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TMI Blog2017 (11) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... 0(A)(3) of the Act cannot be invoked because the payments are accounted for and material is purchased which is accounted for and sales are not doubted by the Revenue. The only alternative left with is to assess the profit rate on the bogus bill obtained by assessee and purchases are made from grey market. In such circumstances, we estimate the profit rate at 5% of the bogus bills of purchase, as estimated in similar circumstances by co-ordinate Bench in the case of ITO vs. Priti Gold (India) Private Ltd. 2017 (11) TMI 1197 - ITAT MUMBAI]. - Decided in favour of assessee. - ITA No. 3752/Mum/2017 And ITA No. 4651/Mum/2017 - - - Dated:- 16-11-2017 - SRI MAHAVIR SINGH, JM AND SRI N.K. PRADHAN, AM For The Assessee : Rakesh Joshi, AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following two grounds: - 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of ₹ 2,49,38,337/- without appreciating the facts of the case and ignoring the fact that the working of peak credit was a made part of seized material found and seized during the course of the search. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition by ignoring the fact that AO was justified to hold that the assessee has taken an accommodation bill for the purchases, and therefore an equivalent amount of cash was paid which in excess of ₹ 20,000/- per day in grey market, and being these purchases made part of the regular b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se by obtaining these bogus bills and accordingly, the AO reopened the assessment by issuing notice under section 148 of the Act. The AO after considering the statement recorded under section 132(4) of the Act of Shri Biren Vaidya on 22-02-2014, recorded during the course of search, wherein Shri Biren Vadiya admitted issuing these bogus bills. Accordingly, the AO computed the peak credit of bogus purchases i.e. the bogus bills obtained by assessee during the FY 2006-07 relevant to AY 2007-08, and computed the addition of ₹ 5,46,03,927/- out of total bogus purchase of ₹ 7,10,73,950/-. For this the AO observed as under: - 8. The peak value of purchases from the accommodation entry providers for FY 2006-07 is computed as ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record in support of his claim. Therefore, I find the cash flow statement prepared by the appellant assuming credit period of 45 days acceptable. The peak of the unaccounted money used for purchases of diamonds assuming credit limit of 45 days works out to ₹ 2,96,65,590/- (the AO did not point out any error in the working of the peak credit in his report). 6. The CIT(A) also considered the contention of the AO raised in his remand report that the payments against the purchases are liable to be disallowed under section 40A(3) of the Act. According to CIT(A), the AO made addition on unexplained cash and not on account of disallowance of purchase and hence, he has not made any disallowance vide Para 6.2 as under: - As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... setting aside to the issue to the file of the AO for verification purposes. On counter reply the learned Counsel for the assessee stated that these entire details were produced before the AO as well as before CIT(A). The assessee referred to the details submitted before AO and AO himself reproduced the same in its order and the relevant of the same reads as under: - Ledger copy of the aforesaid parties along with copies of bills and copy of bank statement highlighting the payments to the parties as also the entire correlation of the sales and the above purchase (which consist of purchases of Diamonds) has already been furnished to your goodself. 8. Finally, the learned Counsel for the assessee stated that Shri Biren Vaidya admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these bogus bills. This fact has not denied by either Revenue or Assessee. In such facts, the provisions of section 40(A)(3) of the Act cannot be invoked because the payments are accounted for and material is purchased which is accounted for and sales are not doubted by the Revenue. The only alternative left with is to assess the profit rate on the bogus bill obtained by assessee and purchases are made from grey market. In such circumstances, we estimate the profit rate at 5% of the bogus bills of purchase, as estimated in similar circumstances by co-ordinate Bench in the case of ITO vs. Priti Gold (India) Private Ltd. in ITA No. 63/Mum/2017 for AY 2009-10 vide order dated 23/08/2007. In the similar circumstances, in the group cases, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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