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TMI Blog2024 (4) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same rate of other genuine purchases As identical facts the issue to the extent of quantification of the profit element in case of bogus/unverified purchases had come up in the case of M/s. Gopal Rice Industries [ 2023 (1) TMI 363 - ITAT RAIPUR] wherein restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchased by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. Thus we 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. Appeal of the assessee company is allowed for statistical purposes X X X X Extracts X X X X X X X X Extracts X X X X ..... .O on the ground that no valid notice was issued to him, therefore, Shri Satya Prakash Sharma, Ld. Sr. DR was directed to obtain a report of the A.O. 4. On the next date of hearing, Shri Satya Prakash Sharma, Ld. Sr. DR had filed a letter of ITO, Ward-Mahasamund dated 12.04.2024 addressed to Jt. Commissioner of Income Tax, ITAT, Raipur a/w. a copy of notice u/s. 143(2) of the Act dated 25.09.2017 that was issued to the assessee for the year under consideration. On a perusal of the aforesaid notice u/s. 143(2) of the Act, I find that the same duly signed by the Officer, viz. Shri Mahendra Kumar, ITO, Ward- Mahasamund. As the aforesaid claim of the assessee based on which, jurisdiction assumed by the A.O has been assailed is found to be factually incorrect, therefore, the same is rejected. Accordingly, Ground of Appeal No.1 raised by the assessee being devoid and bereft of any merit is dismissed. 5. Succinctly stated, the assessee who is engaged in the business of rice milling and trading of rice, paddy, by-products obtained on milling etc., had e-filed his return of income for A.Y.2016-17 on 11.01.2017 declaring an income of Rs. 10,54,850/-. Subsequently, the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lers. 8. The A.O observed that the assessee had failed to substantiate the genuineness of the purchases claimed to have been made from the aforementioned supplier parties by placing on record their respective confirmations. Also, the A.O. observed that the notices issued u/s. 133(6) to the aforesaid supplier parties were received back unserved. 9. The A.O. considering the fact that the five parties from whom the assessee had claimed to have made purchases of Rs. 2,21,47,600/- were in the course of investigation found to be bogus concerns, thus, called upon him to substantiate the authenticity of the impugned purchase transactions on the basis of supporting documentary evidence. In reply, the assessee in his attempt to substantiate the authenticity of the purchase transactions had drawn support from the fact that the payment of the purchase consideration was made to the aforesaid five supplier parties through banking channel. Also, the assessee filed with the A.O copies of purchase bills and mandi anugya patra. It was further stated by him that as he had purchased the goods from the aforementioned parties on FOR basis, therefore, transportation receipts would not be available. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material, later on withdrew cash from their bank accounts which were returned to beneficiaries of bogus bills after deduction of their agreed commission. The assessing officer verified all evidences meticulously, and has established without doubt that transactions mentioned in para 3.1 above are bogus. The Weight bridge slips and challan of transportation submitted were incomplete and improper. In this case, the finding by assessing officer based on statement given during survey u/s. 133A, was that actual movement of goods never happened. The salient feature of accommodation entry is that all cash and bank transactions along with paper works will be clear except the actual stock transfer. Though the payment made by the assessee towards the purchases are through banking channels, it is also revealed that the supplier was issuing bogus bills and vouchers to various parties. in this situation, producing the bills and vouchers and evidencing payment made through cheque alone will not establish that the transactions are genuine. The assessing officer relied on the decision in similar case of Sanjay Oil cake Industries Vs. CIT (2009) 316 ITR 0274 by High Court of Gujrat and disallowed 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above discussions it is held that, in the instant case, the addition of 25% of payment to accommodation entry provider made by the assessing officer is correct and reasonable. As a result, ground no 1 raised in this appeal is dismissed." 12. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. At the time of hearing of the appeal, neither the assessee nor his authorized representative had put up an appearance. However, the written submission have been filed by the assessee before us. 13. The Ld. Departmental Representative (for short 'DR') relied on the orders of the lower authorities. 