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TMI Blog2023 (11) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case is that the assessee is a Partnership Firm engaged in the business of real estate developer. The assessee firm developed a residential scheme of low housing (1 & 2 BHK Budget Apartments) under the name and style "Sandhiya Flora". Land was purchased from the partners of the firm and construction of flats were entrusted to various contractors and agencies for which they provide labour/contract bills and consulting bills in their name and procure material for construction work for which they take bills in the name of assessee firm. 2.1. For the Assessment Year 2015-16, the assessee filed its original Return of Income declaring total income of Rs. 1,99,37,480/-. The return was processed u/s. 143(1) of the Act and then reopened by issuing a notice u/s. 148 on 15.03.2019 on the ground that bogus suppliers and purchases were booked by the assessee which are merely accommodation entries. The assessee filed its Return of Income in response to the u/s. 148 notice and provided various details as required by the Assessing Officer namely the purchase of goods from: (1) Brahmani Traders Rs. 58,48,336/- (2) Mahakali Trading Co. Rs. 55,11,789/- (3) Perfect Steel Corporation Rs. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have not been disputed by the A.O. and the Assessee relied upon various case laws. The Ld. CIT(A) after considering the above explanations and estimated disallowance of bogus purchases to the extent of 12.5% and partly allowed the assessee appeal observing as follows:. "... 7.7 The observations made by the AO and submission of the appellant have been carefully perused and it is found that the sales of the appellant have not been doubted or in other words without consumption of the raw material the construction could not have take place. Since the appellant was in the business of development of real estate, therefore no day to day stock inventory of the raw material consumption is possible to be maintained. Moreover, during the year under consideration it has shown the GP rate of 6.59% on the WIP. However, it is also a fact that the purchases from the aforesaid parties could not be established fully genuine and unverifiable purchases could not be ruled out to a certain extent. 7.8 After careful consideration, it is found that in the case of M. K. Brothers, Hon'ble Gujarat High Court has decided the similar issue in favour of the appellant by saying that there was no evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. (Revenue Appeal in ITA No. 32/Ahd/2021 for A.Y. 2015-16) 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming only 12.5% of the addition of Rs.2,82,87,252/- made by the A.O. on account of disallowance of bogus purchases. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciation the fact that the assessee's claim in respect to expenditure of four parties i.e. Brahmani Traders, Mahakali Trading Co., Perfect Steel Corporation & Prince Sales Corporation, were found bogus and during the assessment proceedings the A.O. proved it beyond doubt that no such transactions took place between the assessee and these four parties. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) ought to have upheld the order of the A.O. 4. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 5. Ld. Senior Counsel Shri Tushar Hemani appearing for the assessee fairly subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to various contractors and the material purchases were made by contractors, structural consultant, architects, etc., as per the requirement and quality approval. The assessee received the above materials at the building site and the bills were sent to Accounting Section for payment purposes. Thus the suppliers of goods were in contact with the contractors, who approved the quality and payments were made by the assessee. Further the construction materials were kept at construction site under lock and key in godown and was supplied as and when the goods are required by the contractors. The suppliers of materials are working agents since they buy the materials from wholesalers and supply the same to various construction sites. Payments are taken by contractors on behalf of the suppliers. Many a times payments are not made to the suppliers of materials, since the contractor prefer to make payment of that bills and keep the payment for material outstanding. Further if there is any dispute as to quality are rate, payments are halted and given to contractors as per the ratio of the labour or contract work. 7.1. It is seen from the assessment order that the assessee after providing dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee extent of 12.5 per cent Tribunal however, sustained addition To Whether since purchases were not bogus but were made from parties other than those mentioned in books of account, only profit element embedded in such purchases could be added to assessee's income Held, yes Whether hence, order of Tribunal needed no interference - Held, yes (Paras 6, 7 & 9 In favour of assessee]" (ii) CIT vs. Sathyanarayan P. Rathi [2013] 38 taxmann.com 402 (Guj HC): in this case it is held that: "Section 143 of the Income-tax Act, 1961. Assessment Additions to income [Purchases from market] - Assessment year 2003-04 - Assessing Officer made addition of entire amount of purchase on ground that concerned suppliers had never supplied goods as named by assessee. Commissioner (Appeals) as well as Tribunal having found that though purchases were not made from parties from whom assessee claimed but such materials were purchased from open market incurring cash payment and bills were procured from various sources, held that only profit element at rate of 12.5 per cent was to be added to income of assessee Whether present case being one of only purchase but not from disclosed sources it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iciously and correctly which does not require any interference and the estimation of gross profit at 12.5% is hereby confirmed. Accordingly, the cross-appeals filed by both the assessee and Revenue are hereby dismissed. ITA Nos. 26 & 27/Ahd/2021 (by the Assessee and ITA Nos. 33 & 34/Ahd/2021 (by the Revenue) for the Assessment Years 2016-17 & 2017-18. 9. The facts of the above cases are namely "bogus purchase" from five different creditors and the facts narrated above while deciding the appeal is identical in ITA. No. 25/Ahd/2021, therefore the same is not repeated here, however, the figures of disallowances are different. The assessee challenged the addition of 12.5% upon the bogus purchase and the Revenue has challenged the deletion of 87.5% on account of bogus purchase, in view of the provision u/s 69C of the Act. The matter of controversy is quite similar to the matter of controversy as decided by us, while deciding the appeal in ITA. No. 25/Ahd/2021 and 32/Ahd/2021 in which we have confirmed the addition to the extent of 12.5% upon the bogus purchase. In view of the above finding, we dismiss the cross appeals upholding the order of the CIT(A). 10. In the result, the appeals ..... 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