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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 ..... hat all 31 parties from whom the assessee claimed to have purchased the finished goods were not available at the address given. The purchase bills were not having telephone number of the seller. The AO deputed the Inspector of the Income-tax department to verify the purchases. However, none of the parties was found at the address given by the assessee. The assessee has also not produced either confirmations from the parties or any of the parties before the AO. The relevant findings recorded by the AO in para 7 of the assessment reads as under: "On verification of purchase bill of finished fabrics claimed by the assessee company, it was noticed that almost the all bills are not having mentioned telephone number, printed bill number, chalan number and de ails of transportation and brokers. The printed format in most of the bills are also similar. Having such doubts, this office has issued notices u/s 133(6) of the IT Act to the each parties for calling contra copy of account, copy of acknowledgement of return filed, Bank statement etc. However, all notices issued by this office have been returned by the postal authorities either mentioning no such party or incomplete address. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of this, he referred to quantitative details given in the audit report and pointed out that entire quantity of purchases made by the assessee was sold. The assessee has not claimed shortage of single meter of the cloth. Thus, when the entire purchase of 1,02,514 meters of the cloth was sold, if the purchase is held to be bogus there cannot be resultant sale. Since the department has accepted the sale as genuine, obviously the corresponding purchase would also be genuine. He submitted that similar facts is considered in detail by the ITAT in the case of Vijay Proteins, 58 ITD 428 (Ahd). That the ITAT in the subsequent cases also made some lumpsum disallowance out of the purchases which was much lower than 25%. That in the case of processing of cloth, at the relevant time, there was neither any custom duty nor excise duty therefore, even in the purchases made in the grey market, there would be only marginal difference in the rate. He therefore stated that lumpsum disallowance out of purchases may be made. 6. The learned DR, on the other hand, relied upon the order of the authorities below. He pointed out that the AO after detailed investigation has proved that the purchases shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be squarely applicable, wherein the Tribunal held as under: "8. We have considered rival submissions and perused the material placed before us. First we shall consider the addition of Rs. 26,76,559/- made by the Assessing Officer as unexplained payment. We find that the Assessing Officer in this case has made a thorough investigation. He had taken pain to trap the payment for purchases made by the assessee from the bank account and at page no.5 of the assessment order has recorded the finding with regard to each payment. Perusal of which clearly shows that the entire payment made by the assessee was by cheque and was debited in the assessee's bank account. Therefore, once the assessee has made the payment by cheque, which is duly debited in the assessee's bank account, the same cannot be said to be unexplained payment, source of such payment in the hands of the assessee is duly explained. Therefore, in our opinion, there was no justification for making the payment of Rs. 26,76,559/- as unexplained credit. So far as the bogus purchase is concerned, we find that the Assessing Officer recorded the detailed finding so as to establish that the purchases claimed to have been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the ITAT in the case of Anubhai Shivalal reads are under: 3. At the time of hearing before us, it is submitted by the learned counsel that the addition sustained is excessive. In support of this contention he referred to the decision of the Tribunal in the case of ITO Vs. Sun Steel 92 TTJ (Ahd) 1126 wherein the Tribunal has sustained the addition of Rs. 50,000/- on account of bogus purchases. However, we find that the facts in the above case were different. In the above case, the assessee has shown purchases of Rs. 27,39,410/-, sale of Rs. 28,17,207/- and GP at Rs. 94,740/-. The Assessing Officer made the addition of Rs. 27,39,407/- for bogus purchases. If the above sum is added to the GP, the GP works out Rs. 28,34,1247/- which was more than the sale itself. The Tribunal held that it is impossible that the GP is more than the sale itself. The Tribunal also found that the assessee has maintained the quantitative details in respect of materials purchased and sold. Considering peculiar facts of that case, the Tribunal arrived at the conclusion that it would be fair and reasonable to estimate the addition at Rs. 50,000/- as against the addition of Rs. 27,39,407/- made by the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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