2017 (9) TMI 307

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....appellant. Reasons assigned by him are wrong and insufficient to justify estimating profit @ 17.50% on such purchases. 2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in rejecting claim of the appellant that proceeding initiated under section 147 of the Act by issuing notice under section 148 of the Act is bad in law and contrary to the provisions of the Act. Reasons recorded by him depict mere suspicion and no tangible material is available in possession of the Assessing Officer. 3. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in rejecting claim of the appellant that order made under section 143(3) rws 147 of the Act is illegal, bad-in-Iaw, ultra virus, without allowing reasonable opportunity of the hearing, and without appreciating facts, submission and evidences in their proper perspective and without providing copies of material /evidences relied upon is liable to be annulled. 4. The learned Assessing Officer erred in charging interest under section 234A. 2348. 234C and 2340 of the Act. For A.Y.2010-11 ....

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.... bogus in so far as these were not traceable at the addresses given by the assessee. In his order AO observed that Information was received in this case from the Office of DGIT (Inv.), that this assessee has taken accommodation entries from certain parties to inflate its purchases. An inquiry u/s. 133(6) of the IT Act, 1961 in a number of scrutiny cases, including in the case of the assessee in AY 2010-11, revealed that several of these parties are not available at the given address and the notices have been returned by the postal dept. with the remarks 'Not Known', 'left', 'unclaimed', etc. The assessee has been unable to produce these parties or prove genuineness of purchases made from them including the transport details, delivery challans etc. This indicates that the assesses had adopted a modus operand; to decrease its true profits by inflating its expenses including purchase expenses by taking accommodation entries from such parties. The records of the assesses also reveal that the assessee has adopted this modus operandi in this year as well. This is apparent from the details of purchases from these parties (from whom the assessee had taken accommodat....

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....t would have made from some unknown entities. Hence, respectfully following the decision of the Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd. (supra), it is concluded that the profit margin embedded in such amounts of purchases could only be disallowed and subjected to tax. 2.7.20 Having decided that the profit margin only to be subjected to tax, now we have to see what is the percentage to be adopted for taxing, especially when it varies from trade to trade. Hon'ble Gujarat High Court in the case of CIT vs. Simit Sheth (2013) 38 Taxmann.com 385 (Guj), was seized with a similar issue where the A.O. had found that some of the alleged suppliers of steel to the assessee had not supplied any goods but had only provided sale bills and hence, purchases from the said parties were held to be bogus. The A.O. in that case added the entire amount of purchases to gross profit of the assessee. Ld. CIT(A) having found that the assessee had indeed purchased though not from named parties but other parties from grey market, partially sustained the addition as probable profit of the assessee. The Tribunal however, sustained the addition to the extent of 12.5%....

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....oss Profit at Rs. 94,740/-, The Assessing Officer made the addition of f 27,39,407/- for bogus purchases. If the above sum is added to the Gross Profit, the Gross Profit works out f 2,83,41,247/- which was more than the sale itself. The Tribunal held that it is impossible that the Gross Profit is more than the sale itself. The Tribunal also found that the assessee has maintained the quantitative details in respect of materials purchased and sold. Considering peculiar facts of that case, the Tribunal arrived at the conclusion that it would be fair and reasonable to estimate the addition at Rs. 50,000/~ as against the addition of Rs. 27,39,407/- made by the Assessing Officer. However, the Learned Commissioner of Income-tax (Appeals) considering the facts of the assessee's case, has sustained the addition at 12.5%. While doing so, he has also relied upon the decision of the Tribunal in the case of M/s. Vijay Proteins Ltd. 55 TTJ (Ahd) 76. In the case of M/s. Vijay Proteins Ltd. the Tribunal has sustained the addition of 25% of the bogus purchases. However, considering the facts of the assessee's case the CIT (A) restricted the disallowance to 12.5% as against 25% made in the c....