख / Date of Hearing : 02.07.2024
घोषणा क तार ख / Date of Pronouncement : 09.07.2024
आदे श / ORDER
PER RAVISH SOOD, JM:
The captioned cross-appeals filed by the assessee and the revenue are directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 14.02.2024, which in turn arises from the order passed by the A.O under Sec. 147 r.w.s.144 r.w.s.144B of the Income-tax Act, 1961 (in short 'the Act') dated 31.03.2022 for the assessment year 2015-16.
2. The assessee has assailed the impugned order on the following grounds of appeal:
"1. On the facts and in the circumstances of the case the order passed by the learned CIT(A) is unjust, unfair and bad-in-law as well on facts.
2. On the facts and in the circumstances of the case the learned CIT (A) is not justified in maintaining 5% of alleged bogus purchases out of 25% addition made by the AO without comparing actual difference in purchase rate of alleged bogus purchase and other genuine purchases as per decision of this Hon'ble ITAT Bench in ITA No.168/RPR/2019 dated 17.10.2022 which is binding on all lower authorities under the jurisdiction.
3. On the facts and in the circumstances of the case the learned CIT(A) erred in maintaining @5% of alleged bogus purchase which works out to Rs. 436000/- while the rate of alleged bogus purchase is equal to or less than the rate of other genuine purchases.
3
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024
4. On the facts and in the circumstances of the case the learned CIT(A) is not justified in maintaining 1% of purchase value which works out to Rs.87200/- as hypothetical commission paid out of 5% added by the AO.
5. On the facts and in the circumstances of the case the learned CIT(A) erred in neither taking into notice nor considering the written submission filed by the appellant on 07.02.2024 in which the decision of jurisdictional bench of ITAT Raipur in the case of Balaji Rice Industries Vs. ITO in ITA No.168/RPR/2019 dt. 17.10.2022 on the same issue has been relied upon by the appellant and copy of order duly filed.
6. That the appellant reserves the right to add alter or delete or any of the grounds of appeal."
3. On the other hand, the revenue is aggrieved with the impugned order on the following grounds of appeal:
"1. "Whether on the facts and in the circumstance of the case, and in law, the ld. CIT(A) was justified in directing the AO to restrict the additions made on account of accommodation bills to Rs. 4,36,000/- only (Being 5% of total accommodation bills of Rs. 87,20,000/-) and thereby allowing a relief of Rs. 17,44,000/-?"
2. "Whether on the facts and in the circumstance of the case, and in law, the ld. CIT(A) was justified in directing the AO to restrict the additions made on account of commission income to Rs. 87,200/- only (Being 1% of total accommodation bills of Rs. 87,20,000/-) and thereby allowing a relief of Rs. 3,48,800/-?"
3. Any other ground which may be adduced at the time of hearing."
4. At the very outset of hearing of the appeal, Shri Satya Prakash Sharma, Ld. Departmental Representative (for short 'DR') submitted that the revenue's appeal involves a delay of 15 days. Elaborating on the reasons leading to the impugned delay, the A.O has filed a letter dated 29.04.2024. As is discernible from the aforesaid letter, it transpires that the delay had occasioned due to huge pendency 4 Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024 with the A.O pertaining to the limitation matters. For the sake of clarity, the letter dated 29.04.2024 filed by the A.O is culled out as under: 5
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024
5. Considering the fact that there are justifiable reasons leading to the delay of 15 days involved in filing of the revenue's appeal, I condone the same.
6. Shri S.K Agrawal, Ld. Authorized Representative (for short 'AR') for the assessee at the threshold of hearing submitted that as the appeal filed by the revenue was below the monetary ceiling limit as contemplated in CBDT Circular No.05/2024 dated 15.03.2024, therefore, the same was not maintainable. 6
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024
7. The Ld. Sr. DR on the aforesaid issue clarified that as the addition made in the present appeal was based on information received from the Investigation Wing, Raipur, thus the same being covered by the exception carved out to the applicability of the aforesaid circular had rightly been filed.
8. I have thoughtfully considered the aforesaid aspect and find substance in the claim of the Ld. DR. Accordingly, the appeal filed by the revenue is admitted as maintainable.
