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M/s. Nikopas Engineering Pvt. Ltd. Versus ITO 2 (2) (3) Mumbai

Bogus purchases - Estimation of possible profit out of purchases made through non-genuine parties - Held that:- Since purchases were not bogus but were made from parties other than those mentioned in the books of account, only profit element embedded in such purchases could be added to assessee’s income. See CIT vs. Simit P. Seth [2013 (10)1028 - GUJARAT HIGH COURT ] - In view of the above, the order of the learned CIT(A) directing the AO to estimate 12.5% of the bogus purchases of ₹ 2 .....

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Mumbai and arises out of order u/s 143(3) r.w.s 147 of the Income Tax Act 1961(the Act ). 2. The grounds of appeal filed by the assessee read as under:- a. On the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals) has erred in law in confirming the addition @ 12.50% ₹ 3,20,927/- on the purchases of ₹ 25,67,420/- without appreciating the actual facts of the case. The appellant prays that the addition of ₹ 3,20,927/- be deleted. b. On th .....

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e sheet. Appellant prays that the addition of ₹ 143,438/- being 12.50% of ₹ 11,47,500/- confirmed by the Learned Commissioner of Income Tax be deleted. 3. In a nutshell, the facts are that the Assessing Officer(AO) noted that as per the information received from Sales Tax Department the assessee was involved in taking entries of bogus purchases from the following parties: 1 M/s. Nikhil Enterprises ₹ 2,75,625/- 2 M/s. Sambhav Sales Corp. ₹ 8,71,875/- 3 M/s. Payal Enterpris .....

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he AO, the assessee filed submissions. The AO having examined the same found the following features: i. The assessee company has stated that the mentioned above parties are not available. The genuineness of said purchases cannot be verified as the assessee is unable to give present address of the said parties, and also unable to produce the said dealers/parties. ii. Transport receipt is not provided. iii. The assessee company has stated in its submission that the company is assembling small part .....

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from the said tainted dealers. 3.1 In view of the above, the AO made addition of ₹ 26,78,795/- as suppressed profit by way of bogus purchases. 4. The assessee preferred an appeal before the learned CIT(A). The learned CIT(A) reduced ₹ 1,11,375/- (evidence for which was produced before him stating the said purchases which had been written off in A.Y. 2010-11 and offered to tax) from ₹ 26,78,795/-. We find that the learned CIT(A) took into account an identical case where bogus p .....

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submitted by him that the parties concerned were proper traders in the markets, who have delivered the goods to the assessee. These parties were registered with Sales Tax Department. These parties may have avoided payment of VAT. It is submitted that during the course of assessment proceedings before the AO, the details of purchases made from these parties, corresponding sales, copy of security/goods inward register maintained at the factory, certificate from bank certifying the payments were s .....

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Tarla S. Shah (ITA No. 5295/Mum/2013) - ITAT E Bench, Mumbai; Shri Hiralal Chunilal Jain vs. ITO (ITA No. 4547/Mum/2014) - ITAT H Bench, Mumbai; M/s. Imperial Imp & Exp vs. ITO (ITA No. 5427/Mum/2015) - ITAT I Bench, Mumbai; ITO vs. Shri Paresh Arvind Gandhi (ITA No. 5706/Mum/2013) - ITAT C Bench, Mumbai; DCIT vs. Shiv Sankar R. Sharma (2016) 48 CCH 0143 Mum-Trib and Shri Govind Bhilu Rathod Vs. ITO (ITA No. 439/Mum/2016). 6. The learned DR supports the order passed by the learned CIT(A). 7 .....

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certified that as the company has not maintained any stock record, it is not possible to give quantitative details. 7.1 The learned counsel of the assessee has placed reliance on the order of the ITAT as mentioned at para 5 here-in-above. However, we have the benefit of having the judgement of the Hon'ble Gujarat High Court in Simit P. Sheth (supra) on similar issues. In that case, the assessee was engaged in business of trading in steel on wholesale business. The AO having found that some a .....

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