TaxTMI 
TaxTMI 
2017 (5) TMI 915
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....2008-09 and had directed the Id AO to adopt gross profit @ 10% of sale. Hence disallowance of expenses u/s 40A(3A) separately was not warranted. 4. The above Grounds of Appeal are without prejudice to one another. 5. The appellant craves leave to amend or alter any of the above Grounds of Appeal or to add new Grounds of Appeal during the course of appeal proceedings." Since the grounds taken by the department in all the appeals are common, for the sake of convenience, the same are taken from ITA No.7299/M/2014 for the A.Y. 2008-09 and are reproduced as under: "1(a). On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing to delete the addition of bogus purchases of Rs. 2,13,99,331/- without appreciating the fact that the AO, made detailed enquiry which had established that purchase bill were bogus and the purchase entries were just to inflate purchases and reduce profit. 1(b). On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in estimating the Gross Profit @10% as against the finding of the A.O. that the assessee had purchased the rejected stock of paper at a lower rate and selling the stock at a ....
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....ded by the A.O. u/s 131 of the Income Tax Act. The A.O. that there were 15 Purchases Bills and Delivery Challans totally amounting to Rs. 1,76,39,908/- of M/s Navkar Enterprises all dated 01.10.2008 which are not entered in the assessee's Purchase Register as well as Ledger Account of M/s Navkar Enterprises in the books of the assessee. On being conveyed by the appellant to the A.O. that the original bills required as per its Purchases Register of M/s Navkar Enterprises aggregating to 33 in Nos. could not be produced before the A.O. because it was lying with Sales Tax Department who had conducted raid on M/s Navkar Enterprises, a letter was written by the A.O. to the Asst. Commissioner of Sales Tax, Inv-7 Shri Sanjay Pawar as well the A.O. contacted him on the phone and it was replied by Shri Sanjay Pawar that only sample bill of the assessee is with him and all other bills were with the assessee. After narrating the damaging evidence collected by the A.O. which is briefly narrated in Para 15, Page 7 & 8 of the assessment order, the A.O. concluded that the purchases of Rs. 3,68,63,236/- were bogus purchases made by the appellant from M/s Navkar Enterprises. Similarly, purchase from....
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....the case and the fact that assessee has been using bogus bills of purchases, the A.O. is directed to take 10% of sales as gross profit and accordingly, re-compute the income of the assessee. Since the books of account have been rejected as basis for computing income and the income is estimated, therefore, there will be no separate disallowance u/s. 40A(3) on account of payments against purchases claimed to have been made to Navkar Enterprises and Shreeji Impex. In the result, the grounds of appeal are partly allowed." 5. The DR submitted that the assessee has made purchase from Enterprises and Shreeji Impex. Therefore, the assessee was asked to produce the cheques and books of account before the Assessing officer to verify whether the assessee has made purchase from Enterprises or not. The assessee has not purchase form Enterprises and all the payments made by cheques to Enterprises are crossed bearer cheques and not account payee cheques. Moreover, all the payments made to Enterprises where bearer cheques and all the cheques were encashed from Bank of Baroda by the third person and AO has also made enquiry from the Bank of Baroda. Moreover the AO has also verified from the Sale....
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....During the Assessment proceedings the A.O. issued notice u/s 133(6) to Navkar Enterprises to verify the genuineness of purchase and notice was returned unserved. The assessee submitted that party is not traceable, therefore, the A.O. has treated this purchase as bogus purchase. The Assessee also admitted that assessee is not able to produce these parties the total purchase from Navkar Enterprises and Shreeji Impex comes 4,06,83,277/-. On the above submission the CIT(A) has held that assessee has imported the rejected stock at cheaper rate and sold it at higher rate. Therefore, require bogus purchase bills and secondly, possible modus operandi is that he has purchased locally the damage stock from local supplier in cash therefore, required bogus bills. The A.O. has not disputed the sells of the assessee and quantity for closing stock the assessee has though disputed the addition but no evidence is produced to show that purchase were made from Navkar Enterprises and Shreeji Impex. Therefore, assessee has not made purchase from this part but the sells have been made. The Books of the account cannot be relied but the profit has to be estimated on the basis of the turn over or any other....
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....yardstick could be adopted." 9. We find that in the instant case the facts are similar to the judgment by Hon'ble Gujarat High Court, we find that entire bogus purchases and entire amount of bogus purchase cannot be the gross profit of the assessee. We find that the purchases were not bogus but were made from the parties other than those mentioned in the books of account. The Assessing Officer has not disputed the sales of the assessee and quantity of sales of closing stock. The assessee has though disputed the addition but no evidence is produced and no document is produced to show that purchases were made from Navkar Enterprises and Shreeji Impex. That being the position, not entire purchase price but only the profit element embedded in such purchases could be added to the income of the assessee. We therefore estimated the possible profit out of purchase made through non-genuine parties. The estimation rate of profit return must be necessary vary with the nature of business and no uniform yardstick could be added. We found that in the instant case stock and sales and the quantity-wise stock and purchases / sales were tallied to the last KG therefore, we directed to take th....
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....s to show that some benefit against the creditors taxed u/s. 41(1) has been taken whether in cash or in kind. But A.O. has not brought on record any material to show that any benefit has been taken by the assessee against these creditors in the previous year. No material has been brought on record even to show that the liability does not exist. The assessee has relied on the decision of Hon'ble ITAT in the case of Maharashtra State Consumer Federation Ltd., (supra) and on the decision of Hon'ble Delhi High Court in the case of Hotline Electronics Ltd. (supra). In these cases, it has been held that the A.O. should show that no liability existed and assessee has taken any benefit in any manner merely because in these cases liability was outstanding for more than few years it cannot be brought to tax u/s. 41(1). In the remand report, A.O. has stated that the assessee does not know the whereabout of a party and, therefore, liability cease to exist. But this logic does not work in business. If the assessee does not know the address of the creditor, it does not mean that the creditor will not come and ask for its money In any case he A.O. has not disputed the creditor and merely recovery....