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TMI Blog2020 (12) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... s under consideration thus was less by about 3% than the average GP rate declared by the assessee for the immediately succeeding three years - additional GP rate of 3% adopted by the Ld. CIT(A) as the profit element embedded in the disputed purchases for all the four years under consideration was quite fair and reasonable - Decided against assessee. Addition u/s 40A(3) - HELD THAT:- It is observed that even though a possibility was expressed by the Ld. CIT(A) about the purchases in question having been made by the assessee from the grey market, there is no evidence whatsoever available on record to show that the said purchases were actually made by the assessee from the grey market and payments against the same were made in cash as alleged by the Ld. DR. In our opinion, this case is therefore not a fit case where the provision of section 40A(3) can be invoked and that too for the first time at this stage before the Tribunal. We, therefore, find no merit in the appeals of the Revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the assessee as well as the adverse findings of survey and search conducted in the case of Shri Sanjiw Kumar Singh, the AO treated the entire purchases made by the assessee from the entities of Shri Sanjiw Kumar Singh as bogus and the following additions were made by him to the total income of the assessee in the assessments completed for all the four years under consideration u/s 143(3) read with section 147 vide orders dated 20.12.2018: "A.Y. 2011-12 ₹ 2,80,75,372/- A.Y. 2012-13 ₹ 2,87,33,384/- A.Y. 2013-14 ₹ 48,00,838/- A.Y. 2014-15 ₹ 15,96,000/-" 4. Against the orders passed by the AO u/s 143(3) read with section 147 of the Act for all the four years under consideration, appeals were preferred by the assessee before the Ld. CIT(A) challenging the validity of the said assessments as well as disputing the additions made therein on account of the alleged bogus purchases on merit. After considering the submissions made on behalf of the assessee and perusing the relevant material available on record, the Ld. CIT(A) did not find merit in the preliminary issue raised by the assessee challenging the validity of the assessments made by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant transactions should be considered for the purpose of addition. To arrive at this conclusion, we relied on the following judicial pronouncements: "i. CIT vs Simit P Sheth 356 ITR 451 (Gujarat) ii. ITO vs Sumit Jaiswal (ITA No. 1541/Kol/2016 dtd. 14.02.2018 iii. CIT vs M/s. Mohommad Haji Adam & Co. (I.T. Appeal No. 1004 of 2016 dtd. 11.02.2019 of Hon'ble Bombay High Court)." 6. In order to estimate the element of profit embedded in the disputed transactions, the Ld. CIT(A) compared the gross profit and net profit rates declared by the assessee for all the four years under consideration vis-a-vis the gross profit and net profit rates declared for the subsequent four years and held that it would be fair and reasonable to estimate the element of profit embedded in the disputed transactions at 3% of the disputed purchases. He accordingly directed the AO to restrict the addition on this issue to 3% of the disputed purchases for all the four years under consideration. He thus partly allowed all the four appeals of the assessee for A.Y. 2011-12, 2012-13, 2013-14 and 2014-15 vide his four separate appellate orders all dated 30.04.2019. 7. Aggrieved by the orders of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the assessee has submitted that gross profit rate of 2.41%, 2.86%, 3.59% and 3.83% was declared by the assessee for A.Y. 2011-12, 2012-13, 2013-14 and 2014-15 respectively and since the gross profit rate so declared by the assessee by itself was quite fair and reasonable keeping in view the nature of the business of the assessee of trading of iron products, the additional GP rate of 3% adopted by the Ld. CIT(A) is excessive and unreasonable as the same would give a net profit of more than 3% which is far excessive than the net profit earned in the business of trading of iron products. He has contended that the same, therefore, needs to be reduced at some reasonable extent. We are unable to accept this contention of the learned counsel for the assessee. It is observed that even though the claim of the assessee as regards the quantum of purchases in question cannot be disputed because of the corresponding sales made by the assessee and accepted by the AO, the fact remains to be seen is that the bills produced by the assessee in support of the said purchases were found to be bogus and therefore, the claim of the assessee at least valuewise could not be fully verifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the same were made in cash. He has submitted that the payments against the said purchases, on the other hand, were made by the assessee by cheques as established on the basis of the relevant bank statements and, therefore, the provisions of section 40A(3) cannot be involved. After taking into consideration all the facts of the case as well as the submissions made by the ld. Representatives of both the sides, we are inclined to accept the contention of the learned counsel for the assessee. It is observed that even though a possibility was expressed by the Ld. CIT(A) about the purchases in question having been made by the assessee from the grey market, there is no evidence whatsoever available on record to show that the said purchases were actually made by the assessee from the grey market and payments against the same were made in cash as alleged by the Ld. DR. In our opinion, this case is therefore not a fit case where the provision of section 40A(3) can be invoked and that too for the first time at this stage before the Tribunal. We, therefore, find no merit in the appeals of the Revenue for both the years under consideration for A.Y. 20111-12 and 2012-13 and dismiss the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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