TaxTMI 
TaxTMI 
2017 (9) TMI 729
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.... less raised common grounds. However, the only solitary issue arising from those grounds of appeal relate to additions made by the AO towards bogus purchases from alleged hawala operators and findings of the CIT(A) in reducing the disallowance made by the AO to net profit element in those alleged bogus purchases. 3. The brief facts of the case as extracted from ITA No.5442/Mum/2016 are that the AO has reopened the assessment, based upon information received from the DGIT (Inv), Mumbai on a search action conducted on Shri Bhanwarlal Jain group that the assessee is a beneficiary of accommodation entries provided by M/s Little Diam, one of the benami concerns floated by Shri Bhanwarlal Jain. The AO relied upon the statement recorded on oath d....
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....after considering relevant submissions of the assessee and also taking into account the information received from DGIT (Inv) further coupled with independent enquiries conducted during the course of assessment proceedings, came to the conclusion that the assessee has taken accommodation entries of purchases from M/s Little Diam and hence, the purchases from M/s Little Diam has been treated as unexplained expenditure u/s 69C of the Act, and added back the same to the total income of the assessee. 5. Aggrieved by the assessment order, the assessee preferred appeal before CIT(A). Before CIT(A), the assessee reiterated its stand taken before the AO. The assessee further submitted that merely because a third party has alleged that certain parti....
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....ssessee was one of the beneficiaries of accommodation entries provided by Shri Bhanwarlal Jain group. He also observed that it is also an admitted fact that the assessee has not filed necessary evidences to justify the purchases from those parties. The fact that notices issued u/s 133(6) to the addresses provided by the assessee have been returned by the postal authorities unserved also indicates that the parties are not existed at the given addresses. All these facts go to prove that purchases from the above parties are not genuine and hence, the AO was right in treating purchases from said party as bogus in nature. The CIT(A) further observed that the AO has not disputed sales declared by the assessee. The purchases / sales co-relation ha....
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....e details. 8. On the other hand, the Ld.DR submitted that the AO has brought out clear facts to the effect that purchases from above parties are bogus in nature which is evident from the fact that the parties have accepted before DGIT (Inv) that they are involved in providing accommodation entries. The Ld.DR referring to the decision of Hon'ble Supreme Court in the case of N.K. Proteins Ltd in SLP 759 of 2017 dated 16-01-2017 submitted that once it is proved that the purchases are bogus, then addition should be made for entire purchases and not for profit element embedded in such purchases. In this case, all evidences lead to a conclusion that the assessee has taken accommodation entries from the above parties and hence, the AO has rightly....
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.... supported by proper evidences. The assessee also contended that the AO has not pointed out any irregularity in the books of account or stock statement and in the absence of any finding as to the incorrectness of books of account, addition cannot be made solely on the basis of third party statement. 10. The AO made additions based on the information received from Maharashtra Sales-tax department and the DGIT (Inv). The AO further observed that the parties have admitted before the sales-tax department that they are providing accommodation entries without actual delivery of goods. We find that the AO has brought out clear facts to the effect that the assessee has made purchases from certain parties who are involved in providing accommodation....
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..... 11. Having said so, let us examine what is reasonable profit in case of these transactions. Various courts and tribunals have upheld estimation of profit ranging from 12.5% to 25% depending upon facts and circumstances of each case. The Hon'ble Gujarat High Court in the case of Vijay Proteins Ltd vs ACIT (supra) has upheld estimation of net profit at 15% on bogus purchases. In yet another case, the Hon'ble Gujarat High Court in the case of CIT vs Smit P Sheth (supra) has taken a view that no uniform yardstick can be applied for estimation of net profit which depends upon facts and circumstances of each case. The Hon'ble High Court further observed that in such cases, the profit element embedded in such purchases can only be added to the ....