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TMI Blog2020 (4) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent of 12.5% of the bogus purchases of Rs. 77,18,604/- booked by the assesee from purchase parties M/s Arch Marketing and M/s Overseas Impex. 2. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in restricting the addition to the extent of 12.5% of bogus purchase amount instead of 100% of bogus amount made by the assessing officer without considering the decision of Hon'ble Apex Court in the case of N K Proteins Ltd Vs DCIT SLP CC No. 769 of 2017 on similar facts of case, when the assessee failed to prove the genuineness of transactions or produced the purchase parties. 3. The brief facts of the case are that the assessee is a partnership firm, which is engaged in the business of trading in medicines and drugs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the decision of Hon'ble Gujarat High Court, in the case of Simith P.Sheth vs CIT 356 ITR 451 (Guj) has scaled down additions made by the Ld. AO towards alleged bogus purchases to 12.5% profit on non genuine purchases. The relevant findings of the Ld.CIT(A) are as under:- 6.4 It Is observed that the Hon'ble Gujarat High Court has adjudicated the case of Simit P. Sheth (ITA No 3238 & 3293/Ahd/2009], wherein the assessee was engaged in trading in steel. The Hon'ble Gujarat High Court in this case was seized with an issue where the A,O, had found that some of the alleged suppliers of iron & steel to the assessee had not supplied any goods but had only provided sale bills and hence, purchases from the said parties were held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was engaged In the business of trading in steel. During the year, information was received from the Sales Tax Authorities about purchases from alleged hawala/bogus suppliers. After due consideration of all the relevant facts, the Hon'ble ITAT confirmed the addition of profits arising from the alleged hawala/bogus purchases by adopting a rate of 12.5%. It was further held by the Hon'ble ITAT that the AO should give credit for the book GP shown by the assessee in respect of the alleged hawala/bogus purchases against the said GP rate of 12.5%. The relevant portion of the order of the Hon'ble /TAT is reproduced as under: "The authorities below in the instant case did not make any industry comparisons to arrive at fair, honest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tio earned was 5.45%. In our considered view and based on facts and circumstances of the case as discussed by us in details above, end of justice will be met in this case if GP ratio of 12.5% on alleged bogus purchases is added to income of the assessee against which credit for the declared GP ratio on the alleged bogus purchases will be granted by the AO after verification by the AO because of failure of the assessee to come forward to discharge primary onus cast upon him as detailed above for which assessee is to be blamed and in the midst of afore-stated un-rebutted allegation against the assessee and non-discharge of primary onus, the declared lower GP ratio of 5.45% in the instant previous year under appeal cannot be accepted. Thus, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has also shown a good GP of 15.22%. Therefore, as was done by Hon'ble ITAT, Mumbai in the case of Ratnagiri Steel (supra), it will be appropriate rate of 12.5% is applied for computing the unaccounted profits related to purchase! Rs. 77,18P604/- from M/s. Arch Marketing and M/s. Overseas Impex and against this set off of the GP shown in the regular books in respect of the purchases from the said bogus parties is allowed. Accordingly, the AO is directed to compute the additional profits in respect of the purchases from the alleged bogus supplier by adopting rate of 12. 5%. However, the AO will allow a set off of the GP already shown by the assessee in the regular books in respect of the purchases from the said alleged bogus sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the case in their favour with necessary evidences. Although, assessee has filed certain basic evidences, but failed to file further evidences to conclusively prove purchases to the satisfactions of the Ld.AO. At the same time, the Ld. AO had also failed to take the investigation to a logical conclusion by carrying out necessary enquires, but he has solely relied upon information received from investigation wing, which was further supported by information received from Maharashtra Sales Tax Department. Under these circumstances, it is difficult to accept arguments of both the sides. Further, in a case where purchases are considered to be purchased from suspicious/hawala dealers, various High Courts and Tribunals had considered an identica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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