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TMI Blog2019 (4) TMI 1722X X X X Extracts X X X X X X X X Extracts X X X X ..... grey market and bills have been obtained from another party i.e. accommodation entry provider. Thus, the purchases themselves cannot be said to be bogus as the same is duly recorded in the books of account of the appellant and such books stands accepted even in the impugned order of assessment. In the instant case, the assessee is engaged in dealing in MS Bar (Iron/Steel Product) and has shown gross profit rate of 5.22%. We find that in the case of Sh. Sanjay H. Shah, Mumbai Vs. Income Tax Officer [ 2018 (2) TMI 1632 - ITAT MUMBAI] who was also engaged in trading of Iron Steel product, the Tribunal restricted the disallowance to 5% of the total alleged bogus purchases - thus we direct the learned Assessing Officer to restrict the disallowance to 5% of the impugned purchase - Appeal of the assessee is partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ng behind the back of the assessee which in law could not be made a basis to uphold the addition. 2.4 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the sales of the appellant have been accepted, the books of accounts having not been rejected by the learned Assessing Officer, the conclusion that the purchases made represented accommodation entry was not a valid conclusion and hence not tenable. 2.5 That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in failing to appreciate the detailed submissions supported by adequate documentary evidence and judicial pronouncements relied upon by the assessee. 3. That without prejudice to the aforesaid and in the alternative, the learned Commissioner of Income Tax (Appeals) ought to have restricted the addition to the gross profits on such purchases and not made the addition by way of entire purchases and thus in any case, the addition made and sustained is excessive. 4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest u/s. 234B of the Act. It is ,therefore, prayed that ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of the cheque, Cash was withdrawn immediately from their account. Most of the parties were not found in existence at the given address and summons issued to them remain uncomplied with. In view of these observations, the Investigation Wing treated those parties as shell/conduit entities having no real business and finally summed up that different cash credit and debit entries in the bank accounts of M/s. Meet Enterprises is accommodation entry provided without any real business transactions. The statement of director of the assessee company Shri Rakesh Aggarwal was recorded by the Investigation Wing who deposed that the purchases were duly made from one M/s Meet Enterprises whose proprietor was Sh. Vikash Kumar. 2.2 In view of the information received, assessment was reopened by way of issue notice under section 148 of the Incometax Act, 1961 (in short 'the Act') on 02/03/2012. During the course of assessment proceedings, the assessee submitted that all the purchases have been duly recorded in the books of account of the assessee. It was also contended that Sales Tax Department has accepted the sale and purchase made by the assessee. It was also submitted that assessee has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r had justifiably rejected the purchases stated to be made from M/s. Meet Enterprises as bogus and added back the entire amount of ₹ 32,76,741/- claimed as expenditure on this account. Aggrieved with the finding of the Ld. CIT(A), the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. Ground Nos. 1 to 1.2 of Appeal were not pressed and are therefore, dismissed. 4. Grounds Nos. 2 and 3 relate to addition of ₹ 32,76,741/- representing the purchases made by the assessee company and held to be an accommodation entry . 4.1 Before us, the learned counsel for the assessee filed two paper-books containing pages from 1 to 104 and 105 to 129 and contended that denial of deduction or genuineness of purchase is not in accordance with law. In support, he contended that claim made may kindly be accepted in light of the following undisputed facts: i) That assessee is engaged in the business of trading of cut pieces of MS Bar; ii) That completed books have been maintained including stock register and have been examined during the course of assessment proceedings. A copy of stock register is placed at pages 93-104 of Paper Book; iii) Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the authorities below and relied on the following judgments: i) N.K. Proteins Ltd. vs. CIT (2017-TIOL-23-SC-IT) ii) N.K. Industries Ltd. Vs. DCIT 292 CTR 354 (Guj) iii) CIT vs. Arun Malhotra 363 ITR 195 (Del) iv) CIT vs. La Medica 250 ITR 575 (Del) v) Vijay Proteins Ltd. vs. ACIT 58 taxmann.com 44 (Guj) vi) Sanjay Oilcake Industries vs. CIT 316 ITR 274 (Guj) 4.4 We have considered the submissions and perused the material on record. During the instant year, it is a matter of record that assessee has declared sales of ₹ 9,99,91,142/- and purchases of ₹ 9,90,26,702/- from trading of M.S Bar. It is also noted that books of account are duly audited under section 44AB of the Act. It is also noted that out of the total purchases, purchases of ₹ 32,76,741/- have been made from one M/s. Meet Enterprises. The copies of invoices from the supplier duly stating the bill no., tin no. have also been placed on record and copies of cheques issued alongwith the receipts from whom two cheques were issued have also been placed on record. It is noted as a matter of record that according to invoices, the supplier is M/s. Meet Enterprises, Ramdham Colony, Shivalik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such amount. This view is also supported by the judgment of Gujarat High Court in the case of CIT vs. Bhola Nath, 355 ITR 290. The relevant portion of the order is as under: "6. We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this court in the case of Sanjay Oilcake Industries v. CIT reported in [2009] 316 ITR 274 (Guj). Such decision is also followed by this court in a judgment dated August 16, 2011, in Tax Appeal No. 679 of 2010 in the case of CIT vs. KishorAmrutlal Patel. In the result, tax appeal is dismissed." 4.7 Also the Hon'ble Gujarat High Court in the case of CIT v. Sathyanarayan P. Rathi 351 ITR 150 has held as under: "4. We are of the opinion that the revenue ought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also taken a similar view in the case of CIT v. Vijay M. Mistry Construction Ltd. [2013] 355 ITR 498 (Guj) and in the case of CIT v. Bholanath Poly Fab (P.) Ltd. [2013] 355 ITR 290 (Guj). The view taken by the Tribunal in the case of Vijay Proteins Ltd. v. Asstt. CIT [1996] 58 ITD 428 (Ahd.) came to be approved." 4.9 In the instant case, the assessee is engaged in dealing in MS Bar (Iron/Steel Product) and has shown gross profit rate of 5.22%. We find that in the case of Sh. Sanjay H. Shah, Mumbai Vs. Income Tax Officer in ITA No.5063 to 5065/Mum/2017 for assessment year 2009-10 to 2011-12, who was also engaged in trading of Iron & Steel product, the Tribunal restricted the disallowance to 5% of the total alleged bogus purchases observing as under: "7. The Id. AR of the Assessee in his submission claimed that VAT rate is only 4%. The rate of VAT is not disputed by Revenue. In our view considering the nature of trade of assessee and the facts of the present case, the disallowance made by AO and sustained by Id. CIT(A) is excessive and unreasonable. In our view the assessee has given sufficient evidences to substantiate its purchases, on which no finding was given by the low ..... X X X X Extracts X X X X X X X X Extracts X X X X
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