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TMI Blog2018 (7) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of Rs. 1,66,68,5827- u/s.69C of the Income Tax Act, 1961, on account of alleged bogus purchases (on the basis of peak theory), without considering the facts and circumstances of the case. 4. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition on accOL5ntlof^suppression of Gross Profit of Rs. 3, 33, 3727- (being 2% of alleged bogus purchase' of Rs. 1,66,68,5827-), without considering the facts and circumstances of the case." 2. The brief facts of the case are that the assessee company which is engaged in the business of manufacturing electro forged gratings, cable trays, ducts and earthing materials, filed its return of income for AY 2009-10 on 30-09-2009 declaring total income at Rs. 1,39,00,742. The assessment has been completed u/s 143(3) on 14-12-2011 assessing total income at Rs. 1,43,55,790. Subsequently, the case has been reopened u/s 147 of the Income-tax Act, 1961 for the detailed reasons recorded as per which income chargeab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ak balance of Rs. 1,66,68,582 u/s 69C of the Incometax Act, 1961. Further, the AO also made addition on account of gross profit on bogus purchases @2% on peak credit and made addition of Rs. 5,33,372. 3. Aggrieved by the assessment order, assessee preferred appeal before CIT(A). Before the CIT(A), the assessee has filed elaborate written submissions which has been reproduced at para 7.2 on pages 3 to 6 of Ld.CIT(A)'s order. The sum and substance of arguments of the assessee before the CIT(A) are that the purchases from the above parties cannot be considered as bogus when assessee has furnished purchase bills, payment proof and other evidences. The assessee further submitted that merely on the basis of statement of third parties, the purchases from the above parties cannot be considered as bogus, that too, without confronting the statement given by the parties to the assessee for its cross examination. 4. The Ld.CIT(A), after considering relevant submissions of the assessee held that the assessee failed to file any evidence to prove purchases from the so-called parties with credible evidences in the backdrop of clear finding of the sales-tax department that they were involved in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate proceedings, submitted a work sheet prepared by Jayant Roadline and only on such work sheet the appellant tries to explain that the material were received. On that work sheet only signature only appears but other details such as who prepared it and corresponding bills of transportation were not attached. The work sheet does not mention from where goods were taken and to where goods were despatched. Therefore, it is held that the work sheet is not a reliable document. In the absence of direct evidence, I cannot hold that the appellant had discharged its onus to establish that the purchases are genuine. Accordingly, I do not find merit in the argument that the addition were made only on the basis of statement recorded by sales tax authorities. The appellant also submitted various case laws and argued that in those cases the Hon'ble ITAT has held that AO was not justified in making addition on the basis of statement given by the third party before Sale Tax Department. Such decision are respectfully followed, but in the instant case, the appellant is not able to discharge its onus to substantiate that the purchase are genuine from its own records. It is the appellant wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of statement of those parties and also on the basis of non response by the parties to the notices issued by the AO u/s 133(6). The additions made by the AO is not based on any deficiency in the books of account of the assessee that the books of account are not giving true and correct result of the assessee but purely on assumption and presumptions, therefore, the addition made by the AO should be deleted. 6. On the other hand, the Ld.DR strongly supported the order of the Ld.CIT(A). The Ld.DR further submitted that it is an admitted fact that the parties were appearing in the list of hawala operators prepared by sales-tax department and also those parties did not respond to the notices issued u/s 133(6). The assessee failed to file necessary evidences to prove purchases from the above parties, except filing purchase bills and payment proof. Therefore, the lower authorities were right in making addition towards purchases from the above parties and, therefore, their orders should be upheld. 7. We have heard both the parties and perused the materials available on record. The AO made addition towards bogus purchases on the basis of information received from sales-tax department th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very difficult to accept the arguments of the assessee that purchases from those parties are genuine in nature and also the version of the AO that purchases from those parties are fully bogus in nature. In such scenario what is needed to be considered for addition is whether total amount of such bogus purchases or only the profit element embedded in such purchases. Various courts and Tribunals have taken a consistent view that in the case of bogus purchases, what is needed to be taxed is only profit element embedded in such purchases, but not the whole bogus purchases. The Hon'ble Gujarat High Court in the vase of Vijay Protiens Ltd vs CIT 2015 TMI 828 (Gujarat HC) has held that in the case of bogus purchases, profit element embedded in such purchases can only be added. In yet another case, in Simit P Sheth 56 ITR 451 (Guj), the Hon'ble Gujarat High Court held that no uniform yardstick can be adopted for estimation of net profit on bogus purchases. The coordinate benches of ITAT, in a number of cases have taken a consistent view and directed the assessing officers to estimate 12.5% to 15% profit on alleged bogus purchases, depending upon facts of each case. In this case, the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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