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TMI Blog2017 (9) TMI 1401X X X X Extracts X X X X X X X X Extracts X X X X ..... by the revenue against the order of CIT(A)-30, Mumbai dated 07/12/2016 for A.Y.2007-08 in the matter of order passed u/s.143(3) r.w.s. 147 of the IT Act. 2. The following grounds have been taken by the Revenue:- 1. "On the facts and circumstances of the case and in law, whether Ld, CIT(A) is correct in relying upon the assessment order for A.Y. 2011-12 while deciding the issue for A. Y. 2007-08 when in A. Y. 2007-08, the assessee had failed to produce the daily stock register and thus the purchases for A. Y. 2007-08 remained un verifiable. 2. On the facts and circumstances of the case and in law, whether Ld. CTT(A)was justified in sustaining only an addition 5% profit rate on total purchases of ₹ 1,67,45,412/- made from three parties as the assessee failed to produce the daily stock register and to correlate the sale with purchase. 3. The appellant prays that the order of the Learned CTT(A) of the above grounds be set aside and that of the AO be restored. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary," 3. Rival contentions have been heard and record perused. 4. Facts in brief are that the assessee is a Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to prove as to how the material purchased was firstly obtained when the suppliers themselves admitted that they never did the business and are merely name lenders for the business concerns of Shri Pravin Jain, Rajendra Jain and others, who has admitted that only accommodation entries were given and no actual sale to those parties. In view of the same, I am in agreement with the findings of the AO that the purchases are not made from these parties. However, in this case after rejecting the books of accounts AO added the entire amount of the purchases from those three parties. But at the same time, AO did not disturbed the sales, ignoring the fact that there will not be any sales without any purchases and moreover some portion of the sale is from exports which are evidenced from the invoices and receipts credited in the bank account. At the same time, one should not ignore that there is clear cut evidence in the form of sworn depositions given in the search operations by the suppliers that they have not supplied the goods and only provided accommodation entries. In these circumstances I am in support of the views of the AO that there is every chance that the appellant might have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the door will be left wide open to evade tax. The Hon'ble Court further held that the Taxing Authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled r to look in to the surrounding circumstances to find out the reality of the recitals made in those documents. ' 7.6 Reliance is also placed on the judgement of Hon'ble Supreme Court in the case of Sri Meenakshi Mills Ltd 63 ITR 609 where it was held that the IT. Authorities are entitled to pierce the veil of Corporate Entity and to look into reality of transaction. In the case of McDowell & Co. 154 ITR 148(SC) it was stated that implications of tax avoidance are manifold. First, there is substantial loss of much needed public revenue. Next, there is serious disturbance caused to the economy of the country due to piling of mountains of black money, causing inflation. Thus, there is "the large hidden loss" to the community, by some of the members in the country being involved in the perpetual war waged between the tax payer and his expert team of advisors, and accountants on the one side and the tax gatherer and his perhaps not so successful advisors on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Group Concerns. In such scenario, on one hand the genuineness of the purchase party is doubted but the genuineness of purchase on a whole cannot be doubted. 7.10 In this case, I find that quantitative details were maintained, Ld. AO not doubted the genuineness of sales, however, held that the appellant indulged in non-genuine purchases to suppress the profits and rejected the books of accounts under section 145 (3) of the I T Act and proceeded to add the entire amount of such purchases made from the three parties, instead of making the profit element embedded in such bogus purchase. As stated earlier when the sales are genuine, it is not possible to sell the goods without making any purchases. If the purchases are not made from those parties, the appellant must have purchased from some other parties. In such a situation, adding the entire amount of purchase to the total income is not correct because it will give a distorted picture of the profit margin. In my considered opinion, which is supported by several judicial forums, estimating the profit percentage on such purchases is the correct way to bring the income to tax. Thus, the issue would boil down to finding out what is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether the purchase price reflected in the books of account matches the purchase price stated to have been paid to other persons. The issue is whether the purchase price paid by the assessee is reflected as receipts by the recipients. The assessee has, by set of evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee have been actually received by the apparent sellers. Hence, the estimate made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should be at a particular sum or at a different sum, can never be an issue of law." 7.13 Similarly, in yet another decision of Hon'ble Gujarat High Court in the case of CIT vs. Simit Sheth (2013) 38 Taxmann.com 385 (Guj), Hon'ble Court was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to ascertain the additional GP, which the appellant must have earned by purchasing the diamonds from the grey market, than from the regular dealer. This would be the margin, which the petty trader in the grey market offers over the genuine trader. During the present proceedings, the AR submitted a copy of the assessment order passed in their own case by the AO on 19-10-2016 for the A.Y, 2011-12, wherein the AO adopted 5% of the value of purchases made from the suspected party to take care of the margin earned by the assessee indulging in such activity. 6. Against the above order of CIT(A), revenue is in further appeal before us. 7. We have considered rival contentions and carefully gone through the orders of the authorities below and found from record that assessee was engaged in the business of manufacturing and trading of Precious and Semi-precious Stones and Jewelllery. On the basis of statement of M/s. Moulimani Impex Pvt. Ltd., M/s. Vitrag Jewels and M/s. JPK Trading Co. Pvt. Ltd., the AO reached to the conclusion that purchases made from these parties were bogus, accordingly, he added entire amount in the income of the assessee. In an appeal filed before the CIT(A), th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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