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TMI Blog2021 (12) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... ough we hold that assessee has received bogus bills from the parties, application of profit rate. The assessee is engaged in reselling of ferrous and non-ferrous metals and in such circumstances we have to apply profit rate suitable to the trade. In this nature of business, i.e. reselling of ferrous and non-ferrous metals, VAT is at 5% and assessee might have made purchases from the grey market for which assessee might have saved some element of profit. Hence, we estimate the profit rate at 5% of the bogus purchases and reverse the orders of the authorities below to that extent. Thus, the appeal of the assessee is partly allowed. - ITA NOS. 1225 & 1226/MUM/2020 - - - Dated:- 12-11-2021 - SHRI MAHAVIR SINGH , VICE PRESIDENT Appellant by : Shri Dixit Jain Respondent by : Shri Vaibhav ORDER These two appeals by the assessee are arising out of the orders of Commissioner of Income Tax (Appeals)-30, Mumbai (in short CIT(A) ) in Appeal Nos. CIT(A)-30/ITO 19(1)(1)/957/15-16 and CIT(A)-30/19(1)(1)/13113/2016-17 dated 09.10.2019 and 28.08.2019 respectively. The assessments were framed by the Income Tax Officer 19(1)(1), Mumbai for Assessment Years 2009-10 and 2010-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 Drashti Overseas ₹ 21,21,341/- 14 Navkar Impex ₹ 1,22,44,086/- Total ₹ 2,67,82,700/- The Assessing Officer required the assessee to give the following details :- (a) Name of the Seller with current full address, (b) PAN, (c) Bill and Voucher No. with date, (d) Description of goods purchased, (e) Quantity, (f) Rate, (g) Amount, (h) Goods despatched from (name of the place) with date, (i) Mode of transportation, if by Road Vehicle No. and also payments, detailed in the annexure-A. The assessee filed the purchase bills/sale bills, payments made by account payee cheques, 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 ₹ 33,47, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 AO that the expenditure is not proven as per Sec 37(1) of the IT Act. The appellant can demolish this afore cited conclusion only by attacking the premises i.e. the basis for holding the purchases as bogus. If the argument is that the premises, that is finding of Ld AO of bogus purchases, is incorrect because the sales are not doubted, it is a case of logical fallacy. Again, it is reiterated that it is not for the Department/Revenue to establish the sales or otherwise. If the appellant claims that it did indeed have the sales as claimed, then it is for the appellant to establish how the purchases were made. If these purchases were from the grey market it is for the appellant to establish from whom these purchases were made, how payments were made and how the corresponding sales took place. Even the CIT(A) has not followed the judgment of Hon'ble Bombay High Court in the case of M/s. Mohommad Haji Adam Co. da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee filed the sale and purchase bills, proof of payment made by account payee cheques to the sellers, stock register, but could not file the delivery challans, transportation receipts, goods inward register maintained at the godown and octroi challans. For this reason, the Assessing Officer came to the conclusion that the assessee has indulged in non-genuine purchases and intention of indulging in such activity is to 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 non-ferrous items. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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