TMI Blog2017 (9) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... r The Assessee : Shri Vimal Punmiya and Shri Bharat Kumar For The Revenue : Shri Ram Tiwari ORDER PER R.C.SHARMA (A.M) : These are the appeals filed by the revenue and assessee against the order of CIT(A)-30, Mumbai 04/12/2015 for the A.Y.2009-10, 2010-11 and 2011-12 in the matter of order passed u/s.143(3) of the IT Act. 2. The following grounds have been taken by the assessee:- For A.Y. 2009-10 2011-12 1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in estimating profit @ 17.50% on alleged bogus purchases of ₹ 27607616/-. Provisions of the Act ought to have been properly construed and regard being had to facts of the case profit should not have been estimated @ 17.50% instead of profit declared by the appellant. Reasons assigned by him are wrong and insufficient to justify estimating profit @ 17.50% on such purchases. 2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in rejecting claim of the appellant that proceeding initiated under section 147 of the Act by issuing notice under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. 6. At the outset, Learned AR pointed out that tax effect in the appeals filed by the revenue for the A.Y.2010-11 and 2011-12 are below 10 lakhs, therefore, in view of CBDT Circular No.21/2015 dated 10th December, 2015, these appeals deserve to be dismissed. 7. We have gone through the orders of the authorities below and found that all the appeals for A.Y.2009-10, 2010-11 2011-12 were disposed by CIT(A) vide consolidated order dated 04/12/2015, wherein totality of tax effect was more than 10 lakhs, accordingly, CBDT Circular dated 10th December 2015 is not applicable in the instant case. 8. Rival contentions have been heard and record perused. 9. Facts in brief are that during the course of scrutiny assessment, AO found that assessee has made purchases from some of the parties who were found to be bogus in so far as these were not traceable at the addresses given by the assessee. In his order AO observed that Information was received in this case from the Office of DGIT (Inv.), that this assessee has taken accommodation entries from certain parties to inflate its purchases. An inquiry u/s. 133(6) of the IT Act, 1961 in a number of scrutiny cases, including in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn that the eight parties in question were non-existent. The appellant has not been able to disprove the findings of the Ld. AO regarding the non-existence of the parties. Ld. AO has, after examining the evidences, found that the appellant did not purchased the goods from the said parties, at the same time he has not disturbed the sales of the goods and income offered on such sale of goods. In this case, Ld. AO has not disputed the quantitative details and also day to day stock register maintained. The appellant being a trader of goods, Ld. A.O. not having doubted the genuineness of sales, could not have gone ahead and made addition in respect of peak balance on such purchases. Thus, the issue would boil down to finding out the element of profit embedded in bogus purchases which the appellant would have made from some unknown entities. Hence, respectfully following the decision of the Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd. (supra), it is concluded that the profit margin embedded in such amounts of purchases could only be disallowed and subjected to tax. 2.7.20 Having decided that the profit margin only to be subjected to tax, now we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal estimated an element of profit percentage of the overall purchase price accounted for in the books of accounts through fictitious invoices. 2.7.22 Further, in the case of M/s. Sanket Steel Traders (ITA No. 2801/Ahd/ 2008 dated 20-05-2011 it was, inter-alia, stated as under: 3. At the time of hearing before us, it is submitted by the Learned Counsel that the addition sustained is excessive. In support of this contention he referred to the decision of the Tribunal in the case of lTO vs. Sun Steel 92 TTJ (Ahd) 1126 wherein the Tribunal has sustained the addition of ₹ 50,000- on account of bogus purchases. However, we find that the facts in the above case were different. In the above case, the assessee has shown purchases of ₹ 27,39,410/-, sale of ₹ 28,17,207/~ and Gross Profit at ₹ 94,740/-, The Assessing Officer made the addition of f 27,39,407/- for bogus purchases. If the above sum is added to the Gross Profit, the Gross Profit works out f 2,83,41,247/- which was more than the sale itself. The Tribunal held that it is impossible that the Gross Profit is more than the sale itself. The Tribunal also found that the assessee has maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the appellant in the submissions (which is around 7% as per the calculation for the previous three years) and to reduce the same from the estimated net profit of 17.5% on the purchases made from the seven/eight parties. As directed earlier, on verification, if there are no purchases made from M/s Vardhaman Trading co as claimed by the appellant and appears to be true, the same needs to be removed for arriving the GP on the bogus purchase parties. Accordingly, the ground of appeal is partly allowed. 14. Against the above order of CIT(A), both assessee and revenue are in further appeal before us. We have considered rival contentions and carefully gone through the orders of the authorities below and also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. From the record, we found that AO has made addition in respect of purchases found to be bogus as per the information from sales tax department. In the appellate proceedings, the CIT(A) recorded a finding to the fact that AO has not disputed the quanti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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