TMI Blog2020 (11) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... or the A.Y. 2008-09 in restricting the addition to 5% of purchases as against the disallowance of 12.5% of purchases as non-genuine/bogus by the Assessing Officer. 2. Briefly stated the facts are that, assessee engaged in the business of Trading of steel, filed return of income on 27.09.2008 declaring income of ₹.25,70,213/- for the A.Y. 2008-09 and the return was processed u/s.143(1) of the Act. Subsequently, Assessing Officer received information from the DGIT (Inv.,), Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. The assessment was reopened U/s. 147 of the Act based on the information received from DGIT(Inv.), Mumbai, that the assessee has availed accommodation entries from M/s. Navratan Impex who is said to be providing accommodation entries without there being transportation of any goods. In the reassessment proceedings, the assessee was required to prove the genuineness of the purchases made from M/s. Navratan Impex. Assessee furnished Profit and Loss Account and details of purchase parties and submitted that the purchases made are genuine. Assessee further submitted that the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carefully considered the same along with the orders of the tax authorities below. The only issue before us relates to the estimation of profit in respect of purchases which are regarded to be bogus purchases by the Assessing Officer even though the sales made by the assessee have not been disputed by the Revenue. Rather it is a fact that Revenue has accepted the sales made by the assessee. The Assessing Officer has disallowed all the alleged bogus purchases and made the addition in the income of the assessee u/s. 69C of the I T Act. It is not disputed that the parties, which are alleged to be bogus purchases are available in the public domain in the website of the Sales tax Department being the hawala operators. It is not a case that the assessee is not maintaining the stock record, rather it is a case where the assessee is duly reconciling the quantitative details in respect of the purchase and sales. Therefore, in our opinion, the fact remains that he assessee would have made the purchases but not from the alleged parties. It is a case where the purchases would have been made from the grey market and when the purchases are being made from the grey market naturally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Gujarat High Court as well as Ahmedabad Bench of this Tribunal and which has been referred to by the CIT(A) as well as by the assessee before us during the course of hearing. In these cases, we noted that the Tribunal/High Court has not directed the Assessing Officer to restrict the addition to the extent o f2% but the addition was sustained ranging from 12.5% to 25%. We may also mention that the gross profit earned by the assessee or shown in its income tax return does not have any bearing so far as the addition is being made in respect of income earned by the assessee on the alleged bogus purchases. The logic for estimating the addition for alleged bogus purchases is that the assessee would have made purchases from the grey market and by making the purchases from the grey market the assessee would have saved taxes may be in the form of excise duty and sales tax, which is being shared between the seller and the buyer. Not only this, in our view, the assessee would never buy the material from the grey market until and unless there is saving in the cost of material. The learned AR before us even though submitted a comparative chart in respect of various decisions, which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made through account payee Cheques. The assessing officer was not accepted by the contention and the evidences of assessee, on the grounds that the assessee claimed that the transporting charges were born by dealers. The assessing officer recorded that from the enquiries from the RTO office, it was revealed that the majority of vehicles allegedly used for transportation are owned by the assessee itself. If the assessee was using its own vehicle while it was claiming that transport charges born by the dealer. The assessing officer further concluded that no delivery challans were found during a search and seizure proceeding. Further the vehicles other than the vehicle owned by the assessee were not utilized for transportation of material or that some vehicles number provided by assessee belongs to the Government authorities and some to the private parties. The private parties have denied to have rendered any services to the assessee or to the dealer. One of the vehicles was tanker and one tipper. The assessee could not provide the slip of weight at the time of delivery. The assessing officer disallowed the entire purchases of ₹ 33,37,54,424/- from Karma Industries Ltd. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which may occur due to human error. The assessee furnished the certified copies of the Registration Certificate (RC) and photographs of the vehicles and the evidence how the Tipper was used for transportation. The assessee also furnished explanation of the discrepancies recorded by assessing officer. On the written submission of assessee, the ld. Commissioner (Appeals) sought the comments of assessing officer. The assessing officer filed his comment / remand report dated 25.10.2016. In the remand report the assessing officer disputed the contention of the assessee and relied on his findings. After considering the submission of the assessee and the material on record the ld. Commissioner (Appeals) concluded that there are good and sufficient reasons to hold that so far as project of Surat- Dahisar and Kolhapur are concerned, the purchase of steel cannot be treated as bogus. (para 6.3.8 of ld CIT(A) order) However, the ld Commissioner (Appeals) concluded that such purchases are made from the parties other than those mentioned in the books of accounts and the profit element embedded therein needs to be brought to tax. The ld. Commissioner (Appeals) further concluded that such purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as trader.During the search action in that case blank signed cheques books and numbers of vouchers were found on the basis of which the transaction was treated bogus. However, in the present case the assessee has given sufficient evidences to substantiate its purchases. Moreover, no incriminating material was found during the search at the premises of the assessee. The addition of alleged bogus purchased are based on third party information. No yardstick formula can be applied while assessing the amount of revenue leakage. Moreover, the revenue has not disputed the consumption of steel. Thus, respectfully following the decision of Hon ble Gujarat High Court in CIT Vs Simit P Seth supra and by Hon ble Bombay High Court in Hariram Bhambani supra, the disallowance of cost of purchases of steel is restricted to 5% of the impugned purchases only. The assessing officer is directed accordingly. In the result the ground no.1 of the appeal is partly allowed. We noted in the aforesaid case, where the Tribunal has directed the Assessing Officer to estimate the profit @5% on the alleged bogus purchases has duly given the reasons for estimating the profit 2%% while we noted in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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