9. Succinctly stated, the assessee who is engaged in the business of rice/broken-rice grading through sortex machine, had filed his return of income for A.Y.2015-16 on 26.09.2015 declaring an income of Rs.4,66,860/-. The return of income filed by the assessee was processed as such u/s. 143(1) of the Act.
10. The A.O based on information shared with him by the Dy. DIT (Inv-1), Raipur, observed that the assessee during the subject year was a beneficiary of bogus/fictitious purchase bills of Rs.87,20,000/- that were received from a bogus entity, viz. M/s. Maa Sharda Process, Prop. Shri Rakesh Sharma, Raipur. Also, the A.O observed that as per information shared by the Dy. DIT (Inv.-1), Raipur, there were heavy cash withdrawals from the current account No.134905000427 of M/s. Maa Sharda Process during the year under consideration. The A.O further observed that Shri Rakesh Sharma (supra) had admitted before the ADIT (Inv.1), Raipur that the bank account of M/s. Maa Sharda Process was used for facilitating bogus 7 Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024 purchases and all the transactions made through the said bank account were not related to any real business activities. Accordingly, the A.O based on the aforesaid information initiated proceedings in the case of the assessee u/s. 147 of the Act. Notice u/s. 148 of the Act dated 30.03.2021 was issued to the assessee. In compliance, the assessee had filed his return of income on 27.04.2021 declaring an income of Rs.4,66,860/-.
11. The A.O, thereafter, issued notice u/s. 143(2) of the Act on 29.06.2021. In response to the aforesaid notice the assessee vide his letter dated 12.07.2021, submitted as under:
"i. That I am carrying on the business of Rice-grading through Sortex, for which regular book-s of accounts maintained, which are duly audited is 44A-B of the IT Act 1961.
ii. That I have purchased Rice from Maa Sharda Process, Raipur for Rs.68,30,000/- during the year 2014-15 on different dates. iii. That there was opening balance payable or purchase as on 01/04/2014 for Rs.18,90,000/- which was duly paid on 7-4-14 & 8-4-14 through bank.
iv. That I have purchased goods of Rs. 68,30,000/- and entire purchase consideration alongwith previous balance of Rs. 18,90,000/- total Rs.87,20,000/- have been duly paid during the year through bank, copy of bank account wherefrom payments made for purchase consideration, enclosed for your kind perusal, v. That day to day stock register, showing purchase, production of sortex Rice & Sortex broken Rice & Rejection goods has been maintained. The finished product Sortex Rice, Sortex Broken Rice & Rejection Rice have been duly sold and accounted for in the books of accounts, which are duly Audited u/s 44AB of the Income Tax Act 1961.
vi. That we are enclosing herewith ledger account of Maa Sharda Process Raipur from our books of accounts, as also details of purchase showing Bill No., Truck No. in which goods transported, Quantity and rate of purchase.8
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024 vii. That the rate of purchase were at prevailing market rate, the Raw material has been used for manufacturing of Sortex Rice/Broken Rice which was ultimately sold and sale proceeds of finished goods as well as by products has been duly accounted.
viii. It is submitted that we have purchased goods from above party, which is genuine. In the bills necessary details to identify the person including TIN No. are duly mentioned, and truck No. by which the goods transported has been mentioned in the Bills itself. The purchase consideration has been made through banking channel only.
ix. That we have purchased goods, which are duly entered in our books of accounts. The entire goods have been used for making of sortex rice and softex broken rice, and the finished goods have duly been sold. The purchase as well as sale transactions were made through banking channel only, and there is no cash transaction for purchase as well as sell.
x. That profit realized on sale against above purchase has been duly accounted for and offered to tax.
In view of the above, it is requested to kindly file the proceedings u/s. 144 of the IT Act, 1961 and oblige."
The aforesaid explanation of the assessee did not find favour with the A.O. Thereafter, the A.O after referring to the modus-oparandi that was adopted by the accommodation entry providers and drawing support from the statement of Shri Rakesh Sharma (supra) recorded u/s. 131 of the Act on 30.10.2015, was of the view that M/s. Maa Sharda Process had provided bogus purchase bills to the assessee. The A.O observed that the assessee was a beneficiary of the bogus bills issued by M/s. Maa Sharda Process (supra) and did not make any actual purchases from the said entity. The A.O was of the view that the assessee had procured inflated bills with an intent to scale down its profit and evade taxes.
