TMI Blog2023 (9) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... y the investors whose identity, creditworthiness and genuineness is proved by the assessee before the authority. GP estimation - Tribunal justification in restricting the gross profit on URD purchases @0.24% holding that the estimation by the AO @6% on URD purchases was over and above the profit of 5.76% disclosed by the assessee - HELD THAT:- In view of the finding of facts arrived at by the Tribunal confirming the order passed by the CIT(A) that the assessee has already declared gross profit as a whole including the purchases from registered parties @ 5.76%, and therefore, if any addition is to be made, it should be the difference between the profit determined by the AO on the URD purchases vis-a-vis the gross profit already declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .06.2010 i.e. during the year under consideration by converting the running business of proprietary concern of Shri Ramgopal O. Maheshwari. At the time of conversion of the proprietary concern into the private limited company, the shares were allotted to Shri Ramgopal O. Maheshwari and his wife Smt. Madhuben R. Maheshwari in the ratio of 7:3 being subscribers of Memorandum of Articles (M.O.A). 2.1 It appears that, thereafter, the assessee company allotted 41,200 shares @ Rs. 1,250/- each comprising of premium on face value of Rs. 10/- and premium of Rs. 1,240/- to Shri Ramgopal O. Maheshwari in lieu of net capital which was the value of his proprietary concern amounting to Rs. 5,15,00,000/-. 2.2 The assessee company also allotted 1,34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no reason for the assessee to retain those share certificates with itself. It was also contended that the assessee company has not given any dividend to shareholders which again creates doubt about the genuineness of the transactions. Reliance was placed on the decision of the Hon ble Supreme Court in the case of P.C.I.T vs. NRA Iron Steel Co. Pvt Ltd., reported in 412 ITR 161, where share capital/application money/ loan was treated as unexplained cash credit under Sec. 68 of the Act in similar facts. 2.7 The Tribunal, after considering the order passed by the CIT(A) as well as the submission made on behalf of the respondent assessee, dismissed the appeal filed by the revenue by observing as under: 12. We have heard the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a piece of a paper. The documentary evidences should not be a mask to cover the actual transaction or designed in a way to present the transaction as true but same is not. Genuineness of transaction can be proved by submitting confirmation of the parties along the details of mode of transaction but merely showing transaction carried out through banking channel is not sufficient to prove the genuineness. As such the same should also be proved by circumstantial surrounding evidences as held by the Hon ble Supreme Court in the case of Shri Durga Prasad More reported in 82 ITR 540 and in case of Smt. Sumati Dayal reported in 214 ITR 801. 2.8 The Tribunal further observed as under: 21. It is equally important to note that it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nregistered dealer from 6% to 0.24%. The Tribunal, after considering the facts of the case as well as the reasons given by the CIT(A) has held as under: 28. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case revolves with respect to the purchases made by the assessee from the URD. Undeniably, the URD purchases were not supported by the proper documents except the self-made vouchers which were also defective insofar no detail of the vendor was not mentioned and no signature of the vendor was there on such vouchers. Furthermore, all the vouchers showing the URD purchases were of the value of less than Rs. 20,000/- so as to avoid provisions of section 40A(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent. Therefore, while determining the undisclosed profit embedded in such URD purchases, the rate of profit to be estimated should also take into the consideration the amount of profit already disclosed by the assessee in the books of accounts otherwise it would lead to the double addition. In the present case, the AO, has estimated the gross profit on such URD purchases at the rate of 6% and if the basis of the AO is considered or presumed to be true then the profit which has already been disclosed by the assessee i.e. 5.76%, the benefit of the same should be allowed. 30. Further, the rate at which purchase from the grey market was shown by the assessee cannot be relied upon as gospel truth in the absence of the facts noticed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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