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TMI Blog2022 (11) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case, the Ld. CIT(A) was justified in ignoring the affirmation on oath in statements recorded u/s. 131 of the I.T. Act by the proprietors of the concerns/brokers during investigation by the Income Tax Department, thereby admitting and confessing on oath that these concerns are bogus entities indulging in accommodation entries and providing bogus bills?" 3. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in ignoring the ratio of the ITAT Mumbai in the case of Soman Sun City vs. JCIT, wherein it was held that purchases could not be treated as genuine even if the purchase bill produced and payment is made through banking channel and other evidence is lacking?" 4. "Whether on points of law and on points of facts & circumstances of the case, the Ld. CIT(A) was justified in ignoring the ratio of the Hon'ble Bombay High Court in case of Shoreline Hotel(P) Ltd. vs. CIT, Central-1 [2018] 98 Taxman.com 234(Bombay) wherein it has been held it was held that if assessee could not supplier, the addition under section 69C on the basis of GP ratio is unjustified"? 5. Whether on points of law and on facts & circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Whether on points of law and on facts and circumstances of the case, the Ld. CIT(A) was justified in giving a decision, thereby without considering and distinguishing the ratio of the judgment of the cases such as Rameshwar Prasad Bagla 68 ITR 653(Allahabad) 85 Homi vs CIT 41 ITR 135, 142 by (Supreme Court) wherein it is stated that the totality of circumstances must be considered in a case of circumstantial evidence and the totality of the circumstances has to be taken into consideration and the combined effect of all those circumstances is determinative of the question as to whether or not a particular act is proved?" 12. "Whether on points of law and on facts & circumstances of the case, the ld. (CIT(A) was justified in restricting the addition upto 3.92% which is contrary to the evidence on record as the alleged concerns have not sold any items to the assessee, indulgence of such concerns providing of bogus bills only in lieu of commission with the help of brokers, as relied upon by the AO in his assessment order a finding which is factually incorrect thereby rendering a decision, which is perverse?" 13. "Whether on points of law and on facts & circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it to substantiate its claim of having made purchases from seven tainted parties, as under: S. No. Name of the party Total Purchases 1. M/s. Siddhi Vinayak Agro Industries Rs.43,15,000/- 2. M/s. Sakshi Gopal Corporation Rs.82,14,750/- 3. M/s. Shrikhand Agrotech Rs.2,38,14,500/- 4. M/s. Eden Rice Mill Rs.55,31,500/- 5. M/s. Shri Bajrang Food Products Rs.2,38,52,625/- 6. M/s. Shri Tulsi Agro Rs.7,68,000/- 7. M/s. Shri Samleswari Foods Rs.29,69,400/- Total 6,84,65,775/- In reply, it was the claim of the assessee that it had made genuine purchases from the aforementioned parties. The A.O in order to verify the genuineness and veracity of the purchases which the assessee had claimed to have made from the aforesaid parties directed him to place on record supporting documentary evidences, viz. gate entry pass, proof of transportation, purchase register etc. In compliance the assessee though produced the purchase bills but failed to place on record any documentary evidence which would substantiate the transportation of goods in question. The assessee on being queried as to whether it had purchased goods directly or through intermediaries stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Rs. 25,69,200/- made by the A.O. 6. The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 8. As observed by us hereinabove, the revenue by preferring the present appeals has sought our indulgence for adjudicating as to whether or not the CIT(Appeals) is right in law and the facts of the case in vacating the addition of Rs. 1,43,22,138/- (out of the total addition of Rs. 1,71,16,444/- that was made by the A.O) in respect of bogus purchases. On the other hand the assessee has assailed the order of the CIT(Appeals), for the reason that he had without any basis estimated the addition as regards the bogus purchases by adopting an ad-hoc GP rate of 8% and sustaining an addition @3.92% of the value of the impugned bogus purchases [i.e. 8% (ad-hoc basis) (-) 4.08% (overall disclosed GP rate)]. 