TaxTMI 
TaxTMI 
2017 (11) TMI 244
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....147 and reassessments were completed on 20.03.2014 u/s. 143(3) r.w.s. 147 of the Act determining the income of the assessee at Rs..71,00,410/- for the Assessment Year 2010-11. The Assessing Officer while computing the income of the assessee treated purchases of Rs..62,31,157/- as non-genuine/bogus purchases for the reason that the purchases made by the assessee from some of the dealers referred to in Page No.3 of the Assessment Order are non-genuine. According to the Assessing Officer the dealers are providing only the accommodation entries as deposed by them before Investigation Authorities of Sales Tax Department of Maharashtra Government and the notice issued to the dealers by the Assessing Officer were returned unserved. The Assessing Officer also observed that confirmation of the concerned party, copy of transport receipts, copy of stock register, etc., were not furnished by the assessee. Therefore, for these reasons Assessing Officer concluded that the purchases made by the assessee are non-genuine and entire purchases from the dealers referred to in Page No.3 of the Assessment Order were treated as bogus and non-genuine purchases. 4. On appeal the Ld.CIT(A) restricted the a....
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....ased from these parties were used in the business and without which, corresponding turnover of 81.97 lac would not possible. Thus, there ought to be purchases made and hence, disallowance of purchases of Rs. 62.31 lac from 7 parties against total purchases of Rs. 63.50 lac during the year is not justified. b. In this regard, I find the ratio laid down by the Hon'ble High Court of Bombay in the case of CIT v. Nikunj Eximp Enterprises (P.) Ltd., quite relevant wherein Hon'ble High Court has held that:- "When the assessee have filed letter of confirmations of the suppliers, Bank statements highlighting the payment entries through account payee cheque, copies of invoices, stock reconciliation statements before the AO; and merely because the suppliers did not appear before the AO, one cannot conclude that the purchases were not made by the assessee. The AO cannot disallow the purchases on the basis of suspicion because the suppliers were not produced before them." C. The facts and circumstances as outlined above, clearly suggest that the purchases of materials by the appellant cannot be doubted but a major lacuna in these transactions is the unverifiable nature of the p....
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....ng sales are not doubted. Alternatively, the profit embedded in such sales against the alleged bogus purchases should be brought to tax. e. In the case of CIT-1 Vs Simit P. Sheth, ITA.No. 553 of 2012, order dated 16/01/2013, while deciding a similar issue, the Hon'ble High Court of Gujarat has held that: "We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed purchases of steel. It may be that the three suppliers from whom the assessee claimed to have purchased the steel did not own up to such sales. However, vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and nonexistent or that the purchases were actually made but not from the parties from whom it was 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 certain quantity of steel, he would have purchased the same qu....
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....f M/s Vijay Protein Pvt. Ltd. (supra), as approved by the Hon'ble Gujarat High Court in the case of Simit P. Sheth (supra) by disallowing 25% of purchases as the benefit garnered in such unverifiable purchases where sales are not disapproved, is a sound benchmark that is being adopted in the present case too. h. Therefore in the instant case, it is found that all the facts and circumstances outlined above lead to the conclusion that although the purchases made by the appellant from the above mentioned parties mentioned above during the year under consideration cannot be summarily rejected but at the same time it is difficult to accept that the purchases shown on invoices/bills issued by these parties are as per the prevailing market price of those materials or actually been made from such parties and might have been purchased in the grey market. The appellant has not placed any evidence on record that the goods were purchased from the above parties at arms' length price. The appellant has also not placed on record any comparable bills/invoices for purchases of similar items made from other parties to establish that the purchases from the above parties in question were at....