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TMI Blog2018 (2) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 - Shri Saktijit Dey ( Judicial Member ) And Shri G Manjunatha ( Accountant Member ) Assessee by : Shri Subodh Ratnaparkhi Respondent by : Shri V Justin ORDER Per Bench, AM : These cross appeals filed by the assessee as well as the revenue are directed against the common order passed by the CIT(A)-2,Thane dated 31-01-2017 for the assessment years 2010-11 2011-12. Since facts are common and identical issues are involved, for the sake of convenience, these appeals were heard together and are disposed of by this common order. 2. The brief facts of the case are that the assessere company engaged in the business of manufacture of process control instruments and rota meters, oil consumption meters and various scientific devices. The assessee has filed its return of income for the assessment years 2010- 11 2011-12 on 06-10-2010 and 29-9-2011, respectively. The case has been reopened u/s 147 on the basis of information received from investigation wing which stated that the assessee is one of the beneficiaries of bogus purchase bills issued by suspicious / hawala dealers as per the list prepared by Maharashtra Sales-tax department. Subsequently, the case has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on received from Investigation Wing observed that though the assessee has filed certain details to justify purchases from the above parties, failed to furnish further evidence in the backdrop of clear findings of the salestax departments that those parties are involved in providing accommodation entries and this fact has been confirmed in the statement given before the sales-tax authorities. The assessee also failed to file any other evidences including transport bills, delivery challans and goods inward receipt except furnishing purchase bills and payment proof. Therefore, he opined that purchases from the above parties are bogus in nature and hence, made addition u/s 69C of the Income-tax Act, 1961 towards total purchases made from the above parties. 4. Aggrieved by the assessment order, assessee preferred appeal before CIT(A). Before the CIT(A), the assessee has challenged reopening of assessment u/s 147 on the ground that the AO has reopened the assessment without there being any independent and valid reason coupled with any income chargeable to tax had escaped assessment. Insofar as addition made by the AO towards bogus purchases, the assessee has reiterated its submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re enclosed herewith, for ready reference. 7.15 In compliance, the Ld. AR could not offer any valid explanation for not making any payments to these parties and also failed to offer proper reasons, for fall in the GP rate vis-a-vis excess consumption of raw-material, with credible documents, as compared to A.Y.2013-14. This clearly establishes the fact that the appellant had suppressed its profit by inflating his hawala purchases, which are not open for verification. 7.16 From the above chart it is seen that the appellant is capable of harvesting GP @ 48.44% in AY 2013-14 from the same set of business and with the same management. If the GP for AY 2013-14 is adopted, after rejecting the accounts u/s. 145(3) of the Act, in these years, then the resultant suppressed GP is worked out at ₹ 11,I9,546/-(5,83,09,680/- x 1.92/100) and ₹ 33,76,0257- (7,92,49,413/- /- x 4.26/100), respectively. In this regard, I would like to place my reliance on the ratio laid down by the following courts - // is held by the Hon 'ble Supreme Court in the case of H M Esufali H M Abdulla 90 ITR 271 (SC) that if the estimation made by the Assessing Authority is a bonafide estimate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the AO has not carried out any kind of investigation about the claim made by the assessee with necessary evidences. The Ld.AR further submitted that the AO has rejected books of account u/s 145(3) without any finding as to incorrectness of books of account or sales made outside the books of account. In the absence of any finding as to incorrectness of books of account, rejection of books of account u/s 145(3) is incorrect and addition towards total purchases from above parties is baseless. The CIT(A), without appreciating the facts has sustained addition by estimating gross profit on total sales which is incorrect. 7. The Ld.DR, on the other hand, submitted that the Ld.CIT(A) was erred in allowing partial relief to the assessee without appreciating the fact that the assessee has failed to justify purchases from above parties in the backdrop of clear findings by the sales-tax department that those parties are hawala operators involved in providing accommodation entries without any actual business activity. The Ld.DR further submitted that the Ld.CIT(A) was erred in relying upon certain judicial precedents including the decision of Hon ble Supreme Court in the case of Kachw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties appeared in the list prepared by the sales-tax department as hawala / suspicious dealers, who were indulging in issuing bogus purchase bills. The AO has not conducted any independent enquiry about the genuineness of purchases. On the other hand, the assessee has furnished various details to justify purchases from the above parties including purchase bills and payment proof. However, failed to furnish further evidences like lorry receipts and delivery challans to further strengthen its case to justify purchases from the above parties in the backdrop of clear findings by the sales-tax department. Under these circumstances, we are of the considered view that it is difficult to accept the arguments of the assessee that the purchases from above parties are genuine in nature and supported by valid evidences. 10. Having said so, let us examine what is required to be done in case of bogus purchases where the AO has made addition towards alleged bogus purchases only on the basis of third party information without conducting any independent enquiry. Various Courts and Tribunals have considered the issue of bogus purchases and depending upon the facts of each case, estimated net p ..... 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