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TMI Blog2020 (10) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... es - In the interest of justice and fair play and to prevent any leakage to the revenue, we are of the view that the justice will be served the assessee as well as to the revenue if income of the assessee is enhanced by 5% on such purchases. Accordingly, we direct the AO to make the addition @ 5% on such bogus purchases. Addition on account of commission expenses - HELD THAT:- AO was aware of all the details of the commission agents such as the addresses, PAN but he has not taken any confirmation from such agents about the genuineness of the commission received by them. The assessee by furnishing the requisite details about the commission agent shifted its onus upon the AO to prove that commission expenses was not incurred in the course of the business. AO was under the obligation to provide the opportunity for the cross-examination of the statement obtained from the flat owners to the assessee as well as to the commission agents before arriving at the conclusion that there was no involvement of the commission agents in selling the flats to the flat owners. In our considered view, the statement obtained at the back of the assessee of the flat owners cannot be a ground for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the inspector, in his reply submitted that hecould not verify the genuineness of the party as the same were not available at the given address. Furthermore, the inspector of income tax could not know any details about such party on conducting enquiries from the neighbors. 5. The AO also conducted the enquiries from the VAT Department and found that the registration of both the firms have been cancelled. Furthermore, the AO also found that both the parties have not reported any sales to the assessee in their respective returns filed to the VAT Department for the sales made to the assessee. 6. In view of the above the AO treated the purchases as discussed above as bogus and, therefore, he disallowed the same by adding to the total income of the assessee. 7. Aggrieved assessee preferred an appeal to the Learned CIT(A) who confirmed the order of the AO by observing as under: 4.1.3 After considering rival submission, I hold that the AO was justified in disallowing ₹ 62,51,247/- on account of purchases made from M/s. Bharti Trading Co. and M/s.Laxmi Enterprise for the reasons discussed as follows. As can be seen, the AO has made detailed investigation rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. Further, in Krishan Textiles vs. CIT 310 ITR 227(Guj), the issue was regarding cross-tallying the accounts of the appellant that of a third party which is not issue in the present case. In the present case the information has been sent by a government department i.e. Sales Tax Department which is the repository of at) information regarding sales made by any party. In view of above, discussion, I hold that the AO was justified in making addition of ₹ 62,51,247/- on account of treating purchases from M/s Bharat Trading Co M/s. Laxmi Enterprise as bogus. Accordingly, the addition of ₹ 62,51,247/- is upheld the same is confirmed. This ground of appeal is dismissed. 8. Being aggrieved by the order of the Learned CIT (A) the assessee is in appeal before us. 9. The Learned AR before us filed a Paper Book running from pages 1 to 305 and submitted that the assessee is maintaining stock registers wherein the impugned purchases and its consumption has been duly recorded. For this purpose, the Learned AR drew our attention on pages 94 to 97 of the Paper Book. The Learned AR also drew our attention on the invoices issued by the parties as discussed above alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials from the grey market and further made bogus purchases to record the same in the books of accounts. Accordingly, we don t incline to disallow purchases treating them as bogus in the given facts and circumstances. 16. The next question arises how to determine the element of profit embodied in such purchases as discussed above. To our mind, there is no standard jacket formula to work out the element of income embodied in such purchases. The assessee has already offered gross profit at the rate of 8.16% on the sales in its books of accounts, meaning thereby, profit on such purchases has already disclosed by the assessee in the books of accounts. However, in the interest of justice and fair play and to prevent any leakage to the revenue, we are of the view that the justice will be served the assessee as well as to the revenue if income of the assessee is enhanced by 5% on such purchases. Accordingly, we direct the AO to make the addition @ 5% on such bogus purchases. Hence, the ground of appeal of the assessee is allowed in part. 17. The next issue arises by the assessee is that the Learned CIT(A) erred in confirming the addition made by the AO for ₹ 6,01,000/- on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h show-cause notice submitted its inability to produce the commission agents but at the same time contended that all the details of the commission agents are available with him (AO) and,therefore, he can call upon them verify the genuineness of the commission expenses. 21. The assessee also filed the retracted statement of Smt. Anjanaben Hirendra Kumar Patel whereby it was stated that she has purchased the flat through the commission agent. 22. The assessee also claimed that the amount of commission has been paid after the deduction of TDS under Section 194 H of the Act. 23. However, the AO disagreed with the contention of the assessee and held that there was no services rendered by the commission agents which is necessary to claim the deduction of commission expenses. Thus, the AO disallowed the commission expenses and added to the total income of the assessee. 23. Aggrieved assessee preferred an appeal to the Learned CIT(A) who confirmed the addition made by the AO by observing as under: 4.2.3 The rival submissions have been considered. It is seen that the appellant paid commission to five (5) persons. When asked to produce these persons, the appellant could prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has claimed to have made payment of the commission to certain parties who have arranged the buyers of the flats. The AO verified the genuineness of the commission by enquiring from the two flat owners as discussed above who denied to have taken any services of the commission agent. Therefore, the disallowance was made by the AO which was subsequently confirmed by the Learned CIT (A). 28. First of all, we note that the AO was aware of all the details of the commission agents such as the addresses, PAN but he has not taken any confirmation from such agents about the genuineness of the commission received by them. The assessee by furnishing the requisite details about the commission agent shifted its onus upon the AO to prove that commission expenses was not incurred in the course of the business. 29. Furthermore, the AO wasunder the obligation to provide the opportunity for the cross-examination of the statement obtained from the flat owners to the assessee as well as to the commission agents before arriving at the conclusion that there was no involvement of the commission agents in selling the flats to the flat owners. In our considered view, the statement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s during assessment where they denied having paid any on money . The AO rejected the contents of the affidavits. No opportunity was given by the AO to the appellant to produce these persons. During appeal proceedings, keeping the principles of natural justice in view, the AO was asked to summon these ten (10) persons u/s 131 of the Act and to record their statements on oath which was done by the AO. As mentioned in Para 4.3.3 above, the AO vide his remand report dated 16.6.2014 reported that all the ten persons attended in response to summons u/s 131 of the Act and their statements were recorded on oath. Based on these statements the AO as follows:- Specific questions were asked regarding amount paid for purchase of flat/shops and amount of cash paid other than as maintained in the registered sale deed. The persons who attended confirmed to have signed the affidavit themselves. They denied having paid any amount over and above the sale deed. They also denied to have paid any amount in cash as on money. Thus. the AO has clearly submitted that on being asked specifically whether any on money was paid, the flat owners denied having paid any amount in cash as on money . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Flat/Shop owners Flat/Shop No. 1 ShriDineshbhai L. Prajapati Flat No. N-104 2 Smt. JasibenRohitbhai Patel Flat No. P-104 3 Shri Jignes'nShaileshbhaiRaval Flat No. L-304 4 Smt. MangubenAmratlal Patel Flat No. J-103 5 Smt. MinaxibenMukundraiRaval Flat No. P-302 6 Smt. JasibenVijaybhai Patel Flat No. M-403 7 ShriAshwinbhaiSureshbhai Pandya Flat No. O-502 8 Smt. AnjanabenHirenkumar. Patel Flat No. F-2Q4 9 Shri JitubhaiDashratbhai Patel Shop No. G-5 10 Shri JadishbhaiKalidas Patel Shop No. FF-26 Specific questions were asked regarding amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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