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TMI Blog2021 (5) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... at, Ahmedabad in PCIT Vs. TAYAB YUNUS BARUDGAR [ 2019 (6) TMI 1226 - GUJARAT HIGH COURT] has confirmed the estimate NP @ 2% of total URD purchases Thus as relying on cases above held that to estimate net profit @ 2% of total URD purchases is proper and fair, hence we dismiss ground No. 2 raised by the assessee, and we confirm the order of ld. CIT(A) so far ground no.2 is to estimate the net profit @ 2% on the turnover of the assessee. Appeal of the assessee is partly allowed. - I.T.A No.3224/AHD/2015 - - - Dated:- 22-10-2020 - Shri Pawan Singh, Hon'ble Judicial Member And Shri Arjun Lal Saini, Hon'ble Accountant Member For the Assessee : Shri A.Gopalakrishnan AR For the Revenue : Ms. Anupama Singla Sr.DR ORDER PER DR. ARJUN LAL SAINI, AM: The captioned appeal filed by the assessee pertaining to assessment year 2011-12, is directed against the order passed by the ld. Commissioner of Income Tax(Appeals), Valsad in appeal no. CIT(A)/VLS/59/14-15 dated 18.08.2015, which in turn arises out of an assessment order passed by the ld. Assessing Officer(AO) under section143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee failed to produce the same. Therefore, Assessing Officer issued a show cause notice to the assessee on 07.03.2014 asking the assessee to furnish the details about sundry creditors shown by him in the Balance Sheet. 3. In response to the said show cause notice the assessee submitted his reply before the Assessing Officer, which is reproduced below: The above show cause notice fixing the hearing on 14/03/2014 has been received by me only on 19/03/2014. In this regard I would like to humbly submit before your good self as under:- The assessee is carrying on business in trading of waste paper. Waste paper is collected from small vendors who belong to the poorest sections of the society. They are generally illiterate and of poor means, without even proper housing to live. This may be reason that the notices send by your good self returned un-served. The assessee has purchased such scrap material and supplied the same to the paper mills. During the subsequent year as soon as the money is received from the paper mills the amount is paid to such small time vendors. This is the nature of business and invariably payments are made to the creditors for supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dger etc. and he had audited the same after examining the said books. Then what element prevented the assessee to produce such audited books of accounts before the Assessing Officer for verification, even when the auditor has specifically mentioned in the audit report that he had audited the books after examining the same. Under the above stated circumstances, the Assessing Officer held that the veracity of the purchases made by the assessee cannot be verified with reference to the purchase bills and other related details and therefore, Assessing Officer has left with no option but to disallow 15% of the total purchases of ₹ 2,66,81,562/- and added to the total income of the assessee which came to ₹ 40,02,234/-. 7. This way, the assessing officer had rejected books of accounts of the assessee and made estimated disallowance @ 15% of the total purchases at ₹ 40,02,234/- ( 15% of ₹ 2,66,81,562). Over and above, the assessing officer also made addition on account of bogus creditors at ₹ 56,68,960/-, as noted above. 8. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld.CIT(A) who has confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant is partly allowed. We note that assessing officer, having rejected the books of accounts made estimated disallowance @ 15% of the total purchases at ₹ 40,02,234/- ( 15% of ₹ 2,66,81,562). On appeal, ld CIT(A) restricted the estimated addition in net profit @ 2% of the turnover, as noted above. Over and above, the ld CIT(A) also confirmed the addition made by assessing officer on account of bogus creditors at ₹ 56,68,960/-, to which, the ld Counsel has objected. We note that since the Assessing Officer has rejected the books of accounts, therefore, he cannot make separate addition on account of bogus creditors, that is, after rejection of books of account the alternative remains with the Assessing Officer is to estimate the profit. We note that ld CIT(A) has also confirmed the addition on account of bogus creditors at ₹ 56,68,960/- under section 68 of the Income Tax Act, 1961, which he should not have done, as the books of accounts of the assessee were rejected and estimated addition as net profit @ 2% of the turnover has been confirmed by him(Commissioner of Income-tax (Appeals). Thus, we note that where the assessing officer himse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbed the findings by drawing presumptions. 11. In such circumstances referred to above, the learned counsel submits that a substantial question of law is involved in the present Appeal as regards the account of unverified sundry creditors as well as on the issue of deleting the addition made on account of the unverifiable purchase. 