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TMI Blog2017 (6) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. AO of Rs. 1,36,825/-(i.e. 0.5% of purchases of Rs. 2,73,65,128/-) in order to equalize the G.P. 4. The Ld. CIT (A) erred in confirming interest charged by Ld. AO u/s 234A, 234B, 234C and 234D of Income Tax Act, 1961. 5. The Ld. CIT (A) erred in confirming initiation of penalty proceeding u/s 271(1)( c ) of the Act." 3. The assessee vide letter dated nil filed amended grounds which read as under: "Ground NO.2: 'The Ld. CIT(A) erred in confirming the addition of Rs. 58,89,729/- made by Ld. AO u/s 69C and enhancing the same by Rs. 25,10,887/- on account of alleged bogus purchase after applying the principals of "Peak Credit"". Ground No.3: "The Ld. CIT(A) erred in confirming the addition of Rs. 1,36,825/- made by Ld. AO and enhancing the same upto Rs. 10,94,605j- in order to equalize the gross profit margin due to alleged bogus purchases". [i.e. The Ld. AO added 0.5% of the alleged bogus purchases to equalize the gross profit margin which was enhanced by the Ld. CIT(A) to 4%" 4. The issue raised in the amended ground no.2 is against the confirmation of addition of Rs. 58,89,729/- by the ld.CIT(A) as made by the AO u/s 69C of the Act and also enhancement by Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... working done by the appellant. Based on the information available on record, the Ld.AO has worked out the peak credit at Rs. 58,89,729/- by calculating the peak after merging the accounts of all the bogus parties from whom the purchases were made during the year u/s 69C of the Act being unexplained expenditure. I find no fault in the additions so made by the Ld.AO and the addition made is accordingly confirmed. The Ld.AO is further directed to verify as to whether there is any outstanding credit as on the day of closure of the accounts of the appellant and if there is any the same need to be treated as bogus and identify what are the corresponding asset created by the appellant to match the balance sheet as on that date. This garound of anneal is thus dismissed with enhancement (appx.25,10,887/-)" 6. While dismissing the appeal of the assessee, the ld.CIT(A) enhanced the income of the assessee by Rs. 25,10,887/- on account of bogus purchases by applying the principle of peak credit. The ld. AR vehemently submitted before us that the addition u/s 69C of the Act cannot be made merely on the basis of information from the Sales Tax Department whether the suppliers who have engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r hand, the ld.DR submitted before the Bench that the assessee has availed accommodation entries to suppress the profits making purchase from hawala operators and thus the books of accounts were manipulated and fudged. The ld. DR also submitted that there was no doubt as to the accommodation entries being availed by the assessee as the suppliers who supplied the bills to the assessee were not traceable on the addresses furnished by the assessee and notices issued u/s 133(6) were received back unserved by the AO with the remark unserved. The ld. DR further argued that furnishing of the purchase bills and sales bills, stock tally register, transport receipts and delivery challans etc did not prove the genuineness of purchases in any manner specifically in view of the facts that the hawala suppliers have given the accommodation entries to the assessee. Finally the ld DR requested to sustain the order of the ld.CIT(A). 8. We have carefully considered the rival contentions and perused the material placed before us including the impugned orders and case law relied upon by the assessee. The undisputed facts of the case are that the revenue has received information from the Sales Tax Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - in the immediate preceding year and made addition at the rate of 0.5% on Rs. 2,73,65,128/- being tainted purchases of Rs. 1,36,825/- to equalize the GP on tainted and non-tainted purchases. In the appellate proceedings, the ld.CIT(A) not only sustained the addition as made by the AO but also enhanced the addition by observing and holding as under (2.3.14): "2.3.14 Having established the fact that the appellant had made the purchases from the bogus parties and the evidences given by the suppliers before the sale tax authorities are creditable evidence which cannot be ignored so lightly as is being done by the appellant. In view of the foregoing discussion, Ld .AO should have rejected the books of account and made the estimation of profit. However the Ld.AO has without rejecting the books of account estimated the profit by stating that 0.5% of bogus purchases(Rs. 2,73,65,128/-) be added to equalise the GP in respect of tainted and non-tainted purchases. Further the Ld.AO has also made an analysis of GP worked out in respect of tainted/non-tainted purchases at 5.08% and 6.40% respectively. The Ld.AO thereafter concluded that GP shown by the appellant in respect of tainted purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X
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