TMI Blog2018 (11) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... Proteins Ltd.[2015 (1) TMI 828 - GUJARAT HIGH COURT] and Sanjay Oil Cake Industries (2008 (3) TMI 323 - GUJARAT HIGH COURT) the fair estimate in our view would be 25% of the alleged bogus transactions, profits to which extent is deemed to be suppressed. Therefore, we consider it expedient to modify the estimation made by the CIT(A) to 25% in place of 20%. - Appeal of the Revenue is partly allowed - I.T.A. No. 1879/Ahd/2014 And CO No. 240/Ahd/2014 - - - Dated:- 14-11-2018 - SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR For The Revenue : Shri S. K. Dev, Sr. D.R. For The Assessee : Shri Aseem Thakkar, A.R. ORDER PER PRADIP KUMAR KEDIA - AM: The captioned appeal has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kodaji Steel Traders have denied making any transaction with the assessee while inquiry from other creditors namely Shree Gopinath Corporation Karnavati Timber Corporation under s.133(6) of the Act have revealed that no credit balance is found. Other creditor namely Madhu Traders was not found at the address given. The AO further observed that the assessee has also failed to support the creditors and suppliers by the relevant purchase bills. After confronting the copies of replies received from respective parties, the AO concluded that the assessee has failed to support the transactions by copy of delivery challans, lorry receipts, invoices towards supply, consumption details and in the wake of information received from different parties, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that goods purchased and consumed have not been denied by the AO. Likewise, work in progress (WIP) / sales have also been accepted by the AO. The CIT(A) further observed that GP rate shown is much higher than the GP rate of the immediately preceding year. The CIT(A) next observed that the GP rate excluding the alleged bogus purchase works out to 27.57% as against which the normal rate of 8% as per presumptive tax scheme in this line of business under s.44AD of the Act. The CIT(A) accordingly relied upon various decisions of the co-ordinate bench of the Tribunal and the Hon ble Gujarat High Court in Satyanarayan P Rathi (2013) 351 ITR 150(Guj) and CIT vs. Simit P. Sheth (2013) 219 TAXMAN 85 (Guj) and others and held that it will be be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at additions made by the AO requires to be restored in full and consequently partial relief granted by the CIT(A) requires to be reversed. 10. We have carefully considered the rival submissions. The essential controversy revolves around the quantification of element of possible overstatement of purchase cost and consequent disallowance on account of bogus purchases. While it is the case of the Revenue that the CIT(A) was not justified in estimating suppression element in the bogus purchase claim to the extent of 20% only instead of the disallowance of entire bogus purchase, the assessee on the other hand by way of its cross objection memo claims that the CIT(A) ought to have given full relief and ought to have accepted the purchase cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s.133(6) of the Act or summons under s.131(1) of the Act. It is thus the case of the AO that in the absence of books of accounts, bills and vouchers and in view of the outcome of inquiry from the suppliers, the culpability on the part of the assessee cannot be displaced. The assessee on the other hand has attempted to attribute the absence of books of accounts and other corroborative evidences of direct nature owing to natural calamity. The assessee primarily relies upon the valuation report by a Registered Valuer to support the work-in progress where the supply is stated to be consumed. The assessee has also objected to the reliance placed by the AO on the outcome of inquiry without providing cross objection of the suppliers. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the doubt requires to go to the assessee on the face of acceptance of work-in-progress. As such, it is difficult to hold the appeal on behalf of the Revenue that the entire alleged purchase amount is bogus. It is quite possible that supplier parties may be non-existing or bogus but the factum of supply of material per se cannot be outrightly rejected. In these circumstances, it is quite just and fair to estimate the probable inflation in cost of purchase to artificially reduce probable profits for the purposes of taxation. The CIT(A) has made such estimations at 20% of the value of alleged bogus purchases. Keeping in mind the total absence of direct evidences to support the purchases, we are of the opinion that such estimations are qui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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