TMI Blog2019 (3) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned counsel of the assessee has prayed that when only the profits earned by the 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. - ITA Nos. 992 & 991/Mum/2018 - - - Dated:- 1-3-2019 - Shri Shamim Yahya, AM And Shri Amarjit Singh, JM For the Appellant : Shri Viraj Mehta For the Respondent : Shri Chaudhary Arun Kumar Singh ORDER PER BENCH: The assessee in these appeals aggrieved by the respective order of the learned Commissioner of Income Tax (Appeals)-22, Mumbai ( ld.CIT(A) for short) dated 21.11.2017 and pertains to the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 4,18,19,549 4. During the assessment proceedings, the assessee company was confronted with the above information received from the Sales Tax (VAT) Department, State of Maharashtra and was asked to furnish the copies of purchase orders, bills raised, nature of expenditure, goods receipt note (GRN), goods /survey inspection report, delivery challan (s) / lorry receipt(s), details of payment(s) made, all other relevant details with supporting documentary evidence, details of transportation of goods and documentary evidence reflecting the relevant entries of having received such goods in the premises of the assessee and having consumed such goods either during the year or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and made submissions vide letter dated 24.03.2014 wherein it was submitted that from the perusal of the statement showing purchases and corresponding sales it could be very clearly seen that there was a clear one-to-one identifiable purchases and sales. Further, the assessee contended without purchasing an item it would not have been possible for it to sell the same. That the purchases were imperative for the sale since there was an item to item correlation and tracking of the afore-stated purchase to the sales recorded by the assessee. The assessee further contended that merely because the aforesaid vendors had defaulted payment under the Sales Tax it could not be considered that the assessee's purchases were not genuine especially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25% of such purchases shown from these parties was disallowed by the A.O. and added back to the total income of the assessee u/s.69C of the IT. Act, 1961. The disallowance on this account was worked out to ₹ 1,04,54,887/- (i.e. 25% of ₹ 4,18,19,549/-). 7. Upon the assessee s appeal, the ld. CIT(A) restricted the disallowance of 25% made by the A.O. to 15%. He held as under: 5.5 I have considered the facts of the case and the appellant s submissions. The appellant has reiterated its submissions made before the Assessing Officer and contended that the purchases made from the impugned parties were genuine. That it has discharged its onus of proving the genuineness of the purchases by submitting copies of purchase bills, proof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing purchases, the only logical explanation is that the appellant would have made purchases from undisclosed parties in the grey market at lower rates and purchases were shown as being made from the impugned parties to suppress its profits. In such a situation, the various Courts including the Hon'ble Gujarat High Court in the case of C1T vs Simit P. Sheth, 356 1TR 451 iave held that not the entire purchases but only the profit element embedded in these purchases was to be disallowed. The estimation would vary with the nature of business and no unifoim yardstick could be adopted. The Assessing Officer had estimated the profit @ 25% of the bogus purchases which appears to be on the higher side. The appellant's GP ratio for A.Y.s 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h situation, in our considered opinion, on the facts and circumstances of the case, 12.5 % disallowance out of the bogus purchases meets the end of justice. However, in this regard the learned counsel of the assessee has prayed that when only the profits earned by the 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. 10. Upon careful consideration we find considerable cogency in the submission of the learned counsel 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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