TMI Blog2014 (8) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... e the AO has established that the price paid to a party is higher as compared to similar products supplied by other parties on the same date and the party to whom higher price has been paid is not traceable and the assessee has not made any efforts to produce the party or give his present address, therefore, the socalled purchases from the said party become suspicious, the AO is fully justified in rejecting the book results and going for estimation. The assessee has categorically explained before the lower authorities that M/s. Asvee Trading Company is not a comparable case since the assessee is a wholesaler whereas the said party is a retailer - No other comparable case was given by the AO - the results of the preceding and succeeding years results were not considered by the AO so as to come to a definite conclusion as to the rate of gross profit in the case of the assessee, vis-a-vis other concerns – thus, the matter is to be remitted back to the AO for decision of the rate of GP. - ITA No. 1027/PN/2013, ITA No. 1298/PN/2013, ITA No. 1028/PN/2013, ITA No. 1299/PN/2013 - - - Dated:- 19-8-2014 - Shri Shailendra Kumar Yadav And Shri R. K. Panda,JJ. For the Petitioner : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Inspector. In view of the above facts, the Assessing Officer examined the purchase invoices and noted that the purchase invoice of M/s. Bharat Steel Company are prima-facie not genuine. 2.1 He observed that the said invoices were different from genuine invoices in as much as they do not carry the features of a genuine purchase invoice. Further, those invoices were not supported by any other documents. He observed from the books of account that payments were made by the assessee to Bharat Steel Company from its bank account with Bank of India, Bhawanipeth Branch, Pune. He, therefore, conducted enquiries with the service branch of Bank of India, Mumbai to find out the details of bank account in which proceeds of cheques issued by the assessee were deposited. From the bank statement so obtained, the Assessing Officer found that the cheques issued by the assessee were deposited in the said bank account of Bharat Steel Company. However, on the same date, cash was withdrawn through self cheques. He further noted that no cheques were issued by Bharat Steel Company for purchases. According to the AO, no one can sell without buying. In view of all these facts, he was of the opinion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by you. Therefore, you were required to prove the genuineness of your claim of purchases from the said suppliers. You were also informed that failure to prove the claim of purchases shall lead to necessary additions/disallowances. It may kindly be noted that enquiries were caused with regard to your claim of purchases from Bharat Steel Co, Room No.56, Khetsi Chaturbhuj Bldg, 172/86, ST.Road, .Mumbai- 40009. It was found that the said concern was not available at that address. Even the telephone number was found to be incorrect. Importantly, enquiries revealed that Bharat Steel Company is having account with Union Bank of India, S.T.Road branch, Mumbai, 'Bank statement was obtained and it is found that the cheques issued by you were deposited in the said bank account of Bharat Steel Co. .However, on the same day cash was withdrawn through self cheques. It is further noticed that no cheques were issued by Bharat Steel Co. for purchases. Needless to mention, no one can sell without buying. All the above mentioned facts prove that you have obtained accommodation entry from Bharat Steel Co-, and no purchases were actually made from Bharat Steel Co. In addition to Bharat Steel C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases from many suppliers c) Many suppliers are not existing at the addresses provided by the assessee. d) It was claimed by the assessee that the suppliers had closed their business. It is rather unusual for so many of assessee's suppliers to close their business. e) One of the suppliers, M/s Bharat Steel Co from the assessee has claimed purchases of ₹ 3,03,18,558/-, is a non-existent concern. Even telephone number provided in the invoice of Bharat Steel Co was proved to be wrong. f) Bank enquiries revealed that cheques issued by the assessee were deposited in the bank account of Bharat Steel Co with Union Bank of India, Mumbai, and almost equivalent amounts in cash are withdrawn on the same day. g) Enquiries further revealed that purchases claimed by the assessee from Bharat Steel Company, Mumbai, is only an accommodation entry and Bharat Steel Co. never supplied material to the assessee. h) Purchase rates from M/s Bharat Steel Co., Mumbai are more than the rates charged by M/s. Bhuleswar Steel and Alloys Pvt. Ltd., and M/s. Shri K.N.Mahalaxmi Ispat Pvt Ltd. There is no reason why assessee should buy the same product from a small trader when the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimation of gross profit at 8% thereby confirming an addition of ₹ 2,27,64,534/-. 4. The appellant craves leave to amend or alter any of the grounds of appeal or add to the same, if deemed necessary . Grounds by Revenue: 1) The CIT (A) has erred in law and on facts by restricting the addition of Gross Profit from 9% to 8 %. 2) The CIT(A) should have upheld the addition made by the Assessing Officer by confirming assessment order passed u/s 143(3) of the I T Act, 1961. 3) The Id CIT(A) has not given any cogent reasons for restricting the addition made of Gross Profit after conducting proper investigations and rejecting books of accounts u/s 145(3) of the Income Tax Act. 4) The Order of the CIT(A) may be vacated and that of Assessing Officer be restored. 5) The appellant craves leave to add, amend or alter any of the above grounds of appeal. 5. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A) in upholding the rejection of book results by the Assessing Officer as well as the adoption of GP rate at 8%. The Ld. Counsel for the assessee reiterated the same arguments as made before the Assessing Officer and the CIT(A). He submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e justification as to under what circumstances the above said party has declared higher gross profit. Relying on the ratio laid down in the various decisions cited by him, the Ld. Counsel for the assessee submitted that the order of the CIT(A) be set-aside and the book results declared by the assessee should be accepted. 6. The Ld. Departmental Representative on the other hand strongly supported the order of the Assessing Officer. Referring to various decisions he submitted that if correctness and completeness of the books are doubted, then the Assessing Officer is at liberty to reject the book results and go for estimation. So far as the various decisions relied on by the Ld. Counsel for the assessee are concerned, he submitted that in all those decisions the entire purchases were disbelieved. Therefore, it was held in those decisions that when sales are accepted as genuine, there has to be purchases and if the assessee has not purchased from X he must have purchased from Y . Under such circumstances, the profit disclosed by the respective assessees have been accepted. Referring to the decision of the Pune Bench of the Tribunal in the case of Honeywell Automation India Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase prices are not verifiable as the parties were not found and in such cases the books should be rejected and the gross profit rate could be estimated. In view of the above decision which was relied on by the Ld. Counsel for the assessee himself, we are of the considered opinion that the CIT(A) was justified in upholding the action of the Assessing Officer in rejecting the book results. 7.1 Although the Ld. Counsel for the assessee has relied on a series of decisions, he has not answered the basic query raised by the Assessing Officer as to why the assessee has paid higher price to Bharat Steel Company for purchase of the identical products which are available at lower rate from reputed companies on the same day. This in our opinions shows that the activities of the assessee are not above board and the assessee is trying to just rely on various decisions without giving the reasons. Therefore, the various decisions relied on by the Ld. Counsel for the assessee, in our opinion, are not applicable to the facts of the present case. Once the Assessing Officer has established that the price paid to a party is higher as compared to similar products supplied by other parties on th ..... 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