TMI Blog2018 (11) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on these bogus purchase transaction is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase. Upon careful consideration we find considerable cogency in the submission of the assessee as otherwise it will be double jeopardy to the assessee. Accordingly we modify the order of learned CIT-A and direct that the disallowance in this case be restricted to 12.5 % of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transactions. Ld counsel of the assessee fairly accepted this proposition - ITA no.2135/Mum/2017, ITA no.2136/Mum/2017, ITA no.4040/Mum/2017, CO No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- 5. Based upon this information from Sales Tax department, assessment order was reopened. The Assessing Officer noted that during the course of the assessment proceedings, the assessee was asked to submit, inter alia, partywise details of purchases, creditors, copies of bills/invoices raised, proof of delivery of goods with complete transportation details/rendering of services, complete bank statement and other documentary evidences to substantiate the genuineness of transactions. That in response to the same, the assessee has, vide written submissions dated 10.09.2014, furnished bills, credit purchase vouchers, goods receipt note, stock register, copy of ledger account etc. That the assessee has contended that mere appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s will serve the purpose. Learned CIT(A) in this regard has concluded as under:- As narrated earlier, the Ld. A.O. in this case has held that the parties from which the purchases were made by the appellant were found to be bogus and that is the reason for which it was not produced during the assessment proceedings. Not having doubted the consumption/ sales, the motive behind obtaining bogus bills thus, appears to be inflation of purchase price so as to suppress true profits. Considering the facts of the case as well as the various case laws cited (supra), I estimate the suppressed profit to the extent of 12.5% of the purchases made from the bogus entities, as the suppressed profit element embedded in such purchases. This estimation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases/consumption. This proposition is supported from honourable jurisdictional High Court decision in the case of Nikunj eximp enterprises (in writ petition no 2860, order dt 18.6.2014). In this case the honourable High Court has upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted. However in that case all the supplies were to government agency. In the present case the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of nonpayment of tax and others at th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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