TMI Blog2019 (7) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... e corresponding purchases. However some of the ingredients for testing the genuineness of purchases are missing but for this reason itself total purchase cannot be disallowed else abnormal and distorted profits will appear in the profit and loss account. We find that similar issue has came up before the Co-ordinate Bench in the case of V.R. Enterprises V/s ITO [ 2019 (6) TMI 1080 - ITAT MUMBAI] and PCIT V/s Mohommad Haji Adam Co [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] also estimated the addition for alleged various purchases @12.5% being the profit element. No inconsistency in the well reasoned finding of CIT(A) confirming the disallowance of purchases at 12.5% of the alleged bogus purchases. No interference is therefore called for in the finding of CIT(A). Sole ground raised by the revenue stands dismissed. In the result appeal of the Revenue stands dismissed. - ITA No. 882 & 883/Ind/2016, C.O.No.51 & 52/Ind/2017 - - - Dated:- 16-7-2019 - Kul Bharat, Judicial Member And Manish Borad, Accountant Member For the Assessee : Shri Hitesh Chimnani, CA For the Revenue : Shri K.G. Goyal ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Year 2010-11 1. Without prejudice to addition deleted by Ld. CIT(A), the addition of ₹ 4,12,550/- being 12.5% of the total alleged purchases liable to be deleted since the profit element in the sales against the alleged purchases have already been disclosed in the profit Loss Account of the appellant. 2. Without prejudice to addition deleted by Ld. CIT(A), the addition ₹ 4,12,550/- to be deleted since the GROSS PROFIT ratio and NET PROFIT ratios are higher as compared to earlier years. The appellant craves leave to add, amend, alter and/or withdraw any of the grounds of appeal at the time of hearing. 5. We will first take up the revenue s appeal for Assessment Year 2010-11 and since both the parties have agreed that the same issues have been raised by the revenue for Assessment Year 2009-10 also, our decision on adjudication of revenue s appeal for Assessment Year 2010-11 shall apply mutandis mutandis on the appeal for Assessment Year 2009-10 also. 6. Brief facts of the case as culled out from the records for Assessment Year 2010-11 are that the assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by assessee ₹ 7,77,147/- Total income ₹ 1,37,58,671/- 7. Aggrieved assessee preferred appeal before Ld. CIT(A) challenging various additions made by the Ld.A.O and partly succeeded. As far as addition relating to unaccounted purchases is concerned Ld. CIT(A) restricted disallowance to ₹ 4,12,550/- being 12.5% of the disputed purchases as the estimated profit embedded in alleged purchases. Ld. CIT(A) followed the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Sheth 38 Taxmann.com 385 (Guj) on arriving at this decision. Ld. CIT(A) also observed that the Ld. A.O neither rejected the books of accounts nor challenged the sales. 8. Aggrieved revenue is now in appeal before the Tribunal raising the sole ground against the finding of Ld. CIT(A) restricting the disallowance of bogus purchases at ₹ 4,12,550/- as against the addition of ₹ 38,61,472/- made by the Ld. A.O. 9. Ld. Departmental Representative vehemently argued supporting the orders of Ld. A.O and contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The addition of entire purchase would be seriously unjustified as it would lead to a case of taxing entire sales without along with the rebate if corresponding purchase. 10. The Ld. AO without any justification and purely on basis of assumption and surmises erred in making the addition of sales tax (VAT) of ₹ 2,29,394/- and unexplained commission of ₹ 2,86,743/- without any corroborating material in hand. 11. Further, additional case laws enclosed Pgs (C )to (O) 12. Suppliers have been doubted, purchases have not been doubted. 11. Ld. Counsel for the assessee placed reliances on the following judgments; 1. CIT vs. Balchand Ajit Kumar 263 ITR 610 (MP-HC) 2. Man Mohan Sadani Vs. CIT 304 ITR 52 (MP-HC) 3. CIT vs. Simit P. Sheth 38 Taxmann.com 385 (Guj-HC) 4. CIT vs. Bholanath Poly Fab Pvt. Ltd 355 ITR 290 (Guj-HC) 5. CIT vs. Nangalia Fabrics Pvt. Ltd 40 Taxmann.com 206 (Guj- HC) 6. DCIT vs. Rajeev G. Kalathi ITA No.6727/Mum/2012 7.ACIT Vs G.V. Sons ITA No.2239/Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bted by the revenue authorities at any stage. The issue raised before us relates to purchases from two concerns M/s. Soham International and M/s. Shweta Enterprises and lifeline Pharmaceuticals and Madhur Impex at ₹ 12,57,012/- and ₹ 20,43,392/-respectively. Ld. A.O had doubted the genuineness of the purchases and treated them as bogus purchases and added it to the income of the assessee along with VAT