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TMI Blog2021 (4) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... iled the impugned order on the following grounds of appeal before us: "1. On the facts and circumstances of the case and in law, the Hon'ble Commissioner of Income Tax (Appeals) [CIT(A)] has erred in upholding the reopening of assessment done by the learned Assessing officer (AO) u/s 147 of the Act. 2. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in upholding the disallowance of Rs. 7,51,450 being the total amount of purchases from Moulimani Impex Pvt. ltd. i.e alleged bogus party." 2. Briefly stated, the assessee firm which is engaged in the business of manufacturing of gold and diamond stud jewellery had filed its return of income for A.Y. 2007-08 on 26.10.2007, declaring its total income at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulimani Impex Pvt. Ltd., which, however, was not complied with by the latter. In the backdrop of the aforesaid facts, the A.O was of the view that the assessee had failed to substantiate the genuineness and veracity of the impugned purchases under consideration. Further, observing that the assessee could also not prove the usage of the material purchased, the A.O holding a conviction that as the assessee had merely booked the purchases without actually getting any material, disallowed the entire amount of the impugned purchases of Rs. 7,51,450/- under Sec. 69C of the Act. 4. Aggrieved, the assessee assailed the assessment order before the CIT(A), wherein the latter finding no infirmity in the view taken by the A.O upheld his order and dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was averred by the ld. A.R that both the lower authorities had erred in making/sustaining the addition w.r.t the purchases made by the assessee from the aforementioned party. 5. Per contra, the ld. Departmental Representative (for short 'D.R') relied on the orders of the lower authorities. 6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. As is discernible from the orders of the lower authorities, the case of the assessee was reopened by the A.O on the basis of an information received from the office of DGIT(Inv.), Mumbai that as per the incriminating documents unearthed in the course of the search proceedings conducted under Sec. 132( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime, we also cannot remain oblivious of the fact that though the assessee had not been able to substantiate to the hilt the authenticity of the impugned purchases claimed to have been made from the aforesaid tainted parties, however, there is no justifiable reason for addition of the entire amount of the impugned purchases to the returned income of the assessee under Sec. 69C of the Act. As observed by us hereinabove, the trading results of the assessee for the year under consideration is substantially better as in comparison to those of the immediately last two preceding years, which for the sake of clarity are culled out as under: A.Y Sale GP rate 2005-06 2,07,11,307.10 14.14% 2006-07 3,59,16,520.34 11.22% 2007-08 4,08,06.951. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of the assessee is liable to be restricted only to the extent of the profit which it would have made by procuring the goods at a discounted value from the open/grey market. Insofar the quantification of the profit from making of the impugned purchases is concerned, we find that the Hon'ble High Court of Bombay in its recent judgement in the case of Pr. Commissioner of Income Tax-17 Vs. M/s Mohhomad Haji Adam & Company (ITA No. 1004 of 2016, dated 11.02.2019) while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate as that of the other genuine purchases. The Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing 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 Rs. 3,70,78,125/- which comes to Rs. 20,98,62 1.88 we think it fit to direct the revenue to add Rs. 20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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