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TMI Blog2023 (8) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... the case properly. The enhancement made by Ld. CIT(A) is illegal in as much as the enhancement is without due and proper opportunity to the appellant. 3. The appellant reserves the right to add, amend or modify any of the ground/s of appeal." 2. Succinctly stated, the assessee who is engaged in the business of manufacturing and trading of rice and its by-products had e-filed his return of income for A.Y. 2014-15 on 30.09.2014, declaring an income of Rs. 39,74,580/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the Act. 3. During the course of the assessment proceedings, it was observed by the A.O that the assessee had claimed to have made purchases of broken rice from the following tainted party: Sr. No. Name of the Bogus firm Amount of purchase Peak purchase amount Date of peak purchase 3. M/s. Krishna Processors, Raipur Rs. 31,00,000/- Rs. 25,00,000/- 19/06/2013 Total Bogus purchase Rs. 31,00,000/- Rs. 25,00,000/- The A.O considering the fact that the aforesaid tainted party from whom the assessee had claimed to have made purchases of Rs. 31,00,000/- was in the course of investigation found to be a b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sharwani, Shri Ghansham Rijwani and Shri Narad Sahu had stated on oath that they had provided bogus entries or bogus bills to various rice millers. 5. The A.O after treating the impugned purchases of Rs. 31,00,000/- under consideration as bogus rejected the books of accounts of the assessee u/s.145(3) of the Act. Thereafter, the A.O by relying on the order of the ITAT, Ahmedabad in the case of Vijay Proteins Ltd. Vs. ACIT, (1996) 58 ITD 428 (Ahd.) was of the view that the assessee company had purchased the goods in question not from the aforementioned tainted party from whom only bills were procured for routing the same through his books of account but had procured such goods at a discounted value from the open/grey market. Accordingly, the A.O on the basis of his aforesaid conviction disallowed 25% of the value of bogus purchases and made a consequential addition of Rs. 7,75,000/- to the assessee's returned income. Apart from that, the AO holding a conviction that the assessee would have rolled his unaccounted income for carrying the business outside his books of accounts on an estimate basis made an addition of Rs. 25 lac towards such unexplained investment. Although the AO had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the sake of clarity the relevant observations of the CIT(Appeals) are culled out as under: "6.5. In relation to addition on account of bogus purchases, argument of the appellant that the purchase bills from the party and payment is made by way of account Payee cheque to the party is not tenable specially in the context of findings of the survey team where it has been found that above-mentioned brokers were indulged in arranging bogus purchase bills without actual delivery of goods. Bills issued and payment through cheque itself was questioned and found to be bogus during survey proceedings. 6.6. Further during assessment proceedings, on demand by assessing officer, appellant could not produce delivery challans and weighbridge bills and receipts which could have proved actual movement of the goods, Appellant also chose not to cross examine brokers who have given statement under oath that they were indulging in arranging bogus purchase bills without actual delivery of goods even after giving such opportunity by assessing officer. To prove the claim of such purchases, it is the duty of assessee to produce working records and copies of quantity wise stock taken of purchases, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .30% for the turnover of Rs. 32,56,27,112/- for A.Y.2013-14 and at 0.82% for the turnover of Rs. 62,21,07,711/- for the AY under consideration. IN view of this, estimating profit at rate of 1.45% for turnover of Rs. 62,21,07,711/- will be fair to assessee as well as revenue. Hence, A.O is directed to delete the additions made under individual accounts head and instead to adopt net profit at the rate of 1.45% of the turnover of A.Y. under this A.Y. under consideration. Thus, grounds of assessee on these issues are partly allowed." 7. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 8. The Ld. Authorized Representative (for short 'AR') for the assessee at the very outset assailed the treating of the aforesaid purchases made by the assessee from the aforementioned supplier party, viz. M/s Krishna Processor, Raipur as bogus by the lower authorities. It was the claim of the Ld. AR that as the assessee had supported his claim of having made genuine purchases from the aforementioned party on the basis of documentary evidences, therefore, there was no justification for the AO in drawing any adverse inferences as regards the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases were made by him from the aforementioned party. On a careful perusal of the assessment order, we are of the considered view that as observed by the A.O and, rightly so, the assessee had failed to substantiate the veracity of his claim of having made genuine purchases from the aforementioned party in question. 12. As the assessee had failed to discharge the onus that was cast upon him as regards proving the authenticity of his claim of having made genuine purchases from the aforementioned party, viz. M/s Krishna Processors, Raipur, therefore, it can safely be concluded that he had procured the goods in question not from the said party but at a discounted value from the open/grey market. Considering the aforesaid 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 his books of accounts. 13. As we have upheld the view taken by the lower authorities that the assessee had not made any genuine purchases from the aforementioned party, therefore, we shall now deal with the second facet of the issue before us, i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antification 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 No1004 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 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 brics. 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 findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases. 17. 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 bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. Needless to say, the A.O shall in the course of set-aside proceedings afford a reasonable opportunity of being heard to the assessee. 18. At the same time, we may herein observe that the A.O while framing the assessment had also pointed out certain discrepancies/infirmities as regards the assessee's claim for deduction of certain expenses pertaining to his duly accounted business transactions, viz. (i) unaccounted railway rack booking charges; (ii) unverifiable labour expenses ; (iii) unverifiable hamali expenses; and (iv) unverifiable office expenses, car and vehicle expenses. Accordingly, the A.O had made addition of the unaccounted railway rack booking charges and also on an ad-hoc basis disallowed the assessee's claim for deduction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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