TMI Blog2022 (11) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... ses 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the following grounds of appeal: 1. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,43,22,138/- out of total addition of Rs. 1,71,16,444/- by ignoring the fact that these purchases are nothing but bogus purchases managed through bogus bills? 2. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was justified in ignoring the affirmation on oath in statements recorded u/s. 131 of the I.T. Act 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? 3. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was justified in ignoring the ratio of the ITAT Mumbai in the case of Soman Sun City vs. JCIT, wherein it was held that purchases could not be treated as genuine even if the purchase bill produced and payment is made through banking channel and other evidence is lacking? 4. Whether on points of law and on points of facts circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Marketing (P) ltd. Reported in (2015) 56 taxmann.com 286(Delhi) held that though it is obligation of assessing office to conduct proper scrutiny of material, in even of assessing officer failing to discharge his functions properly, obligation to conduct proper inquiry shifts to Commissioner(Appeals) and Tribunal and they cannot simply delete addition made by assessing officer on ground of lack of inquiry? 11. Whether on points of law and on facts and circumstances of the case, the Ld. CIT(A) was justified in giving a decision, thereby without considering and distinguishing the ratio of the judgment of the cases such as Rameshwar Prasad Bagla 68 ITR 653(Allahabad) 85 Homi vs CIT 41 ITR 135, 142 by (Supreme Court) wherein it is stated that the totality of circumstances must be considered in a case of circumstantial evidence and the totality of the circumstances has to be taken into consideration and the combined effect of all those circumstances is determinative of the question as to whether or not a particular act is proved? 12. Whether on points of law and on facts circumstances of the case, the ld. (CIT(A) was justified in restricting the addition upto 3.92% wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding of bogus purchase bills to certain parties without actual delivery of goods. The A.O on the basis of the facts that had surfaced in the course of the survey conducted against the brokers/entry operators summoned the assessee u/s. 131(1) of the Act. The A.O confronted the assessee with the statements of the brokers/entry operators who had accepted of having merely provided bogus purchases bills without any supply of material and called upon it to substantiate its claim of having made purchases from seven tainted parties, as under: S. No. Name of the party Total Purchases 1. M/s. Siddhi Vinayak Agro Industries Rs.43,15,000/- 2. M/s. Sakshi Gopal Corporation Rs.82,14,750/- 3. M/s. Shrikhand Agrotech Rs.2,38,14,500/- 4. M/s. Eden Rice Mill Rs.55,31,500/- 5. M/s. Shri Bajrang Food Products Rs.2,38,52,625/- 6. M/s. Shri Tulsi Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, after considering the assessee's overall disclosed GP rate of 4.08% he sustained the addition @ 3.92% [8% (-) 4.08%] of the impugned purchases in question of Rs. 6,84,75,775/-. Accordingly, the CIT(Appeals) sustained an addition of Rs. 27,94,306/- (out of the addition of Rs. 1,71,16,444/- that was made by the A.O). 5. The CIT(Appeals) was further of the view that the addition that was made by the A.O towards peak credit of purchases running in the accounts of the aforesaid seven tainted parties against whose name bogus purchases were booked by the assessee firm could not be sustained. The CIT(Appeals) was of the view that as the payments towards purchase of the goods in question were made by the assessee through its disclosed banking transaction, thus, the peak concept for making of the impugned additions could not be triggered in its case. Accordingly, the CIT(Appeals) vacated the entire addition of Rs. 25,69,200/- made by the A.O. 6. The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 No. 1004 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artially 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 quin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 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. Mohhoma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esult, appeal of the revenue is partly allowed in terms of our aforesaid observations. 22. Adverting to the appeal filed by the assessee, it transpires that it has assailed before us the very basis that was adopted by the CIT(Appeals) for sustaining part addition made by the A.O. However, as while disposing off the appeal of the revenue deliberated at length and substituted the very basis for estimation of the profit/savings which the assessee would have made by making the impugned purchases from the open/grey market, therefore, the present claim of the assessee would be taken care of and stand subsumed by our aforesaid observations. Thus, the Grounds of appeal No. (s) 1 to 3 raised by the assessee are partly allowed in terms of our aforesaid observations. 23. In the result, appeal of the assessee in ITA No. 168/RPR/2019 for the assessment year 2013-14 is partly allowed in terms of our aforesaid observations. 24. Resultantly, both the appeals of the revenue and the assessee are partly allowed in terms of our aforesaid observations. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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