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TMI Blog2011 (7) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase. We direct the AO to work out disallowance accordingly. Decided partly in favor of assessee. - ITA No.137/Ahd/2009 - - - Dated:- 26-7-2011 - S/SHRI G.D. AGARWAL AND T.K. SHARMA, JJ. For the Appellant : Shri Prakash D. Shah For the Respondent : Shri B.L. Yadav ORDER PER G.D. AGARWAL, VICE-PRESIDENT : This is assessee s appeal against the order of learned Commissioner of Income-tax (Appeals)-I, Surat dated 7.08.2008 arising out of the order of the AO under Section 143(3) of the Income Tax Act, 1961. 2. In this appeal of the assessee, the following grounds were raised: 1. The ld.CIT(A) erred in confirming addition of ₹ 40,69,546/- made by the ld.AO by disallowing purchase of finished fabrics amounting to ₹ 40,69,456/- treating the same as unaccounted purchase. 2. The ld.CIT(A) erred in upholding the rejection of the books of accounts under Section 145(3) by the AO. 3. The facts of the case are that the assessee derives income from the business of sale of grey and finished fabrics. During the assessment proceedings, the AO verified the purchase of finished fabrics and he found that all 31 parties from whom the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details regarding clearance of those cheques and noticed that most of clearing were shown payment to Nina and H traders in the case of Kotak Mahindra Bank. In the same fashion the clearing were shown in the name of Arun Chem in the case of HDFC Bank. The inquiries revealed that the assessee company has not issued account payee cheque, accordingly, the cheques have been cleared in other accounts. In view of the above, the AO treated the purchase amounting to ₹ 40,69,546/- from the above parties to be bogus and added the same to the total income of the assessee. 4. On appeal, the CIT(A) sustained the addition, hence this appeal by the assessee. 5. At the time of hearing before us, it is stated by the learned counsel that the assessee made purchases from the above mentioned parties and made payment by cheque. That if, at the time of verification by the AO, the parties were not available at the address given it cannot be presumed that the purchase is not genuine. He further submitted that even if it is held that the assessee did not make the purchase from those parties, it is evident that the goods were actually purchased by the assessee. In support of this, he re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and claim of such purchases was not genuine. However, we find force in the alternative contention of the learned counsel. Quantity-wise details is given in para-28B of the audit report, which reads as under: B. Finished products. By-products. (i) Opening Stock : 57356 (ii) Purchases during the previous year : 102514.20 (iii) Quantity manufactured during the previous year: 390684.50 (iv) Sales during the previous year : 550554.70 (iv) Closing Stock : NIL (vi) Shortage/excess if any. : - From the above, it is evident that the entire quantity of opening stock, purchase and quantity manufactured during the year under consideration was sold by the assessee. There was no closing stock and no shortage was claimed by the assessee. Thus, the purchases of entire 102514.20 meters of cloth was sold during the year under consideration. This supports the assessee s contention that the finished goods are purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed that it is not his responsibility to produce the seller. It is a settled law that onus is on the assessee to establish the genuineness of the purchase. The assessee has produced various evidence with regard to the receipt of the goods by it, i.e. stock register, receipt of weighbridge for weighment of goods purchased by the assessee, octroi receipt for the payment of octroi duty etc. After considering the entire material, we are of the opinion that the assessee did not purchase the goods from the parties mentioned in the sales bill. At the same time, it did purchase the goods from some other suppliers, may be without bill. Therefore, purchase rate as mentioned in the alleged sales bill cannot be accepted. Any person indulging in the practice of purchasing goods from the grey market and obtaining bogus bills of some other parties, would do so for getting some benefit. But what would be the magnitude of the benefit would depend upon facts of each case. In the case of Vijay Proteins, ITAT held that such benefit to be 25% and therefore sustained the disallowance for bogus purchase at 25%. In the case of Sunsteel (supra), the ITAT deemed it fit to sustain the disallowance for a l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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