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TMI Blog2017 (1) TMI 1251X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer has not doubted the bank transaction. Therefore, we are of the view that the entire addition cannot be made. The only addition which can be made is only NP addition. In the instant case, the assessee has shown NP rate of 1.62% of total turnover. Therefore, we direct to apply Net profit on above purchases at the rate of 6%. - Decided partly in favour of assessee - I.T.A. No. 131/Ind/2016, I.T.A. No. 132/Ind/2016 - - - Dated:- 17-10-2016 - Shri D. T. Garasia, Judicial Member And Shri O. P. Meena, Accountant Member Appellants by : Shri P.D. Nagar Respondent by : Shri K.G. Goyal ORDER Per Shri D. T. Garasia, JM These different appeals are filed by different assessees. Since the issue involved in these appeals is identical, these appeals are being disposed of by this consolidated order for the sake of convenience. ITA No.131/Ind/2016 2. The short facts of the case are that during the course of assessment proceedings information was received from DGIT, Bhopal, in the case of the assessee that this concern has made purchases from M/s Nirma Trading Company and Shri Omkar Enterprises without taking delivery of the goods. On the basis of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire purchase as bogus purchase from unexplained sources and added the same u/s 69 of the Act of ₹ 2,46,08,762/-. 3. The matter was carried in appeal and the learned CIT(A) dismissed the appeal of the assessee. Now the assessee is in appeal before the Tribunal. 4. Before us, the learned counsel for the assessee submitted that certain information was forwarded by DGIT (Inv.), Mumbai regarding bogus purchases from these two suppliers for taking necessary action. In turn DGIT (Inv.), Bhopal informed the Assessing Officer that genuineness of purchases from these parties was doubted and based on such information, the enquiry was made by the AO during the course of assessment proceedings. It was contained that aforesaid two parties were found to be suspicious dealer as reported by the Asstt. Commissioner of Sales Tax (1-8), Investigation-A, Mumbai because they were not found at the addresses given hence the conclusion was drawn that those dealers have accommodated other parties by giving purchase invoices. The appellant proved that all transactions were effected in normal course of business by submitting following documents to prove the genuineness of entire purchases :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 252 ITR 476 (Guj) vi) CIT vs. Hi Lux Automative P. Ltd (2009) 183 Taxman 260 (Del) vii) Maruti Impex vs. JCIT (ITAT-Mumbai Bench - order dt. 09.03.2016)[enclosed] According to him, the transaction cannot be considered as non-genuine based on the suspicion, especially when various documents placed substantiates the genuineness thereof. If some of the dealers were branded by Maharashtra VAT department as Hawala Dealers , just because they were not traceable at given address, the Income tax department cannot treat the purchases effected by the assessee from such dealers as bogus without making any enquiry. He pointed out that the Sales Tax Officer (Investigation Wing), had observed that the dealer may be bogus or fictitious having large turnover hence enquiry is required in the matter . According to him, it is just a possibility that the selling dealers, with a malafide intention to avoid the tax liability under Maharashtra VAT Act, did not disclose the sales effected in their return. The Sales tax department of Maharashtra did not mention anywhere in the report that the sales effected to the assessee by aforesaid parties are in the nature of accommodation entries only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless there is some evidence in support of the claim that the money reached back to the assessee. Suspicion alone however strong is not sufficient. Gross profit earned was also substantial on such purchases hence at the most further estimation of profit may be justified instead of considering entire purchases as bogus and its assessment u/s 69C of the Act. Reliance is placed on following judgments :- a) CIT vs. Bholanath Poly Fab Pvt Ltd (2013) 355 ITR 290 (Guj.HC) b) CIT vs. Simit P Sheth (2013) 356 ITR 451 (Guj.HC), c) CIT vs. Hindustan Equipment P. Ltd (2013) 22 ITJ 555 (MP). d) Sanjay Oil Cakes Industries vs. CIT (2009) 316 ITR 274 (Guj.) e) G.G Diamond International vs. DCIT (2006) 104 TTJ 809 (Mumbai) f) DCIT vs. Narendra Kumar Lunawat(2004) 90 TTJ 467 (Jaipur) 7. The learned counsel for the assessee also argued that this case is covered by the decision of the Hon'ble Delhi High Court in the case of CIT vs. Hi Lux Automative P. Ltd. (2009) 183 Taxman 260(Del.) wherein the Hon'ble High Court has categorically summarized the issue regarding the genuineness of the transaction where the party was not traceable and what can be held in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of the party in another case, no addition can be made. In the case of ACIT vs. Bhaskar Trading Corpn.; 9 ITJ 141 wherein the Indore Bench of the Tribunal has dealt with this issue and held that when the payments have been received by account payee cheque, if the sales are genuine and not doubted, the purchases can also be genuine. The counsel also relied upon the decision of the Hon'ble Gujarat High Court in the case of CIT vs. M.K. Bros.; 163 ITR 249 wherein it was held that when the assessee has made purchases from certain party which were held to be bogus by the sales tax authority and if the payment was given by cheque, addition cannot be made on account of income from undisclosed sources. Similarly in the case of CIT vs. Bholanath Poly Fab Pvt. Ltd.; 355 ITR 290 the Hon'ble Gujarat High Court held that where purchases were bogus then not the entire purchases, but the profit element embeded therein can be subjected to tax. Similarly in the case of CIT vs. Simit P Sheth; 356 ITR 451 the Hon'ble Gujarat High Court held that not the purchase price but only profit element embeded in such purchases learned CIT(A) ould be added to the income of the assessee. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprises and M/s Nirma Trading Company, purchases invoice issued by Shri Omkar Enterprises and M/s Nirma Trading Company along with copy of lorry receipt and corresponding sale invoices, copies of sales tax returns filed by the assessee. The assessee has filed complete details showing purchases effected by the assessee from the above parties, TIN number, lot number, cotton bales purchases, net value, value of goods, tax charged and corresponding sales of same cotton bales to various parties. The assessee has earned gross profit on ₹ 37,55,227/- against these purchases. In this case the assessee has also filed copies of VAT audit report and returns submitted under Maharashtra VAT Act of Shri Omkar Enterprises and M/s Nirma Trading Company vide paper book page nos. 96 to 129 and pages 132 to 135. We find that in this case the addition has been made only on the ground that both the parties are not traceable. We find from the order of the Assessing Officer that the Assessing Officer has not issued any summons to both the parties for their presence during the assessment proceedings. As per the decision of the Hon'ble Delhi High Court in the case of CIT vs. Hi Lux Automative Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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