TMI Blog2017 (11) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid observations direct the A.O to reduce the estimated profit rate of 12.5% (supra) by the profit percentage of 6.32% (supra) pertaining to the year under consideration. We thus in the backdrop of our aforesaid observations sustain the consequential addition at 6.18% [i.e. 12.5% (-) 6.32%] of the aggregate value of purchases made by the assessee from the aforesaid parties, viz. (i). M/s Rajendra Impex India; and (ii). M/s Newzone Multitrade Private Limited. That before parting we direct the A.O to verify the claim of the ld. A.R that the G.P rate declared by the assessee during the year under consideration worked out at 6.32%(supra) - I.T.A. No. 2732/Mum/2016 - - - Dated:- 1-9-2017 - SHRI G.S.PANNU, AM AND SHRI RAVISH SOOD, JM For The Appellant : Shri Mayur Kisnadwala, A.R. For The Respondent : Shri Shivaji B. Ghode, D.R ORDER PER RAVISH SOOD, JUDICIAL MEMBER The present appeal filed by the assessee is directed against the order passed by the CIT(A)-30, Mumbai, dated 19.02.2016, which in itself arises from the order passed by the A.O u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short the Act ), dated 19.03.2014. The assessee assail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajendra Impex India ABEPS2046P ₹ 26,87,748/- 27930587111V Newzone Multitrade Private Limited AAECM7719B ₹ 5,81,166/- Total RS. 32,68,914/- The A.O acting on the basis of the aforesaid information reopened the case of the assessee u/s 147 of the Act . 4. During the course of the assessment proceedings the A.O in order to ascertain the genuineness of purchases claimed by the assessee in its books of accounts to have been made from the aforesaid parties, viz. (i). M/s Rajendra Impex India; and (ii). M/s Newzone Multitrade Private Limited, thus issued notices u/s 133(6) of the Act to the said respective parties. The notices sent by the A.O were however returned undelivered by the postal authorities, with the remark not known . The A.O thus in the backdrop of the aforesaid facts called upon the assessee to produce the said parties for examination, as well as place on record documentary evidences to support the genuineness and veracity of the purchase transactions, viz. (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no reason for drawing of any adverse inferences in respect of the genuineness of the purchase transactions. The ld. A.R in order to drive home his aforesaid contention submitted that the payments in respect of the aforesaid purchase transactions were made to the supplier parties vide account payee cheques, and the documents supporting the veracity of the purchases under consideration were produced for verification before the A.O. The assessee thus tried to impress upon the CIT(A) that now when the genuineness of the purchase transactions had been established before the A.O, therefore, there was no reason for him to have drawn adverse inferences as regards the genuineness of the purchase transactions. The CIT(A) after deliberating on the contentions of the assessee in the backdrop of the facts of the case, however, did not find favor with the submissions of the assessee. The CIT(A) observed that the assessee had as a matter of fact failed to substantiate the genuineness of the purchases made by the assessee from the aforesaid parties, which as per the information received from the Sales Tax Department were providing bogus purchase bills. The CIT(A) thus observed that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edded in such amount of purchases could be brought to tax. The CIT(A) thus holding a conviction that the sole issue involved in the case before him was to fairly quantify the element of profit embedded in the bogus purchases claimed by the assessee to have been made from the aforesaid parties. The CIT(A) thus taking support of the judgment of the Hon ble High Court of Gujarat in the case of CIT Vs. Simit P. Sheth (2013) 356 ITR 451 (Guj) , wherein a similar issue was there before the High Court, as well as relying on the view arrived at by the Hon ble High Court in the case of CIT Vs. Vijay M. Mistry Construction Ltd. (2013) 355 ITR 498 (Guj) , wherein the order of the ITAT, Ahmedabad, Bench in the case of Vijay Proteins (58 ITD 428) was approved, thus concluded that there could be no uniform yardstick for estimating the rate of profit in respect of bogus purchases, as the same was bound to vary from business to business. The CIT(A) thus being of the considered view that the various Hon ble Courts had upheld an estimated profit involved in bogus purchases, in the range of 12.5% to 25%, thus concluded that an estimation of such profit could be fairly taken at 17.5% of the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricted the addition only to the extent of an estimated profit element of 12.1% (supra), and thus the assessee was not entitled for any further relief. It was thus submitted by the ld. D.R that the appeal of the assessee lacked any merit and was liable to be dismissed. 8. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We have given a thoughtful consideration to the facts of the case and are of the considered view that it remains as a matter of fact that the assessee had failed to substantiate the genuineness and veracity of the purchase transactions, which as claimed by him were made from the aforesaid parties, viz. (i). M/s Rajendra Impex India; and (ii).M/s Newzone Multitrade Private Limited. We are of the considered view that the CIT(A) had rightly observed that the only addition which could have been made in the hands of the assessee, in the backdrop of the facts involved therein, was in respect of the profit element embedded in the purchases made by the assessee from the unknown parties operating in the open/grey market. Thus, the issue involved in the present appeal boils ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered view that in the backdrop of the order of the coordinate bench of the Tribunal in the case of Madhukant B. Gandhi (supra) , the CIT(A) should have directed reduction of the gross profit rate declared by the assessee during the year under consideration, from the aforesaid initial profit rate so estimated by him, and not the average gross profit rate for the last three years. We have been informed by the ld. A.R that the G.P. rate for the year under consideration stood reflected at 6.32%. We thus in the backdrop of our aforesaid observations direct the A.O to reduce the estimated profit rate of 12.5% (supra) by the profit percentage of 6.32% (supra) pertaining to the year under consideration. We thus in the backdrop of our aforesaid observations sustain the consequential addition at 6.18% [i.e. 12.5% (-) 6.32%] of the aggregate value of purchases made by the assessee from the aforesaid parties, viz. (i). M/s Rajendra Impex India; and (ii). M/s Newzone Multitrade Private Limited. That before parting we direct the A.O to verify the claim of the ld. A.R that the G.P rate declared by the assessee during the year under consideration worked out at 6.32%(supra).The Ground of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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