TMI Blog2021 (9) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... s was not a case of estimation of net profit on circular purchases but this was a case where the assessee had incurred expenses for circular purchases/transaction @ 0.28% and estimated the disallowance @ 0.30% of circular trading purchases - CIT(A) has also explained in his finding regarding analysis of the transaction made by the assessee that these transactions were carried out in order to show better turnover in financial accounts. Revenue could not controvert the facts reported by the ld. CIT(A) with any relevant material. Therefore, no infirmity in the decision of ld. CIT(A) in estimating the disallowance @ 0.30% of circular trading purchases - Appeal of the revenue is dismissed. - ITA No. 790/Ahd/2018 - - - Dated:- 16-9-2021 - Mahavir Prasad, Member (J) And Amarjit Singh, Member (A) For the Appellant : O.P. Sharma, Sr. D.R. For the Respondents : Sakar Sharma, A.R. ORDER Per Amarjit Singh, Accountant Member This revenue's appeal for A.Y. 2013-14, arises from order of the CIT(A)-11, Ahmedabad dated 17-01-2018, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The solitary ground of appeal of the revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to the extent of ₹ 85,13,363/-. The relevant part of the decision of ld. CIT(A) is reproduced as under:- DECISION 4.3 I have gone through the facts of the case, findings of Assessing Officer in assessment order and submissions of the appellant. The A.O. alleged that the assessee had admitted that during the year it had resorted to circular trading, wherein the bills/invoices change hands without movement of physical goods and mentioned movement of invoices and funds in para 3.1 of assessment order. The A.O. treated such purchases of ₹ 2,83,77,87,618/- as not reliable and paper purchases. The A.O. concluded that the benefit derived by the assessee from, such bogus circular paper purchase bills can be around 5% and disallowed ₹ 14,18,89,380/- of purchases. 4.3.1 In assessment proceedings and before me in appellate proceedings, the appellant submitted that: (i) In circular trading, there are no bogus/fictitious purchases/sales, but the circular trading is adhered to show better turnover. (ii) The appellant company has furnished circular trading sample bills and chart before Settlement Commission vide submission dated 21-12-2015 (Pg. No. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TOTAL 331794151 33221249 j 33272933 (iii) The appellant sold goods worth ₹ 3,31,79,415/- in circular trading to the first party, who in-turn sold such goods to second party at ₹ 3,32,21,249/- and finally the second party sold such goods to the appellant company (POL) at ₹ 3,32,72,933/-. In these transactions the purchases value of goods increased by ₹ 93,518/- (sale by POL ₹ 3,31,79,415/- less purchases by POL ₹ 3,32,72,933/-), which is 0.28% of circular purchases by the appellant (POL). (iv) Profit on circular transactions duly recorded and offered by appellant company (POL) at the time of making sale to inter-mediatory parties. Charges by the inter-mediatory @ of 0.28% of circular trading purchases/transactions nullified from the impact of profit duly offered on first sale, which is only paper transaction. Therefore, neither any benefit derived nor any expense booked by the appellant from such circular transactions/purchases, as alleged by the AO. (v) Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradip Overseas Ltd. 2752191 Venkateswara Trading Co, 3923517 Jay Traders 3929222 Pradip Overseas Ltd 3936069 A.M Enterprise 2399220 Shree Balaji Trading Cc. 2403403 Pntiip Overseas Ltd. 2408050 Vinayak Enterprise 2998752 Krishna Enterprise 3002550 Pradip Overseas Ltd. 3007382 Shri Ram Enterprise 3879402 Balaji Enterprise 3884753 Pradip Overseas Ltd, 3890940 TOTAL 33179415 33221249 33272933 4.3.3 From the above facts of the case, submissions of the appellant and findings in assessment order following facts emerges: (i) The transactions of purchases and sales made by appellant are in the nature of ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only difference is in Shop NO, which is 128E, Sanghvi Tower in the case of purchase party and 128B, Sanghvi Tower in the case of sale party. Another sale party M/s. Nakoda Textile Industries Ltd. has the address 128D, Sanghvi Tower. The appellant's address relate to few parties and almost the entire amount of purchase as well as sales is outstanding nor only on 31.03.2009 but also on 31.03.2010. Both the Sundry debtors and creditors on 31.03.2009 are ₹ 10.92 crores each. There are only two parties in Sundry creditors. In respect of both these parties 25% disallowance has been made by A.O. There are five parties in Sundry debtors. The appellant has claimed that payments have been made/received in respect of these creditors/debtors in A. Y. 2012-13. Therefore, it is not a case where purchase parties don't exist or have denied having transactions with appellant. The appellant vide letter filed on 09.08.2012 admitted that it was a case of circular transactions. The said letter is reproduced herein under:..............,......,......... ................... it is apparent that both the purchases and sales in this case are bogus and only book entries for purchase/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he categories. It is a case of circular transactions to show a fake healthy balance sheet. However, the appellant cannot escape the provisions of Section 40A(2)a/40A(2)b even in case of circular transactions within group concerns. Therefore a reasonable estimate c* profit is required even in that case in view of Section 40A(2)a/40A(2)b. Considering all these facts a net profit of 0.5% is estimated on turnover of ₹ 13.23 crores. Therefore, addition is sustained to extent of ₹ 9.12 lakhs. 7. None appeared on behalf of the assessee while as the learned DR vehemently supported the order of the learned AC sno prayed that the same may be sustained. 8. We have carefully perused the materials placed before us and also heard the arguments advanced by the learned DR. Further, perusing the order of the learned CIT(A) we find that the learned CIT(A) after deliberating the issue has made the following findings:- (i) All the parties from whom the assessee had made purchases were assessed to tax and were disclosed in their trading account. (ii) The parties from whom the assessee had made purchases had only wrongly classified in their books of accounts as loan in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The addition is sustained to the extent of ₹ 85,13,363/- and the appellant get relief of ₹ 13,33,76,017/-. This ground of appeal is partly allowed. 5. During the course of appellate proceedings before us, the ld. Departmental Representative has supported the order of Assessing Officer and submitted that ld. CIT(A) has incorrectly relied on the facts and issues pertaining to the earlier year on the basis of report submitted by the assessee before the Settlement Commission. On the other hand, ld. counsel has contended that Assessing Officer has not considered the complete submission of the assessee and made the addition unreasonably without giving any reason. The ld. counsel has also submitted that ld. CIT(A) has rightly adjudicated the issue as the facts are identical to the earlier year for which assessee has made submission before the Settlement Commission. 6. Heard both the sides and perused the material on record. During the course of assessment, the assessee has admitted that it was engaged in circular trading wherein the bills/invoices changed hands without movement of physical goods. The Assessing Officer has treated such purchase of ₹ 2,83,77,87, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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