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TMI Blog2023 (2) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... atsoever. The prevalent net profit as noted above was at 1% to 3%. The net profit declared by the assessee as per tax audit report is 1.24% for both the years. Although the net profit declared falls within the range recommended, in our considered opinion, the interest of justice would be served if the rate of net profit is taken at 2% of sales, Hence bringing to tax, difference between 1.24% net profit shown and the 2% net profit recommended by the above Task Force will, in our considered opinion, serve the ends of justice - Appeal of revenue partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... mers on which assessee has paid the tax. Further, it was submitted that all the payments made against these purchases were through account payee cheques which were duly reflected in the bank account of the assessee. Assessee further challenged the reopening of the assessment merely on the basis of the information gathered during the search and seizure and that too at a third party's premises. However, AO was not convinced and passed a very laconic order as under :- "After considering the submissions made by the assessee and facts of the case and further keeping the findings of the Investigation Wing, I am satisfied that the assessee has taken accommodation entry by providing unaccounted cash which has not been shown in the details filed by the assessee. Hence it is evident that the assessee has not disclosed fully and truly all material facts of his income for the assessment year i.e. 2007-08. On account of failure on part of the assessee, income for the A.Y. 2007-08 to the extent of Rs. 2,87,58,745/- has escaped assessment within the meaning of section 147 of the LT. Act, 1961. Penalty proceedings u/s 271(1)(c)has been initiated separately for concealing the true an correct fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said, on the basis of which this case has been reopened, is behind the assessee, thus for a fair justice, an opportunity should have been provided to the assessee to cross-examine that party. 2. Without prejudice to the above, It is once again confirmed that all purchases made during the relevant previous year, were genuine and duly recorded in the books of accounts and are reflected in the stock register, and all the payments against such purchases, had been made through account payee's cheques. 3. The accounts of the assessee have been audited by the chartered accountants under the provisions re section 44AB of the Act. All purchases/sales, quantitative details of purchase & sales were verified by them and reported in their Report. 4. It may also be appreciated that all these details had also been verified by the ld assessing officer, during the course of assessment made u/s 143(3) of the Act. No specific deficiency either in the purchases or in the sates or in the inventory has been pointed out by the AO. All that, notwithstanding, the fact that with the objective of enabling a correct and comprehensive examination of the trading results the assessee had submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be made on the basis of declaration made by a third party. (A. R. of the Assessee) AO can no treat purchase as Bogus merely because Supplier is declared Hawala dealer by Sales tax Department - Ramesh Kumar & Co vs. ACIT (ITAT Mumbai)." 9. Ld. CIT (A) further noted the assessee's submissions as under:- "14. The entire business of the assessee in diamonds has been seen to with the stock tally by the auditor, the VAT authorities and the Assessing Officer in the original proceedings. The Auditors and the VAT authorities have confirmed the genuineness of the transactions. All transactions are carried out personally by the partners. Items come in small packets which are carried In the body of the transacting persons. There is nothing on record brought by the Assessing Officer to impeach their credibility or an authenticity or genuineness. All transactions are transparent and above board. Parties to whom sales have been made for which payments received by account payee cheques assist. Unmistakably, their genuineness and validity. Such monies have come In exchange for valuable consideration of goods. The purchases are of Identifiable and definite items. They have a tally by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oices duly reflected in the books of account. The payments have been made by account payee cheque which is duly reflected in the bank statement of the assessee. There is no evidence to show that the assessee has received cash back from the suppliers. The additions have been made merely on the report of the Sales tax Department but at the same time it cannot be said that purchases are bogus. We, therefore, set aside the findings of the Ld. CIT (A) and direct the AO to delete the addition. 11. Ld. CIT (A) lastly observed that mere adjustment in purchase without disturbing sales is not justified, therefore, he concluded as under:- "Mere adjustment in purchase without disturbing sales is not justified. Therefore in cases where :- i. Goods purchased are duly recorded quantity and value wise in the books of accounts. ii. Corresponding sales are verifiable from the books iii. If not sold, the goods have been accounted for in the closing stock. iv. Payment has been recorded in the books. treating purchases as bogus shall not be correct. Therefore, the addition of Rs.2,87,58,745/- on a/c of alleged bogus purchases is deleted." 12. Against the above order, assessee and R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubted. Moreover, AO has made no enquiry whatsoever. The prevalent net profit as noted above was at 1% to 3%. The net profit declared by the assessee as per tax audit report is 1.24% for both the years. Although the net profit declared falls within the range recommended, in our considered opinion, the interest of justice would be served if the rate of net profit is taken at 2% of sales, Hence bringing to tax, difference between 1.24% net profit shown and the 2% net profit recommended by the above Task Force will, in our considered opinion, serve the ends of justice. We order accordingly. The above proposition is also in consonance with the exposition in the case of Bhalanath Poly Fab (P.) Ltd. (supra). The head note in this regard may be referred as under :- "Section 69 of the Income-tax Act, 1961 - Undisclosed investments [Bogus purchases] - Assessment year 2005-06 - Assessee was engaged in business of trading in finished fabrics - Assessing Officer found that concerned parties from whom material was purchased were not found at their addresses and held that purchases made by assessee were bogus - Accordingly, he made disallowance - Tribunal found that though purchases were made f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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