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TMI Blog2017 (11) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of the case and in law, the Ld. CIT(A) was justified in sustaining only an addition @ 6.5% profit rate on total purchases of Rs. 3,61,50,427/- made from 13 parties. 3. The appellant prays that the order of the Learned CIT(A) on the above grounds be set-side and that of the A.O be restored. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 2. Briefly stated, the facts of the case are that the assessee who is a reseller in Ferrous and Non-Ferrous Metals had filed his return of income on 26.09.2009, declaring total income of Rs. 5,51,310/-. The return of income filed by the assessee was processed as such u/s 143(1) of the 'Act'. That on the basis of information received from the DGIT (Inv.), Mumbai that the assessee was one of the beneficiaries of the accommodation entries provided by some of the MVAT dealers who were providing bogus purchase bills without supplying any goods, the case of the assessee was reopened u/s 147 of the 'Act'. 3. That during the course of the assessment proceedings the A.O on the basis of the information received from the DGIT (Inv.), Mumbai observed that the assessee had tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umentary evidence, therefore, observed that the assessee had failed to discharge the onus as was so cast upon him. The A.O after deliberating on the facts of the case concluded that in the absence of the relevant supporting documents which could go to evidence the genuineness of the purchase transactions claimed by the assessee to have been made from the aforementioned parties, the same could not be allowed as an expenditure, by observing as under : "(i) It is pertinent to mention here that the Sales Tax Department has conducted independent enquires in each of the hawala parties and conclusively proved that these parties are engaged in the business of providing accommodation entries only. All of the above documents establish beyond doubt that the aforesaid parties did not supply any goods to the assessee. The parties are issuing bills without delivering any goods and services. The payments received by these parties are returned to assessee in cash after deducting a small portion for commission. (ii) It may also be pointed out here that the Sales Tax information about bogus billers is not the sole basis and investigation has been carried out under the I.T. Act and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried the matter in appeal before the CIT(A). The CIT(A) at the very outset upheld the reopening of the assessment u/s 147 which was assailed before him by the assessee. The assessee further submitted before the CIT(A) that in the backdrop of the fact that the GP Rate for the year under consideration was 4.2%, therefore, disallowance of 25% of the total alleged non-genuine purchases of Rs. 3,61,50,427/-(supra) resulting into an addition of Rs. 90,37,607/- (supra) made by the A.O was uncalled for. The assessee submitted before the CIT(A) that the A.O discarding the substantial documentary evidence, viz. bank statements, copies of ledger accounts along with details of payments made to the aforementioned parties towards purchase consideration, as well as details therein correlating the sales made against the aforesaid purchases were placed on the record of the A.O during the course of the assessment proceedings, had therein merely on the basis of suspicion characterized the transactions of purchase of goods by the assessee from the aforementioned parties as bogus transactions. The assessee in order to fortify its claim that the purchase transactions with the aforementioned parties were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the test of scrutiny. The CIT(A) in the backdrop of his aforesaid observations concluded that as the purchases claimed by the assessee to have been made from the aforementioned 13 parties who were into providing bogus bills without supply of any material had thus remained unverified, therefore, taking support of the judgment of the Hon'ble High Court of Gujarat in the case of CIT Vs. Simit P. Sheth (2013) 38 Taxmann.com 385 (Guj), wherein the High court in respect of the case before it had restricted the addition @ 12.5% (Additional advantage towards tax benefit 10% + Profit margin 2.5%), concluded that as the assessee was also in the same line of business, i.e. trading in ferrous and non-ferrous metals, therefore, logically the profit margin could safely be adopted @ 2.5%. Thus, in the backdrop of his aforesaid observations the CIT(A) restricted the addition in the hands of the assessee to 6.5% (i.e. 4% of VAT levied + 2.5% towards Profit margin) of the aggregate value of the total purchases of Rs. 3,61,50,427/- claimed by the assessee to have been made from the aforementioned 13 parties. Thus, the CIT(A) on the basis of his aforesaid observations partly allowed the appeal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered view that the adoption of the rate of 6.5% by the CIT(A) is well supported on the basis of the reasoning adopted by the Hon'ble High Court of Gujarat in the case of CIT Vs. Simit P. Sheth (2013) 38 Taxmann.com 385 (Guj). We are of the considered view that the CIT(A) on the basis of his aforesaid reasoning for restricting the disallowance/addition to 6.5% of the total non-genuine purchases, had also taken due cognizance of the fact that in the case of the assessee for the immediate succeeding years, viz. A.Y. 2010-11 and A.Y. 2011-12 the addition was restricted by the first appellate authority to 6%. We are of the considered view that the CIT(A) in the present case had on the basis of a very well reasoned order restricted the addition in the hands of the assessee to 6.5% of the total purchases aggregating to Rs. 3,61,50,427/- which were claimed by the assessee to have been made from the aforementioned 13 parties. We are persuaded to be in agreement with the view taken by the CIT(A), and finding no reason to dislodge the view taken by him, therefore, uphold his order.
9. The appeal of the revenue is dismissed.
Order pronounced to the open court on 25/10/2017 X X X X Extracts X X X X X X X X Extracts X X X X
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