TMI Blog2018 (7) TMI 1843X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has made purchases from certain parties, who were appearing in the list of suspicious dealers / hawala operators prepared by sales-tax department. It is also an admitted fact that notices issued u/s 133(6() to such parties returned unserved with the remark “left or not known”. At the same time, the assessee also filed certain basic evidences like purchase bills and bank details for having made payment by account payee cheques. Under these circumstances, it is very difficult to accept that purchases from the above parties are genuine in nature and supported by proper evidence. Having said so, let us examine the profit estimated by the AO. The co-ordinate benches of Tribunal in a number of cases has taken a consistent view and held that 12.5% profit estimation on alleged bogus purchases is fair and reasonable - thus we are of the considered view that the AO was right in estimating 12.5% profit on alleged bogus purchases. - Decided against assessee. - I.T.A No.6700 /Mum/2017 - - - Dated:- 20-7-2018 - SHRI JOGINDER SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) Appellant by Shri Bhupendra Shah Respondent by Smt. N Hemlatha O R D E R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of statement recorded were not furnished to the appellant. c) as alleged non-genuine purchases without appreciating the fact that no addition can be made if the suppliers are not traceable as per the judgment of the Bombay High Court. d) Thereby treating the same as alleged non-genuine purchases even though the payments were made by A/C Payee Cheques from the disclosed bank accounts. 4) The Assessing Officer has erred in charging interest u/s 234A, B, C D and initiated penalty u/s 271(l)(c) which is further wrongly confirmed by the learned Commissioner of Income Tax(A). 2. The brief facts of the case are that the assessee is an individual and proprietor of M/s Prime Industries engaged in the business of reselling dyes chemicals and solvents, filed her return of income for AY 2010-11 declaring total income at ₹ 5,84,570. The return of income was processed u/s 143(1) of the Act. Thereafter, the case has been reopened u/s 147 of the Act, after recording reasons for reopening on the basis of information received from DGIT (Inv) which suggests that the assessee is the beneficiary of accommodation entries provided by suspicious dealers / hawala operators, as per the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey market, or there could be benefit of sales tax. This may also be one of the factors due to which the seller may be willing to charge lower rates for unaccounted goods as compared to accounted goods. Hence the margins achieved must be higher than those made in the course of normal trading. Therefore, I am inclined to believe that an addition on account of a higher margin would be fair and equitable. 8.2 However the vital question that arises for consideration here is whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain, whether the purchase themselves were completely bogus and non-existent or that the purchases were actually made but not from the parties from whom it was claimed to have been made and instead may have been purchased from grey market without billing or documentation. As stated above, during the course of assessment proceedings, the assessee has submitted that he has sold the goods purchased from the alleged bogus parties to various parties. That being the position, only the profit element embedded in such purchases can be added to the income of the assessee. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the AO has validly reopened assessment on the basis of information received from external agencies like sales-tax department and DGIT (Inv) which constitutes new material, therefore, there is no merit in the arguments of the assessee that the reopening of assessment is merely on change of opinion. Insofar as additions made towards estimation of profit on alleged bogus purchases, the Ld.CIT(A), after considering relevant facts and also by relying upon the decision of Hon ble Gujarat High Court in the case of CIT vs Simit P Sheth 356 ITR 341 (Guj) held that although assessee has filed certain basic evidence like purchase bills and payment proof, failed to file further evidence in the backdrop of clear findings from DGIT(Inv) and sales-tax department that the parties are hawala operators involved in providing accommodation entries. Therefore, by following the decision of Hon ble Gujarat High Court, he opined that the AO was right in estimating 12.5% net profit on alleged bogus purchases. The relevant portion of the order of Ld. CIT(A) is extracted below:- xiii. In the present facts and circumstance's of I lie cane, the case of the AO is that the appellant only took bills f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to be justifiable and is accordingly upheld. 5. The Ld.AR for the assessee submitted that the Ld.CIT(A) was erred in confirming addition made by the AO towards estimation of profit on alleged bogus purchases without appreciating the fact that the assessee has filed various details to prove purchases from the above parties are genuine in nature. The Ld.AR further submitted that the AO has made additions only on the basis of third party statement without providing opportunity of cross examination to the assessee which is a clear case of violation of principles of natural justice, therefore, the addition made by the AO towards estimation of net profit is not sustainable under law. As far as reopening of the assessment, the Ld.AR submitted that the Ld.CIT(A) was erred in upholding re-assessment order passed by the AO ignoring various details, written submissions and case laws submitted by the assessee during the course of assessment proceedings. On the other hand, the Ld.DR strongly supported the order of the Ld.CIT(A). 6. We have heard both the parties and perused materials available on record. Admittedly, the AO has reopened assessment on the basis of information receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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