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TMI Blog2025 (2) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... e and from local parties - quantification of the profit element which the assessee would have made by procuring the goods not from the six bogus concerns from whom purchase bills were obtained, but at a discounted value from the open/grey market - HELD THAT:-CIT(Appeals), for quantifying the profit which the assessee would have made by procuring the goods at a discounted value from the open/grey market, as against the value booked in his books of accounts based on the bogus purchase bills of the aforesaid bogus/hawala parties, had after by taking cognizance of the fact that in the business of rice millers/traders the GP rate varied between 3% to 10% adopted GP rate of 10% had after allowing credit of the GP rate of 1.53% that was already disclosed by the assessee in his audited books of accounts, thus, made a balance addition of 8.47% of the value of the bogus purchases. As such, the CIT(Appeals) had sustained the addition of Rs. 1,22,08,002/- (out of the addition of Rs. 3,70,33,063/- made by the A.O). We have thoughtfully considered the view taken by the CIT(Appeals) and find no infirmity in the same. As the CIT(Appeals) had fairly quantified the profit element which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made u/s. 143(3) dt.31-3-16 in absence of any fresh/new material, be treated merely on change of opinion on the same material facts, is not permissible in the eyes of law, is liable to be quashed; relied on Siemens Energy Industrial Turbo India (P) Ltd (2024) (Bom HC); Mira Bhavin Mehta (2024) (Bom HC); Godrej Projects Development (P) Ltd (2024) (Born HC); Kelvinator (2010) (SC); Marico Ltd (2020) (SC); Techspan India PL (2018) (SC); Usha International Ltd (2012) (Del HC) (Full Bench). 2. On the facts and circumstances of the case and in law, approval u/s. 151(2) dt.6-2-18 by Jt.CIT is invalid; approval u/s. 151 on wrong facts mentioned in "Proposal Form" (Sl.No.8 & 9) that assessment is proposed to be made first time, while it was earlier assessed u/s. 143(3) dt.31-3-16 by ITO-2(2); without pointing out the mistake/ error committed by AO in the "Proposal Form" put up before her; non application of mind by Jt.CIT while granting such mechanical approval on her part; in absence of a valid approval as mandated by law u/s. 151, reopening u/s. 148/147 would be invalid and would be liable to be quashed; relied on Kalpana Shantilal Haria (2017) (Bom HC); Mumtaz Haj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the addition of Rs. 2,38,25,061/- out of total addition of Rs. 3,60,33,063/-, ignoring his own finding in his order that "there is no doubt regarding bogus purchases of Rs. 14,41,32,250/- had been made by the assessee" whereby he has upheld the basic finding of AO in entirety? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 2,38,25,061/- out of total addition of Rs. 3,60,33,063/-, ignoring the ratio of several judgements including the following in which 100% disallowance on account of bogus purchases has been upheld: a) Para 6 of N.K. Industries Ltd. [2016] 72 taxmann.com 289 (Gujarat), in which SLP of the assessee has been dismissed vide [2017] 84 taxmann.com 195 (SC)? b) Decision of ITAT Mumbai in the case of Soman Sun City in I.T.A. No. 2960/Mum/2016? 3. Without prejudice to the above, wh4ther on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 2,38,25,061/- out of total addition of Rs. 3,60,33,063/-, by assuming that the assessee had made alternative actual purchases when the assessee not proved the same with any ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the survey proceedings. The A.O also noticed that survey action was carried out in the case of Nagarik Sahakari Bank, Raipur where some of the brokers/entry operators maintained their bank accounts. It was further observed by him that the brokers/entry operators had in their respective statements recorded on oath u/s. 131 of the Act had admitted of having provided bogus bills to rice traders and millers without any actual supply of goods. Also, it was noticed by the A.O that certain rice millers in their statements admitted of being involved in the nefarious activity of providing bogus bills without any corresponding sales of goods. After deliberating at length on the modus-operandi that was adopted by the brokers/entry operators and certain rice millers who had admitted of their involvement in providing/facilitating bogus bills in lieu of commission, and referring to their statements which were recorded u/s. 131 of the Act a/w. those recorded in the course of their cross-examination by the rice millers who were alleged by them as beneficiaries, the A.O observed that brokers viz. Shri Sanjay Sharma, Shri Aditya Sharma, Shri Kamelsh Kesharwani (the assessee), Shri Ghanshuam Rijwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r carrying out the aforementioned unaccounted transactions. Accordingly, the A.O vide his order passed u/s. 143(3) r.w.s. 147 of the Act, dated 24.12.2028 after, inter alia, making the aforesaid additions determined the income of the assessee at Rs. 4,09,00,425/-. 9. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) who partly allowed the same. Apropos the addition of Rs. 3,60,33,063/- (supra) that was made by the A.O by disallowing 25% of the impugned purchases, the CIT(Appeals) held a conviction that the quantification of the profit which the assessee would have made by purchasing the goods not from the aforementioned bogus/hawala parties but at a discounted value from the open/grey market could safely be determined by adopting the GP rate of 10% (as was prevailing in the trade line of rice milling and trading). Accordingly, the CIT(Appeals) taking cognizance of the fact that the assessee had already disclosed GP rate of 1.53% (as per his audited books of accounts), thus, made the balance GP addition of 8.47% [10% (-) 1.53%] on the value of the bogus purchases of Rs. 14.41 crore (approx.) and thus, scaled down the addition on the aforesaid issue to an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid facts and figures as was canvassed before us, had drawn our attention to the assessee's trading and profit and loss account dated 31.03.2013, which revealed the total purchases of Rs. 20,31,27,610/- and the corresponding sales of Rs. 20,39,52,845/-. Carrying his contention further, the Ld. AR submitted that the alleged bogus purchases of Rs. 14,41,32,250/- (supra) pertained to the purchases that were made by the assessee from 6 parties (out of 11 parties). The Ld. AR to buttress his aforesaid claim had taken us through a "Chart" forming part of Synopsis-1 (filed on 28.10.2024). The Ld. AR based on his aforesaid contention, submitted that now when the A.O vide his order passed u/s. 143(3) of the Act, dated 31.03.2016 had held 1,43,295 Qntls. of sales (out of total sales for the year) as bogus sales for which accommodation entries were provided by the assessee and had worked out an addition @ Rs. 5/- per Qntl. aggregating to Rs. 7,16,475/-, therefore, reopening of his case by observing that the assessee had not made genuine purchases of goods but only procured bogus purchase bills from six concerns mentioned in the "reasons to believe", had thus, resulted to an observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eopened for the reason that the commission income of Rs. 5/- per Qntl. earned by the assessee by providing bogus purchase bills through his bogus benami concerns had escaped assessment. 15. As the reopening of the concluded assessment in the case of the assessee was, inter alia, based on the aforesaid reasons i.e. facts which were not there before the A.O while framing the original assessment, therefore, we are unable to comprehend as to how the present reassessment proceedings initiated by him could be brought within the meaning of "change of opinion" as had been claimed by the Ld. AR. We, thus, are of the view that the claim of the assessee that his concluded assessment was reopened based on a mere "change of opinion" cannot be accepted and is accordingly, rejected. 16. Apropos, the Ld. AR's claim that as no trading transactions during the subject year were carried out in the aforementioned ten bogus benami concerns, therefore, reopening of the case on the said count itself is also not sustainable, we are unable to concur with the same. The Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd. Vs. Income- Tax Officer And Ors. (1999) 236 ITR 34 (SC), had held, that wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain beneficiaries was not there before the A.O in the course of the original assessment proceedings; and (ii) that the post survey investigation of the bank accounts of the 6 hawala parties revealed that the assessee had during the subject year made purchases of Rs. 14.41 crore (supra) from them, were not there before his predecessor while framing the original assessment vide his order passed u/s. 143(3), dated 31.03.2016, therefore, the reopening of his concluded assessment could not be held to be based on a mere "change of opinion". 