TMI Blog2017 (1) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the payments made are supported by confirmation of the parties, copies of invoices, bank statements and further that none of the parties have named the assessee in their statements. Considering these circumstances, we hereby affirm the order of the CIT(A) in principle that the purchases cannot be treated as bogus. On conclusion of the CIT(A) is that even if, some of the purchases were not verifiable, the addition, if any, could be made only for the embedded profit. In this context, for assessment year 2010-11, the CIT(A) has examined the G.P rate declared by the assessee @11.67% and not that considering the nature of asessee’s business, the G.P rate of 10% is quite acceptable. Since the declared profit of 11.67% was more than the rate of 10%, the CIT(A) has chosen to delete the entire addition. In the absence of any infirmity in the action of the CIT(A), the same is affirmed. - ITA NOS.870 & 871/MUM/2015, CO.NO.132 & 133/MUM/2016 - - - Dated:- 25-1-2017 - SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER For The Revenue : Shri A. Ramchandran For The Assessee : S/Shri K. Shivram Rahul Hakani ORDER PER G.S.PANNU,A.M: The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port u/s 44AB of the LT. Act. 3.2 In the present case, the Sales Tax Department of Govt of Maharashtra after exhaustive investigation and recording statement of various hawala dealers have prepared a comprehensive list of traders who were providing bogus purchase bill without any delivery or transfer of goods and the assessee had never challenged the existence of the list published by the Sales Tax Department. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the Assessing Officer to delete the addition made on account of bogus purchases without taking into consideration the decision in the case of Juggilal Kamlapat Vs CIT 73 ITR 702 (SC), wherein it was held that the Assessing Officer could go behind the legal form and find out substance having regard to the economic realities behind the legal facade. 5. Whether on the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the Assessing Officer to delete the addition made on account of bogus purchases without taking into consideration the decision of the Hon'ble ITA T Delhi Bench in the case of DCIT Vs. Smt. Pho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment and maintenance of gardens through his proprietary concern M/s. Varad Vinayak Gardens. It has been explained that during the year under consideration, assessee has undertaken three activities, namely executing contracts for security; Garden developments maintenance; and, other Government supplies. In the course of assessment proceedings, the Assessing Officer had noted that assessee had made purchases from certain parties, whose names appeared in the list provided by the sales tax department of Maharashtra, which were providing only accommodation bills. A survey under section 133A of the Act was also carried out at the business premises of the assessee on 07/01/2013. The impugned assessment has been carried out as a consequence of a notice issued under section 148 of the Act dated 26/03/2013, after recording reasons that certain income chargeable to tax had escaped assessment. In the ensuring assessment, the Assessing Officer show caused the assessee as to why purchases made through 26 parties totalling to ₹ 4,75,06,338/- be not considered as bogus and it was based on the information collected from the sale tax department of Maharashtra and during the course of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared by the assessee at 8.60% and 10.00%, which was considered as an acceptable level of G.P. As a consequence, for assessment year 2011-12, the CIT(A) retained a disallowance of ₹ 17,27,223/- as against the addition of ₹ 2,32,86,685/- made by the Assessing Officer. Ostensibly, the CIT(A) not only differed with the Assessing Officer on the issue of bogus purchases, but also changed the basis of the part addition retained by her. 5. In the above background, we have heard the rival parties and the relevant material has been perused. Before us, the Ld. Departmental Representative has vehemently pointed out that the CIT(A) has wrongly proceeded to make an addition based on the gross profit rate, whereas the Assessing Officer had made a specific addition on account of unverified purchases under section 68 of the Act. 5.1 On the other hand, Ld. Representative for the respondent assessee has pointed out that the Assessing Officer was not justified in making the addition merely because the parties did not respond, whereas the material on record showed that the purchases were supported by relevant bills, entries in the books of account and the payments were made by acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee @11.67% and not that considering the nature of asessee s business, the G.P rate of 10% is quite acceptable. Since the declared profit of 11.67% was more than the rate of 10%, the CIT(A) has chosen to delete the entire addition. In the absence of any infirmity in the action of the CIT(A), the same is affirmed. 6.2 In assessment year 2011-12 also the CIT(A) has deleted the addition on account of purchases on the same ground as in assessment year 2010-11. The only difference is that in assessment year 2011-12, assessee has declared a G.P rate of 8.60%, which according to the CIT(A) was less than the normal acceptable G.P rate of 10% in such line of business. To the extent of the difference, she has retained an addition of ₹ 17,27,223/-. On this aspect also, we find no reason to interfere with the decision of the CIT(A), which is quite reasonable and is based on a plausible reasoning. Thus, in assessment years 2010-11 and 2011-12, the orders of CIT(A) are affirmed and accordingly Revenue fails in both the assessment years. 7. In so far as the respective Cross Objections are concerned, the same are also dismissed in the absence of any serious persuasion by the Ld. Repr ..... 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