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TMI Blog2019 (4) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... view taken by the AO and hence the entire addition should be deleted. However, the assessee has not cited any reason as to why the G.P rate on purchases made from M/s RTIL is lower than that earned from other purchases. Hence, in order to put this issue at rest, we modify the order passed by Ld CIT(A) on this issue and direct the AO to estimate the G.P on purchases made from M/s RTIL at 0.11% , i.e., the rate of G.P, the assessee earned from other purchases and sustain the addition to that extent. - Decided partly in favour of assessee. - ITA No. 354/Mum/2019 - - - Dated:- 12-4-2019 - Shri B.R. Baskaran, Accountant Member And Shri Ravish Sood, Judicial Member For the Appellant : Shri Mayur Kisnadwala For the Respondent : Shri Narendra Jang Pangi ORDER PER B.R. BASKARAN, AM The appeal filed by the assessee is directed against the order dated 5.11.2018 passed by Ld CIT(A)-52, Mumbai and it relates to the assessment year 2010-11. 2. The assessee has raised four grounds. At the time of hearing, the Ld A.R did not press ground no.2 and hence the same is dismissed as not pressed. The ground no.3 4 are general in nature/consequential. The surviving ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the AO formed the view that the purchases made by the assessee herein from M/s RTIL cannot be considered as genuine, since the assessee has also used the same modus operandi of booking bogus purchases from various hawala parties through M/s RTIL. 6. The AO further noticed that the assessee could not submit proof for delivery of materials and also did not follow the standard operating procedure for the purchases made from M/s RTIL. Before the AO, the assessee furnished copies of ledger account, sample copies of bills, details of sales and corresponding profit made, copies of bank statements. The assessee further submitted that sales made by M/s RTIL were accepted and further it has never confessed that it did not sell goods to the assessee. It was also submitted that RTIL is regularly assessed to tax and further the assessee also furnished confirmation letters obtained from M/s RTIL confirming the sales made to the assessee along with the details of corresponding purchases. 7. The AO was not convinced with the explanations furnished by the assessee. He observed that the assessee has failed to furnish inwardoutward register and also did not furnish proof for delivery of mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration. 9. Though the AO has mentioned that the purchases have been made for AY 2009-10 to 2014-15 in paragraph 10 of the assessment order, the Ld A.R clarified that the addition has been made only in FY 2009-10 relevant to AY 2010-11. 10. In the appellate proceedings, the Ld CIT(A) noticed that the assessee has not directly purchased goods from the hawala dealers. The Ld CIT(A) further took the view that the assessee cannot be given any special treatment, which is different from a case where the tainted purchases were made directly from suspicious hawala dealers. He further noticed that the assessee, in the statement taken from it during the course of survey, had stated that it would procure the materials from the market, only after receiving orders from its customers. Accordingly he noticed that the assessee has made back to back sales of materials procured from M/s RTIL. He further noticed that the softcopy of accounts impounded during the course of survey revealed the quantitative details of purchases and sales. The tax audit report also gave the quantitative details. Under these set of facts, the Ld CIT(A) took the view that the profit element embedded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account payee cheques and the AO has observed on surmises and conjectures that the assessee would have received back the amount by way of cash, without bringing any material on record to support his case. The Ld A.R submitted that the AO did not have any material to support his inference. Further the very fact that the assessee has sold the goods would prove that the assessee has purchased goods, since the goods could not be sold without purchasing it. Accordingly, the Ld A.R submitted that the Ld CIT(A) was justified in holding that the entire purchases could not be disallowed. 13. The Ld A.R submitted that the Ld CIT(A), however, was not justified in adopting the Gross profit rate of 12.50% for estimating the profit from alleged bogus purchases. He submitted that the Ld CIT(A) has placed his reliance on the decisions rendered in the case of purchases made from hawala dealers. He submitted that the facts in the present case are different, i.e., the assessee has not purchased goods from any of the hawala dealers. The assessee has purchased goods from M/s RTIL, which, in turn, has been alleged to have procured materials from hawala dealers. The Ld A.R submitted that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment. The assessee has purchased goods from M/s RTIL, which in turn has been alleged to have purchased goods from hawala dealers. From the assessment order, we notice that the assessing officer of M/s RTIL has rejected the book results and estimated Net profit of M/s RTIL @ 0.25% of the value of sales, meaning thereby, the sales made by the above said party, i.e., M/s RTIL has been accepted by its assessing officer. As submitted by Ld A.R, the sales made by M/s RTIL to the assessee would constitute purchases in the hands of the assessee. Hence there is merit in the contentions of Ld A.R that there is no reason to suspect the purchases, when the sales made by M/s RTIL have been accepted in its hands. 18. The assessing officer has observed that the assessee has failed to produce inward-outward register as well as delivery challans in respect of purchases made from M/s RTIL. He has also observed that the Standard Operating Procedure has not been followed in respect of these purchases. However, it is the submission of the assessee that the purchases made from M/s RTIL have been sold on back to back basis and goods were delivered directly from the site of suppliers to the site o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page 8 Yes, Page 4, 5, 8, 9 3. Whether the Confirmation, including PAN, of Ragini is filed. Yes. Page 8 Yes, Page 3 ,4, 9 4. Whether notice u/s 133(6) served on Ragini responded Yes, Page 4 Yes 5. Whether Ragini has ever stated that no goods are sold to the Assessee. No, Page 8 No 6. Whether Ragini is declared as suspicious party by sales tax authorities No such allegation in the order No Page 4, 5 7. Whether the Bills of Ragini have been produced Yes, Page 6. Yes, Page 4 8. Whether the Delivery challans, transport proof, inward outward proof produced No, Page 5, 6 - However, not applicable considering the modus operand! Of the Assessee. 9. Whether Ragini has paid VAT on such alleged bogus purchases/ sales Yes, P ..... 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