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TMI Blog2019 (12) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee could not have effected the corresponding sales. In such circumstances, one can come to a logical conclusion that the assessee must have purchased the goods from grey market to avoid payment of Sales Tax / VAT and to regularize such purchases, the assessee might have obtained accommodation bills from hawala operators. In such scenario, the profit element embedded in the non genuine purchases can be considered for addition. After considering the overall facts and circumstances of the case and nature of business carried on by the assessee as well as consistent view of the Tribunal and different High Courts in such types of cases, we are of the considered opinion that profit estimated @ 12.5% of the non genuine purchases can reasonab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases made worth ₹ 7,66,041, the Assessing Officer re opened the assessment under section 147 of the Act. In the course of assessment proceedings, the Assessing Officer called upon the assessee to prove the genuineness of purchases. In response to the query raised by the Assessing Officer, the assessee furnished copies of purchase bills, bills of corresponding sales, delivery challans, transport bills, loan confirmation, etc. However, the assessee could not submit Octroi receipts since the goods were not subject to Octroi. Further, to ascertain the genuineness of purchases made, the Assessing Officer conducted independent enquiry by deputing the Inspector of Income Tax to gather information under section 133(6) of the Act from the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd. v/s JCIT, [2006] 288 ITR 10 (SC) and CST Vs H.M. Esufali H.M. Abdulali, [1973] 90 ITR 271 (SC), observed that since sales effected by the assessee have not been doubted, the entire purchases could not be added to the income of the assessee, but only profit element embedded in non genuine purchases estimated at a reasonable percentage can be considered for addition. Accordingly, applying the gross profit rate of assessment year 2013 14, wherein no non genuine purchases was there, learned Commissioner (Appeals), worked out the suppressed profit at ₹ 2,77,221. Whereas, the profit estimated on the quantum of bogus purchase works out to ₹ 1,91,510. Since, the profit worked out by adopting the gross profit rate for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchases is estimated at a reasonable rate and would not contest the legal issue relating to re opening of assessment. 7. We have considered rival submissions and perused material on record. Undisputedly, the Assessing Officer had received specific information from the Income Tax Department indicating that purchases worth ₹ 7,66,041, claimed to have been made from certain parties are not genuine. It is evident, in response to the query raised by the Assessing Officer to prove the genuineness of purchases, the assessee filed copies of purchase bills, corresponding sales, delivery challan, transport bills, etc. On a perusal of the assessment order, it appears that the Assessing Officer has not made any adverse observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales both before the Assessing Officer as well as the learned Commissioner (Appeals). In fact, learned Commissioner (Appeals) has recorded a factual finding that the assessee had effected corresponding sales against the purchases. On the aforesaid premises, learned Commissioner (Appeals) has rightly held that the addition of the entire non genuine purchases cannot be made. This is so, because in the absence of purchases, the assessee could not have effected the corresponding sales. In such circumstances, one can come to a logical conclusion that the assessee must have purchased the goods from grey market to avoid payment of Sales Tax / VAT and to regularize such purchases, the assessee might have obtained accommodation bills from hawala op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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