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TMI Blog2019 (2) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... The application is disposed of. ITA 66/2018 1. The question of law framed in this case is as follows:- Did the ITAT fall into error in setting aside the concurrent finding with respect to the disallowance of purchases worked out at ₹ 6,77,21,540/-, claimed by the assessee in the facts and circumstances of the case? 2. The relevant facts are that the assessee reported income for A.Y. 2010-11; during the course of scrutiny the AO noticed that the sum of ₹ 6,77,21,540/- were shown in the assessee s books, as amounts spent towards purchases made on account of raw materials sought to have procured to manufacture garments. The assessee claimed that the readymade garments were exported and claimed drawback amounts from the concerned authorities. After enquiry, the AO was of the opinion that the amounts claimed towards purchase of the raw materials were bogus. In para 3.3 of the AO s orders, the AO detailed the nature of the particulars provided by the assessee with respect to the entities/firms from whom purchases were made. 3. The assessee s claim was disallowed and the entire sum of ₹ 6.77 crores was brought to tax under Section 68. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of above mentioned facts circumstances, it is inferred that the appellant s purchases are not verifiable at all. The payments made through banking channel do not substantiate the fact that the purchases made by the appellant from the parties under reference are genuine. In view of facts mentioned in the impugned order and the appellant s failure to demonstrate the genuineness of purchases before me, I concur with the finding of the AO. 4. Furthermore the CIT[A] noted that another amount of ₹ 6,18,35,598/- stood on account of debt owned by sundry creditors in the assessee s books which were also without any explanation. Using the concurrent powers, CIT[A] was not satisfied with the assessee s explanation and proceeded to treat them as unexplained credits under Section 68. The CIT[A] however held that since the larger sum of ₹ 6.77 crores was brought to tax, this amount i.e. ₹ 6,18,35,598/- could be subsumed. 5. The ITAT to whom the assessee appealed, allowed and accepted the assessee s plea while affirming the finding with respect to rejection of the books of accounts of the assessee. However, it adopted the strange reasoning that the amounts were taxed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in the present A.Y. 2010-11 was 6.05% and 2.01% respectively, which was higher in comparison to gross profit and net profit rate of immediately preceding A.Y.2009-10 then no further addition in this regard can validly be made and sustained. Thus, on the basis of foregoing discussion we hold that the addition made by the AO 30% of total purchases is not a valid and sustainable addition on all four corner of the factual matrix of the present case as noted above and mandate of the Act, therefore, we dismiss the same. Accordingly, the ground no.1 of the assessee is allowed. 6. The Revenue urges that since the assessee s books of accounts were rejected and at the same time sum of ₹ 6.77 crores was brought to tax concurrently, under Section 68, ITAT could not have apply GP Ratio as in this case. Learned counsel for the assessee, on the other hand, submits that during the course of the assessment proceedings the materials which it possessed by way of names and identity of the suppliers had been duly furnished. It was further stated that the assessee had regular transactions with those suppliers and in these circumstances the entire amounts would not have been disallowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have been made, the question whether the purchases were made from some other source ought not to have weighed with the Tribunal as a factor in favour of the assessee. The conclusion of the Tribunal are, therefore, clearly erroneous contrary to materials on record and have been arrived as without taking into consideration relevant material and placing reliance on irrelevant materials. It is to be noted that assessee s stand was not that it had effected purchases from anybody else. Its stand throughout was that it had effected purchases from Kalpana Enterprises. It was not open to the Tribunal to make out a third case, which was not even the case of the assessee, to hold that the transactions were real and not fictitious as claimed by the Revenue. As observed in Omar Salay Mohamed Sait v. commissioner of Income-tax (1959) 37 ITR 151 (SC), a question of law arises of a finding of fact is arrived at by the Tribunal after improperly rejecting evidence. A question of fact becomes a question of law if the finding is not founded on any evidence or material, or if it is contrary to evidence. Similar is the position if it is perverse or there is no direct nexus or link between conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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