TMI Blog2019 (4) TMI 1722X X X X Extracts X X X X X X X X Extracts X X X X ..... provider. Thus, the purchases themselves cannot be said to be bogus as the same is duly recorded in the books of account of the appellant and such books stands accepted even in the impugned order of assessment. In the instant case, the assessee is engaged in dealing in MS Bar (Iron/Steel Product) and has shown gross profit rate of 5.22%. We find that in the case of Sh. Sanjay H. Shah, Mumbai Vs. Income Tax Officer [ 2018 (2) TMI 1632 - ITAT MUMBAI] who was also engaged in trading of Iron Steel product, the Tribunal restricted the disallowance to 5% of the total alleged bogus purchases - thus we direct the learned Assessing Officer to restrict the disallowance to 5% of the impugned purchase - Appeal of the assessee is partly allowed. - ITA No.7022/Del/2014 - - - Dated:- 29-4-2019 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For The Appellant : Shri Gautam Jain, Advocate And Shri Lalit Mohan, CA For The Respondent : Ms. Rinku Singh, Sr.DR ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 01/10/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding the addition on the basis of alleged statement obtained by the Investigation Wing behind the back of the assessee which in law could not be made a basis to uphold the addition. 2.4 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the sales of the appellant have been accepted, the books of accounts having not been rejected by the learned Assessing Officer, the conclusion that the purchases made represented accommodation entry was not a valid conclusion and hence not tenable. 2.5 That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in failing to appreciate the detailed submissions supported by adequate documentary evidence and judicial pronouncements relied upon by the assessee. 3. That without prejudice to the aforesaid and in the alternative, the learned Commissioner of Income Tax (Appeals) ought to have restricted the addition to the gross profits on such purchases and not made the addition by way of entire purchases and thus in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of proper bilties, name and address of the person with whom business transaction was discussed/finalized. The Investigation Wing also made enquiries in respect of the parties located at New Delhi, Gurgaon, Kolkata, and UP, who received payment from M/s Meet Enterprises. The investigation Wing found that after deposit of the cheque, Cash was withdrawn immediately from their account. Most of the parties were not found in existence at the given address and summons issued to them remain uncomplied with. In view of these observations, the Investigation Wing treated those parties as shell/conduit entities having no real business and finally summed up that different cash credit and debit entries in the bank accounts of M/s. Meet Enterprises is accommodation entry provided without any real business transactions. The statement of director of the assessee company Shri Rakesh Aggarwal was recorded by the Investigation Wing who deposed that the purchases were duly made from one M/s Meet Enterprises whose proprietor was Sh. Vikash Kumar. 2.2 In view of the information received, assessment was reopened by way of issue notice under section 148 of the Incomet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprises, Haridwar but the payment made by the assessee has been credited to the account of M/s. Meet Enterprises maintained at Ghaziabad and thus, the fact of payment to the party from whom the goods are stated to be purchased was not proved. He also held that the assessee has shown an extremely low rate of gross profit i.e. 5.22% in its Returns and therefore, Assessing Officer had justifiably rejected the purchases stated to be made from M/s. Meet Enterprises as bogus and added back the entire amount of ₹ 32,76,741/- claimed as expenditure on this account. Aggrieved with the finding of the Ld. CIT(A), the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. Ground Nos. 1 to 1.2 of Appeal were not pressed and are therefore, dismissed. 4. Grounds Nos. 2 and 3 relate to addition of ₹ 32,76,741/- representing the purchases made by the assessee company and held to be an accommodation entry . 4.1 Before us, the learned counsel for the assessee filed two paper-books containing pages from 1 to 104 and 105 to 129 and contended that denial of deduction or genuinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is no allegation or evidence to suggest that such payments as made by the appellant have remitted back to the supplier. It was therefore, submitted that addition so made is not in accordance with law and therefore, may kindly be deleted. Reliance was placed on the following judgments: i) CIT vs. Precious Jewels Corporation 205 Taxman 22 (Raj)(MaG.) ii) ACIT v. Karam Chand Ruber Industries ITA No. 6599/D/2014 iii) Manoj Sharma v. ITO 103 taxmann.com 105 (Del) iv) CIT v. Nikunj Eximp Enterprises (P) Ltd. 372 ITR 619 (Bom) v) CIT v. Simit P. Seth Tax No. 553/203 (Guj) dated 16.3.2013 4.3 On the contrary, the learned DR supported the action of the authorities below and relied on the following judgments: i) N.K. Proteins Ltd. vs. CIT (2017-TIOL-23-SC-IT) ii) N.K. Industries Ltd. Vs. DCIT 292 CTR 354 (Guj) iii) CIT vs. Arun Malhotra 363 ITR 195 (Del) iv) CIT vs. La Medica 250 ITR 575 (Del) v) Vijay Proteins Ltd. vs. ACIT 58 taxmann.com 44 (Guj) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he stock register corresponding to the sales, purchases have been duly recorded. In the circumstances of no irregularity observed in the inventory record, entire purchases of ₹ 32,76,741/- cannot be disallowed . 4.5 In the above facts and circumstances, we are of the considered opinion that it would be inappropriate to deny the entire expenditure claimed by the assessee. We are of the opinion that at best it would be a case that purchases have been made from one party in grey market and bills have been obtained from another party i.e. accommodation entry provider. Thus, the purchases themselves cannot be said to be bogus as the same is duly recorded in the books of account of the appellant and such books stands accepted even in the impugned order of assessment. 4.6 We are of the opinion that the entire amount should not be disallowed but the disallowance should be restricted to the profit margin embedded in such amount. This view is also supported by the judgment of Gujarat High Court in the case of CIT vs. Bhola Nath, 355 ITR 290. The relevant portion of the order is as under: 6. We are of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was a trader and that the Tribunal retained 12 % of the purchase towards its possible profit, we do not find any reason to entertain the appeal. In the result, Tax Appeal is dismissed. 4.8 Similar view has also been expressed in the case of CIT vs. Simit P. Sheth 356 ITR 451 wherein it has been held as under: 6. In the present case, the Commissioner of Income-tax (Appeals) believed that when as a trader in steel the assessee sold certain quantity of steel, he would have purchased the same quantity from some source. When the total sale is accepted by the Assessing Officer, he could not have questioned the very basis of the purchases. In essence, therefore, the Commissioner (Appeals) believed the assessee's theory that the purchases were not bogus but were made from the parties other than those mentioned in the books of account. 7. That being the position, not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. So much is clear by the decision of this court. In particular, the court has also taken a similar view in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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