TMI Blog2017 (12) TMI 1757X X X X Extracts X X X X X X X X Extracts X X X X ..... n case the additions are restricted @ 6 % of bogus purchases. Consequently orders passed by Ld. CIT(A) are set aside. Issue of accommodation entries is a reality, to arrest such rampant malpractices, a restraint is always inevitable as we cannot encourage such malpractice of obtaining accommodation entries to avoid the impact of levies and defrauding revenue. Since it is proved on record that assessee was indulged in bogus purchases, therefore the assessee is not being given benefit to reduce already GP declared from GP ratio of 6%. Hence no benefit of GP is being given. Direct the AO to restrict the additions to the extent of 6% of the bogus purchases for adding u/s 69C over and above the regular profits disclosed by the assessee. Accordingly this ground raised by the revenue is partly allowed. - I.T.A. No. 6761, 6760 & 6759/Mum/2016, I.T.A. No. 6652, 6653 & 6651/Mum/2016 - - - Dated:- 6-12-2017 - SHRI RAJENDRA, AM AND SHRI SANDEEP GOSAIN, JM For the Appellant : Sh. M. V. Rajguru, DR For the Responent : Sh. Sashank Dundu, AR ORDER Per Shri Sandeep Gosain, Judicial Member: The present 6(Six) Appeals filed by the revenue as well as assessee are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had raised the issue of bogus purchases before the Ld. CIT(A) and Ld. CIT(A) had not made any decision with regard to the amount of ₹ 42,00,78,769 out of the total amount of bogus purchases amounting to ₹ 63,65,38,648/-. It was further submitted by Ld. AR that since the additional ground being a legal ground pertaining to an error from the order passed by Ld. CIT(A), therefore assessee may be permitted to raise the same before us. 7. After having heard counsels for both the parties at length on this application and after considering the material placed on record as well as orders passed by the revenue authorities, we find that Ld CIT(A) while deciding the issue of bogus purchases has not delivered any order in respect of alleged purchases amounting to ₹ 42,00,78,769 out of the total amount of bogus purchases amounting to ₹ 63,65,38,648/-, therefore taking into consideration, such factual error as well as taking into consideration the principles laid down in the case of NTPC Vrs. CIT 229 ITR 383(SC), Jute Corporation Vrs. CIT 187 ITR 688(SC), wherein it has been categorically held that legal grounds which goes to roots of the case, can be rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, the AO cannot make any addition uls.69C. Further, as the AD has not doubted the sales disclosed by the appellant he has to allow the purchases since there cannot be any sales without the purchase of the material. There is some force in the argument of the ld.AR. As was rightly pointed out by the ld,AR, when the quantity details of stock is tallying with the stock register, the purchases cannot be doubted. He further argued that addition cannot be made based on the statements given by a third-party i.e. Bhanwarlal Jam and his team that too without giving the assessee an opportunity to cross-examine them. The only possibility is that the appellant might have inflated its purchases by taking into account the invoices in the names of the bogus suppliers. The presumption is that the material might have been purchased from grey market at a lower rate and made good the entries with bogus bills to reduce the profits. Under similar circumstances the Hon'ble High Court of Gujrat in the case of Simit P Seth, 2013 (356 hR 451 )1tan occasion to deliver its judgment by confirming the decision of the ITAT which has estimated the disallowance at 12.5% of the disputed bogus purchases to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant. Therefore, the link between the bogus concerns floated by the entry operators on the one hand and the appellant company who accounted the purchases in the names of some such bogus concerns on the other, is established. Further, the argument of the Id.AR that the addition was made based on the statement given by a third-party is not acceptable for the simple reason that the fact of providing accommodation entries was admitted by the very authors of the so-called bogus companies/firms. The story of retraction is also not acceptable to the revenue since the entry operators could not substantiate with evidence that the statements were taken from them by exerting force, threat or coercion. Even though the AO could not prove substantively that the amounts given to the sellers in cheque form have come back to the appellant in cash form, the activities of accommodation entries in the trading community is not unheard of. Further, the disturbing facts revealed by Bhanwarlal Jam group during the course of search and seizure proceedings conducted by the investigation wing of the income tax department itself, cannot be lost sight of. Furthermore, one should not be carried away by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om such business as his income under the head profits and gains of business or profession for a particular assessment year, the assessing officer shall accept the trading results. C. The assessee shall be required to maintain separate books of accounts of such business. However, the Board has made it very clear in the above instructions that this instruction will not apply in the case of an assessee where the assessment is being made pursuant to- i) search and seizure action under section 132, or ii) requisition made under section 132A or iii) survey action under section 133A iv) where 50% or more of the income from such business is claimed as deduction under Chapter -III or under Chapter -VIA vi) where there is information regarding escapement of income. The Board has further made clear that this instruction is applicable only for assessments made during F.Y. 2008-09. 4.2.2 From the factual matrix, it is seen that even though the appellant has disclosed GP more than 6% for all the above three year under discussion, the Board's above instruction is not applicable straightaway. Since' the issue of accommodation entries is a reality, to arrest such ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO had called for the parties from whom the purchases were made by the assessee. The assessee could not produce parties for verification and had even denied of knowing those parties. In the present case, the books were seized/impounded by the investigation wing of the department wherein the name of the assessee company also appears. As per the provision of section 292C(1)(ii) of the I.T. Act, a presumption is attached to the effect that the contents of such books of account which are found during the course of search u/s 132 of the Act are true. Therefore the AO on the basis of evidence concluded that no genuine business was carried out by any of these concerns and hence the addition of 9% of the bogus purchases were added to the assessee. The Ld. CIT(A) in its detailed order after appreciating the facts had categorically held that the link between the bogus concerns floated by the entry operator and the assessee company who accounted the purchases is established and hence concluded that the assessee was indulged in bogus purchases. The Ld. CIT(A) while relying upon the theory laid down by the Hon ble Gujarat High Court in the case of Simit P. Sheth (supra) restricted the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, following our own decision in the aforementioned appeal in ITA No. 6761/Mum/16 for AY 2007-08, we apply the same findings in the present appeals which are applicable mutatis mutandi. Resultantly the above appeals filed by the revenue are also partly allowed. I.T.A. Nos. 6652, 6653 6651/Mum/2016 (AY 2007-08, 2009-10 2010-11 respectively) filed by assessee for decision. 12. Since we have already decided the appeal filed by revenue in ITA No. 6761/Mum/15 for AY 2007-08 and all the grounds raised by the assessee in all the above appeals including additional grounds i.e. I.T.A. Nos. 6652, 6653 6653/Mum/2016 (AY 2007-08, 2009-10 2010-11 respectively) are identical to that of the ground raised by the revenue in ITA No. 6761/Mum/15 for AY 2007-08. Therefore, following our own decision in the aforementioned appeal in ITA No. 6761/Mum/16 for AY 2007-08, we apply the same findings in the present appeals which are applicable mutatis mutandi. Resultantly the above appeals filed by the assessee are dismissed. 13. In the net result, all the appeals filed by the revenue in ITA Nos. 6761, 6760 6759/Mum/2016 are partly allowed and all the appeals filed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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