TMI Blog2017 (8) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... eding financial years. We further observe that the assessee might have saved the tax portion embedded in such purchases. If we take into account the average gross profit declared by the assessee and the probable savings on account of tax portion on bogus purchases, the assessee might have saved a profit of 6-7% on those alleged bogus purchases. Therefore, considering the facts and circumstances of the case and also to meet the ends of justice, we deem it appropriate to direct the AO to estimate profit of 7% on alleged bogus purchases from those parties. Addition towards difference in credit balances in 3 parties’ accounts - Held that:- We observe that it is quite possible in business transactions that there may be variance in bill of cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2010-11 on 30-09-2009 declaring total income at ₹ 19,93,060. The case was selected for scrutiny and statutory notices u/s 143(2) and 142(1) were issued. In response to the notices, the authorized representative of the assessee appeared and filed necessary details, as called for. During the course of assessment proceedings, the AO noticed that the assessee has shown huge sundry debtors and creditors. He, therefore, asked the assessee to furnish complete details of purchase and sundry creditors with their names and addresses to carry out verification of the parties by issue of notice u/s 133(6) of the Act on a test basis. The AO further observed that out of the parties to whom notices were issued, notices in three cases we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces appearing in the books of the assessee and the balance confirmed by those parties may be due to price variation, discounts, quality claims, free transactions, etc. Since those parties are having regular business and are having running accounts, the assessee had not reconciled their books of account nor ascertained the balances in the books of those parties, a future date may be give to reconcile and rectify the errors. The AO rejected the request of the assessee for reconciliation and, therefore, held that the assessee failed to explain satisfactorily with necessary evidences. Accordingly, he made additions of ₹ 7,09,432. Aggrieved by the assessment order, assessee preferred appeal before CIT(A). 4. Before CIT(A), assesseee rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties have not responded to the notices. 6. Having heard both the sides and considered material on record, we find that the assessee has furnished certain evidences including purchase bills, corresponding sales bills and also payment details for the purchases made from those parties. We further observe that the AO has not pointed out any irregularities in the books of account maintained by the assessee nor made out any case of difference in stock records maintained by the assessee. The AO never doubted sales declared by the assessee. He made additions only on the ground that notices issued u/s 133(6) were returned by the postal authorities with the remark, not known . Therefore, we are of the considered view that the AO was erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO noted that out of the confirmations furnished by the creditors, there is a difference in 3 parties accounts. The AO further observed that the assessee has not explained the difference in parties accounts with necessary evidences. It is the contention of the assessee that there is no difference in balances appear in the parties accounts as those parties are having regular business and the accounts are running accounts. The assessee further contended that the purchases are made from the parties are supported by proper purchase invoices and the payments have been made through proper banking channels. Therefore, there is no question of any difference in balances appeared in assessee s books of account and balances confirmed by the par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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