TMI Blog2018 (4) TMI 1892X X X X Extracts X X X X X X X X Extracts X X X X ..... Sinha Advocate Respondent by Shri D. D. Yadav, Sr. D.R. ORDER PER O. P. MEENA, AM 1. This appeal by the Assessee is directed against the order of learned of Commissioner of Income tax (Appeals)-2, Surat (in short the CIT (A) ) dated 06.04.2017 pertaining to Assessment Year 2007-08, which in turn has arisen from the order dated 27.03.2015 passed by the ITO 1(3) (1) Surat (in short the AO ) under section 143 (3) r.w.s.147 of Income Tax Act,1961 ( in short the Act ). 2. The grounds of appeal raised by the assessee as under: (1) That on facts in law, the learned CIT(A) has grievously erred in confirming the addition on account of unverifiable purchases, which is made in violation of principle of natural justice by not upplying the copies of report / materials relied on, nor granting opportunity to cross examine the concerned persons whose statements are relied on by the AO to make the addition, inspite of the specific prayer made by the appellant. (2) That on facts in law, the learned CIT(A) has grievously erred in confirming the addition of ₹ 1,41,28,605/- made on account of alleged bogus purchases. (3) That on facts, evidence on record and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable on given address. In view of these facts and circumstances, after relying on some of case laws, the CIT (A) upheld the action of the AO in treating the purchases as bogus. 6. Being, aggrieved the assessee filed this appeal before the Tribunal. The learned counsel for the assessee submitted the copies of statement recorded from seller were not provided to the assessee. Nor any cross examination was allowed as demanded (PB-13). The ld. A.R. relied in the case of CIT v. Ashish International of Hon`ble Bombay High Court [Tax Appeal No. 4299 of 2009 dated 22.02.2011] wherein opportunity of cross examination was not allowed hence, the addition on account of bogus purchases was deleted by the Tribunal was held to be proper. The learned counsel for the assessee relying on the decision of Hon`ble Gujarat High Court in the case of CIT v. M K Brothers [1987] 30 Taxman 547 (Guj) /[1987] 163 ITR 249 (Guj) submitted that it was held that there was no evidence anywhere that those concerns give bogus vouchers to the assessee and further there was nothing to indicate that any part of fund given by the assessee to those parties came back to the assessee in any form. In such circumstances, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was submitted that in the case of the assessee payments were made by account payee cheques and no material was brought on record that monies are returned to the assessee and therefore, rate adopted in Vijay Proteins 55 TTJ 76 (Ahd-Trib) ought not to be adopted in this case. The ld. AR further submitted that total sales are tars 4.29 crores including 90% is from exports on which ground profit rate disclosed by the assessee comes to 8.55% which is as per the market rate of similar diamond traders and also similar to as disclosed by the assessee in earlier years. In view of these facts and circumstances, it was urged that the addition be deleted in full. 7. Per contra, the ld. DR submitted that the contention of the assessee that no information was supplied but the assessment was reopen on the basis of information received from DGIT(Inv), hence, the contention is not acceptable. The AO has examined the matter as discussed in the assessment order. The ld. Sr. DR relied on the decision of Co-ordinate Bench in the case of Vijay Proteins 55 TTJ 76 (Ahd-Trib) and submitted it is fact that seller party is not traceable, hence, purchases needs to be held as bogus and entire addition be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd signed cheque book of number of person were found, payment were made by crossed cheque and not by account payee cheques and it was established that cheques were encashed by party itself and accordingly money had come back to the assessee. The Co-ordinate Bench of Ahmedabad Tribunal in the case of M/s. Suryanarayan Silk Mills (P) v. ACIT [I.T.A. No. 2088/Ahd/2007 dtd. 22.08.2017] has considered the decision of N. K Proteins Ltd. v. DCIT [Tax Appeal No.242/2003 dated 20.06.2016 as upheld in SLP (C ) CC No.963/2017 dtd. 16.01.2017-Gujarat High Court] and had distinguished the said case on the ground that a search has been conducted in said case leading to seizure/ recovery of blank signed cheques , vouchers of number of concerns along with endorsements , blank purchase bills , books letter heads from searched persons. There are no such facts in the instant case. In view of these facts, the said case was distinguishable. The tribunal therefore, restricted the disallowance to 12.5%. No such adverse facts are present in the present case. In view of above facts, we are of the view that facts N. K Proteins Ltd. v. DCIT [Tax Appeal No.242/2003 dated 20.06.2016 as upheld in SLP (C ) CC No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee in earlier years. However, it is also a fact that the assessee has failed to substantiate the purchases by not producing the parties in question and admission of the party that they have indulged in providing bogus accommodation entries. We may also note the ld. CIT (A)-3, Surat in Gangani Impex (supra) has also considered 5 % net profit rate in case of such bogus purchases whereas the other CIT (A) `s of Mumbai income-tax charges as reproduced by the ld. CIT (A) -3 in his order in the case of Gangani Impex (supra) have adopted 3% net profit rate of such bogus purchases made through Bhanwarlal Jain Group. Some cases cited by the Tribunal of Mumbai Tribunal has adopted 2% net profit rate. Therefore, in the light of above facts and circumstances and considering the net profit of 5% as the average rate of the industry as observed by the Hon`ble Jurisdictional High Court and following the judicial pronouncements by the Co-ordinate Bench of Tribunals and the decision of Hon`ble Jurisdictional High Court in the case of Mayank Diamonds Pvt. Ltd. v. ITO [Tax Appeal No. 200 of 2003] dated 17.11.2014; we deem it fit to restrict the addition to 5% of total bogus purchases of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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