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TMI Blog2024 (7) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made by the AO without comparing actual difference in purchase rate of alleged bogus purchase and other genuine purchases as per decision of this Hon'ble ITAT Bench in ITA No.168/RPR/2019 dated 17.10.2022 which is binding on all lower authorities under the jurisdiction. 3. On the facts and in the circumstances of the case the learned CIT(A) erred in maintaining @5% of alleged bogus purchase which works out to Rs. 436000/- while the rate of alleged bogus purchase is equal to or less than the rate of other genuine purchases. 4. On the facts and in the circumstances of the case the learned CIT(A) is not justified in maintaining 1% of purchase value which works out to Rs. 87200/- as hypothetical commission paid out of 5% added by the AO. 5. On the facts and in the circumstances of the case the learned CIT(A) erred in neither taking into notice nor considering the written submission filed by the appellant on 07.02.2024 in which the decision of jurisdictional bench of ITAT Raipur in the case of Balaji Rice Industries Vs. ITO in ITA No.168/RPR/2019 dt. 17.10.2022 on the same issue has been relied upon by the appellant and copy of order duly filed. 6. That the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9. Succinctly stated, the assessee who is engaged in the business of rice/broken-rice grading through sortex machine, had filed his return of income for A.Y. 2015-16 on 26.09.2015 declaring an income of Rs. 4,66,860/-. The return of income filed by the assessee was processed as such u/s. 143(1) of the Act. 10. The A.O based on information shared with him by the Dy. DIT (Inv-1), Raipur, observed that the assessee during the subject year was a beneficiary of bogus/fictitious purchase bills of Rs. 87,20,000/- that were received from a bogus entity, viz. M/s. Maa Sharda Process, Prop. Shri Rakesh Sharma, Raipur. Also, the A.O observed that as per information shared by the Dy. DIT (Inv.-1), Raipur, there were heavy cash withdrawals from the current account No.134905000427 of M/s. Maa Sharda Process during the year under consideration. The A.O further observed that Shri Rakesh Sharma (supra) had admitted before the ADIT (Inv.1), Raipur that the bank account of M/s. Maa Sharda Process was used for facilitating bogus purchases and all the transactions made through the said bank account were not related to any real business activities. Accordingly, the A.O based on the aforesaid informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered in our books of accounts. The entire goods have been used for making of sortex rice and softex broken rice, and the finished goods have duly been sold. The purchase as well as sale transactions were made through banking channel only, and there is no cash transaction for purchase as well as sell. x. That profit realized on sale against above purchase has been duly accounted for and offered to tax. In view of the above, it is requested to kindly file the proceedings u/s. 144 of the IT Act, 1961 and oblige." The aforesaid explanation of the assessee did not find favour with the A.O. Thereafter, the A.O after referring to the modus-oparandi that was adopted by the accommodation entry providers and drawing support from the statement of Shri Rakesh Sharma (supra) recorded u/s. 131 of the Act on 30.10.2015, was of the view that M/s. Maa Sharda Process had provided bogus purchase bills to the assessee. The A.O observed that the assessee was a beneficiary of the bogus bills issued by M/s. Maa Sharda Process (supra) and did not make any actual purchases from the said entity. The A.O was of the view that the assessee had procured inflated bills with an intent to scale down its pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the extent of the profit element which the assessee would have made by procuring the goods at a discounted value from the open/grey market, as against the inflated value at which the same had been booked on the basis of the bogus bills in its books of account. The Ld. AR in support of his aforesaid contention had pressed into service the order of ITAT, Raipur in the case of M/s. Balaji Rice Industries Vs. ITO-1(2), ITA Nos. 168 & 181/RPR/2019 dated 17.10.2022. It was submitted by the Ld. AR that the addition in the present case be restricted 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. 17. Per contra, the Ld. DR relied on the orders of the lower authorities. 