TMI Blog2022 (6) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration i.e. Rs.11,34,14,455/-. So the gross profit needs to be estimated on the basis of gross profit otherwise being earned by the assessee on genuine purchases. In these circumstances we deem 6.41% as the reasonable gross profit on the gross purchases of Rs.1,55,19,372/- keeping in view the gross profit on genuine purchases. The AO is directed to compute the gross profit of 6.41% on bogus purchases in order to make addition thereof to the assessee. - Shri M. Balaganesh, Accountant Member And Shri Kuldip Singh, Judicial Member For the Assessee : Shri Vimal Punmiya, A.R. For the Revenue : Smt. Sonia Kumar, D.R. ORDER PER : KULDIP SINGH, JUDICIAL MEMBER: For the sake of brevity aforesaid appeal and cross objections bearing common question of law and facts are being disposed of by way of composite order. 2. Appellant Dy. CIT 19(1), Mumbai (hereinafter referred to as the Revenue) and the cross objector Mr. Hemantkumar Sumermal J. Bhansali (hereinafter referred to as the assessee) by filing present appeal and cross objections sought to set aside the impugned order dated 24.06.2021 passed by the National Faceless Appeal Centre(NFAC) [Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... errous metals, filed its return at Rs.40,42,980/- which was completed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) by making disallowance of Rs.95,36,617/- as peak balances from the alleged purchases and added the same under section 69C of the Act by treating the same as unexplained expenditure. The Assessing Officer (AO) brought on record the fact that the assessee is one of the beneficiaries of the bogus purchases by taking paper bills without actually taking the material physically and thereby made the addition of Rs.95,36,617/- qua the said bogus purchases under section 69C of the Act by taking the peak balances of alleged purchases of Rs.1,55,19,372/-. 4. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the appeal by restricting the addition to the extent of Rs.19,39,921/- being 12.5% of the bogus purchases of Rs.1,55,19,372/-. Feeling aggrieved both Revenue as well as assessee have come up before the Tribunal by way of filing present appeal and cross objections. 5. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the GP is estimated at a reasonable rate on the non genuine purchases amounting to Rs.42,21,237/-. I am of the considered opinion that, it would be just and fair, if profit element embedded in such purchases is taken as the profit earned from purchases shown to have been made from the nonexistent parties. In this case, the assessee has obtained accommodation entries or non genuine purchases to the tune of Rs.42,21,237/-. Therefore, an addition on account of a higher margin of profit would be fair and equitable, if the gross profit (@ 12.5 is taken on non genuine purchases recorded in the books o account of the assessee of Rs.42,21,237/' during the year under consideration and the profit to that extent is added .back to the income of the assessee for the year under consideration. Having regard to the facts and circumstances of the case as well as Gujarat high Court decision in the case of Simit P Sheth (2013) (356 ITR 451 (Guj).) being the possible profit out of the purchases made through non-genuine parties known as tainted purchases and thereby, the addition to be restricted to an extent of Rs.2,11,062/(12.5% of Rs.42,21,237/-). 6.1.12 Further the courts have taken a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hon ble Bombay High Court decided the identical issue in case of JK Surface Coatings Pvt. Ltd. in ITA No.1850 of 2017 order dated 28 October, 2021by returning following findings: 4. Having considered the memo of Appeal and the Orders passed by AO / CIT(A) and the Order of ITAT, the only issue that comes up for consideration is with respect to the extent of ad-hoc disallowance to be sustained with respect to bogus purchases. The AO has observed 100% of the purchase value to be added to the income of Assessee, the CIT(A) has said it should be 15% and ITAT has said it should be 10%. First of all, this would be an issue which requires evidence to be led to determine what would be the actual profit margin in the business that Assessee was carrying on and the matter of calculations by the concerned authority. According to the Tribunal, in all such similar cases, it is ranged between 5% to 12.5% as reasonable estimation of profit element embedded in the bogus purchase when material consumption factor do not show abnormal deviation. 5. Whether the purchases were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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