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2015 (11) TMI 1304 - AT - Income TaxAddition made on account of share application money - CIT(A) deleted the addition - Held that:- The assessee has filed before the AO documents and details regarding share subscribers in question, so as to establish these ingredients of genuine credit. The identity of the subscribers stood proved by the fact that their names, address PAN Number balance sheet, bank statement and confirmation letters, share application and share allotment details were submitted by the assessee company. All these facts go to prove the identity of the subscribers. The CIT(A) further recorded a finding to the effect that creditworthiness of these parties was also proved by the fact that all the payments have been made through the banking channels through account payee cheques and that bank statements were also submitted by the assessee company. It was also observed that since money is towards purchase of shares having drawn from bank, it is clear that moneys were available. The finding recorded by the CIT(A) is as per material on record and do not require any interference on our part. - Decided against revenue Reopening of assessment - receipt of accommodation entries - CIT(A) deleted the addition by observing that purchases were genuine, however, at the very same time, the CIT(A) directed the AO to estimate the gross profit at 6% - Held that:- carefully gone through the orders of the authorities below and found that the contradictory statement was given by Mehrunissa with regard to the sales undertaken by her. However, nowhere she has stated the name of assessee company with regard to any bogus sales. It is a matter of record that nothing wrong was found by the AO in the books of account. All the purchases have been accepted by the AO and its corresponding sales. Once the sales have been accepted, there must be purchases. Under such circumstances, it is possible that bills have been taken from one party, whereas goods have been purchased from some other party. Keeping in view the totality of facts and circumstances of the case the total purchases cannot be disallowed. Accordingly, we direct the AO to restrict the addition to the extent of 10% of the purchases so as to serve the end of justice. Accordingly, we uphold the addition of ₹ 2,21,600/-. There is no merit in the action of CIT(A) for directing the AO to estimate the assessee’s GP rate at 6%, which was upheld by him in case of SKS Ispat & Power Limited,a group company. Neither it is the case of AO nor it is case of CIT(A) that assessee has not maintained proper books of accounts and that it had not reported true and correct state of affairs.any justification in estimating GP rate without rejecting the books of account. As we have already upheld the addition of ₹ 2,31,600/- on account of purchases which was pointed out by the AO, there is no justification for applying the higher GP rate to the entire sales of the assessee which was ₹ 151 crores. In case of Girish M. Mehta (2005 (2) TMI 494 - ITAT RAJKOT), the Tribunal has elaborately explained the principle of rejection of books of accounts and estimating GP rate in para 9 of the said order is precisely applicable to the facts of the case. It is also pertinent to mention here that the AO has nowhere doubted the quantitative tally/stock register maintained by the assessee. No incriminating material or evidence in respect of other transactions of the assessee have been brought on record. Therefore, addition in the GP, if any, should be restricted to the extent of part of the purchases made from M/s Chevron Metal Products Private Limited. Since we have already upheld the addition of ₹ 2,31,600/-, there is no justification for estimation of assessee’s GP at 6% as directed by CIT(A). We direct accordingly.
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