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2015 (6) TMI 71 - AT - Income TaxAddition on account of bogus purchases - Deduction of loss of goods by fire - Penalty u/s 271(1)(c) of the Income Tax Act, 1961 - Held that:- We are of the view that the fact of damage of goods by fire was not denied in this case. That loss was stated to be the reason of big financial loss suffered by the Assessee. Although, this should not be the reason for proving the genuineness of the purchases but loss due to fire could lead to one possible conclusion that the assessee was not having sufficient evidence to support its claim of purchases. Undisputedly, he was going through hardship and therefore the correct factual position could not be demonstrated. In the compilation, the assessee has placed before us the purchase bills of Pirth Trade Link along with delivery challans. The compilation also consist the purchase bills of Sydney Sales Corporation along with the delivery challans. The Assessee has also placed on record the evidence of transportation of goods from Panch Mahal Transport Company. All these documents were stated to be filed before the AO as well. In addition to these evidences, the Assessee has also placed on record the audited financial statement for the year under consideration to demonstrate that without these purchases there was no possibility to execute the sales. There was no allegation of the Revenue Department that the sales have also not tallied with the corresponding purchases as shown by the Assessee. However contrary to this; payments have been seriously doubted, although it was made through cheques but to some other party. It is also held by several courts that mere payment by cheque do not establish genuineness if not corroborated. Be that as it was, as also to settle the issues; we hereby accept the alternate submission of learned AR not to assess the entire purchases but to assess a reasonable amount of profit earned from those purchases. For this reason, we hereby follow the decision of the Respected Co-ordinate Bench pronounced in the case of M/s. Baldiwala Brothers [2013 (8) TMI 515 - ITAT AHMEDABAD] wherein the profit @ 12.5% was directed to be assessed in respect of alleged bogus purchases. We direct accordingly. Both the lower authorities have merely adopted an estimated figure of value of the stock. The AO was expected to arrive at the justified conclusion of valuing the cost of closing stock. Merely by applying a gross profit rate, the AO has adopted an estimated figure of cost of closing stock which cannot be approved in the eyes of law. We, therefore, hold that in the absence of any corroborative evidence placed from the side of the Revenue to justify the change in the valuation of the closing stock we hereby dismiss such estimation. In the result the addition made merely on suspicion is hereby reversed. - Decided partly in favour of assessee. Penalty u/s 271(1)(c) of the Income Tax Act, 1961 - On perusal of the orders of the authorities below, we have noted that the assessee has furnished the books of accounts and relevant details. The fact about the purchases from those two concerns was duly disclosed. On the basis of those facts and the information available on record, the AO has initiated certain inquiries. Therefore, it is not a case that the facts about the purchases were concealed by the Assessee. However, the question still to be examined that whether these facts were true or not? As far as the Assessee is concern, he has explained that the purchases were made from those parties in the regular course of business as is proved by producing delivery challans and confirmation of transporters for transportation of goods. It has also been pleaded that the accounts were duly audited and there was no adverse remark by the auditor. It has also been pleaded that the sales were duly recorded in the books of accounts which were not disturbed by the AO. Therefore, the argument was that there was no possibility of execution of sales if the corresponding purchases have not been made. In addition to these facts, one more aspect is that we have now directed to assess the income by applying 12.5% of profit. Meaning thereby the total purchases amount has not been added but an estimated figure of profit is now to be assessed in the hands of the Assessee. In such situation, when an estimation is made by this Court then the issue of concealment has come under the cloud of suspicion. Merely on the ground of suspicion as also considering the total facts it is hereby held that concealment penalty need not to be levied. We, therefore, direct to delete the penalty. - Decided in favour of assessee.
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