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TMI Blog2013 (6) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... rally made to extend bogus entries to other concerns in order to help them to evade tax or it could be a circular transaction to generate a healthy balance sheet to deceive financial institutions or for other purposes. Thus the income of the assessee could not be to the extent of 25% of unverifiable purchases. Further, drawing support from the decisions of Vijay Protins Ltd. [1996 (1) TMI 144 - ITAT AHMEDABAD-C] net profit could be estimated at 0.05% on the total turnover of Rs.18.23 Crores. All the findings of the CIT(A) is quite reasonable & either parties did not produce any materials on record to dislodge the findings of the CIT(A, thus no hesitation to confirm the order of the CIT(A). - ITA No.2400 and 2407/Ahd/2012 - - - Dated:- 10-5-2013 - Shri G. C. Gupta, VP And Shri A. Mohan Alankamony, AM,JJ. For the Petitioner : None For the Respondent : Shri Shelley Jindal, Sr. DR ORDER Per A. Mohan Alankamony:- These two cross appeals one by the assessee and the other by the revenue are preferred aggrieved by the common order of the learned CIT (A)-I, Surat dated 22-08-2012 in appeal No. CAS.I/242/11-12 for the assessment year 2009-10 u/s 250 read with section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee following the decision of the case Vijay Protein Ltd. reported in 58 ITD 428 (Ahd). 5. During the course of assessment proceedings on verification of the profit loss account of the assessee, the learned AO noticed that the assessee had debited Rs.18,22,62,856/- on account of purchase of fabrics against sales of Rs.18,23,44,070/-. The learned AO on further examination of the case, various queries were raised for which the assessee neither cooperated nor furnished the details. Finally, the learned AO summarized the discrepancies as follows: (i) The assessee did not furnish the details of month wise purchase and sales according to the format furnished by the revenue. (ii) For the various summons issued there was lack of cooperation by the assessee and often failed to appear before the AO. (iii) Notice issued u/s 133 (6) of the Act to the creditors and debtors were also returned un-served with the remarks 'incomplete'. (iv) From the copy of the accounts of the creditors and debtors furnished by the authorized representative of the assessee, it was revealed that the total purchases during the period 05-04-2008 to 23-04-2008 from M/s. Raman Fabrics Pvt. Ltd. shows an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be carried out without any such expenses; c) As mentioned in the show cause notice at para 1, the address of the assessee is shown at 128D, Building No.2, Sanghvi Tower, Adajan Surat. The notices issued in these address are never delivered in the address given, but later received by the Authorised Representatives office; d) The copy of return of income filed by M/s. Raman Fabrics P. Ltd., and M/s. Kalaniketan Syntex, P. Ltd. shows their sale figure as 'loan to subsidiary company', which were shown to the Authorized Representative during the course of assessment proceedings as demanded by its letter, but there is not satisfactory explanation thereon furnished by him later on; e) These sales by these Companies to the assessee are shown in their books of accounts against the loans given; 15. It is also imperative to mention here that non maintenance of day to day stock records is a defect within the meaning of section 145(3) of the Act. The Hon'ble Apex court has also interpreted so in the case of S. N. Namasivayam Chettiar (SC) 38 ITR 579, wherein, it was held as follows:- "keeping of stock register is of great importance because that is a means of verifying assessee's acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s should have been disallowed. There is no basis for accepting 75% of amount as genuine and treating 25% of the amount as bogus purchases in respect of the same party. Besides doubting the purchases, the A. O. also doubted the sales made by the appellant as mentioned on page -7 (6th line) of the assessment order, reproduced on page 8 of this order. Moreover it is noticed that M/s. Raman Fabrics Pvt. Ltd., a purchase party has similar address as the sale party M/s. Bani Thani Fashions Pvt. Ltd. The only difference is in Shop NO. which is 128E, Sanghvi Tower in the case of purchase party and 128B, Sanghvi Tower in the case of sale party. Another sale party M/s. Nakoda Textile Industries Ltd. has the address 128D, Sanghvi Tower. The appellant's address relate to few parties and almost the entire amount of purchase as well as sales is outstanding nor only on 31.03.2009 but also on 31.03.2010. Both the Sundry debtors and creditors on 31.03.2009 are Rs.10.92 crores each. There are only two parties in Sundry creditors. In respect of both these parties 25% disallowance has been made by A.O. There are five parties in Sundry debtors. The appellant has claimed that payments have been made/r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priate commission income for giving bogus entries need to be estimated as taxable income of the appellant. In case appellant has only indulged in circular transactions, then there may not be any taxable income in the hands of appellant except what has been shown in the return of income. However, if AO's view is accepted that purchases are not verifiable, even then it will be a case of net profit estimation. 13. Appellants declared business is trading in textiles. In the case of M/s. Opulent Jewels Pvt. Ltd., A. Y. 2007-08, wherein 25% of unverifiable purchases were added my predecessor held that it was a case of giving bogus entries and estimated a net profit of 1.5% on purchases as income for giving accommodation entries or purchases/sales. The said estimation was made on the basis of various decision of ITAT discussed in the appellate order No. CAS-I/273/2009- 10 dated 31.03.2010. Following the said order similar estimation was made in A. Y. 2008-09 in the case of M/s. Opulent Jewels Pvt. Ltd. in the appellate Order CAS- I/208/2010-11 dated 02.04.2012. In the said case bogus purchase/sale entries was given for diamonds and not for textiles. In the case of textile business appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as receivable from the assessee as debtors. (iii) In such circumstances, the transactions of the purchases and sales made by the assessee need not be doubted. (iv) However, during the year the assessee had a turnover of Rs.18.23 Crores with gross profit at 0.04% and net profit at 0.02%. During the subsequent assessment year, the turnover declared was nil and had shown negligible administrative expenses of Rs.46,187/- and had outstanding debtors and creditors. From these facts it could be inferred that both the purchases and sales are bogus and only book entries. Such transactions are generally made to extend bogus entries to other concerns in order to help them to evade tax or it could be a circular transaction to generate a healthy balance sheet to deceive financial institutions or for other purposes. (v) From the above facts, the income of the assessee could not be to the extent of 25% of unverifiable purchases. Further, drawing support from the other decisions of the ITAT Ahmedabad Benches, net profit could be estimated at 0.05% on the total turnover of Rs.18.23 Crores. 9. The above findings of the learned CIT(A) is quite reasonable. Further, either parties did ..... X X X X Extracts X X X X X X X X Extracts X X X X
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