2017 (2) TMI 1084

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....Income Tax Act, 1961 (hereinafter 'the Act'). 2. The only common issue in this appeal of Revenue and that of CO of assessee is as regards to the estimation of gross profit on bogus purchases at the rate of 7.87%. For this Revenue has raised following two grounds: - "1. On the facts and in the circumstance of the case, Ld. CIT(A) erred in deleting the addition of Rs. 34,95,000/- on account of bogus purchase as the assessee has failed to prove the genuineness, identity and creditworthiness said transaction and also the party by whom the alleged transaction made by the assessee was listed as Hawala entry provider who indulged in providing accommodation entry through eh bogus concerns floated by him. 2. The learned CIT(A) d....

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.... required the assessee to produce these parties. The AO issued note sheets u/s 131 of the Act to these parties, which returned unserved. Therefore, the AO rejected the books of accounts by applying the provision of Section 145(3) of the Act and added the entire bogus purchases made from Hawala dealers amounting to Rs. 37,93,785/- by holding that these are accommodation entries introduced by assessee in his books of accounts to suppress the profit and to evade tax. Aggrieved assessee preferred the appeal before CIT(A). 5. The CIT(A) estimated the profit on this bogus purchases at 7.87% by observing in Para 3.5 as under: - "3.5. It has been held in the case of M/s. Nikunj Enterprises" 372 ITR 619 (Born) by the Hon'ble Bombay H....

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....is accordingly confirmed out of an addition of Rs. 37,93,785/- and the balance is deleted. Grounds of appeal Nos. 1, 2, 3, 4 & 5 are therefore partly allowed." Aggrieved, now assessee has filed CO and Revenue is in appeal. 6. We have heard the rival contentions and gone through the facts and circumstances of the case. When a query was put to learned Counsel for the assessee whether he has challenged the rejection of books of accounts before CIT(A) or before Tribunal, he conceded the position. Once the rejection of books of accounts are accepted by assessee, the CIT(A) has no option but to estimate profit because the Revenue has not doubted the sales. We also find that the assessee could file the details of purchase and sales i.e. bill....