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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 ..... the A.O on account of gross profit, rejecting the books of accounts and estimating the GP in place of GP disclosed in books. The addition made by the A.O is arbitrary and is not justified. 2. In the facts and circumstances of the case, Ld. CIT(A) erred in sustaining the addition of Rs. 95,81,300/- out of the addition of Rs. 7,30,31,125/- made by the A.O on account of profit on alleged bogus purchases holding such purchased to be not genuine. The purchases made by the appellant are genuine and addition made by A.O and partly sustained by CIT(A) is not justified. 3. The appellant reserves the right to add, amend or alter any of the ground/s of appeal." On the other hand the revenue is aggrieved with the impugned order on the following grounds of appeal: "1. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition Rs. 6,81,64,321/- out of total addition of Rs. 7,30,31,125/- ignoring the fact that these purchases are nothing but bogus purchases managed through bogus bills?" 2. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) having concurrent powers of the AO u/s. 250(4) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 8. "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) & 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 evidenced 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. 9. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in accepting the fresh evidence produced by the assessee without allowing the AO if any, proper opportunity to examine the same, thereby violating the provision on law under Rule 46A of I T Rules?" 10. "Whether on points of law and on facts & circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs. 6,81,64,321/- ignoring the fact available on record viz the alleged concerns have not sold any items to the assessee, indulgence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain rice millers had in their statements that were recorded on oath admitted of being involved in the nefarious activities of providing bogus bills without any corresponding sales of goods. After deliberating at length on the modus-operandi that was adopted by the brokers/entry operators and certain rice millers who had admitted of their involvement in providing/facilitating bogus bills in lieu of commission, and referring to their statements which were recorded u/s. 131 of the Act a/w. those recorded in the course of their cross examination by rice millers who were alleged by them as beneficiary, it was observed by the A.O that brokers namely, Shri Sanjay Sharma, Shri Aditya Sharma, Shri Kamelsh Kesharwani, Shri Ghanshuam Rijwani and Shri Narad Sahu had stated on oath that they had provided bogus entries or bogus bills to various rice millers. It was also observed by the A.O that the assessee had failed to substantiate the genuineness of the purchases claimed to have been made from the aforementioned parties on the basis of supporting documentary evidences, viz. delivery challans. 5. Considering the fact that the 6 parties from whom the assessee company had claimed to have m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(Appeals) scaled down the disallowance made by the A.O to 3.29% of the value of the impugned purchases and sustained an addition of Rs. 95,81,300/- (out of total addition of Rs. 7,30,31,125/- made by the A.O.). 8. Both the assessee and the revenue being aggrieved with the order of the CIT(Appeals) have carried the matter in appeal before us. 9. As the department despite having been put to notice about the hearing of the appeal, had neither put up any representation nor filed any application seeking adjournment before us, therefore, we are constrained to dispose off the appeal after hearing the Ld. Authorized Representative (for short 'AR') for the assessee and perusing the orders of the lower authorities. 10. The Ld. Authorized Representative (for short 'AR') for the assessee at the very outset had assailed the treating of the aforesaid purchases claimed by the assessee to have been made from aforementioned 6 parties as bogus by the lower authorities. It was the claim of the Ld. AR that as the assessee had supported its claim of having made genuine purchases from the aforementioned parties on the basis of documentary evidences, therefore, there was no just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid facts, we are principally in agreement with the lower authorities that the assessee would have procured the goods from the open/grey market at a discounted value as against that booked by him on the basis of bogus bills in its books of accounts. 14. As we have upheld the view taken by the lower authorities that the assessee company had not made any genuine purchases from the aforementioned 6 parties in question, therefore, we shall now deal with the quantification of the profit which it would have made by procuring the goods under consideration at a discounted value from the open/grey market i.e. as against the inflated value at which the same had been booked on the basis of bogus bills in its books of account. 15. On a careful perusal of the order of the A.O, we find that he had not given any cogent reason for working out the disallowance @25% of the value of the impugned bogus/unsubstantiated purchases. In fact, the only reason which can be gathered from a perusal of the assessment order is the reliance placed by the A.O on the order of the ITAT, Ahmedabad in the case of Vijay Proteins Ltd. (1996) 58 ITD 428 (Ahd.). Also, we are not impressed with the manner in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sale declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trade. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- "So far as the question regarding addition of Rs. 3,70,78,125/- as gross profit on sales of Rs. 37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6% gross profit is taken into account, the corresponding cost price is r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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