12. On the other hand, Mr.Darshan Patel, the learned counsel appearing for the assessee on caveat, has vehemently opposed this Appeal. He submitted that no error, not to speak of any error of law, could be said to have been committed by the Tribunal in passing the impugned order. The principal argument of Mr.Patel is that the Assessing Officer, having once rejected the books of accounts, could not have made further additions by relying upon the same books. The Assessing Officer ought to have estimated a reasonable profit of the assessee considering the history and nature of business. Mr.Patel pointed out that the CIT(A) took notice of the fact that the Assessing Officer had already made addition of net profit @ 2% of the turnover. In such circumstances, the amount of ₹ 1,17,31,334=00 could not have been added relying on the same book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r s. 68A. 6. Learned counsel for the appellant in support of his contention relied upon the two judgments of the Division Bench. The first judgment is dt. 28th Jan., 2009, passed by the Division Bench of the Rajasthan High Court in the case of CIT vs. G.K. Contractor Anr. (2009) 19 DTR (Raj) 305 judgment is passed by the Division Bench of the Allahabad High Court in the case of CIT vs. Pancham Dass Jain (2006) 205 CTR (All) 444 : (2006) 156 Taxman 507 (All). 7. Learned counsel for the Revenue submitted that from the evidence of the persons whose identities have been disclosed by the assessee himself it is fully proved that the transaction recorded in the books of account of the assessee was not genuine transaction and for this the AO as well as the Tribunal has given cogent reasons and that finding of fact may not be interfered with by this Court. 8. However, it is submitted that since the transactions were in the form of cash entry only though having been described in the head of amount of persons alleged to have supplied the material to the assessee but when the transactions were found not to be genuine then that entry can be treated to be a cash amount in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessed the total income as ₹ 1,74,03,900 meaning thereby by this order of assessment the AO accepted the books of account for the purpose of finding out the profit shown by the assessee to be correct as disclosed in the return and thereafter added the amount of the credits shown in the account of the sundry creditors. In view of the above, it appears that the AO has passed the contradictory order by holding that the books of account are not reliable while deciding the issue of the sundry creditors but relied upon the return for accepting the profit shown to be correct which is supported by the books of account. The other fact relevant is that for gross receipts of ₹ 4,51,01,011 the AO has not declared that the gross receipt is the correct figure and yet added the income of ₹ 1,59,90,274 merely on account of cash entries. 12. In the facts of the case, the AO has committed an error of law by adding that amount under s. 68 of the Act of 1961 straight-away merely because of the reason that the genuineness of the transaction shown in the heading of the sundry creditors was not found genuine. 13. In view of the above reasons, following s. 145(3) the AO sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying to the above, the ld. Assessee s Representative (AR) submitted that for the immediately preceding year AY 2009-10, the ITAT, Ahmedabad B Bench dismissing the appeal of the Revenue has upheld the conclusion drawn by the ld. CIT(A) to estimate NP @ 2% on the purchases from Un-Registered Dealers (URD) and in the subsequent present AY the ld. CIT(A) has followed the same line directing the AO to estimate the NP @2% of turnover. The ld. AR almost submitted that from relevant para at pg. 24 of the impugned first appellate order, it is clear that the ld.CIT(A) has also taken into account orders of his predecessor for AY 2006-07 to 2008-09 for the same estimation of 2%. Therefore, the ld. AR submitted that the issue is covered in favour of the assessee by the order of the Tribunal dated 27.05.2016 in assessee s own case for AY 2009-10, wherein appeal of the Revenue ITA No.1351/Ahd/2012 has been dismissed on ground No.1. 6. On careful consideration of the above rival submissions, we are of the view that from the relevant part of first appellate order at pg. 24, we observe that the ld. CIT(A) has taken cognizance of the order of his predecessor on the same issue on the identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... void of merits and being covered in favour of the assessee by the earlier Tribunal order is dismissed. 13. We note that ld Counsel has himself accepted the estimate NP @ 2% of total URD purchases by relying on the above judgment of the Coodicate Bench in the case of Shri Tayab Yunus Barudgar (supra). 14. We note that Hon'ble High Court of Gujarat, Ahmedabad in PCIT Vs. TAYAB YUNUS BARUDGAR in R/TAX Appeal No.81 of 2019 dated 18.06.2019 has confirmed the estimate NP @ 2% of total URD purchases. Findings of the Hon`ble Court is given below: 15. With regard to the first question, i.e. addition made on account of the unverifiable purchases, the CIT(A) held as under : The third ground of appeal is the disallowance made to the tune of ₹ 1,05,08,822/- being 15% of the total purchases of waste paper which were treated as non genuine and unverifiable by the assessing officer. Briefly stated the facts of this issue are that the appellant is engaged in the business of trading in waste paper. Besides this, the other items traded are scraps like core pipe, duplex craft waste, paper tube and the like unusable products as disposed off by the end users. As these i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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