TMI Blog2019 (6) TMI 1718X X X X Extracts X X X X X X X X Extracts X X X X ..... rds the bogus purchases by bringing the gross profit rate on such bogus purchases at the same rate as that of the other genuine purchases - Appeals by the assessee allowed for statistical purposes. - SHRI SHAMIM YAHYA (AM) AND SHRI RAVISH SOOD (JM) For the Appellant : Shri Rajendra B. Shah For the Respondent : Shri Chaitanya Anjaria ORDER PER SHAMIM YAHYA (AM):- These are appeals by the assessee wherein the assessee is aggrieved that the learned CIT-A has erred in sustaining 4.08% and 3.77% respectively disallowance on account of bogus purchases vide separate orders for concerned assessment years. 2. Brief facts of the case are that the assessment in this case was reopened upon receipt of information from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. However in that case all the supplies were to government agency. 6. In the present case the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. As regards the quantification of the profit element embedded in making of such bogus/unsubstantiated purchases by the assessee. Learned Counsel of the assessee has submitted precedence that in the case of diamond traders it should be 2% to 3%. However we refer to the latest decision of Hon'ble Bombay High Court in this regard. We find that as held by Hon'ble High Court of Bombay in its recent judgement in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the relevant law could arrive at such a finding on the evidence on record? 2 The issues relate to the Assessment Year ( A.Y. for short) concerning the respondent assessee who is a trader of fabrics. During the survey operations in case of the entities from whom the assessee had claimed to have made purchases, the department collected information suggesting that such purchases were not genuine. The Assessing Officer ( A.O. for short) noticed that the assessee had shown purchases of fabrics worth Rs.29.41 Lacs (rounded off) from three group concerns, namely, M/s Manoj Mills, M/s Astha Silk Industries and M/s Shri Ram Sales Synthetics. On the basis of the statement recorded during such survey operations, the A.O. concluded th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditions, but retained the portion of the order of the CIT(A) to that extent he permitted the A.O. to tax the assessee on the basis of difference in the GP rates . Learned counsel Mr Chhotaray for the Revenue strenuously contended that the CIT(A) and the Tribunal committed serious error. In the present case when it was established that the purchases are bogus, the entire amount should have been added to the income of the assessee. There is no question of granting any relief in the facts of the case. In this context he relied on a decision of the Division Bench of Gujrat High Court in the case of N.K. Industries Ltd. Vs Dy. C.I.T. in Tax Appeal No. 240 of 2003 and connected appeals decided on 20th June, 2016. In such judgment the Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s income. 8 In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee s additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee s sales. There was no discrepancy between the purchases shown by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the revenue. 9 In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order as to costs. 7. We respectfully following the aforesaid judgement of the honourable High Court set aside the matter to the file of the assessing officer with the direction to restrict the addition as regards the bogus purchases by bringing the gross profit rate on such bogus purchases at the same rate as that of the other genuine purchases. Needless to add the assessee should be granted adequate opportunity of being heard. 8. In the result these appeals by the assessee allowed for statistical purposes. Order has been pronounced in the Court on 28.6.2019. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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