12. As the assessee had failed to substantiate the authenticity of the aforesaid purchase transactions on the basis of clinching documentary evidence to the 9 Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024 satisfaction of the A.O, therefore, the latter in the totality of the facts of the case dubbed the same as bogus purchases. Accordingly, the A.O vide his order passed u/s. 147 r.w.s. 144 r.w.s. 144B of the Act, dated 31.03.2022 disallowed 25% of the value of the impugned purchases (including opening balance) and worked out a disallowance of Rs.21,80,000/- in the hands of the assessee. Also, the A.O worked out an addition towards impugned commission which he was of the view that the assessee would have paid for availing the aforesaid facility of accommodation entries, i.e @5% of the value of the total purchases (including opening balance) and made an addition of Rs.4,36,000/-. Thus, the A.O vide his order passed u/s. 147 r.w.s. 144 r.w.s. 144B of the Act, dated 31.03.2022 after, inter alia, making the aforesaid additions, determined the income of the assessee at Rs.30,82,860/-.
13. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals). The CIT(Appeals) deliberating at length on the issue in hand in the backdrop of the contentions advanced by the assessee, scaled down the disallowance of the alleged bogus purchases made by the A.O to 5% of the value of the impugned purchases (included opening balance) and restricted the addition to Rs.4,36,000/-. Also, the addition towards the impugned commission was restricted by him to 1%, i.e. Rs.87,200/-. Accordingly, the CIT(Appeals) partly allowed the appeal of the assessee.
14. Both the assessee and the revenue being aggrieved with the order of the CIT(Appeals) have carried the matter in appeal.
10
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024
15. I have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
16. Shri S.K Agrawal, CA, the Ld. AR for the assessee at the threshold submitted that both the lower authorities had erred in making/sustaining additions as regards the bogus purchases which were highly exorbitant. Carrying his contention further, it was submitted by the Ld. AR that the disallowance, if any, was liable to be restricted to the extent of the profit element which the assessee would have made by procuring the goods at a discounted value from the open/grey market, as against the inflated value at which the same had been booked on the basis of the bogus bills in its books of account. The Ld. AR in support of his aforesaid contention had pressed into service the order of ITAT, Raipur in the case of M/s. Balaji Rice Industries Vs. ITO-1(2), ITA Nos. 168 & 181/RPR/2019 dated 17.10.2022. It was submitted by the Ld. AR that the addition in the present case be restricted in the hands of the assessee qua the impugned bogus/unverified purchased by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases.
17. Per contra, the Ld. DR relied on the orders of the lower authorities. 11
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024
18. Admittedly, it is a matter of fact borne from record that both the lower authorities had admitted that the assessee had procured goods not from the aforementioned tainted party, viz. M/s. Maa Sharda Process, Prop. Shri Rakesh Sharma, Raipur but at a discounted value from the open/grey market.
19. Controversy involved in the present appeal hinges around the solitary issue, i.e., quantification of the profit/income which the assessee would have made by purchasing the goods in question at a discounted value from the open/grey market.
20. At this stage, I may herein observe that though the A.O had made the addition of 25% of the value of the impugned bogus purchases, which thereafter, was scaled down by the CIT(Appeals) to 5% but neither of the said quantification of the profit element has any basis. I am unable to subscribe myself to the quantification of the profit element as had been done by both the lower authorities. As stated by the Ld. AR, and rightly so, the issue in hand is squarely covered by the order of the ITAT, Raipur in the case of M/s. Balaji Rice Industries Vs. ITO-1(2), ITA Nos. 168 & 181/RPR/2019 dated 17.10.2022, wherein the Tribunal after relying on the judgment of the Hon'ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company, ITA No1004 of 2016, dated 11.02.2019 had restricted the addition only to the extent of the difference between the gross profit of the genuine purchases vis-à-vis alleged bogus 12 Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024 purchases. For the sake of clarity, the observations of the Tribunal are culled out as under: (relevant extract):
"11. On a perusal of the observations of both the lower authorities, we would not hesitate to observe that the basis adopted by them for quantifying the amount by which the assessee would have inflated the impugned bogus purchases in its books of accounts is devoid and bereft of any reasoning. Admittedly, in a case where the assessee had purchased goods not from the organized sector but from the open/grey market, then, it can safely be concluded that he would have procured such goods at a discounted value by making savings on manifold factors i.e. sales tax, other government levies, cash discounts etc., as in comparison to the price at which the said goods would otherwise be available in the organized sector. Accordingly, in a case where an assessee had though procured the goods at a discounted value from the open/grey market, but thereafter routed the same through his books of accounts on the basis of bogus purchase bills, thus, in all likelihood would have inflated such purchases. As our indulgence in the present case is confined to the quantification of the profit which the assessee would have made by procuring the goods in question at a discounted value from the open/grey market, therefore, we restrict our adjudication to the said aspect alone.
