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TMI Blog2024 (11) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... of Appeal of the Assessee. - Shri S. Rifaur Rahman, Accountant Member And Shri Yogesh Kumar U.S., Judicial Member For the Appellant : None For the Respondent : Shri Virendra Singh, Sr. Dr ORDER PER YOGESH KUMAR U.S., JM : This appeal is filed by the Assessee against the order of Ld.CIT (A)/National Faceless Appeal Centre [ NFAC for short], dated 05/06/2023 for the Assessment Year 2010-11. 2. The grounds of Appeal are as under: - 1.1. That the assessment order is invalid, illegal and void. 2. That the Ld. AO has erred in law and on facts in making the additions by ignoring the genuineness of purchases and considering it as bogus transaction. 3. That the Ld. AO has erred in law and on facts in making the Addition based on the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une of Rs. 7,39,00,240/- vide assessment order dated 11/12/2017. Aggrieved by the assessment order dated 11/12/2017, the Assessee preferred an Appeal before the CIT(A). The Ld. CIT(A) vide order dated 05/06/2023,partly allowed the appeal of the Assessee by restricting the addition to 16.5% of amount disallowed by the A.O. as an additional taxable income without giving any benefit of expenses towards the same. As against the order of the Ld. CIT(A) dated 05/06/2023, the Assessee preferred the present Appeal on the grounds mentioned above. 6. The Ld. Departmental Representative relying on the orders of the Lower Authorities submitted that the Appeal of the Assessee is devoid of merit which requires no interference at the hands of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase register, stock register, bank statements, audited books of accounts. 6.4. The learned AO has not questioned the sales made by the appellant and has accepted the sales amount as appearing in the financial statements. He has also not provided any adverse finding on inventory appearing in the books of account of the appellant. 6.5 In absence of visibility on correctness of the amount paid/ payable to creditors, the possibility of purchasing the goods from grey market at lower rates and recording the same at inflated price in books of accounts cannot be ruled out. 6.6 However, if the entire purchases are disallowed, the corresponding sales also need to be ignored but the AO has not done so. There, this leaves with unjustified adjustment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 290 (Guj). The view taken by the Tribunal in the case of Vijay Proteins Ltd. v. Asstt. CIT [1996] 58 ITD 428 (Ahd.) came to be approved. 8. If the entire purchases were wholly bogus and there was a finding of fact on record that no purchases were made at all, counsel for the Revenue would be justified in arguing that the entire amount of such bogus purchases should be added back to the income of the assessee. Such were the facts in the case of Pawanraj B. Bokadia (supra). 9. This being the position, the only question that survives is what should be the fair profit rate out of the bogus purchases which should be added back to the income of the assessee. The Commissioner adopted the ratio of 30 per cent of such total sales. The Tribunal, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es vis a vis bogus purchases. The AO is directed to restrict the addition to the extent of lower GP declared by the assessee in respect of bogus purchases as compared to G.P. on normal purchases. 3. PCIT vs. Jakharia Fabric (P) Ltd. (2020) 429 ITR 323 (Bom-HC) dated 10/02/2020 In the underlined case, honourable HC upheld the decision of ITAT for restricting adjustment to the tune of estimated profit element involved in bogus purchase. 6.9 The appellant has also submitted a chart depicting GP earned by it in 5 years. The average GP for such 5 years works out to 16.5%. 6.10 Therefore, it would be justified to restrict addition to the tune of certain gross profit. Considering totality of the case and relying on jurisdictional High Court's ..... X X X X Extracts X X X X X X X X Extracts X X X X
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