TMI Blog2023 (12) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... be incorrect. Since the AO has accepted the sales made out of the purchases and there is no discrepancy in stocks found there is no justification in treating the entire purchases as not proved simply because the seller was not produced or not found in the address given. Therefore, following the decisions of Simit P. Sheth ( 2013 (10) TMI 1028 - GUJARAT HIGH COURT ) the profit element is estimated at 12.5% as against 4.81% estimated by the ld. CIT (Appeals). The decision relied upon by the ld. DR is distinguishable on facts. Thus, we direct the Assessing Officer to restrict the disallowance to 12.5% of the purchases and re-compute the income accordingly. - Shri Challa Nagendra Prasad, Judicial Member And Shri M. Balaganesh, Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant the purchases admittedly have been made through payee cheques and the source of purchases are from the books of account. The figures of opening stock, purchases, sales, closing stock and gross profit have been accepted by the AO. As the quantity of opening stock and purchases on the debit side; and sales and closing stock in the credit side in the books of account has not been rejected, therefore to hold that the some quantity of purchases recorded in the books are unexplained or outside books of account, is not rational and accordingly purchase as debited in the books of accounts cannot be added. If the purchases made from the parties were in the nature of bogus purchases then there can be two scenarios, firstly, whether these purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e belief that the said purchases are bogus on the basis of survey action u/s 133A of the Act on Krishna Maruti Group of companies and the post survey proceedings on M/s SS Engg Enterprises. In the assessment order the AO has mentioned that as per the field enquiry made by the Inspector the concern M/s SS Engg. Enterprises was not traceable at its registered premises. The appellant in its submission has stated that on the day the Inspector visited the premises, it was closed and that the Inspector has stated in its report that the said premises belonged to M/s SS Engg Enterprises. The appellant during the assessment proceedings submitted the details of purchases, sundry creditors, bank statements etc. The judicial pronouncements as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ld. CIT (Appeals) placed reliance on the decision of the Delhi Bench in the case of (i) M/s. Becon Constructions Pvt. Ltd. Vs. ACIT In ITA. No. 5034/Del/2016 dated 24.12.2020; (ii) ACIT Vs. M/s. Sanvik Engineers India Pvt. Ltd. in ITA. No. 3201/Del/2015 dated 30.05.2019; (iii) Manoj Sharma Vs. Income Tax Officer in ITA. No. 4342/Del/2018 dated 28.01.2019. 6. On the other hand, the ld. DR supported the order of the Assessing Officer. He also placed reliance on the decision of the Hon ble Gujarat High Court in the case of N. K. Industries Ltd. Vs. DCIT [(2016) 72 taxmann.com 289 (Guj.)]. 7. We have heard the ld. DR perused the record before us. The only issue to be addressed is whether the ld. CIT (Appeals) is justified in estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this court in the case of Sanjay Oilcake Industries v. CIT [2009] 316 ITR 274 (Guj). Such decision is also followed by this court in a judgment dated August 16, 2011, in Tax Appeal No. 679 of 2010 in the case of CIT v. Kishor Amrutlal Patel. In the result, tax appeal is dismissed. 9. Similarly the Hon ble Gujarat High Court in the case of CIT Vs. Simit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such bogus purchases should be added back to the income of the assessee. Such were the facts in the case of Asst. CIT (OSC) Vs. Pawanraj B. Bokadia (supra). 9. This being the position, the only question that survives is what should be the fair profit rate out of the bogus purchases which should be added back to the income of the assessee. The Commissioner adopted the ratio of 30 per cent of such total sales. The Tribunal, however, scaled down to 12.5 per cent. We may notice that in the immediately preceding year to the assessment year under consideration the assessee had declared the gross profit at 3.56 per cent of the total turnover. If the yardstick of 30 per cent., as adopted by the Commissioner (Appeals), is accepted the gross p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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