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TMI Blog2015 (6) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the GP rate on such accommodation bill which is actually in the nature of expenses, the Ld. CIT was justified in setting aside the order perused by AO and restoring the matter back to the file of the AO for deciding afresh after making necessary inquiry with regard to such purchases/expenses and affording assessee adequate opportunity of hearing. - Decided against assessee - ITA No.964/M/2015 - - - Dated:- 19-6-2015 - SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Assessee : Shri Bhupendra Shah, A.R. For The Revenue : Shri Manjunatha Swamy, D.R. ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 27.01.2015 of the Commissioner of Income Tax (hereinafter referred to as CIT) passed u/s 263 of the Income Tax Act relevant to assessment year 2011-12. 2. The assessee has taken the following grounds of appeal: 1. In the facts of the case and in Law, the learned CIT erred in invoking Section 263 to the case of the Appellant only by way of change of opinion, without pointing out any error in the order of the A.O. and also by wrongly rejecting the detaile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viders had also declined the transactions of any kind with the assessee stating it to be a non genuine sale transaction. The director Shri Rahim Maredia did not accept the Department s contention. He stated that the assessee had been conducting genuine business transactions with those parties. However, since the matter was old and the assessee was unable to produce those parties and in order to have peace of mind and avoid protracted litigation, he had agreed with the Gross Profit on such transactions relating to those parties as offered to tax. Mr. Rahim had further stated that the above declaration made by him was to avoid litigation and to buy peace of mind. As the declaration was made voluntarily, he had requested no penal action may be taken on this voluntary offer of Gross Profit to tax. The AO observed that the assessee had accepted the department's contention that the purchases to the extent of ₹ 3,60,24,582/- made during the year were non genuine as the assessee company's director Shri Rahim Maredia had categorically accepted and offered to tax the Gross Profit on the quantum of above purchases. In view of the above facts, he rejected the books of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r/inventory established one to one diary for purchases and sales. However, in this case assessee has made purchases which has been claimed as expenditure, no corresponding sales of such purchases had been shown by the assessee. The Ld. CIT, therefore, found that AO should have conducted the necessary enquiry regarding the existence of suppliers, whether purchases were actually made, pursued the cash trials etc. Thereafter, relying on the decision of the co-ordinate bench of the Tribunal in the case of Western Extrusion Industries in ITA No.6579/M/2010 dated 13.11.2013, where disallowance of purchases was confirmed as there was no evidence of movement of goods and cash was immediately withdrawn by supplier, order passed by AO was set aside as erroneous and prejudicial to interest of Revenue. Further reliance was placed by Ld. CIT(A) on the decision of Hon ble Rajasthan High Court in the case of Woolen Carpet Factory 125 Taxman 763, wherein purchases were found to be ingenuine and addition was made under section 69 of the IT Act. He accordingly set aside the assessment and restored the matter to the AO for doing the assessment afresh after making necessary enquiry with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 of the paper book to show that the AO vide his letter dated 20.02.2014 had made inquiries from the assessee in relation to the purchases made from different parties. He has further invited our attention to page 63 of the paper book to show that the assessee had given reply in respect of the inquiries. He has further invited our attention to the assessment order to show that the AO had discussed this issue. He has relied upon various judicial decisions to contend that if details were called for by AO and the same were considered by him then, revision cannot be resorted to; That if two views were possible and AO had taken one view it would not render the order erroneous. He has further relied upon the judicial decisions in the cases of Malabar Industrial Co. Ltd. (243 ITR 83) (SC), Gabriel India Ltd. 203 ITR 108 (93) (Bom), Venkata Krishna Rice Co. 163 ITR 129 (Mad). The Ld AR has further relied upon the decisions of the ITAT in cases of (i) Rajeev M. Kalathil 6727/M112 ii) Ganpatraj A. Sanghvi ITA 2826/M/2013 and (iii) Ramesh Kumar Co. ITA No. 2959/Mum/14 to contend that where purchases were made from parties black listed by Sales Tax Department and the additions were made trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gus purchases/expenses. As per our considered view, since the purchases so made were not sold by the assessee, the AO was not justified in estimating 15% profit on such bogus purchases. However, such bogus purchases/expenses were going to reduce the assessee s profits by the equal amount of such expenses and not only by 15% as taken by the AO. It was not a case where purchases so made were actually sold by the assessee. Where assessee is found to have sold the goods out of the bogus purchases, under those circumstances it is reasonable to estimate profit out of such sales so as to make appropriate addition. However, in the instant case, before us, the assessee was engaged in the business of hotel wherein the expenditure alleged to be incurred on plumbing, electrical items, furniture, printing and stationary etc. amounting to ₹ 2,98,13,059/-, appears to have reduced directly the profit earned by assessee. Even in respect of alleged bogus payment made for purchase of furniture items no inquiry was made by the AO to find out whether furniture was actually acquired and installed. Genuineness of the various expenditure so incurred or purchases so made whose suppliers were not trac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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