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2016 (1) TMI 606 - ITAT MUMBAI

2016 (1) TMI 606 - ITAT MUMBAI - TMI - Bogus purchases - G.P. addition - Held that:- As there is no justification for adding the entire amount of purchases in assessee’s income. The CIT(A) has even though deleted the purchases but has made an adhoc addition of 10% of the purchase amount. The CIT(A) has also directed the AO to uphold the addition to the extent of difference between GP as per books of account on undisputed purchases and the GP on sales relating to purchases from these three partie .....

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we direct the AO to calculate the GP on the undisputed purchase vis-à-vis GP in respect of purchase made from these parties and, if the AO finds that the GP disclosed in respect of purchases from these three parties is lower than the GP disclosed in respect of other undisputed purchase, addition should be made to that extent only. We direct accordingly. - Decided partly in favour of assessee - ITA Nos.4154&4155/Mum/2010, ITA Nos.4374/Mum/12, ITA No.57 to 61/Mum/2012, ITA Nos.5436, 5437/Mum/2010, .....

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er of order passed under Section 143(3) r.w.s.147of the I.T. Act. 2. Common grounds have been taken in all the years under consideration, therefore, all the appeals were heard and are now decided by this consolidated order. 3. At the outset ld. AR did not press the ground raised with regard to validity and reopening u/s.147 of the Act, accordingly, grounds No.1 & 2 in assessee s appeal are dismissed as not pressed. 4. Rival contentions have been heard and record perused. Facts in brief are t .....

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. 1.73% whereas in last year G.P. was of 13.47%. The case was reopened u/s.147 of the Act and notice u/s.148 dtd.23.3.2009 was issued with the prior approval of the Addl. Commissioner of Income-tax, Rg.13(1), Mumbai vide his approval letter dtd. 23.3.2009 and duly served on assessee. 5. During the course of assessment u/s.143(3) r.w.s.147 of the Act, the AO observed that as per information received from another AO, the assessee alleged to have made purchases from a concern, which is issuing only .....

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s to the required parties. In the Statement recorded on oath of the Proprietors of above Concerns, they have confirmed that they are exclusively engaged in the activities of issuing accommodation sales bills for the past 9 years and that they did not have any trading activities from the year 2000 onwards and earning 1 % commission on the amount of accommodation sales bills issued. As per AO the business modus operandi of these group concerns was issuing accommodation (sales) bills to the require .....

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assessment proceedings, it is ascertained that during the previous year relevant to A.Yr. 2002-03, the assessee had availed accommodation bills (sales bills) from the above assessees for the following amounts:- 1. M/s. Manoj Mills ₹ 5,52,666/- 2. M/s. Astha Silk Industries ₹ 12,81,449/- 3. M/s. Shree Ram Sales & Synthetics ₹ 11,06,968- Total ₹ 29,41,083/- 6. Since these are only accommodation bills to the extent of ₹ 29.41,083/-, the AO held that assessee s pur .....

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der :- 3.2(a) I have gone through the assessment order as well as the submissions given by the assessee and it is seen that in this case sales are identifiable and quantitative tally is available on record. The alleged bogus purchases, are based on the statement and the assessment record of the third party, the said persons were not made available for cross examination nor the material found form the third party was made available to the assessee. Also, before the A. O. the said three parties ha .....

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the payments received from parties by cheques were deposited. in bank and on encashment of cheques, the same was returned to the persons, minus the commission. (iii) Thus, there was no actual sale of cloth/goods to these parties in question. (iv) AD based upon above has treated the entire purchases as unexplained and added back ₹ 29,41,083/- to the income of the appellant. (v) Subsequently, all the above mentioned 3 persons have filed affidavits stating that as far as appellant is concerne .....

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order itself that appellant must have purchased goods from open market, outside the books of account and to cover up the said purchases, obtained hawala bills. Hence, this clearly shows that there are purchases by the appellant - although now disputed and its consequent sales - which has been offered for taxation by the appellant. 3.2(b) The above facts clearly show that the AO could not have treated the entire purchases of ₹ 29,41,083/- as unexplained when AO has observed in para 19( c)( .....

