TaxTMI 
TaxTMI 
2017 (8) TMI 712
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the facts relating to the issue before us is that the AO, on the basis of information received from Sales Tax Department, noted that the assessee has made bogus purchases from two parties namely, M/s. Raj Traderes and M/s. Bhadra Corporation totalling to Rs. 5,26,77,661/-. The AO accordingly issued a show cause notice to the assessee and consequently issued summons under section 131 to Shri Rahul Mehta and Shri Pravin Kumar, partners of the firm from whom the assessee made purchases and after recording their statements the AO took the view that the assessee has made bogus purchases amounting to Rs. 5,26,77,661/- and disallowed the same while making the assessment. 4. When the matter went before the CIT(A), we noted that, the CIT(A) has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. In the present case, CIT believed that when as a trader in steel the assessee sold certaom quantity of steel, he would have purchased the same quantity from some source. When the total sale is accepted by the Assessing Officer, he could not have questioned the very basis of the purchases. In essence therefore, the Commissioner (Appeals) believed ass assessee's theory that the purchases were not bogus but were made from the parties other than those mentioned in the books of accounts. That being the position, not the entire purchase price but only profit element embedded in such purchases can be added to the income of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT v. Kishor Athrutlal Paiel. In the result, tax appeal is dismissed." 46. In view of the facts and circumstances and the judicial pronouncements cited above what can be disallowed or taxed in the instant case of the alleged bogus purchases, as held by the Hon'ble High Court of Gujarat in the above cited cases is only profit element embedded in such purchases shown to have been made from the alleged bogus parties. 47. In the instant case, all the facts and circumstances outlined above leads to the conclusion that although the purchases made by the appellant from the 2 parties mentioned above during the year under consideration are not in doubt but at the same time it difficult to accept that the purchase price shown on the invoice....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er consideration and the balance addition made amounting to Rs. 4,60,92,954/- is hereby deleted. The Assessing Officer is directed accordingly." 5. The learned D.R., even though vehemently contended that this is a case where all the purchases are bogus and since the assessee failed to prove the genuineness it cannot be allowed, but could not adduce any evidence or cogent material which may prove that the purchases and sales made by the assessee were not reconciled. This fact proves that the assessee would have made purchases as the assessee could make the sales only if purchases are made. Without making purchases it would not be possible that the assessee could have made the sales. The Revenue has duly accepted the sales made by the asses....