9911796707
TMI Blog2021 (12) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act, 1961 (hereinafter referred to as "the Act") vide orders dated 17.03.2015 and 23.03.2016 respectively. 2. The facts and circumstances of the issue are exactly identical in both the years, hence, we will take the facts from Assessment Year 2009-10 in ITA No. 1226/Mum/2020 and will decide the issue. 3. The only issue argued before me is that the CIT(A) has erred in law and in fact in confirming the disallowance of bogus purchases to the extent of Rs. 2,67,82,700/-. For this, assessee has raised the following Ground no. 4 :- "4. The Ld. CIT(A) has erred in law and in facts in confirming disallowance of bogus purchase to Rs. 2,67,82,700/-." The brief facts are that the assessee is engaged in the business of reselling of ferro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, produced the books of account and also the stock register, but could not produce the delivery challans, transportation receipts, octroi receipts, etc. The assessee also could not produce the parties and hence the Assessing Officer estimated the profit rate at 12.5% of the bogus purchases and thereafter made addition on account of non-genuine purchases at Rs. 33,47,838/-. Aggrieved, assessee preferred appeal before the CIT(A). 4. The CIT(A) confirmed the action of the Assessing Officer and also enhanced the addition of bogus purchases to 100% as against the addition made by the Assessing Officer at 12.5% of the bogus purchases. For this, the CIT(A) recorded her findings in paragraphs 6.1 to 6.3 of her order which reads as under :- "6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of 12.5% of such bogus purchases and consequent allowance of 87.5% of such unsubstantiated purchases." 5. The CIT(A) also rejected the argument that sales could not have been made without purchases. For this, the CIT(A) recorded the following findings :- "6.11 .............. Every argument in logic has a structure that is premises and conclusion. Premises are statements which give evidence for, or reasons for accepting the conclusion and conclusion is a statement which is purported to be established or affirmed on the basis of other statements, that is the premises. In this case, the conclusion is that bogus purchases are to be disallowed as per the provisions of Sec 37(1). This conclusion is based on the premises drawn by the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and observed that the department had accepted the sale and therefore there was no reason to reject the purchases, because without purchases there could not be sales and restricted the addition to 10% of the purchase amount and directed the AO to make an addition to the extent of difference between the GP rate as per the books of accounts on undisputed purchases and GP on sales relating to purchases made from disputed parties. The ITAT noted that the CIT(A) had not given any reasons for retaining 10% of the purchases by way of ad hoc additions. The ITAT permitted the AO to tax the assessee on the basis of difference in the GP rates. The Hon'ble Bombay High Court concluded that, there being no discrepancy between the purchases and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppress the true profit. Hence, the Assessing Officer applied profit rate of 12.5% of the total non-genuine purchases by stating that it would be just and fair if the profit element embedded in such purchases is taken as the profit earned from such purchases shown to have been made from non-existent parties. The learned counsel stated that the CIT(A) has simply enhanced the addition by treating the entire bogus purchases as profit whereas it is a fact that sales made by assessee are not doubted. Once sales are not doubted, the bogus purchases in entirety cannot be added. Only the profit element can be added. That profit element can be determined by the nature of assessee's business. Here, the assessee is engaged in reselling of ferrous and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndees, quantity, payment received by account payee cheques, transportation receipts, identification of stock statement of sales against such purchases. The assessee also submitted delivery challans of vendors as well as vendees with transportation receipts and assessee has discharged its initial onus casted upon it by the Act. We noted that the assessee could not produce the parties or the addresses given by the assessee of the parties from whom assessee had made purchases remained unverified. The Income Tax Department issued notices under Section 133(6) of the Act to the parties from whom purchases were made, but same returned unserved. I noted that neither the Assessing Officer nor the CIT(A) tried to carry out any exercise of verificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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