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TMI Blog2021 (3) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodation entries from various dealers who are 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 various parties referred in Assessment Order. In response assessee submitted that the purchases made are genuine. Assessee further submitted that the payments are made through account payee cheques as such contended that all the purchases are genuine. However, parties were not produced before the Assessing Officer. 3. Not convinced with the submissions of the assessee the Assessing Officer treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there being any transportation of materials and the assessee might have made purchases in the gray market. It is the finding of the Assessing Officer that assessee failed to produce the parties as such the purchases made from the parties remained unverifiable. Assessing Officer observed that the notices issued u/s. 133(6) of the Act to the parties are returned unserved with a remark "Not traceable/Not known/left" and the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties from 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 and entered in the stock register. It is also a fact that the AO has not confronted the assessee with all the information in his possession like statements of the alleged hawala operators. He did not go ahead with money trail of cheques debited in the appellant's bank account towards the alleged purchases though such investigation do not lead to concrete results in the case of hawala dealers and investigators often reach dead end in such cases. It is not the case of the AO that the impugned purchases have conclusively been established as not having been effected at all as only found the impugned supplier as bogus parties. 6.4.1 In the facts and the circumstances of the case, the total purchases shown to be made from the aforesaid parties could not be held to be entirely bogus. It needs to be appreciated that in order to achieve the reported sales/turnover, there must be some corresponding purchases, whether effected from the allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket without proper billing or documentation. 6.4.3 In many judicial pronouncements on the issue, the Courts have taken a consistent view that in case of non-existent parties from which the purchases are shown to have been made, only a part of such purchases can be disallowed, particularly in such cases where the corresponding sales are not doubted. Alternatively the profit embedded in such sales against the alleged bogus purchases should be brought to tax. 6.4.3.1 In the case of CIT-1 Vs. Simit P. Sheth, ITA No. 553 of 2012, order dated 16/01/2013, while deciding a similar issue, the Hon'ble High Court of Gujarat has held that: '"We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed, purchases of steel, it maybe that the three suppliers from whom the assessee claimed to have purchased the steel did not own up to such sales. However, vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit embedded therein was to ascertain whether the purchases themselves completely bogus and non existent or that the purchases were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the facts and circumstances of the case and the judicial pronouncements cited above, what can be disallowed or taxed in the instant case, is the excess profit element embedded in such purchases shown to have been made from aforesaid parties. As narrated earlier, the AO in this case has held that various parties from whom the purchases were made by the appellant were found to be bogus, estimations ranging from 12.5% to 25% have been upheld by the Honble Gujarat High Court, depending upon the nature of the business. 6.4.5.1 In a number/series of recent cases involving the scam unearthed by the Sales Tax Dept of Maharashtra whereby the hawala dealers were found to be issuing bogus purchase bills without delivery of goods, the Honble Mumbai Tribunal has estimated the G.P. addition on account of such bogus purchases as 12.5%, some of which are listed below: i) Smt. Kiran Navin Doshi in ITA No. 2601/Mum/2016 dated 18.01.2017. ii) Ashwin Purshotam Bajaj & Anr. Vs. ITO & Anr., in ITA No. 4736/Mum/2014, 5207/Mum/2014, dated: 14-12-2016. iii) ITO & Anr. Vs. Manish Kanji Patel & Anr., in ITA No. 7299/Mum/2014, 7154/Mum/2012 & 7300/Mum/2014, 7627/Mum/2014, dated: 18-05-2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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