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TMI Blog2017 (3) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... in these purchases are to be estimated wherein the learned CIT(A) estimated GP @ 17.5% on alleged bogus purchases as against 7.11% declared by the assessee. End of justice will be met in the instant case if GP is estimated to tune of 12.5% of the purchases from these alleged hawala operators which will cover any leakage of Revenue by way of VAT, commission etc. . Thus, as compared to the GP ratio at 7.11% declared by the assessee, we are estimating GP ratio at the rate of 12.5% on the said bogus purchases wherein the assessee will be allowed credit of declared GP ratio of 7.11% and net addition to GP ratio shall be to the tune of 5.39% on bogus purchases, hence , we allow partial relief to the assessee.We order accordingly. - I .T.A. No.3227/Mum/2016 - - - Dated:- 14-3-2017 - SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Mrs. Mamta Parmar For The Revenue : Shri B.S. Bist, DR ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 3227/Mum/2016, is directed against the appellate order dated 14th December, 2015 passed by the learned Commissioner of Income Tax (Appeals)- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed and shattered . It was submitted that the appellate order dated 14-12-2015 passed by the ld. CIT(A) was received by office staff of the assessee on 13th January, 2016 which were kept by them in the cabin of the assessee on his table. The same was not informed to the assessee by office staff of the assessee. The assessee averred in the aforestated affidavit that he resumed his duties in or about second week of April 2016 and then became aware about the appellate order dated 14-12-2015 passed by learned CIT(A) , being received by his office on 13-01-2016 . It is stated that the assessee took action for filing of the appeal before the tribunal, which was filed belatedly by 54 days on 06-05-2016. Thus, the assessee prayed for condonation of delay of 54 days in filing this appeal beyond time stipulated u/s 253(3) of 1961 Act before the tribunal. The assessee relied upon decision of Hon ble Supreme Court in the case of Collector , Land Acquisition v. Mst Katiji Ors. (1987) 167 ITR 0471(SC) and several other judicial decisions of the Hon ble Courts which are detailed in application for condonation of delay filed by the assessee with the tribunal. 5. Ld. D.R. opposed the condonati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amt. 1. Bharat Forge 26,40,944 2. BPT Tube Corporation 17,47,051 3. National Sales Corporation 14,29,227 4. Veerkripa Enterprises - The assessee was asked by the AO to produce these afore-said four parties along with their books of accounts and prove genuineness of purchases made from these four parties. The assessee produced only sample photocopies of purchase bills for material purchased from these parties as well ledger extract of these parties from its books of accounts. The assessee could not produce all details called for by the AO and also could not produce these parties except M/s Bharat Forge who was produced by the assessee before the AO , from whom the assessee had made purchases . The stock register was also not produced by assessee before the AO . The assessee submitted that payments for purchases from these parties were made by account payee cheque. The A.O. observed that these parties are suspected sales tax hawala operators as per Mahar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not deposit VAT with government and hence they were put in the list of suspicious dealers by Maharashtra VAT department and the assessee cannot be burdened under Income-tax proceedings due their failure to deposit VAT unless there is direct nexus of the assessee being proved in these bogus transactions which the assessee contended that it was not proved. It was submitted that assessee is stockist / dealers and importers of M. S. Pipes fittings and other M S products. The pipes are purchased in bulk Quantity in Kg. and then sold to customers in feet, kgs., pcs. etc. in small quantities . The assessee submitted that payments are made for these purchases by account payee cheque. It was submitted that the assessee was not allowed by the AO to cross examination these parties. The statements were recorded at the back of the assessee by Maharashtra VAT authorities was the contention of the assessee before learned CIT(A) and hence the same cannot be used against the assessee without allowing cross examination of these parties. The assessee submitted that Maharashtra VAT department has not initiated any action against the assessee. There is no incriminating material which could suggest th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned CIT(A) that since the assessee is offering GP of around 7.5%, the ld. CIT(A) estimated GP of 17.5% on these alleged bogus purchases from the parties. The learned CIT(A) refer to decision of Hon ble Gujarat High court in the case of CIT v. Simit Sheth (2013) 38 taxmann.com385(Guj), wherein on the identical facts, the tribunal upheld additions to the tune of 12.5% being the probable profit on such alleged bogus purchases, which was upheld by Hon ble Gujarat High Court by holding that in such cases profit element embedded in such purchases could be added to the assessee s income. The ld. CIT(A) accordingly directed the A.O. to estimate profit of 17.5% on the total alleged bogus purchases from these parties as the profit element embedded in such purchases, while the learned CIT(A) held that the assessee has already offered for taxation GP of 7.5% which shall be reduced from such estimated profit and only net additions were sustained to the tune of 10% of total purchases from said parties, vide appellate order dated 14-12-2015 passed by learned CIT(A). 