AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 641
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.... CIT(A) arising from the assessment order dated 27-03-2014 passed by learned Assessing Officer (hereinafter called "the AO") u/s 143(3) of the Income-tax Act, 1961 (hereinafter called "the Act"). 2. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") read as under:- "1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred by not verifying and examining whether quantity of alleged bogus purchases made and their corresponding sales is accounted in the books of accounts. During the assessment proceedings the assessee failed to establish the facts and discharge his onus. In this case the purchases were....
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....r.w.s. 143(2) of the 1961 Act, information was received by the AO from DGIT (Inv.) Mumbai regarding bogus purchases as informed by the Sales Tax Department, in which the assessee company appeared as one of the beneficiaries for the transaction of Rs. 82,54,793/- with the alleged entry operators, the details of which are as under:- Sr No Name of the party PAN TIN F.Y. Amount involved(Rs) 1 Somnath International AISPG1601K 27470616755V 2019-11 1,60,538 2 M R Corporation BFLPS4883N 27710551730V 2010-11 4,36,255 3 Viva Trading Pvt. Ltd. AADCV3609A 27040801631V 2010-11 22,50,000 4 Pluto Multitrade P. Ltd. AAFCP5947B 2792079455IV 2010-11 54,08,000 ....
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....bserved that the assessee could not prove the genuineness of the purchases from the said above four parties and these parties have provided accommodation entries to the assessee by issuing bogus bills without supplying any material. The notices issued to the said parties u/s 133(6) of the 1961 Act has returned unserved. The AO observed that onus of proving genuineness of the purchase transaction is on the assessee as the said purchases to the tune of Rs. 82,54,793/- stood debited in Profit and Loss Account of the assessee, which onus the assessee failed to discharge that said purchases were genuine. The AO held that transaction of purchase of material to the tune of Rs. 82,54,793/- from these four parties are nothing but a colorable devices....
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....ked out as follows - 27.98% (AY 2006-07), 18.36% (AY 2007-08), 16.14% (AY 2008-09), 12.98% (AY 2009-10) and 12.56% (AY 2010-11). The average GP of these five years works out to 17.6% which according to the AR should be the basis for making the addition. 5.1 While dealing with a similar issue, the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Sheth (356 ITR 451) had endorsed the stand of the CIT(A) who held that when all the sales have been accepted by the AO, he could not possibly question the very basis of their purchases. The Hon'ble High Court had accordingly held that the only element worthy of addition in such a case would be the element of profit and not the purchases. In the instant case, it is seen that ....
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....ted that the assesse has not proved the consumption/utilization of material allegedly purchased from these four hawala entry providers who have merely issued bogus bills without supplying material, for production of finished goods. The learned DR submitted that learned CITA(A) erred in applying GP ratio to these alleged bogus purchases in the absence of the assessee proving consumption/ utilization of the material for producing finished goods. It is submitted by learned DR that the assessee failed to prove genuineness of these alleged purchase transactions from hawala entry providers. Under these circumstances the learned DR submitted that the matter needs to be set aside and restored to the file of the A.O. for re-determination of the issu....
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....any is a manufacturer of engineering goods and the assessee could not prove that the material so purchased from these alleged hawala entry operators has been utilized/consumed for manufacturing of the engineering goods as well the assessee could not prove genuineness of the purchase transactions. In the absence of utilization/consumption of the material so purchased from these alleged entry providers being proved for manufacturing of finished goods, there is always possibility of manipulations to suppress profits and evade taxes and hence it is critical for the assessee to prove utilization/consumption of these material so purchased for manufacturing of finished goods dealt with by the assessee. In our considered view keeping in view factua....