TMI Blog2021 (3) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2009-10 in restricting the addition to 12.5% as against the entire bogus purchases disallowed by the Assessing Officer. 2. Briefly stated the facts are that, assessee engaged in the business of trading in Ferrous and Non-ferrous metals, filed return of income on 27.09.2009 declaring income of ₹ 2,90,596/- for the A.Y. 2009-10 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 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hwala Gems vs. JCIT (2006) 206 CTR (SC) 585: 288 ITR (SC). Thus, the main contention of the appellant does not hold much water. The AO has formed his views about the bogus nature of the purchases made by the appellant from the above parties on the basis of statements recorded by the Sales Tax Authorities as well as further inquiries carried out by him independently. The information received from the Sales Tax authorities was only a piece of evidence to initiate in-depth independent investigation on the issue. It is not the case of the appellant that he has maintained a proper stock register. The appellant has not been able to establish one to one relationship/nexus between the purchases and sales. The assessee has not been able to produce the parties 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /bills cannot be accepted as the correct price paid for the goods purchased from such parties. In view of the same, the possibility of over-invoicing of the materials purchased to reduce the profit cannot be ruled out. Therefore, the gross profit rate shown by the appellant for the year under consideration cannot be relied upon. In the circumstances, the correct approach in such transactions would be to estimate the additional benefit or profit earned on these purchases and not to disallow the entire purchases from the aforesaid parties. In my view either the purchases from such parties is over invoiced or the purchases were actually made but not from the parties from which it was claimed to have been made and instead may have been purchased from grey market 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 purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this court in the case of Sanjay Oilcake Industries v. CIT [2009] 316 ITR 274 (Guj). Such decision is also followed by this court in a judgment dated August 16, 2011, in Tax Appeal No. 679 of 2010 in the case of CIT v. Kishor Amrutlal Patel. In the result, tax appeal is dismissed. (emphasis supplied) 4.5 In 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 ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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