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TMI Blog2019 (6) TMI 1718X X X X Extracts X X X X X X X X Extracts X X X X ..... hat assessee has made bogus purchases and has received accommodation entries from Mr. Rajendra Jain. The assessee submitted the purchase vouchers and the payments were made through banking channel. However, the suppliers were not produced before the Assessing Officer. Sales in this case were not doubted. 3. The Income Tax Officer in this case has made 5% addition on account of bogus purchases as under:- A.Y. 2014-15 Rs. 9,96,835/- A.Y. 2011-12 Rs. 15,57,496/- 3. Upon assessee's appeal ld CIT(A) directed that disallowance should be 8% as reduced by the gross profit already declared. 4. Against above order assessee is in appeal before the ITAT. We have heard both the counsel and perused the records. 5. Upon careful consideration we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax versus M. Haji Adam & Co(ITA No. 1004 of 2016 dated 11/2/2019) the addition in respect of bogus purchases is to be limited to the extent of bringing the gross profit rate on such purchases at the same rate as of other genuine purchases. The observation of the Hon'ble High Court is reproduced as under: 1. All these appeals arise out of common Judgment of the Income Tax Appellate Tribunal. The facts in all these appeals being same, we make it from ITXA No. 1004 of 2016. The revenue-appellant has raised following questions for our consideration "(a) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in not confirming the addition made by the Assessing Officer on account of bogus purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the bogus bills, that the goods in question were never supplied to the assessee, and therefore, the purchases were bogus. He, therefore, added the entire sum in the hands of the assessee as its additional income. 3 The assessee carried the matter in the appeal before the Commissioner of Appeals who accepted the factum of purchases being bogus. However, he compared the purchases and sales statement of the assessee and observed that the department had accepted the sale, and therefore, there was no reason to reject the purchases, because without purchases there cannot be sales. He, therefore, held that under these circumstances A.O. was not correct in adding the entire amount of purchases as the assessee's income. He, therefore, deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Proteins Ltd. Vs. CIT had observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25 % of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s Indian Woolen Carpet Factory (supra) or M/s Vijay Proteins Ltd. In the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to Rs.2,92,93,288/- and taxing only 25 % of these bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect 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. 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 Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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