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TMI Blog2021 (10) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) had taken the GP rate of the assessee for the last eight years i.e. AY 2007-08 to AY 2014-15 of 15.88% as a yardstick and on the said reasoned basis restricted the addition to 15% of the value of the impugned bogus purchases of 2,12,513/-. Accordingly, backed by our aforesaid deliberations we find no merit in the appeal of the revenue and dismiss the same. The Grounds of appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 77,12,722/-. The return of income filed by the assessee was initially processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 3. During the course of assessment proceedings it was, inter alia, observed by the A.O that the assessee had claimed to have made purchases from six tainted parties which as per the information received from the Sales Tax Department were involved in the business of providing accommodation entries. In order to verify the genuineness and veracity of the impugned purchases the A.O issued notices u/s 133(6) of the Act, which however were either returned un-served by the postal authorities with the remarks "not known", "left", "unclaimed" or were though served but not complied with by the concerned parties. For the sake of clarity the fate of the notices issued u/s 133(6) to the aforesaid six tainted supplier parties is culled out as under:- Sr. No. Name of the party Nature of transaction Amount involved (Rs.) Remarks 1 M/s Anmol Enterprises Purchases 26,12,975 Not known 2 M/s Mahavir Enterprises Purchases 19,25,304 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of the view that as the material/goods pertaining to the impugned purchase transactions had factually been purchased and consumed by the assessee in the course of her business, therefore, it could safely be concluded that she had purchased such goods/material though not from the aforementioned hawala parties, but at a discounted value from the open/grey market. Accordingly, the CIT(A) on the basis of his aforesaid deliberationsheld a conviction that the addition in the hands of the assessee was liable to be restricted only qua the profit which she would have made by procuring the goods at a discounted value from the open/grey market. After considering the average gross profit rate of the assessee for the last 8 assessment years i.e. AY 2007-08 to AY 2014-15, which worked out at 15.88%, the CIT(A) restricted the addition to 15% of the total value of the impugned purchases of ₹ 3,54,80,396/- and confined the addition to an amount of ₹ 56,77,225/-. 7. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. 8. We have heard the Ld. Authorized Representative for both the parties, perused the orders of the lower authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by procuring the goods/material at a discounted value from the open/grey market. Insofar the quantification of the aforesaid profit element in procuring the goods at a discounted value was concerned, the CIT(A) had after taking cognizance of the average GP rate of 15.88% of the assessee for the last eight assessment years i.e. A.Y 2007-08 to A.Y 2014-15 had in all fairness worked out the addition qua the estimated profit element embedded in procuring the goods from the open/grey market at 15% of the value of the impugned bogus purchases of ₹ 3,54,86,396/-. For the sake of clarity, the observations of the CIT(A) on the basis of which he had concluded as hereinabove are reproduced as under:- "7.2.7 I have carefully considered the submissions of the appellant with reference to materials on record and the assessment order of the AO. I find the appellant has substantially furnished documentary evidences to prove that the purchases made for the alleged parties are genuine. I also find the AO has not doubted the sales/turnover declared by the appellant in the financial statements and Income Tax Return filed for the impugned assessment year. However, the fact remains that the alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that all the purchases are made within the local limits and the delivery has been done by hand, therefore, no transport, octroi and delivery challans are submitted, However, in view of the nature of business of the assessee and the fact that the assessee is making local purchases without any transportation bills, delivery challans etc., the possibility of tha assessee making: purchases in grey market on cash cannot be ruled out. Therefore, keeping in view the facts and circumstances of the case, we direct the Assessing Officer to disallow 2% of the above purchases to meet the anomalies." 7.2.9 The Hon"ble Jurisdictional High Court in the case of Pr.CIT vs. M /s Mohommad Haji Adam & Co. in ITA No. 1004 of 2016 vide its order dated 11.02.2019 has held as under: "8. In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded en such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant case also estimation of profit embedded in the said alleged purchases be subjected to tax in all fairness. It is observed from the tax audit reports of the appellant of eight assessment years 2007-08 to 2014-15, the average GP is 15.88%. I therefore hold that computing the profit embedded in the said purchases at 15% of total bogus purchase of ₹ 3,77,01,501/-(₹ 3,95,59,626/- less total of credit balances -₹ 18,58,125/-) which works out to ₹ 56,55,225/and addition thereof to total income of the appellant of the impugned assessment year would meet the ends of justice. The AO is directed to retain the addition to the extent of ₹ 56,55,225/and delete the balance amount of ₹ 3,20,46,276/(₹ 3,77,01,501/-less ₹ 56,95,225/-). Accordingly, Ground of Appeal No.2 is Partly Allowed." 10. After giving a thoughtful consideration to the observations of the CIT(A), we concur with the view therein taken by him. We, thus, neither finding any infirmity as regards the restriction of the addition in the hands of the assessee to the extent of the profit element embedded in making of the impugned purchases by the assesssee from the open/grey market, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire purchases are liable to be disallowed?, G. The appellant craves leave to amend or to alter any ground or add a new ground, which may be necessary." 13. Briefly stated, the A.O on the basis of information received from the DGIT (Inv.), Mumbai that the assessee as a beneficiary had obtained bogus purchase bills of ₹ 20,12,513/- from a hawala party, viz. M/s Anil Trading Company had therein u/s 147 of the Act reopened her concluded assessment for the year under consideration i.e A.Y 2010-11. 14. During the course of assessment proceedings, the A.O in order to verify the genuineness and veracity of the purchases that were claimed by the assessee to have been made from the aforementioned tainted party, viz. M/s Anil Trading Company had therein issued to it a notice u/s 133(6) of the Act. However, the aforesaid notice was returned un-served by the postal authorities with the remarks "not known". Backed by the aforesaid fact, the A.O directed the assessee to produce the aforesaid party for examination and also file its confirmation. However, the assessee failed to comply with the direction of the A.O and neither produced the aforementioned party for examina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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