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TMI Blog2021 (6) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income Tax (Appeals)-07, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2009-10. 2. The revenue has raised the following grounds: - 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in restricting the addition @ 12.5% as against @ 19.5% made by the AO on bogus purchases despite the fact that the addition was made on basis of credible information received from DGIT(Inv.) based on information supplied from sales tax authorities. 2. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the AO be restored. 3. The appellant craves leave to amend or alter or add a new ground which may be necessary. 4. The brief facts of the case are that the assessee filed its return of income on 28.09.2009 declaring total income to the tune of Rs. Nil. The return was processed u/s 143(1) of the I. T. Act, 1961 accepting the returned income. Thereafter, the case of the assessee was reopened u/s 147 of the Act I. T. Act, 1961 and accordingly, notice u/s 148 of the Act was issued and served upon the assessee on 19.02.2014. Notices u/s 143(2) 142(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of M/s. Kanchwala Gems vs. JCIT [ITA No. '134/JP/2002 dated 10.12.2003 by the Hon‟ble ITAT, Jaipur wherein it is held that payment by account payee cheque {is not sufficient to establish the genuineness of purchases. The said decision of the ITAT, Jaipur has been affirmed by the Hon‟ble Supreme Court in the case of M/s Kachwala Gems vs. JCIT (2006) 206 CTR (SC) 585: 288 ITR 10 (SC). Thus, the main contention of the appellant does not hold much water. The AO has formed his views about the bogus nature of the purchases made by the appellant from the above parties on the basis of statements recorded by the Sales Tax Authorities as well as further inquiries carried out by him independently. The information received from the Sales Tax authorities was only a piece of evidence to initiate in-depth independent investigation on the issue. It is not the case of the appellant that he has maintained a proper stock register. The appellant has not been able to. establish. one to one relationship/nexus between the purchases and sales. The assessee has not been able to produce the parties from whom purchases have been alleged to have been made. The appellant has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties in question as it could not be established that purchases had been effected from the parties in question. Thus the purchase prices shown on the invoices produced could not be subjected to verification and as such it was difficult to establish the correctness of the purchase prices paid for the materials purchased. In the absence of any such verification as to the correctness of the price paid for the materials purchased by the appellant, the purchase price paid as mentioned on the invoices/bills cannot be accepted as the correct price paid for the goods purchased from such parties. In view of the same, the possibility of over-invoicing of the materials purchased to reduce the profit cannot be ruled out. Therefore, the gross profit rate shown by the appellant for the year under consideration cannot be relied upon. In the circumstances, the correct approach in such transactions would be to estimate the additional benefit or profit earned on these purchases and not to disallow the entire purchases from the aforesaid parties. In my view either the purchases from such parties is over invoiced or the purchases were actually made but not from the parties from which it was cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Poly Fab Pvt. Ltd. vide order dated 23.10.2012 passed in Tax Appeal No. 63 of 2012. The view taken by the Tribunal in case of Vijay Proteins Pvt. Ltd. Vs. CIT reported in 58 ITD 428 came to be approved. 5.3.4 Similarly, while dealing with an identical issue, in the case of CIT, Vs. Bholanath Poly. Fab (P) Ltd., LT.A. No. 63 of 2012, in the order dated 23/10/2012, the Hon'ble High Court of Gujarat has held as under: We are of the opinion that the Tribunal-committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question or fact. The Tribunal having examined the evidence on record the finished go on that the assessee did purchase the cloth and sell. In the entire covered under such purchase, but the profit element embedded therein would be subject to tax, This was the view of this court in the case of Sanjay Oilcake Industries v. CIT [2009] 316 ITR 274 (Guj). Such decision is also followed by this court in a judgment dated August 16, 2011, in Tax Appeal No. 679 of 2010-in the case of CIT v. KishorAmrutlal Patel. In the result, tax appeal is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 620/) and restrict the addition to ₹ 5 63 203/. The appellant gets a relief for the balance amount of ₹ 3,15,387/-. Hence, the grounds No. 1 to 5 of appeal are Partly Allowed. 6. On appraisal of the above mentioned finding, we noticed that the CIT(A) has decided the matter of controversy on the basis of the decision of the Hon ble High Court of Gujarat in the case of CIT Vs. Bholanath Poly Fab Pvt. Ltd. ITA. No.63 of 2012, in the order dated 23.10.2012 CIT Vs. Simit P. Sheth, ITA. No.553 of 2012, order dated 16.01.2013 and the other judgments which have been reproduced in the order. In the instant case, sale is not doubted, therefore, the CIT(A) has restricted the addition to the extent of 12.5% of the bogus purchase which works out to the tune of ₹ 5,63,203/- (12.5% of ₹ 45,05,620/-). The facts are not distinguishable at this stage. Taking into account, all the facts and circumstances, we are of the view that CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, we upheld the finding of the CIT(A) on this issue and decide this issue in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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