2017 (10) TMI 160

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....arties which were alleged to be bogus purchases should be sustained notwithstanding the various evidences produced by the appellant and the facts particular to the appellant‟s case and thereby in confirming an addition to the extent of Rs. 1,75,04,222/-. 2. In confirming the disallowance of Rs. 9,15,542/- as interest attributable to advances given for acquisition of property notwithstanding that there were no borrowings made for this purpose and notwithstanding that the appellant had adequate own funds in the form of share capital and reserves to meet no disallowance in this case." 2. Briefly stated relevant facts of the case are that the assessee is engaged in the business of manufacturing of studded gold jewellery and plain gol....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s against the said additions on account of bogus purchases. On hearing the same and after obtaining the remand report of the AO on the said affidavits, CIT (A) decided the appeal partly allowing the appeal of the assessee. In his order, CIT (A) held that the addition of entire purchases is not sustainable and relied heavily on the jurisdictional High Court judgment in the case of CIT vs. Nikunj Eximp Enterprises [2015] (372 ITR 0619) (Bom). Further, CIT (A) held that restricting the addition to 12.5% of the said purchases is reasonable. He relied on the Gujarat High Court judgment in the case of CIT vs. Simit P Sheth [2013] (356 ITR 451) (Guj.) in this regard. Thus, the CIT (A) confirmed the addition of Rs. 1,75,04,222/- being 12.5% of Rs. ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....he order of the AO. Referring to the order of the CIT (A), Ld DR submitted that the CIT (A) is reasonable in restricting the addition to 12.5% of the said bogus purchases. The same need not be linked to the GP rate of the assessee considering the modus operandi involving the suspicious purchases from the said three suppliers. Referring to the said suppliers, Ld DR submitted that these suppliers never were produced for investigation by the AO. Ld DR is of the view that such suppliers and their wrong practices should not be encouraged by granting further relief to the assessee. He also submitted that the assessee buys bills from the marker and the material from grey marker and create required documents to meet the requirements of the law. But....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....to the business of Gold Jewellery. Further, it is a well established company and the GP rates are varying from 5.37% (AY 2010-2011) to 10.26% (AY 2012- 2013). In our view, this issue of percentage GP or NP need to revisit the file of the AO. AO is directed to study the relevant details of the company or that of the other good comparable ones and decide the issue afresh after granting a reasonable opportunity of being heard to the assessee. Further, AO is also directed to freshly consider the assessee‟s argument of netting of GP already shown in the books relatable to the said bogus purchases as well as the applicable VAT rates to the assessee. On VAT issues, the purchases in the grey market results into loss to the Government treasury....