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2022 (11) TMI 180 - ITAT RAIPURBogus purchases - quantification of the profit - Assessee procuring the goods at a discounted value from the open/grey market - affirmation on oath in statements recorded u/s. 131 by the proprietors of the concerns/brokers during investigation by the Income Tax Department, thereby admitting and confessing on oath that these concerns are bogus entities indulging in accommodation entries and providing bogus bills - CIT-A deleted the addition - HELD THAT:- 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. Broken Rice (Kanki) (10,500 quintals) - 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). Rice (27350 quintals) - As per the judgment of M/s. Mohhomad Haji Adam & Company [2019 (2) TMI 1632 - BOMBAY HIGH COURT] 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]. Paddy (4470 quintals) - 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). We, thus 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 raised by the revenue are partly allowed.
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