14. We have heard the Ld. Departmental Representative, perused the orders of the lower authorities and the material available on record, as well as considered the written submissions a/w. judicial pronouncements that have been pressed into service by the assessee to drive home his contentions. 15. We have given a thoughtful consideration to the issue in hand, i.e., dubbing of the impugned purchases as bogus by the lower authorities; as well as quantification of the profit which the assessee would have made by procuring the subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the profit/income which the assessee would have made by procuring the goods in question at a discounted value from the open/grey market. 20. Admittedly the addition in the hands of the assessee is liable to be restricted only to the extent of the profit which he would have made by procuring the goods at a discounted value from the open/grey market as against the inflated value at which he had recorded the same on the basis of bogus bills in his books of account. In so far the issue of quantification 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt that the addition in respect of the purchases which were found to be bogus in the case of the assessee before them, who was a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of other genuine purchases. We, thus, on the basis of the aforesaid observations of the Hon'ble High Court, are of the considered view, that on the same lines the profit made by the assessee in the case before us by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases. 21. Also, we find that involving identical facts the issue to the extent of quantification of the profit element in case of bogus/unverified purchases had come up before the "Division Bench" of the ITAT, Raipur in the case of M/s. Gopal Rice Industries, Vs. ITO, Ward-Dhamtari, ITA Nos. 62 & 74/RPR/2020, dated 22.12.2022, wherein the Tribunal after relying on the judgment of the Hon'ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company (supra) had observed as under :(relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tls- Rice Date : 03.07.2013 9 2. Shri Shyam Trading, Gondia 2000 Qtls- Rice Date : 07.10.2013 10 3. Eadan Rice Mill, Raipur 1250 Qtls-Broken rice Date: 08.04.2013 11 4. Maa Sharda Process, Raipur 2000 Qtls- Broken Rice Date : 01.10.2013 13 5. Maa Sharda Process, Raipur 1000 Qtls- Broken Rice Date :01.11.2013 14 6. Shri Krishna Processers, Raipur 1000 Qtls-Broken rice Date: 01.11.2013 14 7. Shri Samleshwari Foods, Abhanpur 750 Qtls- Broken Rice Date :28.11.2013 14 8. Shri Zin Mata Rice Mill, Raipur 750 Qtls- Broken Rice Date : 30.11.2013 14 9. Maa Sharda Process, Raipur 1000 Qtls-Broken Rice Date :05.12.2013 14 10. Shri Zin Mata Rice Mill, Raipur 1000 Qtls- Broken Rice Date 05.12.2013 14 11. Shri Ganapati Paddy, Raipur 2000 Qtls- Broken Rice Date: 12.12.2013 15 12. Maa Sharda Process, Raipur 1000 Qtls- Broken Rice Date :26.12.2013 15 13. Shri Veshno Devi Exim, Abhanpur 1000 Qtls- Broken rice Date :27.01.2014 15 14. Shri Ganapati Paddy, Raipur 1000 Qtls-Broken Rice Date : 28.01.2014 16 15. Maa Sharda Process, Raipur 200 Qtls- Broken Rice Date :17.02.2014 16. Quantitative details of rice/broken rice claimed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid 8 tainted parties who are admittedly only in the business of providing bogus/accommodation bills were availed by the assessee firm for the limited purpose of facilitating routing of the impugned purchases through its books of account. We, thus, on the basis of our aforesaid observations, are of the considered view, that now when purchases of the impugned goods, i.e., rice/broken rice had been routed through the assessee's books of account and thus, had formed part of its sales/closing stock for the year under consideration, therefore, there could have been no justification for making an addition of the entire amount of the impugned purchases of Rs. 2.97 crore (supra) in the hands of the assessee firm. At the same time, as the assessee had failed to substantiate the authenticity of the purchase transactions claimed to have been made from the aforementioned 8 tainted parties, therefore, it can safely be concluded that it had procured the goods in question, i.e., rice/broken rice at a discounted value from the open/grey market, as against the inflated value at which the same on the basis of the aforesaid bogus bills had been accounted for in its books of account. 18. Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66% Therefore, considering 5.66 % of Rs. 3,70,78,125/- which comes to Rs. 20,98,62 1.88 we think it fit to direct the revenue to add Rs. 20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue." 9. In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order at costs." It was, thus, observed by the Hon'ble High Court that the addition in respect of the purchases which were found to be bogus in the case of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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