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TMI Blog2018 (4) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... ent appeal. In the meantime the Assessing Officer reopened the assessment by issuing a notice u/s 148 on 30.03.2015 whereby proposed to assess a further income of Rs. 1,33,94,163/- on account of purchases made by the assessee from Adi Impex. The Assessing Officer in the reassessment proceedings rejected the books of account u/s 145(3) and made an addition by estimating the profit of the assessee at 25% the purchases of Rs. 2,45,02,247/-. On appeal against the reassessment order/addition the ld. CIT(A) restricted the addition to 15% of such purchase as against 25% made by the AO. Thus, the assessee is aggrieved by the impugned order and filed the present appeal. 3. Grounds raised by the Revenue as well as assessee in these appeals are as under:- Revenue's Ground "On the facts and in the circumstances of the case the Ld. CIT(A) has erred in (i) The CIT(A) has erred in law and on facts and in perversity, restricted the addition of Rs. 1,19,58,445/- made on account of purchases from 12 different parties, none of which was produced for examination/verification before the A.O. despite repeated requests. (ii) The CIT(A) has erred in law and on facts and in perversity, held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re going into the merits of the rival stands, the primary claim of the appeal that the present issue has already been dealt and decided by the Hon'ble ITAT, Jaipur bench, in their favour, in the past, was examined. On perusal of the relevant orders of A.Y. 2006-07 & 2007-08, it is transpired that the Hon'ble ITAT has deleted the addition made by the AO of entire or part of such purchases, made almost from same suppliers, which are involved in current year. While giving the relief to the appellant, the Hon'ble bench has held that once the-sales are accepted then the addition cannot be made while terming the corresponding purchases as bogus in nature. Under such circumstances, the Hon'ble bench has laid down the principle that any addition can be made, only on the basis of the adequacy of the trading results shown of current year viz. shown in the past period. While disposing the appeal for A.Y. 2006-07, the Hon'ble ITAT deleted the addition of entire purchases made u/s 69C of the Act and restricted the same, up to the gap of the higher GP ratio shown in the past then shown is the relevant year. Similarly while deciding the appeal of A.Y. 2007-08, the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting the addition made by the AO then no addition is called for on this account. Hence, as far as the Revenue's appeal is concerned in the absence of any contrary material or fact we do not find any error or illegality in the impugned order of the ld. CIT(A). 5. As regards the appeal of the assessee since, the Assessing officer in the reassessment proceeding has rejected the books of account u/s 145(3) of the Act therefore, only course of action left with the AO is to estimate the income of the assessee are some reasonable and proper basis. The Assessing Officer instead of applying GP rate as declared by the assessee in the past as a proper bench mark for estimation of the income, has made a disallowance of 25% of the purchases made from certain parties. The ld. CIT(A) though restricted the disallowance to 15% of such purchases however, once the books of account are rejected u/s 145(3) of the Act the AO ought to have estimated the income by applying proper and reasonable GP rate. The past history of GP rate declared by the assessee is a proper guide for estimation of income. We further note that it is settled proposition that the rejection of books of accounts would not ipso fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts are rejected by the AO the only course of action left to the AO is to assess the income of the assessee on the basis of best judgment and GP rate is considered as proper and reasonable basis and guidance for the best judgment. Once, the books result are rejected the Assessing Officer cannot proceed to make an addition to the income offered by the assessee as per books result. However, the AO in the case of the assessee instead of applying the GP rate made on addition@ 25% of the purchases to the book results. This act of the Assessing officer itself contradicts the decision of rejecting the books of accounts and books result. The Tribunal in assessee's own case for the assessment year 2006-07 has considered this issue and upheld the order of the ld. CIT(A) in para 2.20 and 2.30 as under:- "2.20 Hence, there are certain concerns for which Revenue got evidence in the form of statement recorded in respect of such parties, opening balance is Rs. 37,06,175/- while the closing balance is Rs. 42,81,496/-. It means that there is an accretion of amount of Rs. 5.75/- lacs. It means that to this extent, accretion in purchase is without supporting the correct bills. Of course, tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see in the absence of furnishing complete addresses of trade creditors/consignors and the payment vouchers was genuine or not." While evaluating the material collected by the Revenue on the touch stone on human probability and considering the accretion in the closing balance in respect of parties for which Revenue has material in the form of statement. We fell that the ld. CIT(A) was reasonable in confirming the addition of Rs. 5.00 lacs. Hence both the grounds of assessee as well as Revenue are dismissed." We further noted that when the corresponding sale is not in dispute then the question is only regarding the correct amount of purchases and verification of the same. The ld. DR has relied upon the various decisions of Hon'ble Gujarat High Court however, we find that in all those decisions there was a finding of facts that the assessee inflated the purchases upto 25% and therefore, it was not a case of non verification of the purchase and rejection of books of accounts but the fact was established in the investigation that the assessee inflated the purchase price and accordingly the addition of 25% being inflated purchases was made and upheld by the Tribunal which was again ..... X X X X Extracts X X X X X X X X Extracts X X X X
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