TMI Blog2020 (12) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional GP rate of 3% adopted by the Ld. CIT(A) as the profit element embedded in the disputed purchases for all the four years under consideration was quite fair and reasonable - Decided against assessee. Addition u/s 40A(3) - HELD THAT:- It is observed that even though a possibility was expressed by the Ld. CIT(A) about the purchases in question having been made by the assessee from the grey market, there is no evidence whatsoever available on record to show that the said purchases were actually made by the assessee from the grey market and payments against the same were made in cash as alleged by the Ld. DR. In our opinion, this case is therefore not a fit case where the provision of section 40A(3) can be invoked and that too for the first time at this stage before the Tribunal. We, therefore, find no merit in the appeals of the Revenue - I.T.A. Nos. 1455 to 1458/Kol/2019 And I.T.A. Nos. 1585 & 1586/Kol/2019 - - - Dated:- 22-10-2020 - Shri P.M. Jagtap, Hon ble Vice President (KZ) And S. S. Godara, Hon ble Judicial Member For the Assessee : Shri Miraj D Shah, AR For the Revenue : Shri Dhrubajyoti Ray, JCIT ORDER PER P.M. JAGTAP, VICE-PRESIDENT (KZ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place and also could not produce the copies of bilties, challans etc. to establish the genuineness of the said purchases. Keeping in view this failure on the part of the assessee as well as the adverse findings of survey and search conducted in the case of Shri Sanjiw Kumar Singh, the AO treated the entire purchases made by the assessee from the entities of Shri Sanjiw Kumar Singh as bogus and the following additions were made by him to the total income of the assessee in the assessments completed for all the four years under consideration u/s 143(3) read with section 147 vide orders dated 20.12.2018: A.Y. 2011-12 ₹ 2,80,75,372/- A.Y. 2012-13 ₹ 2,87,33,384/- A.Y. 2013-14 ₹ 48,00,838/- A.Y. 2014-15 ₹ 15,96,000/- 4. Against the orders passed by the AO u/s 143(3) read with section 147 of the Act for all the four years under consideration, appeals were preferred by the assessee before the Ld. CIT(A) challenging the validity of the said assessments as well as disputing the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such purchases ought to be considered for addition. It would be just and fair in my considered view to arrive at such percentages of the profits which would justify such addition. 5. The Ld. CIT(A) thus held that the entire unverified purchases were not vulnerable for addition and only the element of profit as embedded in the relevant transactions should be considered for the purpose of addition. To arrive at this conclusion, we relied on the following judicial pronouncements: i. CIT vs Simit P Sheth 356 ITR 451 (Gujarat) ii. ITO vs Sumit Jaiswal (ITA No. 1541/Kol/2016 dtd. 14.02.2018 iii. CIT vs M/s. Mohommad Haji Adam Co. (I.T. Appeal No. 1004 of 2016 dtd. 11.02.2019 of Hon ble Bombay High Court). 6. In order to estimate the element of profit embedded in the disputed transactions, the Ld. CIT(A) compared the gross profit and net profit rates declared by the assessee for all the four years under consideration vis-a-vis the gross profit and net profit rates declared for the subsequent four years and held that it would be fair and reasonable to estimate the element of profit embedded in the disputed transactions at 3% of the disputed purchases. He accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve heard the arguments of both the sides and also perused the relevant material available on record. As regards the common issue raised in the appeals of the assessee for all the four years under consideration relating to the gross profit rate of 3% adopted by the Ld. CIT(A) for estimating the income of the assessee as embedded in the disputed transactions, the learned counsel for the assessee has submitted that gross profit rate of 2.41%, 2.86%, 3.59% and 3.83% was declared by the assessee for A.Y. 2011-12, 2012-13, 2013-14 and 2014-15 respectively and since the gross profit rate so declared by the assessee by itself was quite fair and reasonable keeping in view the nature of the business of the assessee of trading of iron products, the additional GP rate of 3% adopted by the Ld. CIT(A) is excessive and unreasonable as the same would give a net profit of more than 3% which is far excessive than the net profit earned in the business of trading of iron products. He has contended that the same, therefore, needs to be reduced at some reasonable extent. We are unable to accept this contention of the learned counsel for the assessee. It is observed that even though the claim of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplier and since the genuineness of the said purchases is finally accepted keeping in view the corresponding sales made by the assessee, no adverse inference can be drawn against the assessee regarding applicability of section 40A(3) of the Act especially when there is nothing to show that the said purchases were made by the assessee from the grey market and payments against the same were made in cash. He has submitted that the payments against the said purchases, on the other hand, were made by the assessee by cheques as established on the basis of the relevant bank statements and, therefore, the provisions of section 40A(3) cannot be involved. After taking into consideration all the facts of the case as well as the submissions made by the ld. Representatives of both the sides, we are inclined to accept the contention of the learned counsel for the assessee. It is observed that even though a possibility was expressed by the Ld. CIT(A) about the purchases in question having been made by the assessee from the grey market, there is no evidence whatsoever available on record to show that the said purchases were actually made by the assessee from the grey market and payments against th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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