paid thereon and commission of ₹ 1,65,020/- calculated @5%. Ld. CIT(A) restricted the disallowance to 12.5% of the alleged purchases bring down the addition to₹ 4,12,550/- placing reliance on various judgments inclujding that of Hon ble Gujarat High Court in the case of Cit Vs. Simit P. Sheth (supra) giving following finding of facts; Ground No. 9 9. This ground of appeal has been raised against the addition on account of bogus purchases of ₹ 38,61,472/-. The AO has discussed the issue at para 9 of the assessment order wherein the AO has treated the entire purchases made from two parties named Soham International and Shweta Enterprises amounting to ₹ 33,00,404/- along with VAT of ₹ 3,96,048/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubted and substantial amount: of sales made by assessee was to Government Department - further ,books of accounts of the assessee has not been rejected -Tribunal deleted disallowance - Whether merely because suppliers had not appeared before Assessing Officer or Commissioner (Appeals), it could not be concluded that purchases were no made by assessee -Held yes . In case of ITO vs. Deepak Popatlal Gala ITA No.5930 /Mum /2013, Hon'ble Mumbai -ITAT decided that- In all the above cases the Co-ordinate Benches of the Tribunal has held that the A.O. was not justified in makinq the addition on the basis of statements given by third parties before the Sales Tax Department without conducting any other investigation. In the instant case also, the assessing officer has made the impugned addition on the basis of statements given by the parties before the Sales Tax Department. We notice that the Ld.CIT (A) has taken note of the fact that no sales could be effected without purchases .He has further placed reliance on the decision rendered by Hon'bleGujaraj High Court in case of CIT Vs. M.K Brothers (163 ITR 249}.He has further relied upon decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . But ,he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for details of the bank account of suppliers to find out as to whether the was any immediate cash withdrawal from their account. We find that no such exercise was done . Transportation of goods to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of the closing stock. As far as the case of Western Extrusion Industries ITA/6727/ Mum/ 2012/RGK 4 (supra) is concerned, we find that in that manner cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But , in the case before us, there is nothing, in the order of the A. 0., about the cash trial. Secondly, proof of movement of goods is not in doubt. Therefore, considering the peculiar facts and circumstances of the cases under appeal, we are of the opinion that the order of the FAA does not suffer any legal infirmity and there is not sufficient evidence on file to endorse the view taken by the A. O. So confirming the order of the FAA, we decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e genuineness of purchases are missing but for this reason itself total purchase cannot be disallowed else abnormal and distorted profits will appear in the profit and loss account. 14. We find that similar issue has came up before the Co-ordinate Bench in the case of V.R. Enterprises V/s ITO (supra) and the Mumbai Tribunal following the recent judgment of Hon'ble High Court of Bombay in the case of PCIT V/s Mohommad Haji Adam Co (supra) also estimated the addition for alleged various purchases @12.5% being the profit element therein observing as follows; 5. We have carefully heard the rival submissions and perused relevant material on record and deliberated on judicial announcements cited before us. We find that assessee was in possession of primary purchase documents and the payments to the suppliers was through banking channels. The assessee had established corresponding sales before Ld. AO. The books of accounts were audited wherein quantitative details of stock was provided. We are of the considered opinion that there could be no sale without actual purchase of material keeping in view the fact that the assessee-was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- So far as the question regarding addition of ₹ 3, 70, 78,125/- as gross profit on sales of ₹ 37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of th8 view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6% gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result 01 which profit comes to 5.66. Therefore, considering 5.66 01 ₹ 3, 70, 78,125/- which comes to ₹ 20,98,621.88 we think it lit to direct the revenue to add ₹ 20,98,621 88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favor of the assessee and partially in favor of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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