12. On the issue of quantification of the profit which the assessee would have made by procuring the goods in question from the open/grey market, we find that the Hon'ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company, ITA No1004 of 2016, dated 11.02.2019, while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate as that of other genuine purchases. The Hon'ble High Court while concluding as hereinabove had observed as under:
"8. In the present case, as noted above, the assessee was a trader of brics. The A.O found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the 13 Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024 Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sale declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trade. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under-
"So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66% Therefore, considering 5.66 % of Rs.3,70,78,125/- which comes to Rs.20,98,62 1.88 we think it fit to direct the revenue to add Rs.20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue."
9. In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order at costs." It was, thus, observed by the Hon'ble High Court that the addition in respect of purchases which were found to be bogus in the case of the assessee before them, who was a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of other genuine purchases. On the basis of the aforesaid observations of the Hon'ble High Court, we are of the considered view that on the same lines the profit made by the assessee in the case before us by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases.
13. Our attention was drawn by the ld. AR towards the bifurcated details of bogus purchases in question aggregating to Rs.6,84,65,775/- a/w. the average rate of purchase of the various items, viz. (i) purchase of 27350 quintals of rice: Rs.4,67,45,125/-;
(ii) purchase of 10,500 quintals of broken rice (Kanki) :
Rs.1,48,64,000/- and (iii) purchase of 4470 quintals of paddy Rs.51,07,400/-, which reads as under:-
(Purchase rate of Kanki) 14 Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024 Qty. ( Qntls) Amount (Rs.) Average rate Kanki purchase ( from 10,500.00 1,48,64,000 1,415.62/qntls alleged bogus parties) Kanki purchase ( from 12,213.10 1,75,55,969 1,437.47/qntls genuine parties) Total Kanki Purchase 22,713.10 3,24,19,969 1,427.36/qntls ( Purchase rate of Rice) Qty. ( Qntls) Amount (Rs.) Average rate Rice purchase ( from 27,350.00 4,67,45,125 1,709.14/qntls alleged bogus parties) Rice purchase ( from 21,421.50 3,50,61,771 1,636.76/qntls genuine parties) Total rice Purchase 48,771.50 8,18,06,896 1,677.35/qntls ( Purchase rate of paddy) Qty. ( Qntls) Amount (Rs.) Average rate Paddy purchase ( from 4,470.00 51,07,400 1,142.60/qntls alleged bogus parties) Paddy purchase ( from 15,621.40 1,92,50,591 1,232.32/qntls genuine parties) Total paddy Purchase 20,091.40 2,43,57,991 1,212.36/qntls As observed by us herein above the entire exercise for quantifying the profit which the assessee would have made by procuring the goods in question at a discounted value from the open/grey market, i.e, by bringing the GP rate of the bogus purchases at the same rate as that of other genuine purchases, is that by so doing the monetary benefit which would have accrued to the assessee but withheld by him in his financial statements by booking the purchases at an inflated value on the basis of bogus purchase bills would stand neutralized.