18. Apropos the Ld. AR's contention that as the appropriate authority i.e. Jt.CIT, Range-1, Raipur had without application of mind granted approval u/s. 151 of the Act, therefore, the issuance of notice u/s. 148 of the Act and framing of the impugned assessment was liable to be struck down on the said count itself, we are unable to concur with the same. The Ld. AR submitted that the Jt. CIT, Range-1, Raipur at Sr. No.8 & 9 of the proposal form of approval, Page 2 of APB had therein recorded his observation in the respective columns wherein information/details were sought, viz. (i) whether the assessment was proposed to be made for the first time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original assessment that was earlier framed u/s. 143(3) of the Act, dated 31.03.2016, but the same would not be fatal to the assumption of jurisdiction for initiation of proceedings u/s. 147 of the Act in case of the assessee before us. We are of a firm conviction that as both the A.O and the Jt. CIT, Range-1, Raipur, had taken cognizance of the fact that it was a case of a reassessment within the meaning of "Explanation-2(c)(i)" of Section 147 of the Act, and also the complete details of the income assessed vide order u/ss. 143(3)/144 of the Act, dated 31.03.2016 were provided in the "reasons to believe", dated 05.02.2018, therefore, the aforesaid contention of the Ld. AR being devoid and bereft of any merit is rejected. 21. Per contra, Dr. Priyanka Patel, Ld. Sr. Departmental Representative (for short 'DR') relied on the orders of the lower authorities. 22. We have thoughtfully considered the aforesaid issue in the backdrop of the contentions advanced by the Ld. Authorized Representatives of both the parties. As is discernible from the record, the CIT(Appeals) had though principally concurred with the view taken by the A.O that the assessee had not made genuine purchases f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oken Rice sales at Rs. 161.17L Trading portion treated as genuine by the Ld. AO Rs. 610.84L (29.95%) Trading portion treated as bogus by the Ld. AO Rs. 1428.69L (70.05%) Thus, out of the "whole books" the Ld. AO has accepted 29.95% as genuine and 70.05% as bogus. "That the Ld. AO has dully accepted the 'book results' of 30% portion of its trading activities in terms of quantity and value, and thus, he has suspected/doubted only 70% of the total sales of Rs. 20,39,52,845 on the count of paddy, broken rice and rice purchases which is purely related to its trading activities and thus, he only doubted the purchases made from the alleged six vendors, while he had again duly accepted the corresponding sales including quantity involved therein, shown in the same books of account, in between, he has not found any kind of suppression of yield in Broken rice and Rice because the assessee had not involved any kind of manufacturing activities during the year under consideration and thus, the main allegation of the Ld. AO that the assessee had made bogus purchases does not stand in its own legs, because of the reason that the assessee had not involved in manufacturing activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Industries was a 'manufacturing concern' and in that case the revenue has proved by clinching evidence on record that yield has been suppressed and to cover up such suppressed yield, bogus purchases of raw material has been introduced from bogus parties and purchase price of raw material has also been inflated according to their own will, since, the parties were not traceable; they opened the bank accounts of such bogus parties and in which cheques were credited and amounts were withdrawn by bearer cheques through their own staffs and in this way, they created bogus parties as conduit for showing bogus purchases of raw materials/semi-finished goods. 3.1.7 The assessee is running a trading concern in a proprietary concern M/s.Kesharwani Rice Mill, Raipur, which deals in trading in paddy, rice & broken rice, thus, it is engaged in trading activities of paddy, rice & broken rice. The total sales for the F.Y. 2012-13 come to Rs. 20,39,52,845/-(i.e. manufacturing portion of Rs. 0/- and trading portion of Rs. 20,39, 52,845/-) as per audited trading and Profit & Loss account. No manufacturing activity has been done by the assessee during the F.Y. 2012-13. -while, in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, hence it is distinguishable from 'Sanjay Oil Cake Industries' case. If the case of assessee is not manufacturing, disallowance of 25% should not be applicable in his case, only certain NP/GP may be applied in case, after rejection of books of account. I have gone through