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TMI Blog2020 (8) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties, we direct the ld. AO to estimate 12.50% gross profit on alleged bogus purchases. Appeal filed by the assessee is partly allowed. - ITA No.1809/Mum/2019 - - - Dated:- 20-5-2020 - Shri G. Manjunatha, Accountant Member And Shri Ravish Sood, Judicial Member For the Assessee : Ms. Arti Sathe, AR For the Revenue : Shri R.Bhoopathi, DR ORDER PER G.MANJUNATHA (A.M): This appeal filed by the assessee is directed against order of the Ld. Commissioner of Income Tax (Appeals) 53, Mumbai, dated 20/12/2018 and it pertains to Assessment Year 2009-10. 2. The assessee has raised the following grounds of appeal: 1. The Learned Commissioner of Income Tax (A)-53 has confirmed the Income Tax Officer addition of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) are that purchase from the above party is genuine, which is supported by necessary evidences. Therefore, no additions could be made on the basis of information received from third party. The Ld.CIT(A), after considering relevant submission of the assessee and also, by following the decision of Hon ble Gujarat High Court, in the case of CIT vs. Simith P. Sheth (356 ITR 451), has upheld addition made by the AO towards alleged bogus purchases to 40.50% gross profit on total purchases from those parties. The relevant findings of the Ld.CIT(A) are as under:- 4.5. It is an undisputed fact that the assessing officer identified parties based on information received from Investigation Wing. However, as far as the evidence submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context of the situation, the cause of justice would be served by looking at the gross profit margins being declared by the appellant. The Hon'ble Gujarat High Court in the case of CIT vs. Bholanath PolyFab Pvt. Ltd. (2013) 355 ITR 290 and thereafter in the case of CIT vs. Simit P. Sheth ( 2013) 219 Taxman 85 (Guj) has held that in such facts and circumstances, not entire purchase price but only profit element embedded in such purchases can be added. The finding of the Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Seth is as under :- We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed purchases of steel. It may be that the three suppliers f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 ITR 290 (Guj). The view taken by the Tribunal in the case of Vijay Proteins Ltd. v. Asstt. CIT [1996] 58 JTD 428 (Ahd.)came to be approved. If the entire purchases were wholly bogus and there was a finding of fact on record that no purchases were made at all, counsel for the Revenue would be justified in arguing that the entire amount of such bogus purchases should be added back to the income of the assessee. Such were the facts in the case of Pawanraj B.Bokadia(supra) This being the position, the only question that survives is what should be the fair profit rate out of the bogus purchases which should be added back to the income of the assessee. The Commissioner adopted the ratio of 30 per cent of such total sales. The Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own gross loss this year. The assessing officer has made disallowance @ 40.50 % and has given his reasons for the same. The same is reasonable and is sustained. Thus the ground of appeal is dismissed. 5. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that the Ld. AO has made addition of 40.50% gross profit on alleged bogus purchases on the ground that the assessee is one of the beneficiary of accommodation entries of bogus purchase bills issued by Hawala dealers. According to the Ld. AO, although assesee has filed certain basic evidences, but failed to file further evidence in the backdrop of clear finding by the Sales Tax Department, Maharashtra that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maharashtra Sales Tax Department. The AO neither pointed out any descrepanices in books of accounts nor made out a case of sales outside books of accounts. In fact, the AO did not disputed sales declared for the year. Under these circumstances, it is difficult to accept arguments of both the sides. Further, in a case where purchases are considered to be purchased from suspicious/hawala dealers, various High Courts and Tribunals had considered an identical issue in light of investigation carried out by the Sales Tax Department and held that in case of purchases claims to have made from alleged hawala dealers, only profit element embedded in those purchases needs to be taxed, but not total purchase from those parties. The Hon ble Gujarat H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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