18. Admittedly, it is a matter of fact borne from record that both the lower authorities had admitted that the assessee had procured goods not from the aforementioned tainted party, viz. M/s. Maa Sharda Process, Prop. Shri Rakesh Sharma, Raipur but at a discounted value from the open/grey market. 19. Controversy involved in the present appeal hinges around the solitary issue, i.e., quantif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counted value from the open/grey market, therefore, we restrict our adjudication to the said aspect alone. 12. On the issue of quantification of the profit which the assessee would have made by procuring the goods in question from the open/grey market, 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 as that 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 assessee was a trader of brics. The A.O found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities 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 add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit 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. 13. Our attention was drawn by the ld. AR towards the bifurcated details of bogus purchases in question aggregating to Rs. 6,84,65,775/- a/w. the average rate of purchase of the various items, viz. (i) purchase of 27350 quintals of rice: Rs. 4,67,45,125/-; (ii) purchase of 10,500 quintals of broken rice (Kanki) : Rs. 1,48,64,000/- and (iii) purchase of 4470 quintals of paddy Rs. 51,07,400/-, which reads as under:- (Purchase rate of Kanki) Qty. ( Qntls) Amount (Rs.) Average rate Kanki purchase (from alleged bogus parties) 10,500.00 1,48,64,000 1,415.62/qntls Kanki purchase (from genuine parties) 12,213.10 1,75,55,969 1,437.47/qntls Total Kanki Purchase 22,713.10 3,24,19,969 1,427.36/qntls (Purchase rate of Rice) Qty. (Qntls) Amount (Rs.) Average rate Rice purchase (from alleged bogus parties) 27,350.00 4,67,45,125 1,709.14/qntls Rice purchase (from genuine parties) 21,421.50 3,50,61,771 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As in the case of the assessee before us the rate of bogus purchases of broken rice (kanki) i.e Rs. 1415.62 per quintal (average rate) is lower than the rate of genuine purchases of broken rice (kanki) i.e Rs. 1437.47 per quintal (average rate), therefore, as a consequence thereto [by taking the sale rate (average) as static] the GP rate of bogus purchases of broken rice (kanki) as in comparison to the GP rate of genuine purchases of broken rice( Kanki) is already on the higher side, therefore, no addition on the said count could have validly been made in its hand. We, thus, in terms of our aforesaid observations vacate the addition of 3.92% of the value of bogus/unproved purchases of broken rice (10500 quintals) as sustained by the CIT(Appeals). Accordingly, the A.O is directed to vacate the addition of Rs. 5,82,668/- [Rs. 1,48,64,000/- X 3.92%] sustained by the CIT(Appeals). (B) Rice (27350 quintals) :- 16. On a perusal of the records, it transpires that the assessee had made bogus purchases of 27350 quintals of rice (value of Rs. 4,67,45,125/-). As observed by us hereinabove the A.O had quantified the profit on the purchase of bogus rice by disallowing 25% of the value of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the judgment of the Hon'ble High Court of Bombay in the case of M/s. Mohhomad Haji Adam & Company (supra) there could be no occasion much the less any justification for making any addition on the said count in the hands of the assessee. We, say so, for the reason that the Hon'ble High Court in the case of M/s. Mohhomad Haji Adam & Company (supra), had held, that for the purpose of quantifying the profit which the assessee would have made by carrying out bogus/unproved purchases the addition is to be made to the extent the GP rate of the bogus/unproved purchases is brought to the same rate as that of other genuine purchases. As in the case of the assessee before us the rate of bogus purchase of paddy i.e Rs. 1142.60 per quintal (average rate) is lower than the rate of genuine purchase of paddy i.e. Rs. 1232.32 per quintal (average rate), and thus, as a consequence thereto [by taking the sale rate (average) as static] the GP rate of bogus purchases of paddy as in comparison to the GP rate of genuine purchases of paddy is already on the higher side, therefore, no further addition on the said count could have validly been made in his hand. We, thus, in terms of our aforesaid observa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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