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TMI Blog2020 (9) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee at the beginning of the year was much more then the interest free advances. We uphold the order of the CIT(A) and dismiss the second ground of appeal of the revenue. - ITA No. 5474/MUM/2018 C.O. No. 184/Mum/2019 - - - Dated:- 17-9-2020 - SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) Revenue by : Smt. Samatha (DR) Assessee by : Shri Dharmesh Shah (AR) ORDER PER N.K. PRADHAN, A.M. The captioned appeal by the revenue and cross objection by the assessee are directed against the order passed by the Commissioner of Income Tax (Appeals)-40, Mumbai [in short CIT(A) ] and arise out of assessment completed u/s. 143(3) of the Income Tax Act. 1961 (the Act). 2. The grounds of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se are that the assessee filed its return of income for the AY 2012-13 on 20/09/2012 declaring total income of ₹ 56,54,240/-. On the basis of the information received from the Sales tax Department, Government of Maharashtra that the assessee had obtained accommodation entries through bogus bills, the AO made enquiry in respect of purchases from M/s. Harshil Freemate Pvt.Ltd. (₹ 84,19,056/-), M/s. Pradip Kumar Babulal (₹ 3,45,48,129/-) and M/s. Hans Enterprises (₹ 2,19,24,616/-). On the reason that the notice u/s. 133(6) could not be served on the above parties and the report of the inspector that the above parties do not function in their given address, the AO made an addition of the total amount of ₹ 6,48,91,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition made by the AO of ₹ 6,48,91,801/- be affirmed. 8. On the other hand, the Ld. Counsel for the assessee relies on the order of the Hon ble Bombay High Court in the Pr.CIT vs M/s. Mohommad Haji Adam Co. (ITA No.1004 of 2016). It is argued by him that as the principle has been laid down by the jurisdictional High Court on similar matter, the same may be followed. 9. We have heard the rival submissions and perused the relevant materials available on record. The reasons for our decisions are given below It is relevant to mention here the reply given by the assessee to the order sheet entry dated 12/03/2015 by the AO asking him to explain why the purchases of ₹ 6,48,91,801/- from the said parties should not be added. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom we had purchased goods have charged MVAT separately in their invoice and have collected the tax from us. It is also pertinent to note that during the course of assessment proceedings also we had produced these details and it was also brought to the notice of the Asst. Commissioner of Income Tax that we had made all the payments through payee cheques which were encashed by the respective parties through their own bankers. Therefore these purchases were genuine purchases. 10. In such a context , we are of the considered view that the judgment of the Hon ble Bombay High Court in M/s. Mohommad Haji Adam Co. (supra) is applicable. In that case, during the course of survey operations in the case of entities from whom the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried the matter before the Tribunal. The Revenue also carried the issue before the Tribunal. The Tribunal allowed the appeal of the assessee partly and dismissed that of the Revenue. The Tribunal noted that the CIT(A) had not given any reasons for retaining 10% of the purchases by way of ad-hoc additions. The Tribunal, therefore, deleted such additions, but retained the portion of the order of the CIT(A) to that extent he permitted the AO to tax the assessee on the basis of difference in the GP rates. In further appeal before the Hon ble Bombay High Court, the Revenue referred to the decision of the Division Bench of the Hon ble Gujarat High Court in the case of N.K. Industries Ltd. v. DCIT in Tax Appeal No. 240 of 2003 and connected appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n regarding addition of ₹ 3,70,78,125/- as gross profit on sales of ₹ 37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66 %. Therefore, considering 5.66 % of ₹ 3,70,78,125/- which comes to ₹ 20,98,621.88 we think it fit to direct the revenue to add ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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