TaxTMI 
TaxTMI 
2017 (4) TMI 107
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....the addition of Rs. 2,32,328/- on account of so called bogus purchases effected by the petitioner. 2) The Learned CIT(A) has erred in confirming and retaining the addition of Rs. 8,15,231/- on account of capitalization of interest in respect of capital expenses incurred by our petitioner during the year ended 31.03.2011. 3) The Learned CIT (A) has erred in retaining and sustaining for amount of Rs. 5,21,358/- being portion of expenses which according to Assessing authority was requiring to capitalized 2. The short facts of the case are as under: The Assessing Officer has made the addition of Rs. 18,58,622/- as unexplained investment in purchases shown from three parties. According to the Assessing Officer, the assessee has made ....
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....) 355 ITR 290 and thereafter in the case of CIT vs. Simit P. Sheth ( 2013) 219 Taxman 85 (Gui) has held that in such facts and circumstances, not entire purchase price but only profit element embedded in such purchases can be added. The finding of the Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Seth is as under :- "We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed purchases of steel. It may be that the three suppliers from whom the assessee claimed to have purchased the steel did not own up to such sales. However, the vital question while considering whether the entire amount of purchases should be added back to the income of the assessee o....
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....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). 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, however, scaled down to 12.5 per cent. We may notice that in the immediately preceding year to the assessment year under consideration the assessee had declared the gross profit at 3.56 per cent o....
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.... be added to the income of the assessee. The assessee has submitted purchase invoices of three parties, ledger account copies of the bank statement showing the payment of purchases to above parties transport receipts, receipt and entry of the material in stock register. Therefore, the assessee had made purchases and made payment through proper channel. The assessee did not produce the parties, but payments have been made by the crossed account payee cheque back by transport receipt and capital payment. They are all made by agent of purchaser. The Ld. A.R. submitted that the assessee has made purchases from the parties and as per the decision Supreme Court in the case of CIT vs. J.M.D. Computers & Communications Pvt. Ltd., S.I.P. (C) of No.2....
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....ssessee has made payment by cheque to these parties and thus the purchases have been made by the assessee. Moreover, the assessee has sold this much goods which he has purchased from the above parties therefore, it is rightly concluded that the purchases shown by the assessee is not in doubt, but the assessee might have not purchased from these parties who he might have purchased it from the grey market. Therefore, we are of the view that entire purchases cannot be added to the total income of the assessee and CIT(A) has rightly relied upon the decision of the Hon'ble Gujarat High Court in the case of CIT(A) vs. Simit Seth (supra) and our interference is not allowed. In the result, ground No. 1 of appeal of the assessee is dismissed. ....
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.... by the assessee. The CIT(A) has not pointed out any defect in the working given before CIT(A) therefore, we direct the AO to capitalize interest expenditure of Rs. 6,96,075/- in the result ground No.2 of assessee's appeal is allowed. The third ground:- 9. The Assessing Officer asked the assessee to furnish the details of expenses related to work in progress as the Assessing Officer noticed that some of the expenses debited under the head administration and selling expenses, like travelling, salary are definitely related to work in progress. However, he disallowed Rs. 10 lakh and capitalized work in progress. Therefore, he disallowed. 10. The matter carried to CIT(A) and CIT(A) has partly allowed the appeal on the ground that 10% o....