9. As the issues raised in the present cross-app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company, ITA No. 1004 of 2016, dated 11.02.2019, while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate as that of other genuine purchases. The Hon'ble High Court while concluding as hereinabove had observed 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 on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. AR towards the bifurcated details of bogus purchases in question aggregating to Rs. 6,84,65,775/- a/w. the average rate of purchase of the various items, viz. (i) purchase of 27350 quintals of rice: Rs. 4,67,45,125/-; (ii) purchase of 10,500 quintals of broken rice (Kanki) : Rs. 1,48,64,000/- and (iii) purchase of 4470 quintals of paddy Rs. 51,07,400/-, which reads as under:- (Purchase rate of Kanki) Qty. ( Qntls) Amount (Rs.) Average rate Kanki purchase ( from alleged bogus parties) 10,500.00 1,48,64,000 1,415.62/qntls Kanki purchase ( from genuine parties) 12,213.10 1,75,55,969 1,437.47/qntls Total Kanki Purchase 22,713.10 3,24,19,969 1,427.36/qntls ( Purchase rate of Rice) Qty. ( Qntls) Amount (Rs.) Average rate Rice purchase ( from alleged bogus parties) 27,350.00 4,67,45,125 1,709.14/qntls Rice purchase ( from genuine parties) 21,421.50 3,50,61,771 1,636.76/qntls Total rice Purchase 48,771.50 8,18,06,896 1,677.35/qntls ( Purchase rate of paddy) Qty. ( Qntls) Amount (Rs.) Average rate Paddy purchase ( from alleged bogus parties) 4,470.00 51,07,400 1,142.60/qntls Paddy purchase ( from genuine part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequence thereto [by taking the sale rate (average) as static] the GP rate of bogus purchases of broken rice (kanki) as in comparison to the GP rate of genuine purchases of broken rice(Kanki) is already on the higher side, therefore, no addition on the said count could have validly been made in its hand. We, thus, in terms of our aforesaid observations vacate the addition of 3.92% of the value of bogus/unproved purchases of broken rice (10500 quintals) as sustained by the CIT(Appeals). Accordingly, the A.O is directed to vacate the addition of Rs. 5,82,668/- [Rs. 1,48,64,000/- X 3.92%] sustained by the CIT(Appeals). (B) Rice (27350 quintals):- 16. On a perusal of the records, it transpires that the assessee had made bogus purchases of 27350 quintals of rice (value of Rs. 4,67,45,125/-). As observed by us hereinabove the A.O had quantified the profit on the purchase of bogus rice by disallowing 25% of the value of the impugned purchases, which, however, was scaled down by the CIT(Appeals) to 3.92% (supra) i.e. to the extent of difference between 8% (ad-hoc rate adopted by the CIT(Appeals) and the overall disclosed GP rate of 4.08% of the assessee for the year under consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason that the Hon'ble High Court in the case of M/s. Mohhomad Haji Adam & Company (supra), had held, that for the purpose of quantifying the profit which the assessee would have made by carrying out bogus/unproved purchases the addition is to be made to the extent the GP rate of the bogus/unproved purchases is brought to the same rate as that of other genuine purchases. As in the case of the assessee before us the rate of bogus purchase of paddy i.e. Rs. 1142.60 per quintal (average rate) is lower than the rate of genuine purchase of paddy i.e. Rs. 1232.32 per quintal (average rate), and thus, as a consequence thereto [by taking the sale rate (average) as static] the GP rate of bogus purchases of paddy as in comparison to the GP rate of genuine purchases of paddy is already on the higher side, therefore, no further addition on the said count could have validly been made in his hand. We, thus, in terms of our aforesaid observations vacate the addition of 3.92% of the value of bogus/unproved purchases of paddy (4470 quintals) as sustained by the CIT(Appeals). Accordingly, the A.O is directed to vacate the addition of Rs. 2,00,210/- [Rs. 51,07,400/- X 3.92%] out of that sustaine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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