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TMI Blog2022 (12) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in ignoring the material placed before the Assessing Officer and himself in this regard. 4) Having regard to the facts and circumstances of the case and the provisions of law, the appellant submits that the disallowance u/s.69C is unjustified and requires to be deleted. 5) The Commissioner of Income Tax (Appeals) erred in confirming the addition of unexplained deposit of Rs. 10,30,500/- on the basis of AIR information. 6) The Commissioner of Income Tax (Appeals) erred in ignoring the clarification from the Bank about the error in uploading their data. 7) Having regard to the facts and circumstances of the case and the provisions of law, the appellant submits that the addition of unexplained deposit is unjustified and requires to be deleted. The Appellant craves leave to add to, amend, alter, modify or withdraw any or all the Grounds of Appeal before or at the time of hearing of the Appeal, as they may be advised from time to 3. We are primarily concerned with two grounds of appeal in the instant case. Ground 1 to 4: Disallowance of Rs. 77,12,502/- in respect of purchases from M/s Virat Enterprises: 4. The brief facts in relation to this grounds of appeal is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t payments have been made through the banking channel doesn't make a transaction genuine. c) The genuineness of the transaction should have been proved beyond doubt, and there must have been a live link between the business of the taxpayer and the expenditure incurred. The Appellant should have also been in a position to prove the expenditure with proper records beyond doubt. The Appellant has not furnished any manufacturing process or the product mix that could establish that the said item has been used in its business manufacturing. d) The high value of the transactions and nonavailability of creditor as also PAN raise eyebrows, and it was for the taxpayer to prove the existence of the payee.in Remand Report, the A.O. has also stated that AH the documents/bills/vouchers have carefully been perused but in absence of PAN No. contra confirmation of the Virat Enterprises the identity and the genuineness of the said party/ transactions remains unproved. As there is clear provision that it's the onus of assessee to prove the identity, creditworthiness and genuineness of the transaction but the assessee failed to discharge its onus and hence the identity, creditworthiness an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as excise audit and no adverse opinion has been made by the auditors) and since the sales of the assessee has been subject to tax and the assessee has declared gross profit @ 7.63% on a turnover of Rs. 76 crores approximately, the disallowance on account of bogus purchases may be restricted to a reasonable amount. The assessee has placed reliance on the decision of Jagadish H Patel 84 taxmann.com 259 (Gujarat High Court) in support of its contention. In response, the Ld. DR placed reliance upon the observations made by the assessing officer and Ld. CIT(Appeals) in their orders. 7. We have heard the rival contentions and perused the material on record. We observe that in the instant case, the assessee is in the business of manufacture of perfumes and other beauty products. The assessee made purchases of certain chemicals from M/s Virat Enterprises, which formed the ingredient in the product sold by the assessee. The argument of the assessee is that once the tax has been imposed on the sales made by the assessee, and the sales itself has not been doubted, then the entire purchase cannot be disallowed for the simple reason that it would not have been possible for the assessee to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made from said parties were bogus. He, accordingly, added entire amount of purchases to gross profit of assessee. The Commissioner (Appeals) having found that assessee had indeed made purchases, though not from named parties but other parties from grey market, sustained addition to extent of 30 per cent of purchase cost as probable profit of assessee. The Tribunal however, sustained addition to extent of 12.5 per cent. The High Court held that since purchases were not bogus but were made from parties other than those mentioned in books of account, only profit element embedded in such purchases could be added to assessee's income. Accordingly, the High Court sustained the addition to the extent of 12.5% of the bogus purchases. The case of Bholanath Poly Fab (P.) Ltd. [2013] 40 taxmann.com 494 (Gujarat), the Gujarat High Court held that where assessee did purchase cloth and sell finished goods, but purchasers were not traceable, profit element embedded in purchases would be subjected to tax and not entire amount. 7.2 In our view, there is always an element of guesswork on the quantum of disallowance that should be made in case in the case of purchases made from parties whom th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is in appeal before us against the aforesaid additions confirmed by Ld. CIT(Appeals). Before us, the counsel for the assessee drew our attention to pages 163-197 of the Paper-Book and submitted that the balances standing at the end of the year in the balance sheet of the assessee were correct. The counsel for the assessee submitted that the bankers of the assessee, Bank of India, have confirmed the year end balances which tallies with the balances as per the books of the assessee. Accordingly, the counsel for the assessee submitted that there is no unexplained deposits made by the assessee and since the confirmation from the bankers of the assessee, Bank of India, has been filed, there is no further requirement of placing another reconciliation in support of its claim. In this connection, the assessee drew our attention to page 176 of the paper book and submitted that Bank of India itself has confirmed that the balances as per the assessee's books of accounts are correct and tallies with the records of the banker of the assessee. In response, the Ld. DR relied upon the observations made by Ld. CIT(Appeals) in the appellate order. 11. We have heard the rival contentions and perus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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