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TMI Blog2013 (10) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be much higher. In essence, the Tribunal only estimated the possible profit out of purchases made through non-genuine parties. No question of law in such estimation would arise. The estimation of rate of profit return must necessarily vary with the nature of business and no uniform yardstick can be adopted - Disallowance to the extent of 12.5 percent is allowed – Decided against the Revenue. - TAX APPEAL NO. 553 of 2012 - - - Dated:- 16-1-2013 - MR. AKIL KURESHI AND MS SONIA GOKANI, JJ. FOR THE APPELLANT: MR KM PARIKH, ADVOCATE (PER : HONOURABLE MR. AKIL KURESHI) 1. The Revenue is in appeal against the judgment of the Income-tax Appellate Tribunal ("the Tribunal" for short) dated February 24, 2012, raising the following su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of goods. The Assessing Officer, therefore, concluded that the total purchases of Rs. 41,04,903 cumulatively made from the said three parties were bogus. He, thus, treated such purchases as bogus purchases and added the entire amount of Rs. 41,04,903 to the gross profit of the assessee. He also rejected the books of account and estimated the assessee's business profit at Rs. 5 lakhs. 2.4. The assessee thereupon preferred appeal an before the Commissioner (Appeals). The Commissioner (Appeals) though confirmed the view of the Assessing Officer that the purchases were not made by the said three parties, viz., Bhavna Trading Co., M/s. Minaxi Enterprise and Arun Industrial Corporation, but believed that the appellant-assessee had made th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on thereof for addition to the income of the assessee. Counsel heavily relied on the decision of a Division Bench of this court in the case of Asst. CIT v. Pawanraj B Bokadia in Tax Appeal No. 2345 of 2009, dated September 27, 2011, wherein this court was pleased to allow the Revenue's appeal and reinstate the entire additions of the bogus purchases made by the Assessing Officer. 4. In the present case, however, we notice that before the Commissioner (Appeals), the assessee pointed out that the assessee was trading in steel. Once his sale of "x" quantity of steel is accepted, the purchases of the same quantity had to be believed. It was canvassed that the assessee had made sales of 1,10,786 metric tons of steel. Therefore, there had to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed purchases of steel. It may be that the three suppliers from whom the assessee claimed to have purchased the steel did not own up to such sales. However, the vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and non-existent or that the purchases were actually made but not from the parties from whom it was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. 6. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Such were the facts in the case of Asst. CIT (OSC) v. 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 percent of such total sales. The Tribunal, however, scaled down to 12.5 percent 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 percent of the total turnover. If the yardstick of 30 percent., as adopted by the Commissioner (Appeals), is accepted the gross profit rate will be much higher. In essence, the Tribunal only estimated t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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