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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 ..... ion of the sale of the bogus purchases and wherever the gross profit on transaction of sale corresponding to bogus purchases is found to be less than the gross profit on the genuine purchases, then he may make addition for the corresponding amount of deficiency of gross profit. Appeal filed by the assessee is allowed for statistical purposes. - Shri Om Prakash Kant (Accountant Member) And Shri Sandeep Singh Karhail (Judicial Member) For the Assessee : Mr. Vimal Punmiya For the Revenue : Mr. H.M. Bhatt, Sr. DR ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 28.07.2023 passed by the Ld. Commissioner of Income-tax (Appeals) National Faceless Appeal Centre, Delhi [in short the Ld. CIT(A) ] for assessment year 2009-10, raising following grounds: 1. Ground On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming addition of Rs. 9550585/- made by the Assessing Officer to the total income of the appellant which is calculated @ 12.5% on alleged non-genuine purchases of Rs. 76404685/-. Provisions of the Act ought to have been properly constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that 19 parties from whom the assessee had received total accommodation entries of Rs. 7,64,04,685/-. During the course of the assessment proceedings, the Assessing Officer asked the assessee to furnish details and complete address of those parties including purchase bills details/invoice bills details of transaction of the goods i.e. lorry receipts, documentary evidence reflecting the relevant entries having received goods in premises of the assessee and having consumed such goods etc. However, no such information except copy of the ledger account, copy of the invoices and bank statement of the assessee was provided to the Assessing Officer. Further, the Assessing Officer issued notice u/s 133(6) of the Act on the address of the parties provided by the assessee however same were returned back with the remark of the postal authorities that parties left or address not known. In the circumstances, the Assessing Officer asked the assessee to produce said purchase parties for examination however, the assessee failed in doing so. Thereafter, the Assessing Officer following decision of the Hon ble Gujarat High Court in the case of CIT v. Simit P. Seth (supra) treated 12.5% of tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee in assessment year 2008-09, 2010-11 and 2011-12. The Tribunal (supra) following decision of the Hon ble Bombay High Court in the case of Mohommad Haji Adam Company (supra), deleted the addition of bogus purchases on the ground that gross profit declared by the assessee in respect of alleged bogus purchases was more than the gross profit declared in the non bogus parties: 8. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The brief facts of the case are that assessee is engaged in the business of trading in ferrous and non-ferrous metals. The AO got an information from the Sales Tax Department regarding assessee taken purchase bills which was alleged to be bogus. Accordingly, the AO reopened the assessment and after making inquiry added 12.5% of the alleged bogus purchases in the assessee s income in all the years under consideration. By impugned order by the CIT(A) after considering various judicial pronouncements directed the AO to restrict the addition to the extent of 6.5% of alleged bogus purchases. The precise observation of CIT(A) read as under.:- 7.9 The appellant made purchases from ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted ward inspector and forced the attendance of these parties. It is submitted that the A.O. failed to collect and bring on record the evidences from Sales Tax Department and not provided copies of the same to the assessee. It is submitted that observation made by the A.O. that purchases made by the appellant from the above parties are nongenuine is wrong and baseless therefore requested to delete the additions. Appellant placed reliance on the following decisions which includes:- Ramanand Sagar Vs. DCIT (256 ITR 134), CIT v. Nangalia Fabrics (P.) Ltd. 220 Taxmann 17 (Guj.), CIT Vs. M.K. Brothers (163 FR 547), Nikunj Eximp Enterprises (P.) Ltd. v. CIT 216 Taxman 171 (Born.), CIT v. M.K. Bros. 163 FIR 249 (Guj.),etc. It is also argued that the dealers are regularly assessed to tax and the purchases properly reflected in the books of account and payments are made through account payee cheques and on payment of the amount to the seller, the purchaser has no control on their affairs and there is no evidence that the cash is received back from the suppliers and the purchases cannot be treated as bogus. Appellant maintained stock register and also maintained the quantitative details. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 assesses additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(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 sales 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 trader. 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. 12. The Coordinate Bench of the ITAT, Mumbai in the case of Shri Rameshkumar Daulatraj Vs ITO in ITA No. 4192/Mum/2018 order dated 07/05/2019 after following the above decision of Hon ble Bombay Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the issue in dispute relying on the decision of the Mohammad Haji Adam Co. (supra). Accordingly, we feel it appropriate to restore this issue back to the file of the Assessing Officer with the directions to identify the sales corresponding to the bogus purchases and compute the gross profit earned in each transaction of the sale of the bogus purchases and wherever the gross profit on transaction of sale corresponding to bogus purchases is found to be less than the gross profit on the genuine purchases, then he may make addition for the corresponding amount of deficiency of gross profit. Following the decision of the Hon ble Bombay High Court in the case of Haji Adam (supra) the ground No. 1 to 3 of the appeal of the merit are allowed for statistical purposes. The ground No. 4 and 5 of the appeal challenging the validity of the reassessment were not pressed before and therefore same are dismissed as infructuous. The ground No. 6 being consequential and ground No. 7 being general, same are dismissed as infructuous. 6. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 29/12/2023. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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