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TMI Blog2024 (1) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... time. No comparable stances of GP in similar industry is brought on record either by assessing officer or by assessee. Thus, keeping in view overall facts and circumstances, when their certain statements of staff member of assessee though it was retracted, we are of the view that 7.5% of impugned purchase is seems to be a higher side when the assessee itself as declared income of Rs. 10.87 crores during current assessment year, which is higher than earlier years. We find that in the earlier year, assessee has shown gross profit at 7.69% and 8.68% in the current year respectively, which is 0.98% to earlier years also. We are also conscious of the fact that when there is allegation of bogus purchase only profit element embedded in such purchase is to be brought to tax and substantial part of the transaction. Therefore, keeping in view that assessee has shown good gross profit of 8.68%. Therefore, further addition of 7.5% of Rs. 36.05 crores would be on higher side. Therefore, in order to avoid possibility of revenue leakage, the gross profit of assessee is increased at 9.00% in place of 8.68%. This ground of assessee s appeal is partly allowed. - Shri Pawan Singh, Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing any cogent evidence. 6. It is therefore prayed that the above addition may please be deleted as learned Members of the Tribunal may deem it proper. 7. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal. 2. The Revenue in its cross-appeal in ITA No.375/SRT/2023 has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in restricting the addition of Rs. 2,70,37,530/- (being 7.5% of Rs. 36,05,00,394/-) out of total addition of Rs. 9,01,25,099/- (25% of Rs. 6,05,00,394/-) made by the AO on account of G.P. on bogus purchase without appreciating the fact that GST tax rate on the purchase of raw materials made from the disputed transactions is usually at the rate of 18% and the assessee had availed the benefit of such GST tax., Further, the assessee must have benefited in various ways like low prices in grey market, less transportation and labour charges, etc. Thus it is justifiable and reasonable that assessee in all must have gained a benefit of about 25% of total bogus purchases detected for the year under considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... item No. 1 to 6 of Annexure-A. The Assessing Officer on analysing of such excel sheets was of the view that it contains the day-to-day account of cash transaction for entering bogus purchase of goods / materials without taking actual delivery of goods / materials. Such excel sheets contains the details of bills, invoice value, discount amount return by supplier s cash payment receipt, checks / RTGS. The Assessing Officer further recorded that during search proceedings statement of Ramesh Sharma, Smt. Jigna Desai and Sunil Patel were recorded by search party under section 132(4), wherein they accepted that there are certain bogus entries on the instruction of Shailesh Desai, Director of assessee. The Assessing Officer recorded relevant part of statement of such persons in assessment order. The Assessing Officer also extracted the details of excel sheets which allegedly contains the disputed / bogus purchases at pages-21 to 82 of the assessment order. The Assessing Officer also recorded the details of retraction / statement filed by Managing Director and other employees by explaining that there was mistake and omission in their part by answering such questions during the course of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 crores. The assessing officer while making addition relied on the decision of Hon ble Apex Court in the case of NK Proteins Ltd. vs. DCIT (2017) 292 CTR 354 (SC) and Hon ble jurisdictional High Court in the case of NK Industries Ltd. vs. DCIT (2016) ITA No.240-242, 260 261 of 2003 dated 20.06.2016. The assessment order was passed under section 143(3) r.w.s. 147 on 30.03.2023 5. Aggrieved by the addition made in the assessment order, the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee filed detailed submission in the form of comparatively chart with regard to show cause notice, Assessing Officer remarks in the assessment order and their explanation. Such contention is recorded by Ld.CIT(A) in para-6.3 at pages 5 to 14 of his order. The assessee in the sum and substance submitted that nothing incriminating was found during search action except excel sheets found from the computer of Sunil Patel and statement recorded thereafter was retracted by filing affidavit that he made such statement under pressure and explained that in the past he was not working in manufacturing company and he totally misunderstood the cash discount while making his statement, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no cash withdrawal found in the books of suppliers. The suppliers has paid tax on all supplies, therefore the case law of Vijay Proteins Ltd.