14. We shall now deal with the quantification of the profit which the assessee would have made by procuring the goods at a discounted value from the open/grey market, as under:
(A) Broken Rice ( Kanki) (10,500 quintals) :-15
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024
15. Considering the aforesaid details which are stated by the assessee to have been filed before the lower authorities, it transpires that the bogus purchases of broken rice (Kanki) was made by the assessee @1415.62 per quintal (average rate), as against the purchase of the genuine broken rice (kanki) that was made by him @ 1437.47 per quintal (average rate). On the basis of the aforesaid facts, now when the assessee had made bogus purchase of broken rice (kanki) (average rate) at a value lower than that at which it had made genuine purchase of broken rice (kanki) (average rate), therefore, as per the ratio of the judgment of the Hon'ble High Court of Bombay in the case of M/s. Mohhomad Haji Adam & Company (supra) there could be no occasion much the less any justification for making any addition on the said count in the hands of the assessee. We, say so, for the reason that the Hon'ble High Court in the case of M/s. Mohhomad Haji Adam & Company (supra), had held, that for the purpose of quantifying the profit which the assessee would have made by carrying out bogus/unproved purchases the addition is to be made to the extent that the GP rate of the bogus/unproved purchases is brought to the same rate as that of other genuine purchases. As in the case of the assessee before us the rate of bogus purchases of broken rice (kanki) i.e Rs.1415.62 per quintal (average rate) is lower than the rate of genuine purchases of broken rice (kanki) i.e Rs. 1437.47 per quintal (average rate), therefore, as a consequence thereto [by taking the sale rate (average) as static] the GP rate of bogus purchases of broken rice (kanki) as in comparison to the GP rate of genuine purchases of broken rice( Kanki) is already on the higher side, therefore, no addition on the said count could have validly been made in its hand. We, thus, in terms of our aforesaid observations vacate the addition of 3.92% of the value of bogus/unproved purchases of broken rice (10500 quintals) as sustained by the CIT(Appeals). Accordingly, the A.O is directed to vacate the addition of Rs. 5,82,668/- [Rs. 1,48,64,000/- X 3.92%] sustained by the CIT(Appeals).
(B) Rice (27350 quintals) :-
16. On a perusal of the records, it transpires that the assessee had made bogus purchases of 27350 quintals of rice (value of Rs.4,67,45,125/-). As observed by us hereinabove the A.O had quantified the profit on the purchase of bogus rice by disallowing 25% of the value of the impugned purchases, which, however, was scaled down by the CIT(Appeals) to 3.92% (supra) i.e. to the extent of difference between 8% (ad-hoc rate adopted by the CIT(Appeals) and the overall disclosed GP rate of 4.08% of the assessee for the year under consideration.
16
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024
17. As can be gathered from the details filed by the assessee, the assessee had made bogus purchases of rice @ Rs.1709.14 per quintal (average rate), while for the genuine purchase of rice was made @ Rs.1636.76 per quintal (average rate). Admittedly, the bogus purchases of rice i.e average rate is found to be on the higher side by an amount of Rs.72.38 per quintal (average rate). Considering the addition that had been sustained by the CIT(Appeals) i.e @ 3.92% of the value of the impugned purchases, it transpires, that by applying the same the purchase value per quintal of rice (average rate) would stand reduced to an amount of Rs.1642.14 per quintal [i.e Rs.1709.14/- per quintal (-) 3.92% of Rs.1709.14/-]. As per the judgment of the Hon'ble High Court of Bombay in the case of M/s. Mohhomad Haji Adam & Company (supra) the profit made by the assessee by procuring the goods from the open/grey market is to be determined by bringing the GP rate of the bogus/unproved purchases to the same rate as that of the other genuine purchases. As the aforesaid addition had been sustained by the CIT(Appeals) @ 3.92% of the value of the impugned bogus purchases of rice, the same, thus brings the purchase price (average rate) of the bogus purchase of rice to an amount of Rs.1642.14 (supra), which, however is still in excess of the purchase of genuine rice (average rate) of Rs.1636.76 per quintal by an amount of Rs.5.38 per quintal. We, thus, in terms of our aforesaid observations direct the A.O to make an addition of Rs.1,47,143/- [i.e. 27350 quintals (bogus purchases) X Rs.5.38/- per quintal].