the detailed investigation in this rice miller's case assessment order of assessee and the reply of assessee during the appeal proceeding. I thoroughly examined the reply of assessee with the facts of the case. Now, it is clear that the present case is a case of trading concern and there is not any manufacturing activity hence the case is little bit distinguishable from Sanjay Oil Cake Industries, relied by the Ld. AO. Secondly, there is no doubt regarding bogus purchases of Rs. 14,41,32,250/- had been made by the assessee. Thirdly, a detailed investigation has been done to prove these purchases as bogus and even cross exanimation was also done b'. rice millers during the investigation. As the Ld. AO has rejected books of account for limited purpose, but he had not questioned the sales. This is a well settled proposition that the sales cannot be made without purchases. So, if the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry providers, reopened assessment. No evidence was produced by assessee to show that purchases were genuine by actual delivery of goods on said parties. Notice u/s 133(6) were returned unserved. One of the parties appeared before the AO and confirmed that the transaction were bogus. Assessee having purchased the goods from grey market for earning higher profits, GP rate 12.5% applied by AO and confirmed by CIT(A) was justified. However the assessee will get credit of GP ratio declared on these bogus purchase in the return of income filed with the Revenue." In the line of business of rice millers and traders in the state, the GP varies from 3% to 10% depending on various factors such as price of paddy paid by the government, level of crop production and quantity of procurement committed by the statement government. Adopting a GP of 10%, since the GP shown by the assessee is 1.53%, an addition of 8.47% on the suspicious purchases is hereby sustained, attributing to the extra profit earned by showing purchases. Therefore on a purchase of Rs. 14,41,32,250/- an amount of Rs. 1,22,08,002/- is hereby sustained and balance addition is deleted." 23. We have thoughtfully considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the assessee who is proprietor of M/s. Keshwarni Rice Mills, i.e. a concern engaged in the business of trading in rice/by products, had admitted that he was deriving commission income @ Rs. 5/- per quintal from providing bogus purchase bills, but independent of and in addition of his said stream of income he was deriving income from the business of trading in rice/by products. 24. The fact that the assessee had made actual purchases of goods is supported by the fact that to route the purchases made by him from the open/grey market, he had procured bogus bills from the aforementioned six bogus parties to whom payments of Rs. 14.41 crore (supra) were made by him during the subject year (as observed by the A.O in the "reasons to believe", Page 6, Para 4 of APB). Apart from that, we find that the assessee had in reply to the Question No.20 of his statement recorded in the course of survey proceedings u/s. 133A of the Act, dated 15.03.2016, stated that goods were being received by him at his business premises situated at Abha-sibni, Page-28 of APB. For the sake of clarity, Question No.20 a/w. the reply of the assessee is culled out as under:- IV] प्रश ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fairly quantified the profit element which the assessee would have made by procuring the subject goods not from the aforementioned six bogus concerns, but from the open/grey market, by adopting the GP rate prevailing in the business of rice miller/traders, therefore, we find no infirmity in the view taken by him, and, thus, sustain the addition to the extent that was upheld by him. Thus, the Grounds of appeal No. 3 & 4 raised by the assessee and the corresponding Grounds of appeal No.1, 2 & 3 raised by the revenue are dismissed in terms of our aforesaid observations. 