AI Drafter 
TaxTMI 
TaxTMI 
2010 (2) TMI 1211
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....stated the facts of this ground are that the assessee was engaged in the business of resale of Dyechem. On total turnover of Rs. 66,45,144, gross profit was declared at Rs. 7,73,444 at the rate of 11.64% and net profit at Rs. 1,41,759 at the rate of 2.13%. During the course of assessment proceedings the Assessing Officer issued notice u/s.133(6) to certain parties with whom the assessee had entered into trading transactions. One of such notice was issued to M/s.Harshit Enterprises from whom the assessee had shown to have made purchases amounting to Rs. 10,15,000. Shri Yogendra B.Shah, proprietor of M/s.Harshit Enterprises replied to AO vide his letter that he had not entered into any business transactions with the assessee and as such there....
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....t was temporarily concluded. Again when the statement was continued on 13.3.2007 the assessee failed to give the desired information but insisted of having made the purchases through broker. The A.O. called upon the assessee to produce the said broker through whom such transaction was entered into. Though the assessee gave the name of the broker and his mobile number, but expressed his inability to give his address or produce the broker. On the basis of mobile number given, the A.O. issued summons u/s.131 to the broker Shri Manish Gaglani which was duly served through the Ward Inspector. The broker did not respond. The A.O. deputed the Inspector to verify the business activities of the other two parties i.e. M/s.Jyoti Enterprises and M/s.Me....
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....um of the purchases held by the AO to be bogus vis-à-vis the total quantity of sales and closing stock, it becomes clear that some goods were in fact purchased by the assessee which were subsequently sold, as but for the inclusion of such quantity purchased the sale of the quantity declared is not possible. At the same time the Assessing Officer also brought the inquiry to the logical conclusion that the purchases from these three parties were bogus. It is simple and plain that unless some purchases are made there cannot be corresponding sale. The only possibility which exists in such a situation is that assessee made the entries for bogus purchases at inflated rates while keeping the actual purchases at lower rates outside the books....
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....- Purchase from these three parties Rs.42,99,845 Conversion of purchase price into sale price with profit rate of 5%. (42,99,845 / 100 x 105) Rs.45,14,837 Net profit (45,14,837 - 42,99,845) Rs. 2,14,992 Less : Net profit declared by the assessee (45,14,837 x 2.13 / 100) Rs. 96,166 [Since the net profit rate declared by the assessee is 2.13%] Further addition (2,14,992 - 96,166) Rs. 1,18,826 5. We, therefore, uphold the addition at Rs. 1,18,826 allowing relief of Rs. 41,81,019. This ground is partly allowed. 6. Ground no.2 is against the addition u/s.68 for a sum of Rs. 3,28,000. The facts of this ground are that the assessee deposited cash of Rs. 18,70,000 in his bank acco....
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....d the Ward Inspector for inquiry of household expenses. Vide his report, the Inspector observed that the assessee's family consisted of four members and the total household expenses were Rs. 15,000 per month along with education expenses of both the children at Rs. 53,000 per annum. Considering this report, the Assessing Officer determined the total household expenses at Rs. 2,33,000 [Rs.1,80,000 (Rs.15000 x 12) + Rs. 53,000]. Since the assessee had shown withdrawals at Rs. 54,000, the A.O. made addition of Rs. 1,79,000. No relief was allowed in the first appeal. 9. We have heard the rival submissions and perused the relevant material on record. It is seen from the assessee's contention made before the learned CIT(A), as reproduced at pa....