(supra) and NK Proteins (supra) are not applicable on the present case of assessee. The Ld.CIT(A) noted that assessee has shown gross profit margin at 8.68% of sales during the impugned year, which is more than 7.69% in the previous year. The Ld.CIT(A) also considered the report of SVNIT about the consumption of raw material and stock of raw material, which were found to be correct. No discrepancies or infirmity were found in the said report of SVNIT. The Ld. CIT(A) further noted that assessee has furnished all details like PANs, confirmation of account, purchase bills, quantitative details of raw materials purchase, bank statement corresponding sales etc., The Ld. CIT(A) also recorded that assessee pleaded that entire addition was based on the statement recorded during the search action. Sales is not possible without purchase. The Ld. CIT(A) noted that once the Assessing Officer accepted sales, correspondence purchase at least in terms of quantity need to be accepted. Even such fact is to be considered in the light of circumstances and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the office and factory premises of assessee on 18.11.2021. During the search action various documents and digital data were seized by Investigation Wing on the ground that such documents contain incriminating evidence about the inflated / bogus purchase, in fact, at the time of search no major discrepancy was found in the purchase and stock register by the search party except in respect of a few items, in respect of entries were pending and later on which was made and in normal difference of about slightly 1.00% more than was found. Such discrepancy was explained and reconciled the quantitative details were exactly matched with the bills and record and supporting purchase were made from the parties. Since all the purchases are either consumed in manufacturing process or sold directly in a trading activities. All quantitative details were reconciled when provided in the tax audit report. The bankers of assessee also examined the stock audit from time to time. All quantitative details were maintained right from the inception of business and assessee maintains its all details of production, which was cross-verified and examined during the search action. No major discrepancy was fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of impugned assessment year and no further addition was warranted. Even the Ld. CIT(A) on confirming the addition would resultantly increase the gross profit will to the extent 9.44% the assessee has already declared gross profit of 8.68%, which is comparatively on higher side. 10. The Ld. AR for the assessee submits that he has furnished the comparative chart of gross profit of last four years, wherein the average gross profit 7.03% and current year GP is 1.65% more than earlier years. The Ld. AR for the assessee submits that there is no evidence on inflated purchase, hence, no addition is warranted. To support his submission, Ld. AR for the assessee relied upon Central Board of Direct Taxes instruction No.5/2011 [F.No.225/61/2011-IT(A-II)] dated 30.03.2011, wherein CBDT directed to obtain the report of technical expert in case of complex issues, decision of Hon ble Apex Court in the case of CIT vs. Virtual Soft Systems Ltd. [2018] 92 taxmann.com 370 (SC)/[2018] 255 Taxman 352 (SC)/[2018] 404 ITR 409 (SC)/[2018] 302 CTR 65 (SC) [24-04[2018]; CIT vs. Emptee Poly-Yarn (P.) Ltd. [2010] 188 Taxman 188 (SC)/[2010] 320 ITR 665 (SC)/[2010] 229 CTR 1 (SC)[20-01-2010] and in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order. We find that Assessing Office as well as search party made investigation from seller of goods. However, no such investigation report is made on part of assessment order. We further find that during the assessment proceedings, Assessing Officer obtained the report from SVNIT. Complete report of SVNIT is available at pages 74 to 92 of the paper book. We find that SVNIT in a detailed analysis about the material consumed and ultimate production of finished goods prepared its report and reported that based on the documents / data provided by Assessing Officer and on inspection of industrial process in the factory of assessee at Vapi on 29.12.2022. It was certified that material quality consumed vis- -vis output of finished products by the assessee-company in respect of financial years 2020-21, 2017-18 and 2021-22 are theoretically correct subject to process normal embedded by the chemical industry. We find that Assessing Officer despite relying upon the report of SVNIT still proceeded to make addition of bogus purchase. 14. We are conscious of the fact that this was the case of search under section 132, yet the Assessing Officer instead of issuance of notice under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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