28. Apropos the addition towards unaccounted investment of Rs. 10 lacs that was made by the A.O, we are of the view that as observed by the CIT(Appeals), and rightly so, the assessee would have made certain unexplained investment in his business of providing bogus billing. Ostensibly, the A.O had taken the amount of "peak purchase" appearing in the account of one of the aforesaid bogus concerns as a bogus outstanding liability and made an addition of the same in the hands of the assessee. Thereafter, the CIT(Appeals) had approved the view taken by the A.O, observing as under: "3.2 Ground No. 4:- On the facts & cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Raj), the past history of the assessee is best guiding factor. Further, the result shown by the assessee is better than M/s.Rishabh construction (P) Ltd. Further the trading result is better because the entire cash and other found as the result of the search were surrendered as business income for A.Y. 2010-11. Further, if trading addition for A.Y. 2009-10 is sustained then the same is entitled for telescoping benefit in A.Y. 2010-11 against the cash and other assets found as the result of search in view of Anantharam Veerasinghaiah & Co (1980) (SC) and Tyaryamal Bal Chand (1987) (Raj) and such telescoping benefit has not been given by the AO and Ld. CIT (A)." 3.2.3 Consider the above discussion, the AO has added possible investment in effecting the unaccounted purchases added by him, from a seller the assessee has made several purchases. Ld. AO has picked up the largest amount out of purchases from each seller. Such largest amounts from all sellers have been added and total has been treated as unaccounted investment. On the facts of the case, the assessee making bogus purchase of Rs. 14,41,32,250/-.The case of purchases made out of unknown sources. The transactions reflect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts & circumstances of the case and in law, Id CIT(A) has erred in sustaining addition of Rs. 1,36,78,421 on count of adhoc estimation of GP of 10% on alleged bogus purchases of Rs. 15,99,81,541 without giving any basis for such arbitrary estimation; revenue has rejected books of account; applied sec.145(3); estimation of GP made @10% but assessment not made u/s. 144; in such a situation, assessment made u/s. 143(3) would be invalid; addition is liable to be deleted & assessment is liable to be quashed. 3. On the facts & circumstances of the case and in law, Id CIT(A) has erred in sustaining addition of Rs. 27,93,750 on the count of arbitrary estimation of unexplained investment in bogus purchases; addition made merely on presumption & surmises without bringing any material/ evidence on record; addition is unjustified and is liable to be deleted. 4. "The appellant craves leave, to add, urge, alter, modify or withdraw any grounds before or at the time of hearing." On the other hand, the revenue has assailed the impugned order on the following grounds of appeal before us: "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 750/- Rs.3,33,750/- 28/12/2013 9. M/s. Shri Laxmi Agrotech Rs.7,23,750/- Rs.3,75,000/- 28/02/2014 Total Rs.23,26,56,741/- Rs.42,57,500/- 33. The A.O observed that in the course of the aforesaid survey operation conducted u/s. 133A of the Act at the business premises of Shri Kamlesh Kumar Keshwarwani i.e. the assessee, it was admitted by him that he had acted as an intermediary for arranging the bogus sale and purchase bills between the parties without actual delivery of goods. Accordingly, the A.O vide notice issued u/s. 142(1) of the Act, dated 29.11.2016 directed the assessee to produce his books of accounts in order to substantiate the authenticity of the purchases made by him during the subject year which were stated to have made from 32 parties (Page 4 & 5 of the assessment order). In response, the assessee submitted a written reply wherein, it was stated by him that, viz. (i) that he had received commission of Rs. 5/- per Qntl. from other firms (i.e. M/s. Agrawal Agro, M/s. Shri Shyamji Rice Agrotech and M/s. Shri Annapurna Foods in F.Y.2015-16) as per his statement recorded during the survey conducted on 15.03.2016, but in F.Y.2013-14 ( i.e. the subject year), he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the respective parties etc. Also, the A.O had offered the assessee to cross-examine the brokers and the persons whose statements were recorded by the department. However, the assessee could not substantiate the authenticity of the aforesaid purchases by placing on record the documentary evidence that was called for by the A.O. Accordingly, the A.O held a view that the assessee had failed to substantiate the authenticity of his claim of having made genuine purchases. Thus, the A.O held that the impugned purchases claimed by the assessee, except for, the purchases made from three firms, viz. (i) M/s. Agrawal Agro; (ii) M/s. Annapurna Foods; and (iii) M/s. Shyamji Rice Agrotech which were stated to be the assesse's own concerns as bogus. Thereafter, the A.O rejected the assessee's books of accounts u/s. 145(3) of the Act and held the balance amount of purchases pertaining to the remaining six parties of Rs. 15,99,81,541/- as bogus and thus, disallowed 25% of the value of the same with a consequential addition of Rs. 39,99,538/-(sic). 