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TMI Blog2016 (8) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... it is sufficient to say that effective ground of appeal has to be decided against AO. - ITA/715 to 717/Mum/2015, I.T.A./7554 to 7556/Mum/2014 - - - Dated:- 3-8-2016 - S/Shri Rajendra,Accountant Member and C.N. Prasad,Judicial Member Revenue by:Shri N. Sathya Moorthy-DR Assessee by: Shri Bhupendra Shah Order u/s.254(1)of the Income- tax Act ,1961(Act ) PER RAJENDRA, AM Challenging the order dt.14.11.2014 of the CIT(A)-33Mumbai the Assessing Officers(A.O.s) and the assessee have filed the cross appeals for the above mentioned three years.The assessee is engaged in the business of supplying iron and steel.As the issues involved in all the appeals are common involving identical issue, so we are disposing them off by a consolidated order,for the sake of convenience.The details of filing of returns, returned incomes and assessed incomes etc.can be summarised as under :- AY. ROI filed on Income returned Assessment dt. Assessed income 2009-10 25.09.2009 Rs.9,79,390/- 22.03.2014 Rs.2,33,04,760/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee. He also held that the assessee was not able to furnish any evidence to establish the delivery of goods, that the results declared by the assessee in the books of accounts were not believable. He further observed that without purchases there cannot be any sale, that the assessee had shown the income in his return of income arising out of the sales of goods, that the supplier of the goods in question were not genuine,that the physical delivery of the goods not had taken place, that the goods were purchased from other parties,that the bills issued by the said parties were not genuine, that in reality no actual purchases were made from the above-mentioned eleven parties, that the purchase of goods was a mere sham transaction.Finally,he treated the entire purchase of ₹ 2,22,70,672/-as unexplained expenditure under section 69C of the Act. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him, it was argued that during the course of assessment proceedings the assessee had furnished complete details of purchases including the documents in form of delivery challans,transport receipts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 69C of the Act, that he had held that the assessee had purchased goods from third parties, that the conclusion drawn by the AO was based on presumption, that he had not disputed the fact that assessee had in fact purchase the goods and also made sales out of such purchases,that purchase of goods was not in doubt,that the parties from whom purchases were shown to have been made were registered dealers under MVAT.He referred to the case of Kirtila Kalidas Jewellers Pvt.Ltd.(54SOT29) and held that no addition could be made under section 69C of the Act. He also referred to the other cases decided by the Tribunal and held that the AO did nothing except relying upon the nonverification of the parties under an enquiry under section 133 (6) and the information obtained from the Sales Tax Department, that he had completely ignored the factors like corresponding consumption and sale of goods purchased ,payment made by him to the parties concerned through proper banking channels, that the provisions of section 69C were applicable in a case where the source of expenditure was in doubt and not the expenditure itself, that in the case under consideration on the one hand the AO had doubted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossibility that such purchases were over invoiced to reduce the profit, that in such cases profit element amended in the transaction could be upheld. He referred to the cases of Simit P Seth (ITA/ 553 of 2012) of the Hon,ble Gujarat High Court and Bholenath Poly Fab (P.) Ltd (ITA/63 of 2012, dated 23/10/2012) and Sathyanarayan P Rathi(351 ITR 150)and reiterated that only the profit element embedded in such purchases shown could be added to the income of the assessee. Finally,he held that it would be fair and reasonable if the disallowance,out of the alleged bogus purchases to cover up inflation namely case in the case of the assessee,was restricted to 10%. He directed the AO to disallow the 10% of the alleged bogus purchases i.e to ₹ 22.27 lakhs. 4.During the course of hearing before us,the Departmental Representative (DR) supported the order of the AO and argued that assessee had not produced the parties for verification, that the assessee had not proved the genuineness of the transaction. The Authorised Representative (AR) stated that provisions of section 69C were not applicable in the year under consideration. He referred to the cases of 1. Rajeev M. Kalathil, (ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 dated September 29, 2011 The Hon ble Court mentioned the facts of the case and decided the issue as under: 2. The issue pertains to bogus trade made by the respondent-assessee.The assessee is in the business of trading in iron and steel. For the AY. 2003-04, during the reassessment proceedings,it was found that the purchases worth ₹ 61.40 lakhs (rounded off) were not supported by sufficient evidence. The assessee's claim of having purchased such goods from various suppliers was verified, but was not found genuine. It was found that such parties had never supplied the goods as named by the assessee. On such basis, the Assessing Officer made addition of the entire amount of purchase of ₹ 61.40 lakhs(rounded off).The assessee carried the matter in appeal and the Commissioner of Income-tax (Appeals) partly allowed the appeal. It was found that though the purchases were not made from the parties from whom the assessee claimed, there was complete quantitative tally of material purchased and sold. In that view of the matter, the Commissioner of Income-tax (Appeals) was of the view that such materials were purchased from the open market incurring cash payment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not suffer from any legal or factual infirmity,as far as deleting the addition of ₹ 2.27 Crores is concerned.We would discuss the issue of estimating the profit element embedded in the transaction,while adjudicating the appeal filed by the assessee.As far as the appeal of the AO is concerned,it is sufficient to say that effective ground of appeal has to be decided against AO. ITA/7554/Mum/2014,AY.2009-10(Appeal by the Assessee): 6.While deciding the appeal,filed by the AO,we have taken note of judgment of Satyanarayan P. Rathi(supra).We find that the said case was not brought to the notice of the Tribunal,in the cases relied upon by the assessee,as stated earlier.The failure of the assessee to produce the alleged purchasers before the AO and returning back the notices issued by the AO by the postal authorities lead to the inference that the purchases made by the assessee were not verifiable as the sales were. In our opinion,to that extent, the assessee was not able to prove the genuineness of the purchases made from the above-mentioned 11 parties. So,in absence of veracity of the claim made by the assessee about the purhcases,the FAA had to make an estimate.In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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