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TMI Blog2017 (11) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... ding A.O's action of reopening of assessment u/s.147 of the Act which is bad in law. 2. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of A.O considering purchases from certain parties aggregating to Rs. 32,68,914/- as Bogus Purchases and directing the A.O to make addition by estimating profit (c) 17.5% as reduced by the average gross profit ratio of last three years, of the alleged bogus purchases. 3. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of A.O in levying interest u/s 234B and 234C of the Act. The appellant craves to leave to add, alter, amend, delete or modify any of the above referred grounds of the appeal." 2. The assessee is an Individual engaged in the business of trading in ferrous and non-ferrous metals as a sole proprietor under the name and style of M/s Hi-Tech Metal & Tubes. The assessee had filed his 'return of income' for the year under consideration, viz. A.Y. 2009-10 on 28.09.2010, declaring total income of Rs. 15,02,920/-. The 'return of income' of the assessee was processed as such u/s 143(1) of the 'Act'. The case of the assessee was thereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. The A.O after deliberating on the material produced by the assessee, therein concluded that though it remained as a matter of fact that the assessee had not made any genuine purchases from the aforesaid bogus parties, nevertheless the purchases themselves were not bogus. The A.O thus in the backdrop of the aforesaid facts holding a conviction that as the assessee had not made any purchases from the aforementioned bogus parties, but from unknown parties operating in the open/grey market, therefore, it could safely be concluded that the purchases actually made by the assessee were sourced out of his undisclosed income. The A.O thus in the backdrop of his aforesaid view made an addition of the peak investment of Rs. 32,68,914/- in respect of the purchases made by the assessee from the aforesaid parties and added the same to his total income u/s 69C. 5. The assessee being aggrieved with the order passed by the A.O, therein carried the matter in appeal before the CIT(A). That during the course of the hearing of the appeal it was submitted by the assessee that though the genuineness and veracity of the purchase transactions was duly substantiated during the course of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a clear case where the genuineness of the purchase transactions could not be established by the assessee. The CIT(A) observed that though the A.O had not doubted the genuineness of the sales, but it remained as a matter of fact that the assessee had made the purchases of the goods, though not from the parties in question, but from unknown parties operating in the open/grey market. It was thus concluded by the CIT(A) that though it remained as a matter of fact that the assessee had not made any genuine purchases from the aforesaid bogus parties, nevertheless the purchases themselves were not bogus. 6. The CIT(A) in the backdrop of his aforesaid observations concluded that now when the A.O had not doubted the genuineness of the sales, therefore, he could not have gone ahead and made an addition in respect of the peak investment in respect of the correlating purchases. It was observed by the CIT(A) that now when the A.O had recorded a finding that the assessee had made purchases, though not from the aforesaid parties, but from certain unknown parties, therefore, an addition towards the peak investment in respect of the said purchases was not justified. The CIT(A) thus concluded that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing aggrieved with the order of the CIT(A) had carried the matter in appeal before us. The ld. Authorized Representative (for short A.R) at the very outset submitted that he was not pressing ground of appeal no. 1, wherein the validity of the reopening of the assessment u/s 147 was assailed before us. That in light of the concession of the ld. A.R, the Ground of appeal No. 1 is dismissed as not pressed. The ld. A.R restricted his submissions in respect of the estimated addition of 12.1% [i.e. 17.5% (-) 5.4%] as had been upheld by the CIT(A) in respect of the aggregate value of the bogus purchases of Rs. 32,68,914/-. It was submitted by the ld. A.R that as the assessee was a trader in ferrous and non-ferrous metals, therefore, the addition of 12.1% (supra) sustained by the CIT(A) was highly exorbitant. The ld. A.R averred that the addition in respect of the bogus purchases in all fairness may be restricted to 5%, keeping in view the nature of business of the assessee. Per contra, the ld. Departmental Representatives (for short D.R) in order to drive home his contention that already a substantial relief had been allowed to the assessee by the CIT(A), therein submitted that the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on the sale of such goods in its 'books of accounts', and offered for tax, in all fairness was liable to be reduced from the aforesaid estimated profit rate of 17.5%. We find that the CIT(A) after taking cognizance of the average G.P. rate of 5.4% of the assessee for the last three years, had reduced the same from the estimated profit of 17.5% (supra). Thus, the CIT(A) on the basis of his aforesaid observations had sustained an addition of 12.1%(supra) of the aggregate value of the bogus purchases made by the assessee. We have given a thoughtful consideration to the facts involved in the case of the present assessee and after deliberating on the observations arrived at by the CIT(A) find ourselves to be in agreement with his view that the addition in the backdrop of the facts involved in this case, was liable to be restricted only to the extent of the profit element which was embedded in the bogus purchases claimed by the assessee to have been made from the aforesaid parties, viz. (i). M/s Rajendra Impex India; and (ii). M/s Newzone Multitrade Private Limited. We however are of the considered view that the CIT(A) in the backdrop of the facts of the case should have in all fai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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