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TMI Blog2017 (10) TMI 1249X X X X Extracts X X X X X X X X Extracts X X X X ..... read as under:- ( 1) The Assessing Officer erred in adding 25% of alleged bogus purchases ₹ 29,46,224/- (out of ₹ 40,62,462) i.e. ₹ 7,36,556/- and the Learned CIT (A) 38 erred in enhancing the addition at the rate of 25% of Total alleged Bogus purchases from Five parties amounting to ₹ 40,62,462/- and making addition ofRs.10,15,615/-. Same be deleted. ( 2) The A.O has treated bogus purchases merely on the Basis of third party evidences i.e. nonpayment of MVAT by these parties in spite of the facts the appellant has fulfilled primary onus of proving the genuineness of purchase of goods and sale of same items -goods. ( 3) The 25% of addition made on Accounts of five alleged Bogus suppliers amounting to Rs,40,62,462/- i.e. ₹ 10.15.615/- be deleted. ( 4) The AO has made addition on account of bogus purchases from Five arties without verifying the fact that the purchases were genuine and payment was also made through account payee cheque and the Income Tax Department has not proved that appellant has received any cash back from such parties. The sales of the appellant are also accepted by the Income Tax Department. Once the sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever the: were found, it was stated by them that no business was done by them and they were engaged only in providing bills. 3.3 In view of the above, the AO observed that there is inflation of expenditure resulting in escapement of income to the extent of ₹ 40,62,462/- for A.Y.2009-10 in the case of the appellant and therefore on the basis of the information, the case for the A.Y. under consideration was reopened by the AO after recording the reasons for reopening and in response to notices u/s. 148 of the I.T. Act, the assessee has submitted the copy of return of income along with details of bank account. 3.4 However, in order to verify the genuineness of the purchases, the AO issued notice u/s 133(6) of the I.T. Act, to all the aforesaid parties on the addresses given by the assessee . The said notices were returned by the postal authority unserved with the remarks left, not known. The AO also issued show cause notice to the assessee to establish the identity of the said parties, but the appellant failed to discharge his onus and therefore after considering the contentious of the assessee, the AO did not accept the same in view of the following reasons:- (i) The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine as the assessee has merely indulged in inflating expenses by introducing bogus purchases amounting to ₹ 40,62,462. The AO held the assessee to be a beneficiary of the accommodation bills issued by the aforementioned parties, however held the sale to be genuine and purchases to have been made from grey market. Therefore, the AO estimated profit @25% on the above alleged transactions being manufacturer, over and above that declared by the assessee which was worked out at ₹ 7,36,556 and was added by the AO to the total income of the assessee. 3.6 However, while working out the profit element involved on account of inflation of purchases, the AO took the quantum of the nongenuine purchases at ₹ 29,46,224 as against ₹ 40,62,462 mentioned supra. 4. Upon assessee s appeal, the learned CIT(A) elaborately considered the issue. He concluded as under:- 4.1.11 Thus in view of the above facts and circumstances of the case and the recent judgments quoted as above, it is observed that the likelihood of the purchase price being inflated cannot be ruled out and therefore in view of the above, the AO has not treated the entire purchases from the aforesaid p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are binding on the appellant authorities and has requested to delete the addition made by the AO at the rate of 25% of alleged Bogus purchases. 4.1.17 The contention of the appellant has been considered not found to be acceptable in view of the fact that in case of Bogus purchases, it is vital to ascertain whether purchases were totally non-existent or were actually made from grey market without proper billing instead of the parties from whom it was claimed to be purchased. Once it is clear that purchases were actually made then only the profit embedded in it and not price of bogus purchases could be added in the income of the assessee. 4.1.18 In view of the facts and circumstances of the case and discussion herein above, the contentions and submissions of the assessee are not found to be acceptable and are therefore rejected and the G.P rate of 25% applied by the AO is sustained. However the quantum of bogus purchases taken by the AO at ₹ 29,46,224/- is not found correct as the quantum of actual purchases from the aforesaid alleged dealers is at ₹ 40,62,224/- as claimed by the appellant. Therefore the profitability is required to be worked out at an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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