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TMI Blog2021 (12) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer has taken note of the transactions as bogus. However, AO failed to acknowledge that the assessee has declared corresponding sales. CIT(A) came to the proper conclusion that only profit element embedded in the purchases alone should be disallowed not the whole purchases, since the assessee has already declared corresponding income in its financial statement - CIT(A) has disallowed the suppressed profit on the purchases claimed by the assessee to the extent of 12.5%. The decision of the Ld. CIT(A) is supported by the decision in the case of CIT Vs. Simit P. Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] proposed that only profit element embedded in such purchased could be added to the assessee s income. Therefore, we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, the Assessing Officer issued information from Investigation Wing of the Income Tax Department, Mumbai and it is inferred by the Assessing Officer that assessee is one of the beneficiaries of hawala transactions routed through the hawala dealers who have merely issued bills without supplying any goods and/or providing any services. The Assessing Officer disallowed ₹ 3,83,74,530/- of the accommodation bills claimed as expenditure under the head repairs and maintenance and balance amount of ₹ 2,65,00,972/-, he disallowed from the work-in-progress of the vessels A2, A3 A4. A survey action was conducted on Shri Dilip S. Doshi by the Investigation Wing, Mumbai in which Shri Dilip S. Doshi accepted that he was into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of any confirmation from these parties, the Assessing Officer presumed that these parties are not in existence and he relied on various case laws to treat these purchases as bogus purchases to the extent of ₹ 6,48,75,502/-. 4. Aggrieved, assessee preferred an appeal before the CIT(A) and made a detailed submission before him. After considering the detailed submissions of the assessee, the Ld. CIT(A) set aside the findings of the AO and submissions of the assessee and he came to the conclusion as below: 7.24 The facts in the present case are similar to the facts in the above mentioned case. In the present case, the Ld. AO has shown that the party in question was non-existent. The appellant has not been able to disprove the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stained the addition as probable profit of the assessee. The Tribunal however, partly sustained the addition. Taking into account the above facts, the Hon'ble Gujarat High Court held that since the purchases were not bogus, but were made from parties other than those mentioned in books of accounts, only the profit element embedded in such purchases could be added to the assessee's income and as such no question of law arose in such estimation. While arriving at the above conclusion, the Hon'ble Court also relied on the decision in the case of Vijay M. Mistry Construction Ltd. 355 ITR 498 (Guj) and further approved the decision of Ahmedabad Bench, ITAT in the case of Vijay Proteins 58 ITD 428. 7.26 In the case of Vijay Prot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given keeping in view the GP rate shown by the assessee and comparable figure of the GP rates in earlier year. There is no such fact given in this case to attract application of such decision. 7.28 As narrated earlier, the Ld. AO in this case has held that the parties from which the purchases were made by the appellant were found to be bogus and that is the reason for which it was not produced during the assessment proceedings. Not having doubted the consumption/sales, the motive behind obtaining bogus bills thus, appears to be inflation of purchase price so as to suppress true profits. Considering the facts of the case as well as the various case laws cited (supra), I estimate the suppressed profit to the extent of 12.5% of the purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss account and partly charge to work-in-progress. We noticed that the Ld. CIT(A) analysed the findings of the Assessing Officer and submissions of the assessee in detail and he came to conclusion that the Assessing Officer has taken note of the transactions as bogus. However, AO failed to acknowledge that the assessee has declared corresponding sales. In our view, the Ld. CIT(A) came to the proper conclusion that only profit element embedded in the purchases alone should be disallowed not the whole purchases, since the assessee has already declared corresponding income in its financial statement. Accordingly, the Ld. CIT(A) has disallowed the suppressed profit on the purchases claimed by the assessee to the extent of 12.5%. The decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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