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Apollo Heat Exchangers Private Limited Versus Assistant Commissioner of Income-tax, Circle-4, Thane

Bogus purchases - assessee having made alleged purchases from accommodation entry providers i.e. hawala dealers - bogus bills with no actual purchases - Held that:- The said party Nutan Metals has confessed before sales tax authorities that they are engaged in providing accommodation entries without supplying any material physically wherein only bogus bills are issued. The said party has allegedly issued bills to the tune of ₹ 56,55,569/- to the assessee. The said information was received .....

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and to save on VAT, grey market profits etc. has obtained bogus invoices from the said party namely Nutan Metals. The consumption/utilization of the material reflected by the said bogus invoices stood proved while the GP already declared is 31.91% which included these alleged purchases, which has already suffered tax. End of justice in this case will be best served in this if addition is sustained to the tune of 6% of the purchases to the tune of ₹ 56,55,569 so made from Nutan Metals, whic .....

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of Income Tax (Appeals)- 3, Mumbai (hereinafter called the CIT(A) ), for assessment year 2011-12 and 2012-13 respectively, appellate proceedings before learned CIT(A) arising from separate assessment orders dated 05-03-2015 and 24-03- 201 passed by learned Assessing Officer (hereinafter called the AO ) u/s 144 r.w.s. 147 of the Income-tax Act, 1961 (hereinafter called the Act ). 2. These two appeals involve common issue of disallowance of purchases on the allegation of the assessee having made a .....

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he AO received information from Sales Tax Department that the assessee has made purchases from Nutan Metals to the tune of ₹ 56,55,569/- who is engaged in providing accommodation hawala entries wherein only bogus bills are issued without supplying any material and the assessee is one of the beneficiary of such accommodation entry. The case was reopened by the AO u/s 147 of the 1961 Act by the AO by issuance of notice dated 23-04-2013 u/s 148 of the 1961 Act, which was issued within four ye .....

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tted ledger copies, purchase bills along with delivery challans, stock records etc. and also submitted that payments to Nutan Metals were made by account payee cheque. The assessee claimed that purchases were genuine. The details of purchases, utilization of material and manufacturing process were all explained by the assessee before the AO. There is no adverse comments about the same by the AO so far as proving the utilization and consumption of material so purchased for manufacturing finished .....

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rather only bogus invoices were issued, which proves that purchases shown to be made from Nutan Metals is bogus. It was observed by the AO that keeping in view factual matrix of the case, it is clear that the assessee made purchases from grey market to tally stock as the assessee was in possession of stock while bogus bills were obtained from Nutan Metals. Thus, the assessee benefited by way of margin of grey market. The books of accounts were rejected and the AO estimated GP of 31.91% on these .....

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u/s 144 r.w.s. 147 of the 1961 Act., vide appellate order dated 16-06-2016. 5. The assessee has come in appeal before the tribunal. The learned DR would rely on the appellate order of the learned CIT(A) to contend that the same may be confirmed while none appeared for assessee despite notice being served on the assessee. 6. We have heard contentions of learned DR and also perused the material available on record. The brief facts of the case are that assessee company is manufacturer of heat excha .....

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e of the beneficiary of such accommodation entry. The case was reopened u/s 147 of the 1961 Act by the AO by issuance of notice dated 23- 04-2013 u/s 148 of the 1961 Act, which was issued within four years from the end of the assessment year. The reasons for reopening was supplied by the AO to the assessee and in response to notice u/s 148, the assessee submitted that the return of income filed by the assessee u/s 139(1) of the 1961 Act may be treated as return filed in response to notice u/s 14 .....

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ee before the AO. It was explained by the assessee that the goods have been entered into stock and the bin card summary of purchases and sale of the party was enclosed. Thus, utilization and consumption of the material so reflected in alleged purchases from Nutan Metals for manufacturing of finished goods stood proved which is not controverted by Revenue. However, the assessee despite being asked to produce the said party Nutan Metals did not produce the said party before the AO nor notices u/s .....

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hus, the assessee benefited by way of margin of grey market. The books of accounts were rejected u/s 145(3) and the AO estimated GP of 31.91% on these alleged bogus purchases from Nutan Metal to the tune of ₹ 56,55,569/- and income of ₹ 18,04,692/- was brought to tax by the AO vide assessment order dated 05-03-2015 passed by the AO u/s 144 r.w.s. 147 of the 1961 Act which was confirmed by learned CIT(A). Reference is drawn to decision of Hon'ble Supreme Court in the case of Kachw .....

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record or document to verify the basis of the valuation of the closing stock shown by the assessee. The assessee is not able to prepare such details even with the help of books of account maintained, purchase bills & Sale Invoices. 3. Provisions of section 145(3) are clearly attracted in this case. 4. The genuineness of purchases to the extent of ₹ 42 lakhs (approx.) is not proved without any doubt. 5. The GP rate declared by the assessee at 13.49 per cent during the assessment year is .....

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e were rejected by the Assessing Officer and he resorted to best judgment assessment under section 144 of the Income-tax Act. The view that the case of the assessee is more or less having similar facts as that of M/s. Gem Plaza where the Gross Profit has been taken as 35.48 per cent. The Assessing Officer estimated the Gross Profit of the assessee as 40 per cent. 6. The Assessing Officer further held that the assessee has shown bogus purchases in order to reduce the Gross Profits. 7. In appeal, .....

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ith the same in this appeal. As regards the rejection of the books of account, cogent reasons have been given by the income-tax authorities for doing so, and we see no reason to take a different view. 11. It is well-settled that in a best judgment assessment, there is always a certain degree of guess work. No doubt the authorities concerned should try to make an honest and fair accounts. In our opinion, there was no arbitrariness in the present case on the part of the income-tax authorities. Thu .....

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n entries without supplying any material physically wherein only bogus bills are issued. The said party has allegedly issued bills to the tune of ₹ 56,55,569/- to the assessee. The said information was received by Revenue from Sales Tax Department wherein the assessee is stated to be beneficiary of the accommodation entry provided by Nutan Metals. Notices u/s 133(6) by the AO to the said party remained uncomplied with by Nutan Metals and the assessee could not produce the said party before .....

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