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TMI Blog2024 (1) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of Rs. 9550585/-. 2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming invoking of provisions of section 145(3) of the Act and rejecting books of account by the Assessing - Officer. 3. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) failed to provide copy of remand report and opportunity to file rejoinder of the same. 4. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming initiating proceeding under section 147 of the Act by issuing notice under section 148 of the Act in as much as reasons recorded by Assessing Officer depict mere suspicion and no tangible material is available in possession of the Assessing Officer. 5. The Commissioner of Income Tax (Appeals) erred in upholding order made under section 143(3) rws 147 of the Act which is illegal, bad-in-law, ultra virus and without allowing reasonable opportunity of the hearing, and without appreciating facts, submission and evidences in their proper perspective and without providing copies of materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is held that the assessee has indulged in non-genuine transaction. The intention of indulging in such activity is to supress the true profits and to reduce the tax liability. Therefore, an addition on account of a higher margin of profit would be fair and equitable. Hence, following the decision of the Gujarat High Court in the case of CIT Vs. Simit P. Sheth (2013) reported in 356 ITR 451 (Guj.) and also giving due consideration to the fact that the assesse has recorded such purchases in the books of account, I am of the considered opinion that, it would be just and fair, if profit element embedded in such purchases is taken as the profit carned from purchases shown to have been made from the above mentioned nongenuine parties. Therefore, an amount of Rs. 95,50,585/ - being 12.5% of the total non-genuine purchases of Rs. 7,64,04,685/- is added to the total income of the assesse as profit earned from such purchases. Proceedings under 274 r.w.s 271(1)(c) are separately initiated for furnishing inaccurate particulars of income chargeable to tax." 3. On further appeal, the Ld. CIT(A) upheld the disallowance following various decisions cited in the impugned appellate order includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given address. When asked to produce the party during the assessment proceedings by the AO, appellant expressed his inability to do so. In the present case, A.O. estimated the profit percentage on bogus purchases as 12.5%. The simple issue to be decided is whether the percentage adopted by the AO is correct in the line of business i.e. trading in ferrous and non-ferrous metals. As noticed above, in the similar circumstances of bogus purchases, Hon'ble Gujarat High Court estimated the additional advantage towards tax benefit (10% and the profit margin (2.5%) totaling to 12.5%. In the present case on perusal of copies of the invoices furnished by the appellant in the bill the percentage of VAT levied is (c) 4%. Applying the same logic, the profit margin should be adopted @ 2.5%. In view of the above, in my considered opinion, applying the logic of the above said case the profit percentage embedded on such purchases is restricted to 6.5% (i.e. 4% of VAT levied + 2.5% towards profit margin), that will meet the ends of the justice. Taking all the facts into consideration and applying the logic of Simit P. Sheth case, the A.O. is defected to restrict the estimation (c) 6.5% on the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with brief of the case laws of Hon'ble ITAT Benches giving relief in similar bogus purchase cases. It is stated that after addition the rate of G.P. would work out to 10% which is not possible in this line of business. The assessee has declared G.P. at the rate of 4.91% for year under consideration. 10. However the AO did not agree with the assessee's contention and he added 12.5% of alleged bogus purchase in the assessee's income. By impugned order by CIT(A) directed to restrict the addition to the extent of 6.5% of alleged bogus purchases. The Ld. AR argued that the assessee has filed all the documents and evidence to prove the genuineness of the purchases so made which comprises of.:- "(i) Copies of Ledger Accounts along with copies of purchase invoices of the specified parties. (ii) Copies of bank statement evidencing made through proper banking channels by issuing account payee cheques in respect of all the parties highlighting the relevant entries. (iii) Chart showing the details of purchases of the alleged parties. (iv) Details in respect of purchases from the above named parties and the corresponding sales. (v) Item wise and bill wise extract of stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable in view of the decision of Hon'ble Gujarat High court in the case of Smith P. Seth (supra). We have considered the rival contentions ITA No. 4192/Mum/2018 and are of the view that Hon'ble Bombay High Court in the case of Mohammad Haji Adam & Co. and Ors. (supra) has considered this issue and respectfully following the same, we direct the AO to restrict the profit rate only to the extent of differential percentage as declared on the bogus purchases and as declared on the regular purchases, Hence, we direct the AO accordingly." 13. It is clear from the above decisions that in case of bogus purchases where sales are accepted, quantitative details of purchases, sales and stock was filed with copy of delivery challans, the addition is required to be made only to the extent of lower GP declared by the assessee on bogus purchases as compared to G.P. on normal purchases. As per the G.P. statement chart placed on record we found that the GROSS PROFIT declared by assessee in respect of alleged bogus purchases was more than the GROSS PROFIT declared in the normal purchases. Under these facts circumstances, applying the judicial pronouncement laid down by Hon'ble Jurisdictional Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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