(C) Paddy (4470 quintals) :-
18. On a perusal of the records, it transpires that the bogus purchases of paddy had been made by the assessee @ Rs. 1142.60 per quintal (average rate), as against the purchase of the genuine paddy that was made by him @ 1232.32 per quintal (average rate). On the basis of the aforesaid facts, now when the assessee had made bogus purchase of paddy (average rate) at a value lower than that at which it had made genuine purchase of paddy (average rate), therefore, as per the ratio of the judgment of the Hon'ble High Court of Bombay in the case of M/s. Mohhomad Haji Adam & Company (supra) there could be no occasion much the less any justification for making any addition on the said count in the hands of the assessee. We, say so, for the reason that the Hon'ble High Court in the case of M/s. Mohhomad Haji Adam & Company (supra), had held, that for the purpose of quantifying the profit which the assessee would have made by carrying out bogus/unproved purchases the addition is to be made to the extent the GP rate of the bogus/unproved purchases is brought to the same rate as that of other genuine purchases. 17
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024 As in the case of the assessee before us the rate of bogus purchase of paddy i.e Rs.1142.60 per quintal (average rate) is lower than the rate of genuine purchase of paddy i.e. Rs. 1232.32 per quintal (average rate), and thus, as a consequence thereto [by taking the sale rate (average) as static] the GP rate of bogus purchases of paddy as in comparison to the GP rate of genuine purchases of paddy is already on the higher side, therefore, no further addition on the said count could have validly been made in his hand. We, thus, in terms of our aforesaid observations vacate the addition of 3.92% of the value of bogus/unproved purchases of paddy (4470 quintals) as sustained by the CIT(Appeals). Accordingly, the A.O is directed to vacate the addition of Rs. 2,00,210/- [Rs. 51,07,400/- X 3.92%] out of that sustained by the CIT(Appeals).
19. We, thus, in terms of our aforesaid observations partly uphold the order of the CIT(Appeals) as regards the additions that have been sustained by him towards the profit which the assessee would have made by procuring the aforesaid goods i.e. broken rice (kanki)/ rice/paddy from the open/grey market. Thus, the grounds of appeal No.(s) 1 to 10 raised by the revenue are partly allowed in terms of our aforesaid observations."
Considering the parity of the facts and the issue involved in the present case as were involved in the aforesaid case, I, respectfully follow the same. Accordingly, in terms of the observations recorded in the aforesaid order I restore the matter to the file of the A.O, with a direction to him to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchases by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases.
21. Before parting, I may herein observe that the assessee had placed on record the bifurcated details of average purchase rates of rice/broken rice, i.e 18 Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024 bogus/unverified purchases vis-à-vis purchases other than the bogus/unverified purchases, as under:
As the aforesaid details filed by the assessee before me were not there before the lower authorities, therefore, I herein direct the A.O to consider the same in the course of the set-aside proceedings after making necessary verifications to his satisfaction. Be that as it may, the A.O shall quantify the profit element which the 19 Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024 assessee would have made by procuring the goods in question at a discounted value from open/grey market in the backdrop of the judgment of the Hon'ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s.
Mohhomad Haji Adam & Company (supra). Needless to say, the A.O shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee. Thus, the Grounds of appeal Nos. 1 to 3 & 5 raised by the assessee and Ground of appeal No.1 raised by the revenue are allowed for statistical purposes in terms of the aforesaid observations.
22. Apropos the addition towards alleged commission which was made by the A.O @ 5%, which thereafter, was scaled down by the CIT(Appeals) to 1%, I am unable to find any substance in the same. As nothing have been placed on the record that would prove to the hilt that the assessee had incurred any such expenditure, therefore, the addition so made/sustained by the lower authorities on a presumptive basis cannot be sustained. Accordingly, I, herein vacate the addition of Rs.87,200/-. Thus, the Ground of appeal No.4 raised by the assessee is allowed, while for, the Ground of appeal No.2 raised by the revenue is dismissed in terms of the aforesaid observations.
23. Ground of appeal No.6 raised by the assessee and Ground of appeal No.3 raised by the revenue being general in nature are dismissed as not pressed. 20
Nand Kishor Agrawal Vs. ITO, Ward-Dhamtari ITA Nos. 144 & 185 /RPR/2024
24. In the result, both the appeals of the assessee and revenue are partly allowed for statistical purposes in terms of the aforesaid observations.
Order pronounced in open court on 09th day of July, 2024.
Sd/-
(रवीश सूद /RAVISH SOOD) या यक सद य/JUDICIAL MEMBER रायपुर/ RAIPUR ; दनांक / Dated : 09th July, 2024.
****SB, Sr. PS
आदे श क त ल प अ े षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT(Appeals)-1, Raipur (C.G.)
4. The Pr. CIT, Raipur-1 (C.G)
5. वभागीय त न ध, आयकर अपील य अ धकरण, रायपुर बच,
रायपुर / DR, ITAT, Raipur Bench, Raipur.
6. गाड फ़ाइल / Guard File.
आदे शानुसार / BY ORDER,
// True Copy //
Senior Private Secretary
आयकर अपील य अ धकरण, रायपुर / ITAT, Raipur.