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TMI Blog2018 (2) TMI 1542X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer that purchase aggregating to Rs. 92,60,035/- (wrongly computed by the assessing officer at Rs. 85,64,509/-) made by the appellant from M/s Avi Exports, M/s Sun Dian and M/s Vitrag Jewells are not genuine and bogus. 2. The ld. CIT(A) is further wrong and has erred in law in confirming rejection of books of accounts of the appellant by the assessing officer u/s 145(3) of the I.T. Act, 1961 and in upholding addition to the extent of Rs. 13,89,005/- being 15% of above said alleged unverifiable purchases, as trading addition u/s 69C of the I.T.Act, 1961. 3. The appellant craves leave to add to, amend or modify the above grounds of appeal or to withdraw any of them." 2. At the time hearing, the learned counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale of the assessee which is corresponding to the purchase howeve, the books of accounts were rejected because of the reasons that that assessee has made purchase from these three parties who were indulged for providing bogus bills without any actual delivery of goods. Therefore, once the books of accounts are rejected by the AO the income of the assessee is required to be computed on estimated basis and best decision of the AO. The AO cannot make an addition to the book result on account of purchase which is part of the trading account and therefore, after rejection of books of accounts only the course of action left with the AO assessee is to estimate the income by applying proper GP or NP rate. The ld. AR has placed reliance on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record. The Assessing Officer rejected the books of account by invoking the provisions of section 145(3). The issue of rejection of books of accounts is involved in the cross objection filed by the assessee, therefore, we deal with this issue while deciding the cross objection. Once, the books of accounts are rejected by the AO the only course of action left to the AO is to assess the income of the assessee on the basis of best judgment and GP rate is considered as proper and reasonable basis and guidance for the best judgment. Once, the books result are rejected the Assessing Officer cannot proceed to make an addition to the income offered by the assessee as per books result. However, the AO in the case of the assessee instead of applyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the creditors is not misplaced because there is no distinction laid between the trade creditor and the non-trade creditor and we are further of the opinion that in case the assessee claims liability of payment to the trade creditors shown in the balance-sheet, the assessee is definitely required to prima facie prove the identity of the trade creditors as well as the genuineness of the transaction. In this case, admittedly the assessee has neither been able to disclose the complete addresses of the trade creditors nor is able to give the complete addresses of the consignors nor the name has been mentioned on the challan forms, so the verification of the same by the Assessing Officer became totally impracticable on account of lack of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only regarding the correct amount of purchases and verification of the same. The ld. DR has relied upon the various decisions of Hon'ble Gujarat High Court however, we find that in all those decisions there was a finding of facts that the assessee inflated the purchases upto 25% and therefore, it was not a case of non verification of the purchase and rejection of books of accounts but the fact was established in the investigation that the assessee inflated the purchase price and accordingly the addition of 25% being inflated purchases was made and upheld by the Tribunal which was again upheld by the Hon'ble High Court. On the contrary in the case of the assessee the AO not given any finding of inflated purchases by the assessee but doubted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the average rate of GP. 6. The Revenue in the cross appeal has raised the following ground:- "Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in substituting the addition of Rs. 85,64,509/- made u/s 69C on a/c of unverifiable purchases by disallowance @ 15% of account of unverifiable purchases." Thus, it is clear that the Revenue is aggrieved by the order of the ld. CIT(A) to the extent of the addition restricted from the total purchase to 15%. This issue is common to the ground No. 2 of the assessee's appeal and accordingly, in view of our findings on this issue in assessee's appeal the Ground raised by the Revenue stands disposed of in same terms. In the result, the appeal of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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