36. Apart from that, the A.O being of the view that the assessee would have made unaccounted investment by rolling his unaccounted money in his busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thirdly, a detailed investigation has been done to prove these purchases as bogus and even cross examination was also done by rice millers during the investigation. As the Ld. AO has rejected books of account for limited purpose, but he had not questioned the sales. This is a well settled proposition that the sales cannot be made without purchases. So, if the purchases have not been made from the six parties mentioned in assessment order then the assesses should have made these purchases from somewhere else. In such cases of bogus purchases, actual purchases were made from other parties and mainly in cash. These purchases are always done at lower rates. Taxes and other expenses are also saved. Now, the assessee should have disclosed the actual parties and actual amount of purchase. These purchases might have been purchased from gray market and in cash. There is a strong possibility of a lower rate purchases as other taxes and expenses will be saved in such gray purchases. Hence, actual GP will be much higher than declared in the books of account. There are some judicial pronouncements, on the similar facts. The Delhi Tribunal in the case of NKG has held that since purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Adopting a GP of 10%, since the GP shown by the assessee is 1.45%, an addition of 8.55% on the suspicious purchases is hereby sustained, attributing to the extra profit earned by showing purchases. Therefore on a purchase of Rs. 15,99,81,541/- an amount of Rs. 1,36,78,421/- is hereby sustained and balance addition is deleted." 39. Apropos the addition of Rs. 27,93,750/- that was made by the A.O towards unexplained investment which the assessee would have made for carrying out aforesaid unaccounted transaction i.e. peak purchase amount of the bogus parties, the CIT(Appeals) finding no infirmity in the view taken by the A.O, upheld the same, observing as under: 3.2 Ground No. 4:- On the facts & circumstances of the case and in law, the Ld. AO has erred in making addition of Rs. 27,93,750 as unaccounted investment on these bogus purchases considered by the Ld. AO, which is without bringing any clinching material evidence on record and in absence of this, the addition of Rs. 27,93,750 is liable to be deleted. 3.2.1 During the assessment proceeding the assessee making bogus purchase of Rs. 15,99,81,541/- the assessee must have invested his unaccounted income which is being rol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sult shown by the assessee is better than M/s. Rishabh construction(P) Ltd. Further the trading result is better because the entire cash and other found as the result of the search were surrendered as business income for A.Y. 2010-11. Further, if trading addition for A.Y. 2009-10 is sustained then the same is entitled for telescoping benefit in A.Y. 2010-11 against the cash and other assets found as the result of search in view of Anantharam Veerasinghaiah & Co (1980) (SC) and Tyaryamal Bal Chand (1987) (Raj) and such telescoping benefit has not been given by the AO and Ld. CIT (A)." 3.3.3 Consider the above discussion, the AO has added possible investment in effecting the unaccounted purchases added by him, from a seller the assessee has made several purchases. Ld. AO has picked up the largest amount out of purchases from each seller. Such largest amounts from all sellers have been added and total has been treated as unaccounted investment. On the facts of the case, the assessee making bogus purchase of Rs. 15,99,81,541/-.The case of purchases made out of unknown sources. The transactions reflected in the bank accounts of assessee are having the same pattern. The assessee giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rs. 14,41,32,250/- i.e. at Rs. 3,99,95,285/- (wrongly taken by the A.O in the assessment order as Rs. 39,99,538/-). (B) On appeal, the CIT(Appeals) principally concurred with the A.O that the assessee would have made profit by procuring the subject goods not from the aforementioned 6 bogus/hawala parties but at a discounted value from the unknown parties operating in the open/grey market. At the same time, the CIT(Appeals) was of the view that the profit which the assessee would have made by procuring the subject goods from the open/grey market could safely be quantified by adopting GP rate of 10% (as was prevailing in the business of rice milling/trading). Accordingly, the CIT(Appeals) after considering the GP rate of 1.45% that was disclosed by the assessee during the subject year scaled down the addition to 8.55% [10 % (-) 1.45%] of Rs. 15,99,81,541/-(supra) i.e. at an amount of Rs. 1,36,78,421/-. 