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TMI Blog2017 (9) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. Rs. 10,21,467/- held as Bogus/Non-genuine Purchases by the Assessing Officer mentioned in Para 3 of the Appeal Order. The C.I.T. has arbitrarily estimated this on the basis of G. P. Ratio of the Appellant. The learned C.I.T. (A) erred in estimating his income at too high a figure and results into unfair, unjust and illogical addition. Because of arbitrary assessment the appellant is put to greater hardship and prays for fair treatment, in these present proceedings. 2. The learned C.I.T. (A) has erred in sustaining addition/disallowance to the extent of Rs. 29,301/- in respect of short booking of Receipts as per 26AS statement Rs. 9,49,336/- vis-a-vis Ledger Account at Rs. 9,20,035/- in case of one of the customer of the appellant M/s. Shree Krishna Controls Pvt. Ltd. mentioned in Para 5.1 of the Appeal Order. Addition merely on the basis of transactions reported in Form 26AS is unreasonable, unjust, biased and unfair, to the appellant. 3. The appellant craves for cancellation of the unfair assessment in unjust and arbitrary manner for the reliefs, sought above, the appellant prays." 3. At the outset, we find that this appeal is filed late by 7 days by the assessee, beyo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the A.O. to the following parties to verify the genuineness of purchases made by the assessee from the following parties:- M/s Prarthi Trading Co. M/s Krish Corporation M/s Kantilal Brothers M/s Inspire Traders The notices issued to all the above parties were returned un-served by the postal authorities, except in the case of M/s Kantilal Brothers, however, there was no compliance even from this party to whom the notice u/s 133(6) was served. It was observed by the AO that in some of the cases, where the parties were notified by the sales tax authorities as suspected to have been engaged in issuing bills without delivery of materials, addresses were not provided by the assessee. The assessee was asked to substantiate the genuineness of the purchases by producing the parties/furnishing evidences with confirmation. The assessee was show caused by the AO to substantiate the genuineness of the purchases wherein letter was issued to the assessee by the AO, the relevant portion of the letter is reproduced below:- "Sub: Assessment proceedings in your case for the A.Y. 2011-12 - reg. Please refer to the above. 1. Notice u/ s 133(6) issued to the following partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e genuineness of the purchases. The AO also observed that the assessee has also not produced evidences in support of the delivery and transport of material allegedly supplied by these parties. The A.O. observed that the parties from whom the alleged purchases were made by the assessee are all in the notified list of Sales Tax Department as entities who were involved in issuing of bills without actual supply/delivery of material. Thus, the A.O. observed that the assessee has failed to substantiate the genuineness of the purchase transaction in spite of opportunity provided to the assessee to produce the party and substantiate its genuineness. The A.O., therefore, added an amount of Rs. 34,09,991/- as unproved purchases being held to be bogus purchases by the AO, vide assessment order dated 28- 03-2014 passed by the AO u/s 143(3) of the 1961 Act. 5. Aggrieved by the assessment order dated 28-03-2014 passed by the A.O. u/s 143(3), the assessee carried the matter in appeal before the ld. CIT(A). 6. Before the ld. CIT(A), the assessee submitted that the copies of the invoices from various parties were filed before the A.O. whereby the proper name, address, contact no. and VAT registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce the parties for verification and the assessee could not produce any evidence in support of the delivery and transport of the materials from the bogus suppliers. Thus, the ld. CIT(A) concluded that the assessee had taken bogus bills and the assessee failed to establish that the raw materials were purchased from the party which has issued the bills and hence inflation of purchases is now to be estimated based on facts of the case. The learned CIT(A) concluded that the assessee procured material from some other sources or it was from the suppressed stock of the preceding years. The learned CIT(A) observed that the assessee had declared GP at 29.13%. The total purchase of Rs. 2.57 crores had been debited to Profit and Loss Account, out of which purchases to the tune of Rs. 34,09,991/- had been disallowed. The assessee stated that the disallowance of Rs. 4,91,514/- was on account of error or wrong identification on the side of supplier. Thus, as per learned CIT(A), the purchase disallowance should have been restricted to Rs. 29,18,477/- by the AO. The ld. CIT(A) accordingly estimated disallowance @35% of purchase price to be reasonable disallowance and accordingly worked out di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment u/s 143(2) r.w.s. 143(3). The A.O. in order to verify purchases issued notice u/s 133(6) of the Act to the parties from which the assessee made purchases, wherein notices returned unserved in all cases except one case, while even in this one case where the notice u/s 133(6) was served, there was no compliance to the said notice. The assessee was asked to produce the parties which the assessee failed to produce. The said parties were listed as alleged accommodation entry providers by Maharashtra VAT authorities, wherein these alleged bogus dealers had deposed before MVAT authorities that they were merely issuing bills without supplying any material. The assessee delayed the submissions of details during assessment proceedings wherein replies were submitted on 18-02-2014 when the matter was getting time barred in March 2014 while notices were first issued by the AO to submit these details in the month of November 2013, which as per AO prevented AO from making further enquiries in the mater. It is only claimed by the assessee that payments were made by account payee cheques and invoices are available. The assessee did not produce any evidence to substantiate delivery and tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-11 that consumption of material which was around 54.5% (approx) for the financial year ended 31-03-2009 (pb/page30) and 31- 03-2010(pb/41) has suddenly gone up to 66% in the subject assessment year 2011-12(FY 2010-11)(pb/page 3) and in the same period GP ratio also fell from 37%(approx) for FY 2008-09 and 2009-10 to 29% in FY 2010-11, which the assessee did not explained to the authorities below at all nor details of consumption/utilization of these material for manufacture of finished products was brought on record by the assessee. Keeping in view peculiar factual matrix of the case where no consumption/utilization of the material for manufacture of finished goods as well fall in GP ratio was not explained by the assessee nor genuineness of the purchases stood proved, the matter needs to go back to the A.O. for de-novo determination of the issue on merits in accordance with law. As such, the appellate order of the ld. CIT(A) is set aside and matter is sent back to the file of A.O. for denovo determination of the issue on merits in accordance with law. The assessee is directed to file evidences and explanations including utilization and consumption of the material for manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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