TMI Blog2015 (6) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... dences, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chaturvedi, AM,JJ. For the Appellant : Shri M K Singh, Sr. DR For the Respondent : Shri Mehul Shah, AR ORDER Per: Mukul Kr Shrawat: These two Appeals have been filed by the Assessee, one in respect of quantum additions and the other in respect of levy of penalty u/s.271(1)(c) arising from the orders of learned CIT(A), Valsad, Gujarat both dated 11.01.2010. A. ITA No.1742/Ahd/2010, A.Y.2005-06 2. Ground No.1 is reproduced below: 1. On the facts and in the circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of the Assessing Officer in making addition of ₹ 66,14,400/- on account of bogus purchases. 2.1 Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) dated 27.12.2007 were that the Assessee had declared a loss at ₹ 82,93,500/-. The Assessee is in the business of manufacturing of Nylon Mono filament. It was noted that the goods purchased from Pirth Trade Link was at ₹ 33,69,600/- and purchases from Sydney Sales Corporation was ₹ 32,44,800/-. Those purchases were made in the month of September, 2004. It was informed that a fire took pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es issued to Sydney Sales Corporation shows that, the cheques were credited in the name of Oswal Traders . When being asked to explain, Assessee Company could not explain the same why the cheques were issued to Oswal Traders. Verification of Bank account of Pirth Trade Link for the F.Y. 2004-05 shows that no major payment was made by Pirth Trade Link for the purchases of goods either during the month of August or in the month of September and in the whole financial year. The bank account of Pirth Trade Link shows that the amount was frequently withdrawn by cash. The copies of bills of Pirth Trade Link and Sydney Sales Corporation show that both the transactions are related to the same party. In view of the facts mentioned above, the purchases could not be proved by the appellant. Therefore, amount of ₹ 66,14,400/- added to the income of the appellant company. Before me, the Ld. A.R. submitted five copies each of Transport bills from Panchmahal Transport Company, Chinch Bunder, Opp. Kesar Baug, Mumbai - 400009 in the name of M/s. Pith Link and M/s. Sydney Sales Corporation of Bhivandi. On a closure look to the copies of the transport bills placed on record, it was noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be taxed in the hands of the Assessee but only a component of profit should be taxed. In respect of this contention an ITAT 'D' Bench decision pronounced in the case of M/s. Baldiwala Brothers Vs. ITO, Ward-5(i), Baroda, bearing ITA No. 2451 2452/Ahd/2012 dated 19th July, 2013 is placed before us. 6. From the side of the Revenue, learned Sr.D.R. has placed reliance on the view given by learned CIT(A) and pleaded that the Assessee was not able to co-relate the transportation charges, therefore, the genuineness of the purchases were seriously doubted by the AO. Even, the purchase bills remained pending for a long period so it was doubtful whether the purchases were actually made and why the said creditor has not demanded for the amount due. Even the cheques were issued in the name of some other party and the Assessee was not able to give a reasonable explanation; hence the addition was rightly confirmed by learned CIT(A). 7. Having heard the submission of both the sides and after considering the facts and circumstances of the case, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as excess claim of stock damage under fire by passing a cryptic order as under: The assessee has claimed finished stock loss of ₹ 59.85 lacs @165/- per kg. on 36.27 tons. The assessee is also using waste for its manufacturing process, The assessee has sold finished goods during the year till September at the rate of ₹ 178/- per kg. The assessee has shown the Gross Profit of 30% in the last year. Therefore the valuation of closing stock of finished goods at cost, which is damaged in fire, comes to ₹ 45.19 lacs. Therefore excess claim of ₹ 14.66 lacs is disallowed and added to the income of the assessee. 10. When the matter was carried before the First Appellate Authority, learned CIT(A) has approved the action of the AO as under: 7. The appellant has claimed finished stock loss of ₹ 59.85 lacs @ 165/- per Kg. on 36.27 tons. The appellant is also using waste for its manufacturing process. The appellant had sold finished goods during the year till September at the rate of ₹ 178/- per Kg. The Appellant has shown the Gross Profit of 30% in the last year. Therefore the valuation of closing stock of finished goods at cost, which is damaged i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particulars of income to the tune of ₹ 66,14,400/-. I am convinced that, the appellant had furnished inaccurate particulars of Income and at the same time, failed augment its case why penalty should not be levied. In this circumstance I am constrained to upheld the penalty levied by the A.O. Accordingly this ground of appeal is dismissed. 17. We have heard both the sides. 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 ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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