44. We have thoughtfully considered the view taken by the CIT(Appeals) and in terms of our observations recorded by us while disposing of the cross-appeals for the immediately preceding assessment year i.e. A.Y.2013-14 in ITA No. 122/RPR/2024 & ITA No.135/RPR/2024, finding no i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be quashed; relied on Synfonia Tradelinks (P) Ltd (2021) (Del HC); S Goyanka Lime & Chemicals Ltd (2015) (SC); Chhugamal Rajpal (1971) (SC); Arjun Singh (2000) (MP). 3. On the facts & circumstances of the case and in law, ld CIT(A) has erred in sustaining addition of Rs. 1,32,65,272 on count of adhoc estimation of GP of 10% on alleged bogus purchases of Rs. 15,44,26,911 without giving any basis for such arbitrary estimation; while the assessee is a trader in goods i.e., paddy, rice and broken rice; corresponding sales has been accepted; there cannot be a case of "bogus purchase" in case of a "trader in goods" wherein corresponding sales quantity of goods is not disputed by the revenue; addition of Rs. 1,32,65,272 is unjustified; is liable to be deleted. 4. On the facts & circumstances of the case and in law, ld CIT(A) has erred in sustaining addition of Rs. 1,32,65,272 on count of adhoc estimation of GP of 10% on alleged bogus purchases of Rs. 15,44,26,911 without giving any basis for such arbitrary estimation; revenue has rejected books of account; applied sec145(3); estimation of GP made @10% but assessment not made u/s144; in such a situation, assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear i.e. A.Y.2014-15 that the assessee had made bogus purchases from 9 tainted parties, initiated proceedings u/s. 147 of the Act. Notice u/s. 148 of the Act, dated 30.03.2017 was issued to the assessee. In response, the assessee filed his return of income on 17.11.2017, declaring an income of 12,75,640/-. 49. During the course of the assessment proceedings, the A.O observed that the assessee had claimed to have made purchases aggregating to Rs. 15,44,26,911/- from ten tainted parties, as under: Sr. No. Name of the Bogus firm Amount of purchase Peak purchase amount Date of peak purchase 1. M/s. Agrawal Agro, Dunda, Raipur Rs.3,51,50,375/- Rs.5,17,500/- 11/06/2014 2. M/s. Shrikhand Agrotech, Raipur Rs.1,86,22,050/- Rs.5,42,500/- 27/07/2014 3. M/s. Hardaha Agency, Abhanpur, Raipur Rs.72,34,000/- Rs.5,82,500/- 29/07/2014 4. M/s. Sakshi Gopal Corporation, Raipur Rs.1,20,16,800/- Rs.5,48,750/- 06/08/2014 5. M/s. Pushkar Paddy Rs.1,49,00,050/- Rs.5,58,900/- 07/07/2014 6. M/s. Eden Rice Mill Rs.89,28,000/- Rs.4,48,000/- 02/03/2015 7. M/s. Shri Shyamji Rice Agrotech Rs.77,01,500/- Rs.4,87,500/- 03/08/2014 8. M/s. Shree Annapurna Foods Rs.1,20,47, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the value of the same resulting to an addition of Rs. 3,86,06,728/-. 52. Apart from that, the A.O being of the view that the assessee would have made unaccounted investment by rolling his unaccounted money in his business activities, thus, made an addition of peak purchase amount pertaining to the aforesaid bogus firms (except for six concerns) of Rs. 26,80,650/- u/s. 68 of the Act. Accordingly, the A.O based on his aforesaid observations vide his order passed u/s. 143(3) of the Act, dated 30.11.2017 after, inter alia, making the aforesaid additions determined the income of the assessee at Rs. 4,88,46,806/-. 53. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) who partly allowed the same. Apropos the addition of Rs. 15,44,26,911/- (supra) that was made by the A.O by disallowing 25% of the alleged bogus purchases of Rs. 3,86,06,728/- that the assessee had claimed to have made from 6 parties (out of 10 parties), the CIT(Appeals) holding a view that the GP rate of 10% (as was prevailing in the trade line of rice milling) would fairly take care of the aforesaid issue, thus, after referring to the GP rate of 1.41% that was already disclosed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2016, Ld. AO conducted a thorough inquiry on the aspects including the purchases made by the assessee from Sharma group aggregating Rs. 63.90 crores and having considered the contentions of the assessee, Ld. AO reached a conclusion that the material purchased from the Sharma was bogus, and since the assessee itself offered rate of GP in business at approximately 