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2019 (6) TMI 584 - ITAT MUMBAIAddition u/s 68 - unsecured loans - HELD THAT:- Assessee has discharged initial burden by filing various documents to prove identity, genuineness of transactions and creditworthiness of the parties. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan u/s 68. The Ld. CIT(A) without appreciating these facts simply confirmed the addition made by the AO. Hence, we reverse the findings of the CIT(A) and direct the AO to delete the additions made towards unsecured loans u/s 68. Disallowance of interest and estimation of commission on unsecured loans obtained from companies controlled and operated by Shri Bhanwarlal Jain - AO has disallowed interest paid the ground unsecured loans are bogus - AO has also estimated 0.2% commission on total unsecured loans - HELD THAT:- As the issue of unsecured loans has been decided in preceding paragraphs, where we held that the transactions between the parties are genuine which cannot be considered as unexplained cash credit u/s 68 of the Act, consequently, additions made towards disallowance of interest and estimation of commission on such unsecured loans is also needs to be considered in the light of discussions in the preceding paragraphs. Therefore, we are of the considered view that the AO as well as the Ld. CIT(A) was erred in making additions towards interest on unsecured loans and commission on such unsecured loans. Accordingly, we direct the AO to delete the additions made towards disallowance of interest and estimation of commission. Bogus purchases - assessee has filed basic evidences including confirmations from the parties - notice u/s 133(6) were issued, such notices were returned unserved with a remark “address not known” - HELD THAT:- When the AO has not pointed out any discrepancies in the books of accounts or stock details filed by the assessee merely for the reason that notices issued u/s 133(6) were returned unserved, no adverse inference could not be drawn against the assessee, when assessee has filed sufficient material in order to prove the purchases from the above parties, no doubt, it is an admitted fact that the parties were never responded to notice u/s 133(6), but that by itself would not be a ground for holding the purchases as bogus in nature, that too when materials furnished by the assessee proves otherwise. The assessee has done its at best and filed whatever information available with it. The appearance of the parties is not within the control of the assessee. Further, when the parties are not appeared before the AO in response to notices, then separate procedure is provided under the Act to deal with those parties. For this purpose, the assessee cannot be blamed or made responsible for non-appearance of parties and also purchase from the parties cannot be considered as bogus when the assessee has filed all other evidences to prove the purchases from the parties. In this case, the assessee filed complete details including confirmations from the parties. The AO never disputed this fact. The AO also accepted sale declared by the assessee. Therefore, we are of the considered view that it is difficult to accept the arguments of the AO that purchases from above parties are bogus in nature. What is the amount of additions required to be made when both parties failed to conclusively prove the purchases in their favour? - Hon’ble Gujarat High Court in the case of Ld. Vijay Proteins vs CIT [2015 (1) TMI 828 - GUJARAT HIGH COURT] had taken similar view and held that where purchases are considered to be bogus, then only profit element embedded need to be taxed. In these cases, the assessee is in the business of real estate development. The profit element of real estate business is in the range of 8 to 15% depending upon the type of projects and places where project is executed by the parties. Therefore, considering all we deem it appropriate to direct the AO to estimate 12.5% profit on alleged bogus purchases. Accordingly, we direct the AO to estimate 12.5% profit on total alleged bogus purchases.
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