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TMI Blog2022 (5) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Commissioner of Income Tax (Appeals)-02, relevant to the A.Y.2010-11. 3. The revenue has raised the following grounds: - 1. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in not appreciating the fact that the assessee could not establish the genuineness of the purchases from the non-existent vendors as per information received from Law enforcement agency of State Govt. of Maharashtra i.e. Sales Tax Department, and established by the Assessing Officer. 2. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in not appreciating the fact that the onus to justify the claim of expenses is on the assessee and the same has failed to discharge it in relation to the purchases made from the non-existent vendors. 3. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in ignoring, the fact that the assessee could not substantiate its claim of purchases from non-existent vendors by means of relevant supporting documents related to movement of goods, stock register, etc. to restrict the addition to 25 % is estimated on so called alleged bogus purchases fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed during the course of hearing nor issued a show cause notice of his intention to apply N.K. Proteins Ltd to the case of appellant. The order was passed without providing opportunity of Hearing as it amounts to Denial of Principle of Natural Justice. 5) However, the Facts and circumstances of the case of N.K. Proteins Ltd vs DCIT (ITA No. 240-242/2003) (Gujarat High Court) (As mentioned in the CIT(A) Order) are not applicable to the case of appellant as the fact and circumstances are different. Hence even the ratio of the above case is not applicable to the appellant. 6) The Ld. CIT(A) erred of fact as well as of law that the Ld. AO had accepted the entire sales of the appellant and there cannot be sales without purchases. 7) The Ld. CIT(A) erred of fact as well as of law by restricting the estimated addition on so called bogus purchases to the extent of 25% without appreciating the fact that the gross profit of the appellant is around 4% only. Comparison of Gross Profit Ratio: - Particulars / Assessment Year 10-11 11-12 12-13 Sales 2,04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 25% of the bogus purchase i.e. 30,12,081/- out of total purchases of Rs.1,20,48,325/- but the revenue was not satisfied, therefore, the revenue has filed the present appeal before us and the assessee filed the cross-objection before us to the delete the addition. 6. The matter of controversy in the appeal as well as cross-objection is that what should be the addition on account of bogus purchase. The contention of the Ld. Representative of the Department is that there should be 100% addition of the bogus purchase. However, on the other hand, the Ld. Representative of the assessee has refuted the said contention and argued that the case of the assessee s father has been disposed off by the Hon ble ITAT bearing ITA. No.2016/Mum/2020 dated 25.02.2022 in which the Hon ble ITAT has restricted the addition to the extent of 5% of the bogus purchase, therefore, the claim of the assessee is liable to be allowed accordingly. The copy of order dated 25.02.2022 in the case of assessee s father is on the file in which under the similar circumstances, the addition was restricted to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be treated as non genuine to make addition of the entire bogus purchases amount. Hon ble High Court of Bombay in the case of JK Surface Coatings Pvt. Ltd. (supra) upheld the view taken by the Tribunal that in such circumstances gross profit should be in the range of 5% to 12.5% as reasonable estimation of profit element embedded in the bogus purchases by returning following findings: 4. Having considered the memo of Appeal and the Orders passed by AO / CIT(A) and the Order of ITAT, the only issue that comes up for consideration is with respect to the extent of ad-hoc disallowance to be sustained with respect to bogus purchases. The AO has observed 100% of the purchase value to be added to the income of Assessee, the CIT(A) has said it should be 15% and ITAT has said it should be 10%. First of all, this would be an issue which requires evidence to be led to determine what would be the actual profit margin in the business that Assessee was carrying on and the matter of calculations by the concerned authority. According to the Tribunal, in all such similar cases, it is ranged between 5% to 12.5% as reasonable estimation of profit element embedded in the bogus purchase when ..... X X X X Extracts X X X X X X X X Extracts X X X X
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