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TMI Blog2023 (4) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... chases. Thus profit made by the assessee in the case before us by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases. Restore the matter to the file of the A.O, with a direction to him to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchases by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. - ITA No. 156/RPR/2019 ITA No. 170/RPR/2019 - - - Dated:- 28-3-2023 - SHRI RAVISH SOOD , JUDICIAL MEMBER And SHRI G D PADMAHSHALI , ACCOUNTANT MEMBER For the Assessee : Shri R. B Doshi , CA For the Revenue : None ORDER Per Ravish Sood , JM The captioned cross-appeals filed by the assessee and the revenue are directed against the order passed by the CIT(Appeals)-I, Raipur dated 18.02.2019, which in turn arises from the order passed by the A.O. u/s. 143(3) of the Income-tax Act, 1961 (for short 'Act') dated 31.12.2016 for assessment year 2014-15. As common issues are involved in the captioned appeals, therefore, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the landmark decision of the Supreme Court in the case of McDowell and Co. Ltd. Vs Commercial Tax Officer 154 ITR 148 (SC), as the same ratio of this landmark decision is applicable to the facts and circumstances of the instant case of the assessee? 5. Whether on points of law and on facts circumstances of the case, the ITAT was justified in giving a decision without discussing the issue on merits and without giving any cognizance to the decision of the Hon'ble Supreme Court in the case of M/s. N.K. Proteins in SLP 759 of 2017 dated 16.02.2017. 6. 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 is 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? 7. Whether on points of law and on facts circumstances of the case, the ld. CIT(A) was justified in ignoring the ratio of Hon'ble Delhi High Court in the case of CIT-II vs. Jansampark Advertising Marketing (P.) Ltd. reported in [2015] 56 taxmann.com 286(Delhi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment u/s. 143(2) of the Act. 4. During the course of the assessment proceedings, it was observed by the A.O that the assessee had claimed to have purchased paddy/broken rice aggregating to an amount of Rs. 29,12,24,500/- from the following six parties, as under: S. No. Name of the party Total purchase 1. Agrawal Agro 413,20,000/- 2. Shri Annpurna Foods 40,00,000/- 3. Shri Bajrang Food Products 230,60,000/- 4. Shri Riddhi Siddhi Foods 28,00,000/- 5. Shri Sarswati Paddy 19,76,47,000/- 6. Shri Shyamji Rice Agrotech 223,67,500/- Total 29,12,24,500/- A survey operation u/s. 133A of the Act was conducted at the business premises of Shri Sanjay Sharma, Hanuman market, Raipur and Shri Kaml ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O bilities and also took support of the fact that it had made payment of 80%-90% of the purchase bills. However, the A.O was of the view that as the assessee company as in a case where bogus purchase bills were procured, had failed to support its claim of having made genuine purchases from the aforementioned 6 parties by producing delivery challans and also the mode of inward transport, Mandi passage and Anugya etc., therefore, its claim of having made genuine purchases did not merit acceptance. As the assessee had failed to substantiate the authenticity of the purchases claimed to have been made from the aforementioned six parties, therefore, the A.O held the same as bogus purchases. The A.O in the totality of the facts involved in the case held the entire purchase of Rs. 29,12,24,500/- as bogus. 6. After treating the impugned purchases in question as bogus the A.O rejected the books of accounts of the assessee u/s. 145(3) of the Act. The A.O by relying on the order of the ITAT, Ahmadabad in the case of Vijay Proteins Vs. ACIT, (1996) 58 ITD 428 (Ahd.), and impliedly being of the view that the assessee had purchased the goods in question not from the aforementioned taint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hilt. On a specific query by the Bench as to whether the copies of delivery challans as regards the purchases claimed by the assessee company to have been made from the above-mentioned parties were made available either before the A.O or before the CIT(Appeals), the Ld. AR answered in the negative. 11. We have heard the Ld. AR, 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 him to drive home his contentions. 12. We have given a thoughtful consideration to the issue in hand, i.e., dubbing of the impugned purchases as bogus by the lower authorities, as well as quantification of the profit which the assessee would have made by procuring the same at a discounted value from the open/grey market. As the assessee company had failed to place on record copies of delivery challans pertaining to the impugned purchase transactions in question, therefore, it can safely be held that no infirmity does emerge from the orders of the lower authorities that no genuine purchases were made by the assessee company from the aforementioned parties. Apart from that, we may also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds in question not from the aforementioned six parties but at a discounted value from the parties operating in open/grey market. Our indulgence in the present appeals in the backdrop of our aforesaid observations wherein we have upheld the dubbing of the impugned purchases as bogus, thus, boils down to the quantification of the profit which the assessee would have made by procuring the goods in question at a discounted value from the open/grey market. 17. Admittedly the addition in the hands of the assessee is liable to be restricted only to the extent of the profit which the assessee would have made by procuring the goods at a discounted value from the open/grey market as against the inflated value at which the same were booked on the basis of the bogus bills in its books of account. In so far the issue of quantification of profit which the assessee would have made by procuring the goods in question from the open/grey market is concerned, we find that the Hon'ble High Court of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue. 9. In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order at costs. It was, thus, observed by the Hon'ble High Court that the addition in respect of the purchases which were found to be bogus in the case of the assessee before them, who was a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of other genuine purchases. On the basis of the aforesaid observations of the Hon'ble High Court, we are of the considered view that on the same lines the profit made by the assessee in the case before us by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases. 18. We, thus, in terms of our aforesaid observations restore the matter to the file of the A.O, with a direction to him to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchases by br ..... X X X X Extracts X X X X X X X X Extracts X X X X
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