TMI Blog2023 (6) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of 10% on account of alleged bogus purchase. Thus the grounds raised by the Revenue is devoid of merit and the same is hereby dismissed - Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member For the Assessee : Shri Dhiren Shah, A.R. And Shri Karan Shah, A.R. For the Revenue : Shri Rakesh Jha, Sr.D.R. ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Revenue as against the appellate order dated 10.06.2019 passed by the Commissioner of Income Tax(Appeals)-10, Ahmedabad, arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) relating to the Assessment Year (A.Y) 2016-17. The Cross Objection is filed by the Assessee as against the above Revenue appeal. 2. The brief facts of the case is that the assessee is a partnership firm engaged in the business of civil construction, filed its Return of Income declaring total income of Rs. 82,28,850/- for the Assessment Year 2016-17. The return was processed u/s. 143(1) and then taken for limited scrutiny. The assessee was asked to furnish name, PAN, current communication addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elete balance addition of Rs. 3,75,42,332/- on account of bogus purchase and thereby partly allowed the assessee appeal observing as follows: .In view of the aforesaid judicial pronouncements of the jurisdictional Gujarat High Court and also considering the fact that the appellant firm itself has made the alternate plea in the submission that profit element embedded on such purchase should be considered for addition instead of adding the total amount of purchases, I am of the view that if profit element embedded on such purchases is added to the total income, that will meet the ends of justice. In the light of the decision of the Hon'ble Gujarat High Court in Gujarat Ambuja Exports (Supra), CIT vs. Bholanath Poly Fab Pvt. Ltd 355 ITR 290 (Guj.) and the decision of the Hon'ble Supreme Court in the case of PCIT vs Tejua Rohitkumar Kapadia arising out of the decision of the Hon'ble Gujarat High Court in Tax Appeal No. 691 of 2017, judgment dated 18.09.2017, the decision of Hon'ble Mumbai ITAT G Bench in the case of ACIT, Circle 19(1), Mumbai vs. M/s. HBS Mall Nahur, ITA No. 817/Mum/2017 A.Y. 2009-2010 order dated 03.10.2017 and the decision of Hon'ble ITAT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppliers of materials were not existing. The Ld. CIT(A) is not correct in restricting the quantum of disallowance of bogus purchase to 10% and argued to restore the order passed by the Assessing Officer. 6. Per contra, the Ld. Counsel Shri Dhiren Shah appearing for the assessee submitted during this assessment year, the assessee was under going with the construction of the project Parmeshwar-5 for which materials were purchased from six parties and received the purchase invoices showing the name of suppliers, date of purchase, invoice number, bills are signed buy the authorized person, name and address of the seller and VAT/Sales Tax Number as well as the assessee firm name clearly depicted. The assessee made payments to the six suppliers through account payee cheques/RTGS during the Financial Years 2015-16 2016-17, the above payments receipt with bank statements were very much filed before the Assessing Officer. However the Assessing Officer relying upon the report given by the Inspector treating the above purchases as bogus purchases and made addition thereon. The A.O. failed to verify that the building materials were supplied at the site namely Parmeshwar-5 and without t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the above circumstances, the Ld. CIT(A) determined the element of profit in the purchases made by the assessee firm and thereby determined profit element at 10% of the purchase amount which in our view does not require any interference. 8. In this regard, it is appropriate to refer to the decision of the Gujarat High Court in the case of Bholanath Poly Fab Pvt. Ltd 355 ITR 290 (Guj.) where the Hon'ble Court was dealing with the issue as regards to the finding of Hon'ble ITAT that purchases have been made from bogus parties since notice issued by the A.O. to these parties were allegedly received returned/unserved' and the assessee was unable to produce any confirmation from these parties. The Tribunal had held that though purchases were made from bogus parties, nevertheless, the purchases themselves were not bogus as the entire quantity of opening stock, purchases and sales were tallying and hence, only the profit margin embedded in such amount would be subjected to tax. The Hon'ble Gujarat High Court taking cognizance of the fact held that whether purchases themselves were bogus or whether parties from whom such purchases were made were bogus, in essentiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different sum, can never be an issue of law. 8.1. Similarly, in yet another decision of Hon'ble Gujarat High Court in the case of CIT vs. Simit Sheth (2013) 38 Taxmann.com 385 (Guj), Hon'ble Court was seized with a similar issue where the A.O. had found that some of the alleged suppliers of steel to the assessee had not supplied any goods but had only provided sale bills and hence, purchases from the said parties were held to be bogus. The AO, in that case added the entire amount of purchases to gross profit of the assessee. Ld. CIT(A) having found that the assessee had indeed purchased though not from named parties but other parties from grey market, partially sustained the addition as probable profit of the assessee. The Tribunal however, sustained the addition to the extent of 12.5%. Taking into account the above facts, the Hon'ble Gujarat High Court held that since the purchases were not bogus, but were made from parties other than those mentioned in books of accounts, only the profit element embedded in such purchases could be added to the assessee's income and as such no question of law arose in such estimation While arriving at the above conclusion, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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