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are fully accounted for and merely because the other parties viz. Mr. Rakeshkumar Gupta proprietor of Manoj Silk Mills, Mrs. Hema Gupta, proprietress Shree Ram Sales & Synthetics arid Mr. Mohit Gupta the proprietor of Astha Silk Industries have stated during the course of survey that they have not supplied the cloth/goods cannot result/become the basis of disallowance in appellant's case - unilateral uncorroborated evidence - CBI Vs S. C. Shukla 3 SCC 410 (1998) (SC). The issue to be dec .....

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r that although the purchases have been disputed by Mr. Rakeshkumar Gupta proprietor of Manoj Silk Mills, Mrs. Hema Gupta, proprietress Shree Ram Sales & synthetics and Mr. Mohit Gupta the proprietor of Astha Sillk Industries but then the appellant has sold these very items and booked the sales as in come offered the same for taxation the only addition to be made can be for possible leakages - relating to purchases - as they have become the subject matter of dispute - whether appellant In fa .....

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l serve the purpose because in this case as held by the AO in para 23 page 21 of the order all the cheques issued by the appellant to the 3 parties (Mr. Rakeshkurnar Gupta proprietor of Manoj Silk Mills, Mrs. Hema Gupta, proprietress Shree Ram Sales & Synthetics and Mr: Mohit Gupta the proprietor of Astha silk Industries) have been encashed after a period of 12 to 17 months - para 19(b) page 15 of the assessment-order and as stated by these parties in their statement on oath they were encash .....

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TAT Ahmedabad 'B' Bench 92 TTJ (Ad) 1126. A!so, the difference in GP rate on goods sold for which purchases are not disputed and goods sold on which purchases are disputed, will also need to be added back and which is as follows :- GP as per books on undisputed purchase 15.11% GP only on sales relating to purchases from 3 parties - Mr. Rakeshkumar Gupta proprietor of Manoj Silk fviills, Mrs. Hema . Gupta, proprietress Shree Ram Sales & Synthetics and Mr. Mohit Gupta the proprietor of .....

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ara 3.2(e) of ₹ 3 Lakhs and the GP additional of 1.93% of the disputed purchases of ₹ 29,41,083/15,90,154 (to be verified by AO). 8. Against the above order of CIT(A), both assessee and revenue are in appeal before us. 9. The assessee is aggrieved for the adhoc addition made by the CIT(A) as well as GP addition sustained by the CIT(A), whereas the revenue is aggrieved for deleting the addition made by the AO on account of bogus purchases. 10. We have considered rival contentions, car .....

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assessee, we found that assessee has shown purchases made from the three group concerns in the A.Y.2002-03, such as M/s. Manoj Mills, M/s. Astha Silk Industries and M/s. Shree Ram Sales & Synthetics amounting to ₹ 29,41,083/-. During the Survey Action conducted by the ITO 14-3 (2), Mumbai, in the premises of these parties, it was found that they are indulging in issuing accommodation (sales) bills and no transaction of any goods, which is confirmed in the statement recorded of the main .....

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said group concerns for the supply to customers - in absence of all these verifiable documents to substantiate the claim of purchases, these are not actual purchases, especially, when the said group concerns have disclosed their modus operandi of business that they issue only accommodation bills and get commission on that and in order to co-relate the sales bills issued, the purchase bills are prepared by themselves by getting the bill books printed in various fictitious firms. In view of the a .....

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e was neither any real purchase nor sales but merely issuing of hawala sales bills. Accordingly, the AO made addition of ₹ 29,41,083/- in respect of these three parties on account of accommodation bills. The CIT(A) has dealt with the quantitative details of purchase and sales and recorded a finding to the effect that assessee had sold the goods out of the purchase so made, thus, quantitatively there is no difference. So far as these three suppliers are concerned, the CIT(A) accepted the AO .....

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