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TMI Blog2014 (3) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... et – The decision in CIT vs. Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] followed - estimation of profits on bogus purchases in case of trading in steel on wholesale basis and purchases were found bogus but CIT(A) found that these purchases were made from the grey market from other parties - The ld. CIT(A) confirmed the addition on 30%, however, ITAT reduced it to the extent of 12.5% - the assessee held that 12.5% net profit on bogus purchase could be added to the assessee’s income as a profit element - 12.5% net profit on bogus purchase is reasonable – Decided against Revenue. - ITA No. 43 /Ahd/2011, ITA No. 113 /Ahd/2011 - - - Dated:- 27-3-2014 - Shri Mukul Kr. Shrawat And Shri T. R. Meena,JJ. For the Petitioner : S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rification of the reply received, it is seen that following parties had never supplied any material to the assessee. Sr. No. Name of the party Amount 1. M/s Arun Industrial Corpn. 31,56,405 2. M/s Minakshi Enterprises 12,39,380 Total 43,95,785 The ld. A.O. has reproduced the reply of above parties as under: Arun Industrial Corporation Please refer to your aforesaid letter sent to me. It is stated that Shri Narendra Jivaram Bishnoi has shown purchases for the F.Y. 2006-07 from M/s Arun Industrial Corporation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which was availed by the assessee on this issue. After considering the assessee s reply, the A.O. held as under: a) The assessee has not maintained any day to day stock, purchase and sales. Therefore, purchase and corresponding sales are not identifiable. b) In the statement of the above party recorded u/s.131 of the Act, by DDIT(lnv.) on 31-08-2009, and in a statement recorded u/s.131 of the Act on 10-11-2009, by the undersigned that they have not supplied any goods to the assessee, the assessee has categorically stated. c) The evidence produced do not show the place of the actual delivery of the goods, mode of transportation, like LR No., Regn. No. of the vehicle etc. d) There is no endorsement on the delivery to establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The payments have been made by cheque from explained funds of the business. That leaves only one alternative. The materials have been purchased from the open market incurring cash payment and bills have been taken from paper concerns like M/s. Arun Industrial Corporation and M/s. Minakshi Enterprises. In the process the appellant has violated Sec. 40A(3) which prohibits cash purchases and also there were accompanying gain as the purchases of materials made from unregistered parties escapement of sales tax and other statutory duties. 5.4.2. However, as per various decisions of ITAT such as Vijay Proteins Ltd. 58 ITD 528, entire cost of purchases cannot be added in such cases. This view is also supported by the judgments of ITAT in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The factual position is that the appellant did purchase steel and supply the same directly from the place of supplier to the place of its customers from which it received payments and disclosed the same as sales. In such types of case, testing weighing were also made, where the goods sold to the customers. If later on any discrepancy noticed by the customer with regard to quality, quantity and rate differences, the appellant gives credit accordingly after confirmation with them. The genuineness of the sales so made has not been disputed by the ld. A.O. It is a matter of common sense that in order to execute sales one has to make purchases that too at least of equal quantity. The ld. A.O. made inquiry u/s. 133(6) of the IT Act but there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court confirmed the order of the ITAT. He further relied upon in case of Hon ble ITAT B Bench in case of ITO vs. Sunsteel, in ITA No. 2641/Ahd/1997, for A.Y. 1994-95, wherein assessee had not able to prove the existence of certain suppliers. The A.O. does not have material to prove the payments of purchases came back to the assessee. It is possible that assessee had made purchase from unregistered dealers to get benefit of margin of purchases. The addition was restricted to Rs.50,000/- on bogus purchase of Rs.5,80,485/-. He has drawn our attention on page no.78, the assessee is having TIN No. his purchase had been disclosed in the VAT return filed by the assessee. The Commercial Tax Department, Vadodara, had accepted these purchases as ge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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