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TMI Blog2025 (3) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... 29,74,75,300/-. The case of the assessee was selected for scrutiny u/s 143 of the Act and accordingly, the assessment was framed by assessing the total income at Rs. 29,76,02,380/- u/s 143(3) of the Act. Thereafter, the ld. AO received information form Director of Income Tax (Systems), CBDT in accordance with the risk management strategy formulated by the Board as per the provisions of clause (1) of Explanation 1 to Section 148 of the Income-tax Act, 1961 (the Act), which revealed that the assessee had entered into transactions with two parties namely Tanman Jewels Pvt. Ltd. and Saffron Gems Pvt. ltd. of Rs. 1,09,32,273/- and Rs. 1,10,73,291/- respectively, aggregating to Rs. 2,20,05,564/-. Accordingly, the case of the assessee was reopened and notice u/s 148 o the Act was issued on 31.03.2022, which were complied with by the assessee by filing the return of income on 28.04.2022, declaring the same income as declared in the original return of income. Thereafter, the ld. AO after referring to the investigation wing search/ investigation, on the suspicious transactions between Bhanwar L. Gurjar, Prop of M/s Kakoda International and M/s Tanman Jewels Pvt. ltd. treated the purchases as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase materials, copies of bank statement, copy of stock register, screen shot of GST return, etc. Thereafter, the ld. AO rejected the contentions of the assessee and treated the purchase made by the said concerns as bogus and unexplained expenditure u/s 69C of the Act and added to the income of the Assessee. 04. In the appellate proceedings, the ld. CIT (A) while partly sustaining the addition directed the ld. AO to assess the income at the rate of 12% of the total bogus purchases by observing and holding as under:- "4.1 Appeal Notices were issued to the assessee on 28.02.2024, 12.04.2024, 15.05.2024 fixing the case for 06.03.2024, 29.04.2024, 30.05.2024 respectively. The assessee has filed written submission and relevant documents on 06.03.2024, 14.05.2024 and 29.05.2024. 4.2 I have gone through the assessment the assessment of assessment order and record available. The assessee filed its income tax return for A.Y, 2018-19 on 30.10.2018, declaring a total income of Rs 29,74,75,300/-, The assessment order under section 143(3) was passed, assessing the total income at Rs 29,76,02,380/-. Based on information flagged by the Directorate of Income Tax (Systems) and the risk manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f notice u/s 133(6). The AO added Rs 2,20,05,564/- as unexplained expenditure under section 69C read with section 115BBE on the non-genuine nature of the purchases. In my view, given that sales were accepted as genuine by AO, it could be concluded that the above purchases could not be treated as non-genuine. Hence, there should be a reasonable estimation of the profit element from these purchases. Although, the appellant has given the copies of bank accounts showing payment and receipts but has failed to prove that the above said entities from where the purchases have been made actually did not physically existed. No document with relation to them has been submitted. Since the assessee could not conclusively prove that the purchases were actually made from the genuine parties, a profit element at 12% may be charged by AO from these purchases. The disallowance of purchases is to be restricted to 12%, and the income to be computed accordingly. The assessee failed to present the vendors for verification. A reasonable estimation of the profit element due to the inability to conclusively prove the parties as genuine is seemed appropriate on the facts of the case. 5. As a result, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annels and it was not the allegation that the cash was introduced before the payments made for the purchases. Therefore we are in a position to subscribe to the conclusion drawn by the ld. CIT (A) of partly sustaining the addition to the extent of 12% of the so-called bogus purchases, especially when the sales were accepted by both the authorities below. Even GST authorities have not made any adverse inference qua these purchases by the assessee from these parties. Considering all these facts and circumstances, we are not in a position to sustain the addition. The case of the assessee find support from the decisions of the co-ordinate Bench in case of ACIT Vs. Urgaya Foods and Fees Private Limited in ITA No. 1116/KOL/2024 for A.Y. 2021-22 vide order dated 15.01.2025, New India Construction Co. Vs. ITO in ITA No. 827 & 828/KO/2023 for A.Y. 2013-14 & 2014-15 vide order dated 12th October, 2023 & the Hon'ble Calcutta High Court decision in the case of M/s Diagnostics Vs. CIT in ITA No. 153 of 2004 vide order dated 4th March, 2011. For the sake of ready reference, the operative part of the decision in the case of M/s Diagnostics (supra) is extracted below:- "It appears from recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consequently, the said party did not co-operate with the Assessing Officer. However, the transaction having taken place through account payee cheques, we are unable to accept the contention of Mr. Agarwal, the learned advocate appearing for the Revenue that the transaction was a non-existent one. If an assessee took care to purchase materials for his business by way of account payee cheques from a third party and subsequently, three years after the purchase, the said third party does not appear before the Assessing Officer pursuant to the notice or even has stopped business, the claim of the assessee on that account cannot be discarded as non-existent. In the case before us, the Revenue has not put forward any other ground, such as, it was not a genuine transaction for other reasons but has simply rejected the claim on the ground as if there was no such transaction. The transaction having taken place through payment by account payee cheques, such plea is not tenable and in such circumstances, the Tribunal below erred in law in reversing the finding arrived at by the Commissioner of Income-tax (Appeal) accepting the said transaction as a genuine transaction. We, therefore, se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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