TMI Blog2020 (1) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Shamim Yahya, AM And Shri Amarjit Singh, JM For the Assessee : Shri Sanjay R. Parikh (AR) For the Revenue : Shri Akhtar Ali Ansari (DR) ORDER PER AMARJIT SINGH, JM: The revenue has filed the present appeal against the order dated 08.10.2018 passed by the Commissioner of Income Tax (Appeals) -25, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2009-10. 2. The revenue has raised the following grounds: - (i) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 62, 792/- made by the Assessing Officer on account of bogus purchases, without appreciating the fact that the assessee had failed to produce bills, vouchers and other documentary evidences in support of his claim and without considering the latest Apex Court decision in the case of N.K. Protiens Ltd. wherein it is held that once it is proved that the purchases are bogus then addition should be made on entire purchases and not on profit element embedded in such purchases. (ii) On the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. The total income of the assessee was assessed to the tune of ₹ 31,61,225/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 12.5% of the bogus purchase in sum of ₹ 1,97,383/-. The revenue was not satisfied, therefore, the revenue has filed the present appeal before us. 4. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record: - 5.1 Vide the ground of appeal No.1, the assessee has challenged the action of the AO in disallowing an amount of ₹ 87,464/- being peak of purchases of ₹ 1,97,383/- which had been made from two parties as mentioned below. The AO had received information from the Sales Tax Department, Mumbai as well as DGIT(Inv.) Mumbai that the assessee had taken accommodation bills for purchases from the party declared as hawala operators by Maharashtra Sales Tax Department. During the course of re-assessment proceedings, the AO has seen that the assessee had made purchases from various parties out of which ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through account payee cheque. Further, the assessee failed to produce any parties, brokers or transporter in spite of specific opportunity provided to him. Further, the assessee also failed to furnish evidences, such as, delivery challans, transportation details etc. to substantiate his claim of purchases from the aforesaid parties. The assessee could only furnish copies of bank statements claiming that the purchases made were genuine as the payments have been made through banking channels. 5.1.4 The AO did not accept assessee's contention that the payment was made through banking channel and therefore, the purchases were genuine. Since, the assessee could not produce the above mentioned parties before the AO it could not provide the evidences of the purchase like delivery challans, transport bills etc., and the assessee has not given any evidence which leads to the conclusion that the purchases were actually made by the assessee from the above mentioned parties and the said parties actually existed, AO relying on various case laws mentioned in his order, held that purchases shown to have been effected from the above mentioned parties were not genuine transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is held that payment by account payee cheque is not sufficient to establish the genuineness of purchases. The said decision of the ITAT, Jaipur has been affirmed by the Hon'ble Supreme Court in the case of M/s. Kanchwala Gems vs. JCIT (2006) 206 CT!? (SC) 585: 288 LIR to (Sc.). Thus, the main contention of the appellant does not hold much water. The AO has formed his views about the bogus nature of the purchases made by the appellant from the above parties on the basis of statements recorded by the Sales Tax Authorities as well as further inquiries carried out by him independently. The information received from the Sales Tax authorities was only a piece of evidence to initiate in-depth independent investigation oil issue. The appellant 11.3 has been able to establish one to one relationship/nexus between the purchases and sale assessee has not been able to produce the parties front whom purchases have been alleged to have been made. The appellant has also failed to produce corroborative evidence in the form of transportation bills etc. to establish that the alleged purchases were actually transported to its premises. It is also a fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed could not be subjected to verification and as such it was difficult to establish the correctness of the purchase prices paid for the materials purchased. In the absence of any such verification as to the correctness of the price paid for the materials purchased by the appellant, the purchase price paid as mentioned on the invoices/bills cannot be accepted as the correct price paid for the goods purchased from such parties. In view of the same, the possibility of over-invoicing of the materials purchased to reduce the profit cannot be ruled out. Therefore, the gross profit rate shown by the appellant for the year under consideration cannot be relied upon. In the circumstances, the correct approach in such transactions would be to estimate the additional benefit or profit earned on these purchases and not to disallow the entire purchases from the aforesaid parties. In my view either the purchases from such parties over invoiced or the purchases were actually made but not from the party from which it was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. 5.4.1 In many judicial pronouncements on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58 ITD 428 came to be approved. 5.4.3 Similarly, while dealing with an identical issue, in the case of CT, Vs. Bholanath Poly Fab (P) Ltd., I.T.A. No. 63 of 2012, in the order dated 23/10/2012, the Hon ble High Court of Gujarat has held as under:- We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such Order Dote: 08.102018 purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase. but the profit element embedded therein would be subject to tax. This was the view of this court in the case of Sanjay Oileake Industries v. CIT 120093 316 ITR 274 (G4j). Such decision is also followed by this court in a judgment dated August 16,2011, in Tax Appeal No.679 of 2010 in the case of CIT v. Kishor Amrutlal Patel. In the result, tax appeal is dismissed. (emphasis supplied). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. Therefore, I direct the AO to estimate profit @ 12.5% of the alleged bogus purchases, which works out to Its. 24,672/-(@12.5% of ₹ 1,97,383/-) and restrict the addition to ₹ 24,672/-. The appellant gets a relief for the balance amount of ₹ 62,792/- (₹ 87,464 - ₹ 24,672). Hence, ground of appeal No. 1 is partly allowed. 5. On appraisal of the above mentioned order, we noticed that the CIT(A) has decided the matter of controversy on the basis of the decision of Hon ble Bombay High Court in the case of CIT Vs. Nikunj Eximp Enterprises Pvt, Ltd. and CIT Vs. Simit P. Sheth ITA. No.553 of 2012 dated 16.01.2013 and CIT Vs. Bholanath Poly Fab (P) Ltd. ITA. No.63 of 2012 dated 23.10.2012. The CIT(A) has also gone through the case and restricted the bogus purchase to the extent of 12.5% of ₹ 1,97,383/- i.e.24,672/-. However, at the time of argument, the Ld. Representative of the assessee has no objection to restrict the addition to the extent of 12.5% of the bogus purchase. Anyhow, on seeing the facts and circumstances, it seems quite justifiable to restrict the addition to the extent of 12.5% of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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