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TMI Blog2020 (4) TMI 623X X X X Extracts X X X X X X X X Extracts X X X X ..... hawala dealers from Sales Tax Department and investigation wing of the Income Tax Department?" 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition to 25% of bogus purchase despite upholding that the assessee could not produce primary documents before the Assessing officer or during the appellate proceedings which can establish beyond doubt the correlation between the items purchased and then corresponding sales?" 3. "On the facts and circumstances of the case and in law, whether the Ld.CIT(A) is correct in not following the ratio of the decision of the Apex Court on the issue of bogus purchases in the case of N.K. Proteins Ltd Vs. DCIT [2017] 84 taxrnann.com 195 (SC), dated 16.01.2017 wherein it has been held that the addition on the basis of undisclosed income could not be restricted to certain percentage when entire transaction was found bogus?" 4. The appellant prays that the order of the Ld.CIT(A) on the above grounds be set aside and that of the AO be restored. 5. The appellant craves leave to amend or alter any grounds or add a new ground." 3. Briefly stated the facts are that, the assessee engaged in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, Assessing Officer treated purchases of Rs..1,06,18,400/- and Rs..51,65,318/- for A.Y. 2010-11 and 2011-12 respectively as non-genuine and added to the income of the assessee. On appeal the Ld.CIT(A) considering the evidences and various submissions of the assessee restricted the disallowance to the extent 25% of the non-genuine purchases. The revenue as well as the assessee filed appeals and cross objection against the order of the Ld.CIT(A) in partly deleting and sustaining the disallowance of purchases. 5. Before us, the Ld. Counsel for the assessee reiterated the submissions made before the lower authorities. He also placed reliance on the decision of the Hon'ble Bombay High Court in the case of Pr.CIT v. M/s. Mohommad Haji Adam & Co. in Income Tax Appeal No. 1004 of 2016 dated 11.02.2019 and submitted that the Assessing Officer may be directed to estimate the Gross Profit on the non-genuine purchases to similar percentage as shown in the genuine purchases for the purpose of disallowance. 6. Ld. DR vehemently supported the orders of the Assessing Officer. 7. We have heard the rival submissions, perused the orders of the authorities below. Assessing Officer treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties were engaged only in supplying the bogus bills, that the goods in question were never supplied to the assessee, and therefore, the purchases were bogus. He, therefore, added the entire sum in the hands of the assessee as its additional income. 3 The assessee carried the matter in the appeal before the Commissioner of Appeals who accepted the factum of purchases being bogus. However, he compared the purchases and sales statement of the assessee and observed that the department had accepted the sale, and therefore, there was no reason to reject the purchases, because without purchases there cannot be sales. He, therefore, held that under these circumstances A.O. was not correct in adding the entire amount of purchases as the assessee's income. He, therefore, deleted the addition refreshing it to 10 % of the purchase amount. He also directed the A.O. to make addition to the extent of difference between the gross profit rate as per the books of accounts on undisputed purchases and gross profit on sales relating to the purchases made from the said three parties. 4 The assessee carried the matter before the Tribunal. The Revenue also carried the issue before the Tribunal. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was a trader. Even if the purchases are found to be bogus, entire purchase amount cannot be added by way of assessee's income. 8 In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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