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TMI Blog2017 (8) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... only the profit element embedded in such bogus purchases depending upon the nature of business.With the observations held in this case , therefore we directed the AO to estimate net profit of 20% on alleged bogus purchases made from those parties in present case - Appeals of revenue are partly allowed. - ITA No.3445/Mum/2015 And ITA No.3446/Mum/2015 - - - Dated:- 30-6-2017 - Shri Joginder Singh (JUDICIAL MEMBER) AND Shri G Manjunatha (ACCOUNTANT MEMBER) For The Appellant : Shri Saurabh Kumar For The Respondent : None ORDER Per G Manjunatha, AM : These two appeals filed by the revenue are directed against the common order of the CIT(A)-24, Mumbai dated 18-03-2015 for the assessment years 2010-11 an 2011-12. Since facts are identical, for the sake of convenience, we heard both the appeals together and are disposed of by this common order. 2. The brief facts extracted from ITA No.3445/Mum/2015 for the assessment year 2010-11 are that the assessee company, engaged in the business of software development and consultants, filed its return of income for the assessment year 2010-11 on 15-10-2010 declaring total income of ₹ 1,63,92,382. The case was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those parties are bogus in nature. The AO further observed that though assessee has furnished certain details like sales invoices, details of materials purchased and payment details, but failed to furnish further evidences to prove that the purchases are genuine in the form of delivery notes, weigh bridge slips, etc. The assessee also failed to produce the stock register showing quantity of goods purchased from those parties and also failed to produce the consumption register to show consumption of materials, if any, purchased from those parties. There was no evidence of physical delivery of goods, whatsoever, in nature, was produced in support of its arguments. Accordingly, the total purchases made from the said parties have been considered as bogus purchases and made additions as unexplained income of the assessee. 4. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee reiterated its submissions made before the AO. The assessee further submitted that the AO was erred in making addition of 100% purchases, despite furnishing necessary evidences to prove that the purchases are genuine merely on the ground that those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases cannot be added and what needs to be added is the profit element embedded in these purchases. The Courts have upheld the estimation of net profit ranging from 12.5% o 25% depending upon the nature of business. The Hon ble High Court, in yet another case in CIT vs Smit P Sheth (supra) observed that no uniform yardstick could be applied for estimation of net profit. It depends upon nature of business carried out by the assessee. With these observations, the CIT(A) directed the AO to estimate net profit of 15% on total bogus purchases made from those parties. Aggrieved by the order of CIT(A), the revenue is in appeal before us. 6. None appeared for the assessee despite service of notice. However, we find that the matter could be disposed of even without the presence of the assessee. Therefore, we heard the Ld.DR and proceed to dispose of the matter qua the assessee. 7. The Ld. DR submitted that the Ld.CIT(A) erred in directing the AO to estimate profit at 15% on the total alleged bogus purchases without appreciating the fact that there was completely no proof of delivery of purchases of goods and the said sellers were found to be hawala operators / bogus billers. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no specific observations by the AO with regard to the incorrectness of financial books as well as stock book maintained by the assessee, addition cannot be made towards bogus purchases merely on the basis of information received from Sales-tax Department. We further observed that in these type of cases, various High Courts including Tribunals have estimated the net profit at 12.5% to 25% depending upon facts of each case and nature of business carried out by the assessees. The Hon ble High Court of Gujarat in the case of Vijay Proteins Ltd vs CIT (supra) observed that additions cannot be made of total bogus purchases and what needs to be taxed is only the profit element embedded in such bogus purchases. In yet another case, in M/s Smit P Sheth (supra), the Hon ble High Court observed that no uniform yardstick could be adopted for estimation of net profit on bogus purchases. No doubt, once the assessee fails to prove the purchases as genuine, then the profit element embedded in such purchases has to be taxed. In this case, the assessee has relied upon certain judicial precedents wherein the Courts have directed the AO to estimate net profit at 12.5% to 25%. Therefore, considering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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