10. Aggrieved by the appellate order dated 14-12-2015 passed by ld. CIT(A), the assessee is in appeal before the tribunal. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tios for the four quarter for previous year 2009-10 is as under(Ref csimarket.com relied upon by the assessee PB/page 1), while average comes to 8.82% Gross Margin in %age Q1 2009 Q2 2009 Q3 2009 Q4 2009 15.26% 11.69% 5.4% 2.94% 12. The ld. D.R. submitted that the Revenue has not filed appeal against the order of the ld. CIT(A), wherein the learned CIT(A) had given relief to the assesseee wherein GP rate of 17.5% was adopted for purchases from these parties instead of addition made by the AO based on peak calculation of purchases. The GP ratio of 17.5% is applied by learned CIT(A) on bogus purchases which is quite reasonable, while the assessee had only declared GP ratio of 7.11% in its books of accounts. The ld. CIT(A) has only added 10% to GP w.r.t. bogus purchases from these accommodation entry providers. It was submitted that learned CIT(A) rightly relied on decision of Hon ble Gujarat High Court in the case of CIT v. Simit Sheth(supra).Ld DR submitted that assessee has not submitted any trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not possible to quantitatively reconcile the same. The stock register was also not produced . The assessee has not maintained stock records, delivery challans, goods received notes , octroi receipt , lorry numbers etc to substantiate the genuineness of the purchases to prove that there was actual delivery of material to the assessee , more so in light of incriminating statements of these alleged bogus entry providers. The AO brought to tax income computed by way of peak calculation of purchases by considering the three parties which could not be produced by the assessee before the AO as stated above wherein fourth party Bharat Forge was not considered by the AO for computing peak purchases vide page 11 of AO assessment order dated 28-03-2013 passed u/s 143(3) of 1961 Act, wherein additions to the tune of ₹ 28,57,208/- was made by the AO towards bogus purchases based on peak calculation of purchases. The ld. CIT(A) estimated GP at the ratio of 17.5% on alleged bogus purchases as against 7.11% declared by the assessee in its return of income filed with the Revenue , wherein it was held by the learned CIT(A) that profit embedded in purchases which were purchased from hawal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em. The assessee could not produce stock register and also could not prove actual delivery of material being purchased from these hawala dealers as octroi receipts, goods receipt note, lorry receipts, purchase orders could not be produced nor invoices had any details of movement of goods to assessee from the alleged hawala dealers,, however, the assessee did produced the sample copies of purchase invoices and also submitted that payments were made by account payee cheque . Under the factual matrix of the case , we have observed that the learned CIT(A) rightly held that profit embedded in these purchases are to be estimated wherein the learned CIT(A) estimated GP @ 17.5% on alleged bogus purchases as against 7.11% declared by the assessee. We are in principle agreeable with the approach of learned CIT(A) that profits are to be estimated as embedded in these alleged bogus purchases which view is consistent with the view of Hon ble Gujarat High court in the case of CIT v. Simit Sheth(supra) . Similar view was taken by Mumbai-tribunal in the case of Sh. Ashwin Purshottam Bajaj v. ITO in ITA no. 4736/Mum/2014 vide orders dated 14-12-2016 ( wherein one of us being Accountant Member was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire purchases amount to ₹ 1.13 crores by making additions of ₹ 1,31,88,227/- being peak credit payable during the year for purchases to these parties which included balance of ₹ 18,43,451/- for purchases made in the earlier year, while the AO has , however , not doubted the sales made by the assessee against these purchases. The assessee has reconciled the quantitative details of the stock reflected in these purchases with quantitative details of stock as per sale invoices. The A.O. has doubted the purchases from these four alleged accommodation entry providers being hawala dealers as concluded by Sales Tax Department of Government of Maharashtra to be bogus purchases, that these four parties only provided accommodation bills and the goods were never supplied by these parties and the assessee allegedly made purchases from some other parties for which payments were made through undisclosed income. Thus, the A.O. observed that the assessee has purchased the material from someone else while bogus bills were organized by these hawala dealers, hence, section 69C of the Act was invoked by the AO and additions were made by the AO. The conclusion of the ld. CIT(A) that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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