TaxTMI 
TaxTMI 
2017 (10) TMI 1256
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....ll the years under consideration. 5. The assessee is engaged in the business of trading in electric and hardware materials. Upon receiving information from the Sales Tax Department that certain dealers are indulging in issuing only accommodation bills without actually supplying the materials and upon noticing that the assessee has purchased goods from some of such suspicious dealers, the Assessing Officer reopened the assessments of all the three years under consideration. Before the Assessing Officer the assessee furnished copy of bills and details of payments. However, assessee could not produce any confirmation letters from the suppliers and also could not produce the suppliers before the Assessing Officer. The Assessing Officer also issued notices u/s. 133(6) and they were returned back un-served. Hence the Assessing Officer disallowed entire amount of purchase in all the three years treating them as bogus in nature. The learned CIT(A), however, restricted the addition to 12.5% of the value of purchases made from suspicious dealers in all the three years under consideration. The Revenue is aggrieved by the decision of the learned CIT(A). 6. We noticed that the learned CIT(A) ....
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....3,72,895 25,87,399 31,84,790 40,24,437 45,33,170 GP ratio 4.30% 4.23% 3.87% 4.42% 5.35% NP 4,82,121 5,12,160 7,24,120 7,96,680 11,48,094 NP ratio 0.87% 0.84% 0.88% 0.87% 1.35% 7. The appellant also relied on the following decisions - "ITAT Mumbai in the case of Shri Rajeev G. Kalathil Vs. DC1T held that purchases cannot be termed as bogus by the AO merely because the supplier was listed as a hawala dealer by the Vat authorizes. ITAT Bombay Bench 'B' case of Balaji Textile Industries (P) Ltd. Vs. Third Income-tax Officer, held that no sales were likely to be effected if there were no purchases. A sale could be made if the goods were available with the seller. Therefore, the assessee was entitled to get the entire deduction of purchases made. Merely because the parties were not found at the address given, no adverse inference could be drawn against the assessee. This view is supported by the judgement of the Hon'ble Supreme Court in the case Ahmed & Sons vs. C1T (297 ITR 431). Also the judgement of the Hon'ble court of Gujarat in the case of MK. Bros. vs. 'IT 163 ITR 240 supports the case of the assessee. In that ca....
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....he genuineness of the purchases from such parties. 9. With regard to the appellant's reliance on various decisions it is seen that the facts of the appellant's case are different from the facts of the decisions relied upon by the appellant. In the case of Nikunj Exim (supra) the Hon'ble Bombay High Court held that the assessee in that case had filed confirmations from the suppliers, copy of bank account statement showing payment through check, stock reconciliation statement etc. Based on all this evidence the Tribunal's order holding that purchases were not bogus was held to be well reasoned. In the case of CIT vs. M.K. Brothers, it was held by the ITAT that there was no evidence that the parties had issued bogus vouchers and that the payment made by the assessee in that case through checks had been received back by the assessee. It was held that even though there were some doubtful features of the transactions but sufficient evidence was not there to hold the purchases as bogus. The Hon'ble Gujrat High Court upheld the order of the ITAT by observing that whether the said transactions were bogus or not was a question of fact. In the case of Rajeev Kalathil vs....
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....total purchases of Rs. 41,04,903/- cumulatively made from the said three parties were bogus. He thus, treated such purchases as bogus purchases and added the entire amount of Rs. 41,04,903/- to the gross profit of the assessee. The Commissioner (Appeals) though confirmed the view of the Assessing Officer that the purchases were not made by the said three parties viz. Bhavna Trading Co., M/s. Minaxi Enterprise and Arun Industrial Corporation but believed that the appellant assessee had made the purchases from other parties in the open market. Thereupon, he retained 30% of the purchase cost as the probable profit of the assessee. The Tribunal was of the opinion that twelve and half percent of the disputed purchases should be retained in the hands of the assessee as business profit. In the present case, CIT believed that when as a trader in steel the assessee sold certain 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 assessee's theory that the purchases were not bogus bu....
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....T(A) has noticed that the assessee has produced copy of purchase bills and details of payment. He has also noticed that the Net profit declared by the assessee was less than 1% in these three years and impugned addition made by the Assessing Officer would result in abnormal increase in NP ratio to around 8%, which is unreasonable one. Hence the Ld CIT(A) has taken the view that the entire purchases could not be disallowed. However, since the assessee has failed to furnish confirmation letters obtained from suppliers nor could he produce them before the Assessing Officer, the learned CIT(A) by following the decision rendered by Hon'ble Gujarat High Court in the case of CIT Vs. Simit P. Sheth (356 ITR 451) has restricted the addition to 12.5% of the value of purchases. The apparent inference drawn by the Ld CIT(A) is that the assessee could have made profit from out the impugned purchases by sourcing the materials from some other sources. Under facts of this case, we are of the view that the learned CIT(A) has taken a fair view on this matter and hence the orders passed by him on this issue does not call for any interference. 8. The Revenue is also aggrieved by the decision of t....