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TMI Blog2019 (4) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... uine which are supported by evidences. When the purchases are considered to be bogus and also when the assessee is not able to prove the purchases to the satisfaction of the AO, what needs to be taxed – whether the total amount of alleged bogus purchases or only a profit element embedded on those purchases is a question of fact. The Courts and Tribunals in number of cases have come to the conclusion that in cases where purchases are not proved with necessary evidences, only profit element embedded on those purchases needs to be taxed. The Hon’ble Gujarat High Court in the case of COMMISSIONER OF INCOME-TAX-I VERSUS SIMIT P SHETH [2013 (10) TMI 1028 - GUJARAT HIGH COURT] has held that no uniform yardstick can be applied for estimation of profit and it depends upon facts of each case. The co-ordinate bench of ITAT, Mumbai Benches in several cases have taken a consistent view and directed the AO to estimate profit ranging from 5% to 12.5% depending upon facts of each case - AO to adopt a profit percentage of 12.5% on the alleged bogus purchases - ITA No. 564/Mum/2017 - - - Dated:- 1-2-2019 - Shri Sandeep Gosain, Judicial Member And Shri G. Manjunatha, Accountant Member For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these parties and also to produce the said parties for verification. The assessee neither furnished complete names and addresses nor produced parties for verification, but reiterated its stand taken earlier, to argue that purchases from the above parties are genuine, which are supported by purchase bills. The AO after considering the submissions of assessee and also taken into account the report prepared by Maharashtra Sales Tax Department, where the investigation proved that certain parties were involved in providing accommodation entries without actual business, opined that assessee failed to produce proof, accordingly made additions towards purchase from those parties for ₹ 41,34,987/- as unexplained expenditure. 5.1. Aggrieved by the assessment order, assessee preferred an appeal before the CIT(A). 6. Before the CIT(A), assessee has filed written submissions, which have been re-produced at para 4 of page No. 5 in the order of Ld. CIT(A). The assessee also relied upon plethora of judgments, including judgment of Hon'ble Supreme Court in the case of Kishanchand Chellaram Vs. CIT (1980) [4 Taxman 29] to argue that making additions on the basis of third party ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax Department has evidentiary value, which cannot be ignored. If the purchases were genuine in toto, the appellant could have filed counter affidavit and should not have paid the VAT on behalf of the Hawala dealers/unverifiable dealers, but failed to do so. (b) The aforesaid parties with whom the appellant had made purchases are Hawala Operators, who issue only bills without delivery of materials to the beneficiaries and Sales Tax Department has branded these/some parties as bogus dealers in their official website. Now, the appellant is agitating that such evidences cannot be used against them, but the appellant should have filed a counter affidavit by stating that what is stated by the supplier before the Sales Tax Department is not correct and the appellant should have asked for cross examination of the Hawala dealers before the Sales Tax Authority. In addition to this, when the appellant cannot produce the Hawala dealer with whom he had business transactions, then, how come the appellant s asking for cross examination from the AO. (c) There are various reasons as to why the Hawala dealers were absconding and also not appeared before the Assessing Officer f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce these parties for cross verification. (f) The Gross Profit ratio for the A.Ys. 2011-12, 2012-13 2013-14 is shown @ 33.21%, 23.96% 41.70% respectively. All the more, the addition made by the AO is justified because the Gross profit in the year under appeal is less by 9.25% as compared to immediate preceding year less by 17.74% in the immediate subsequent year. Considering the totality of the facts of the case, I am of the considered opinion to disallow 100% as bogus/inflated purchases on the total purchases made from unverifiable parties. Accordingly, the book result is rejected u/s. 145(3) of the Act. The disallowance @ 100% of unverifiable purchases made from Hawala/unverifiable dealers had been upheld in the following cases: (1) CIT vs. La Medica (2001) 250 ITR 575 (Del) (2) Sri. Ganesh Rice Mills vs. CIT (2007) 294 ITR 316 (All) (3) Khandelwal Trading Co. vs. ACIT (1996) 55 TTJ (JP) 261 (4) Swetambar Steels Ltd. vs. ITO 707/1075/1262/1263/JD(2002) ITAT (Ahd). Also upheld up to Supreme Court. (5) Ruchi Developers, ITAT B Bench, Ahmedabad in ITA No. 3348/Ahd/201.0 - A.Y.2007-08 ITA No. 1170/Ahd/2014 -A.Y.2007- 08. Date of order: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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