8% however, to recover any further leakage of revenue, 0.25% was to be added to the rate offered by the assessee. Basing on this premise, Ld. AO recalculated the GP at 9% of the sales turnover by rejecting the books of account of the assessee u/s. 145. According to AO the difference between 9% of the turnover, the aggregate amount of the GP already declared by the assessee and the additions made during the earlier assessment u/s. 153A had to be added. Decision on similar line has been given by ITAT Mumbai in case of Ratnagiri Stainless Pvt. Ltd. Vs ITO ITA No. 4463/Mum/2016 Dated 04.04.2017. Facts are as under- "The AO, on the basis of information received from Dy Director of IT (Inv.) that assessee had received bogus purchase invoice from 28 entry providers, reopened assessment. No evidence was produced by asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 15,44,26,911/- the assessee must have invested his unaccounted income which is being rolled into its business activities. hence the element of unaccounted investment has to be determined which is taken as the peak purchase amount from theses bogus firms (except six as above) and stands at Rs. 26,80,650/-. The same is added to the total income of the assessee us/ 68 of the I.T.Act, 1961. 3.2.2 During the appeal proceeding the appellant company to submitted the reply as under:- "It is submitted that the Ld. AO has made this addition on mere presumption, conjectures and surmises and on a baseless belief that the assessee had made unexplained investment in alleged bogus purchases of paddy broken rice and rice from the alleged parties/vendors while the fact is the assessee has earned Rs. 62,83,788 as commission income on undisclosed bank account of the alleged 6 firms which has been added by the Ld. AO on the basis of statement recorded on 09.11.2017 which forms part of the assessment order dt. 30.11.2017. It is not disputed by the assessee in first appellate proceedings before your Honor, it means the alleged income earned of Rs. 62,88,788/- during the A.Y. 2015-16 be availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een added and total has been treated as unaccounted investment. On the facts of the case, the assessee making bogus purchase of Rs. 15,44,26,911/-.The case of purchases made out of unknown sources. The transactions reflected in the bank accounts of assessee are having the same pattern. The assessee giving check/online transfer to six parties and these six parties withdraw the same amount from their bank accounts in form of cash. This cash is handed over to the assessee by the entry operator. Then this cash is used for purchases from gray market in cash at lower rate. Then, the sales is done and payment received in bank accounts. Here one round is completed. Then the another payment in form of bank transfer is made for bogus purchases and entire year it goes on like in this way. In this the process there is a first initiative money to run all these affairs and it is ng always unaccounted money i.e. seed money of all these bogus purchases. In this case this seed money is also present. The Ld. AO is validly assessed it as Rs. 26,80,650/- by drawing the peak of purchases is hereby confirmed. The appeals of ground is dismissed. 4. In the result, appeal are partly allowed." 55. Both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile disposing off the cross- appeals for the immediately preceding assessment year i.e. A.Y.2013-14 in ITA No.122/RPR/2024 & ITA No.135/RPR/2024, find no infirmity in the view taken by him and, thus, uphold the same. Thus, the Grounds of appeal Nos. 3 & 4 raised by the assessee are dismissed and Grounds of appeal Nos. 1 to 3 raised by the revenue are dismissed in terms of our aforesaid observations. 60. Apropos the addition made by the A.O of Rs. 26,80,650/- towards the value of peak purchase, we are of the view that as the facts involved qua the aforesaid issue remain the same as were there before us for the immediately preceding assessment year i.e. A.Y.2013-14 in ITA No. 122/RPR/2024 & ITA No.135/RPR/2024, therefore, our observations therein recorded while adjudicating the said issue shall mutatis-mutandis apply for this year also. Thus, the Ground of appeal No.5 raised by the assessee is dismissed in terms of our aforesaid observations. 61. In the result, appeal filed by the assessee in ITA No.124/RPR/2024 and appeal filed by the revenue in ITA No.138/RPR/2024 for A.Y.2015-16 are dismissed in terms of our aforesaid observations. 62. Resultantly, the appeals filed by the ass ..... 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