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TMI Blog2017 (8) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 27-03-2014 passed by learned Assessing Officer (hereinafter called "the AO") u/s 143(3) of the Income-tax Act, 1961 (hereinafter called "the Act"). 2. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") read as under:- "1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred by not verifying and examining whether quantity of alleged bogus purchases made and their corresponding sales is accounted in the books of accounts. During the assessment proceedings the assessee failed to establish the facts and discharge his onus. In this case the purchases were entirely bogus where the parties were not tracea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om DGIT (Inv.) Mumbai regarding bogus purchases as informed by the Sales Tax Department, in which the assessee company appeared as one of the beneficiaries for the transaction of Rs. 82,54,793/- with the alleged entry operators, the details of which are as under:- Sr No Name of the party PAN TIN F.Y. Amount involved(Rs) 1 Somnath International AISPG1601K 27470616755V 2019-11 1,60,538 2 M R Corporation BFLPS4883N 27710551730V 2010-11 4,36,255 3 Viva Trading Pvt. Ltd. AADCV3609A 27040801631V 2010-11 22,50,000 4 Pluto Multitrade P. Ltd. AAFCP5947B 2792079455IV 2010-11 54,08,000 Total 82,54,793 The assessee had submitted list of purchase vouchers, gross total of purchase material, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodation entries to the assessee by issuing bogus bills without supplying any material. The notices issued to the said parties u/s 133(6) of the 1961 Act has returned unserved. The AO observed that onus of proving genuineness of the purchase transaction is on the assessee as the said purchases to the tune of Rs. 82,54,793/- stood debited in Profit and Loss Account of the assessee, which onus the assessee failed to discharge that said purchases were genuine. The AO held that transaction of purchase of material to the tune of Rs. 82,54,793/- from these four parties are nothing but a colorable devices using forged and fabricated bills for the purposes of evasion of income-tax. The A.O. made addition of entire alleged bogus purchases from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five years works out to 17.6% which according to the AR should be the basis for making the addition. 5.1 While dealing with a similar issue, the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Sheth (356 ITR 451) had endorsed the stand of the CIT(A) who held that when all the sales have been accepted by the AO, he could not possibly question the very basis of their purchases. The Hon'ble High Court had accordingly held that the only element worthy of addition in such a case would be the element of profit and not the purchases. In the instant case, it is seen that the appellant has come forward with a request that it may be charged to tax only to the extent of the addition arising on account of the profit made out of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplying material, for production of finished goods. The learned DR submitted that learned CITA(A) erred in applying GP ratio to these alleged bogus purchases in the absence of the assessee proving consumption/ utilization of the material for producing finished goods. It is submitted by learned DR that the assessee failed to prove genuineness of these alleged purchase transactions from hawala entry providers. Under these circumstances the learned DR submitted that the matter needs to be set aside and restored to the file of the A.O. for re-determination of the issue after verifying the consumption/utilization of the material for manufacturing of finished goods. 8. We have considered rival contentions and also perused the material availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t prove genuineness of the purchase transactions. In the absence of utilization/consumption of the material so purchased from these alleged entry providers being proved for manufacturing of finished goods, there is always possibility of manipulations to suppress profits and evade taxes and hence it is critical for the assessee to prove utilization/consumption of these material so purchased for manufacturing of finished goods dealt with by the assessee. In our considered view keeping in view factual matrix of the case and in the interest of justice to both the parties, the matter needs to be set aside and restored to file of A.O. for denovo determination of this issue by the AO on merits in accordance with law and the assessee is hereby dire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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