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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 ..... es vis- -vis alleged bogus 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. Addition of commission made by the A.O @ 5% as scaled down by the CIT(Appeals) to 1% - HELD THAT:- As nothing have been placed on the record that would prove to the hilt that the assessee had incurred any such expenditure, therefore, the addition so made/sustained by the lower authorities on a presumptive basis cannot be sustained. Accordingly, herein vacate the addition. Thus, the Ground of appeal No.4 raised by the assessee is allowed. - Shri Ravish Sood, Judicial Member For the Assessee : Shri S.K Agrawal, CA For the Revenue : Shri Satya Prakash Sharma, Sr. DR ORDER PER RAVISH SOOD, JM: The captioned cross-appeals filed by the assessee and the revenue are directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 14.02.2024, which in turn arises from the order passed by the A.O under Sec. 147 r.w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of total accommodation bills of Rs. 87,20,000/-) and thereby allowing a relief of Rs. 3,48,800/-? 3. Any other ground which may be adduced at the time of hearing. 4. At the very outset of hearing of the appeal, Shri Satya Prakash Sharma, Ld. Departmental Representative (for short 'DR') submitted that the revenue's appeal involves a delay of 15 days. Elaborating on the reasons leading to the impugned delay, the A.O has filed a letter dated 29.04.2024. As is discernible from the aforesaid letter, it transpires that the delay had occasioned due to huge pendency with the A.O pertaining to the limitation matters. For the sake of clarity, the letter dated 29.04.2024 filed by the A.O is culled out as under: 5. Considering the fact that there are justifiable reasons leading to the delay of 15 days involved in filing of the revenue's appeal, I condone the same. 6. Shri S.K Agrawal, Ld. Authorized Representative (for short 'AR') for the assessee at the threshold of hearing submitted that as the appeal filed by the revenue was below the monetary ceiling limit as contemplated in CBDT Circular No.05/2024 dated 15.03.2024, therefore, the same was not maintainable. 7. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. That there was opening balance payable or purchase as on 01/04/2014 for Rs. 18,90,000/- which was duly paid on 7-4-14 8-4-14 through bank. iv. That I have purchased goods of Rs. 68,30,000/- and entire purchase consideration alongwith previous balance of Rs. 18,90,000/- total Rs. 87,20,000/- have been duly paid during the year through bank, copy of bank account wherefrom payments made for purchase consideration, enclosed for your kind perusal, v. That day to day stock register, showing purchase, production of sortex Rice Sortex broken Rice Rejection goods has been maintained. The finished product Sortex Rice, Sortex Broken Rice Rejection Rice have been duly sold and accounted for in the books of accounts, which are duly Audited u/s 44AB of the Income Tax Act 1961. vi. That we are enclosing herewith ledger account of Maa Sharda Process Raipur from our books of accounts, as also details of purchase showing Bill No., Truck No. in which goods transported, Quantity and rate of purchase. vii. That the rate of purchase were at prevailing market rate, the Raw material has been used for manufacturing of Sortex Rice/Broken Rice which was ultimately sold and sale proceeds of finished good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of the total purchases (including opening balance) and made an addition of Rs. 4,36,000/-. Thus, the A.O vide his order passed u/s. 147 r.w.s. 144 r.w.s. 144B of the Act, dated 31.03.2022 after, inter alia, making the aforesaid additions, determined the income of the assessee at Rs. 30,82,860/-. 13. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals). The CIT(Appeals) deliberating at length on the issue in hand in the backdrop of the contentions advanced by the assessee, scaled down the disallowance of the alleged bogus purchases made by the A.O to 5% of the value of the impugned purchases (included opening balance) and restricted the addition to Rs. 4,36,000/-. Also, the addition towards the impugned commission was restricted by him to 1%, i.e. Rs. 87,200/-. Accordingly, the CIT(Appeals) partly allowed the appeal of the assessee. 14. Both the assessee and the revenue being aggrieved with the order of the CIT(Appeals) have carried the matter in appeal. 15. I have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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, ITA No1004 of 2016, dated 11.02.2019 had restricted the addition only to the extent of the difference between the gross profit of the genuine purchases vis- -vis alleged bogus purchases. For the sake of clarity, the observations of the Tribunal are culled out as under: (relevant extract): 11. On a perusal of the observations of both the lower authorities, we would not hesitate to observe that the basis adopted by them for quantifying the amount by which the assessee would have inflated the impugned bogus purchases in its books of accounts is devoid and bereft of any reasoning. Admittedly, in a case where the assessee had purchased goods not from the organized sector but from the open/grey market, then, it can safely be concluded that he would have procured such goods at a discounted value by making savings on manifold factors i.e. sales tax, other government levies, cash discounts etc., as in comparison to the price at which the said goods would otherwise be available in the organized sector. Accordingly, in a case where an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would stand neutralized. 14. We shall now deal with the quantification of the profit which the assessee would have made by procuring the goods at a discounted value from the open/grey market, as under: (A) Broken Rice ( Kanki) (10,500 quintals) :- 15. Considering the aforesaid details which are stated by the assessee to have been filed before the lower authorities, it transpires that the bogus purchases of broken rice (Kanki) was made by the assessee @1415.62 per quintal (average rate), as against the purchase of the genuine broken rice (kanki) that was made by him @ 1437.47 per quintal (average rate). On the basis of the aforesaid facts, now when the assessee had made bogus purchase of broken rice (kanki) (average rate) at a value lower than that at which it had made genuine purchase of broken rice (kanki) (average rate), therefore, as per the ratio 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 Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 1642.14 per quintal [i.e Rs. 1709.14/- per quintal (-) 3.92% of Rs. 1709.14/-]. As per the judgment of the Hon ble High Court of Bombay in the case of M/s. Mohhomad Haji Adam Company (supra) the profit made by the assessee by procuring the goods from the open/grey market is to be determined by bringing the GP rate of the bogus/unproved purchases to the same rate as that of the other genuine purchases. As the aforesaid addition had been sustained by the CIT(Appeals) @ 3.92% of the value of the impugned bogus purchases of rice, the same, thus brings the purchase price (average rate) of the bogus purchase of rice to an amount of Rs. 1642.14 (supra), which, however is still in excess of the purchase of genuine rice (average rate) of Rs. 1636.76 per quintal by an amount of Rs. 5.38 per quintal. We, thus, in terms of our aforesaid observations direct the A.O to make an addition of Rs. 1,47,143/- [i.e. 27350 quintals (bogus purchases) X Rs. 5.38/- per quintal]. (C) Paddy (4470 quintals) :- 18. On a perusal of the records, it transpires that the bogus purchases of paddy had been made by the assessee @ Rs. 1142.60 per quintal (average rate), as against the purchase of the genuine padd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid order I 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. 21. Before parting, I may herein observe that the assessee had placed on record the bifurcated details of average purchase rates of rice/broken rice, i.e bogus/unverified purchases vis- -vis purchases other than the bogus/unverified purchases, as under: As the aforesaid details filed by the assessee before me were not there before the lower authorities, therefore, I herein direct the A.O to consider the same in the course of the set-aside proceedings after making necessary verifications to his satisfaction. Be that as it may, the A.O shall quantify the profit element which the assessee would have made by procuring the goods in question at a discounted value from open/grey market in the backdrop of 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). Needless to say, the A.O shall in the course of the set-aside p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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