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TMI Blog2020 (10) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... ad purchased the material from grey market and evaded the applicable taxes. Therefore, addition to the extent of profit earned from such transaction and the applicable taxes evaded by the assessee is required to be made. In CIT vs. Simit P. Seth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] has upheld the decision of the Tribunal and sustained the addition 12.5% of the total bogus purchases shown by the assessee holding that only profit element embedded in such purchases can be added to income of the assessee. - Decided partly in favour of assessee. - ITA No. 214/MUM/2019 And ITA No. 215/MUM/2019 - - - Dated:- 10-9-2020 - Shri Rajesh Kumar (AM) And Shri Ram Lal Negi (JM) For the Assessee : Shri Devendra Jain (AR) For the Revenue : Shri Jernold Michel (DR) ORDER PER RAM LAL NEGI, JM These appeals have been filed against the two orders dated 31.08.2018 passed by the Commissioner of Income Tax (Appeals)-39 (for short the CIT(A), Mumbai, for the assessment years 2009-10, whereby the Ld. CIT(A) has partly allowed the appeals filed by the assessee against the assessment orders passed u/s 143 (3) r.w.s. 147 and u/s 144 r.w.s. 147 of the Income Tax Act, 1961 (f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Various expenses debited to Profit Loss A/c Ground No. 4 ₹ 2,85,180/- Borrowed Funds Ground No. 8 ₹ 6,50,000/- 2. In the facts and circumstances of the case and in law, the learned CIT (A) Mumbai has erred in confirming the action of the assessing officer in considering genuine purchase made from following parties as non-genuine purchase and adding the whole amount u/s 69C. Sr. No. Name of Party Amount 1 M/s Prayan Trading Co. ₹ 8,98,040/- 2 M/s Sampark Steels ₹ 8,21,174/- Total ₹ 17,19,214/- 3. In the facts and circumstances of the case and in law, the learned CIT (A), Mumbai has erred in confirming the action of the assessing officer in considering, various expenses aggregate to ₹ 2,85,180/- debited to P L A/c., as unexplained expenditure u/s 69C and disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO in the issues not relating to the reasons recorded for reopening. The Ld. counsel for the assessee placing reliance on the judgment of the Hon ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT 336 ITR 136 (Delhi) submitted that Explanation 3 to section 147 does not empower the AO to make roving enquiries in respect of other matters. Making roving enquiries in respect of other matters is different from something coming to his notice of AO during the course of assessment. The Ld. counsel further submitted that since the Ld. CIT (A) has allowed the legal ground raised by the assessee and held that the AO cannot make fishing enquiry during the course of assessment proceedings, the Ld. CIT (A) ought to have deleted the addition made by the AO on the issues other than the issue mentioned in the reasons recorded for issuing notice u/s 148 of the Act. 5. So far as the addition on account of bogus purchases is concerned, the Ld. counsel for the assessee submitted that the Ld. CIT (A) has wrongly confirmed the action of AO and upheld the addition amounting to ₹ 17,19,214/- on account of alleged bogus purchases made from M/s Prayan Trading Company and M/s Sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 6,50,000/- on account of unexplained cash credit u/s 68 of the Act apart from the addition of ₹ 17,19,214/- on account of bogus purchases. 7. We have heard the rival submissions of parties and also perused the material on record including the cases relied upon by the parties. As pointed out by the Ld. counsel for the assessee, the assessee challenged the assessment order before the Ld. CIT (A) inter alia on the ground that in the facts and circumstances of the case and in law, the Ld. AO has erred in making fishing enquiries about matters not related to the reasons recorded for issuing notice u/s 148 and thus traveling beyond the scope of the assessment and making addition to the total income on matters not related to reasons recorded for reassessment. The assessee contended before the Ld. CIT (A) that on the basis of information received from DGIT (Inv.), the AO formed the belief that income of the assessee had escaped assessment to the tune of ₹ 17,19,214/- being purchases shown from hawala parties. However, the AO made fishing enquiry about many other matters not related to the reasons recorded for issuing notice u/s 148 and made various additions. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for statistical purposes and since the department has not challenged the findings of the Ld. CIT (A), in our considered view, the addition made by the AO except the addition made on account of bogus purchases which was the subject matter of reassessment, are not sustainable. Once, it is established that the AO has made fishing and roving enquiry, the additions made as a result of such enquiry cannot be confirmed. Hence, we allow the legal ground raised by the assessee and delete all the additions sustainrd by the Ld. CIT (A) except the addition made on account of bogus purchases. 9. So far as the addition on account of bogus purchases is concerned, we notice that the assessee did not produce delivery challan, transport bill, stock register, quantitative reconciliation of purchases and sales. As per the audit report, the assessee had not maintained the stock register. In our considered view, the assessee has failed to establish the genuineness of the purchases made from two bogus traders amounting to ₹ 17,19,214/-, therefore, the authorities below have rightly held the said transaction as bogus. We further notice that the authorities below have not rejected the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case and in law, the learned CIT (A) Mumbai has erred in confirming the action of the assessing officer in considering genuine purchase made from following parties as non-genuine purchase and adding the whole amount u/s 69C. Sr. No. Name of Party Amount 1 M/s Prayan Trading Co. ₹ 6,52,090/- 2 M/s Sampark Steels ₹ 6,25,185/- Total ₹ 12,77,275/- 3. In the facts and circumstances of the case and in law, the learned CIT (A), Mumbai has erred in confirming the action of the assessing officer in considering, various expenses aggregate to ₹ 6,20,512/- debited to P L A/c., as unexplained expenditure u/s 69C and disallowing 100% of such expenditure and in sustaining such disallowance CIT (A) ignored his own findings in ground of appeal no. 1 before him. Sr. No. Expense Amount 1 Bonus 20,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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