TaxTMI 
TaxTMI 
2017 (11) TMI 1142
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....intained at godown etc.? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in sustaining only an addition @ 6.5% profit rate on total purchases of Rs. 3,61,50,427/- made from 13 parties. 3. The appellant prays that the order of the Learned CIT(A) on the above grounds be set-side and that of the A.O be restored. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 2. Briefly stated, the facts of the case are that the assessee who is a reseller in Ferrous and Non-Ferrous Metals had filed his return of income on 26.09.2009, declaring total income of Rs. 5,51,310/-. The return of income filed by the assessee was processed as such u/s 143(1) of the 'Act'. That on the basis of information received from the DGIT (Inv.), Mumbai that the assessee was one of the beneficiaries of the accommodation entries provided by some of the MVAT dealers who were providing bogus purchase bills without supplying any goods, the case of the assessee was reopened u/s 147 of the 'Act'. 3. That during the course of the assessment proceedings the A.O on the basis of the information rece....
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....ad produced the parties for necessary examination, nor substantiated the genuineness and veracity of the purchase transactions on the basis of irrefutable documentary evidence, therefore, observed that the assessee had failed to discharge the onus as was so cast upon him. The A.O after deliberating on the facts of the case concluded that in the absence of the relevant supporting documents which could go to evidence the genuineness of the purchase transactions claimed by the assessee to have been made from the aforementioned parties, the same could not be allowed as an expenditure, by observing as under : "(i) It is pertinent to mention here that the Sales Tax Department has conducted independent enquires in each of the hawala parties and conclusively proved that these parties are engaged in the business of providing accommodation entries only. All of the above documents establish beyond doubt that the aforesaid parties did not supply any goods to the assessee. The parties are issuing bills without delivering any goods and services. The payments received by these parties are returned to assessee in cash after deducting a small portion for commission. (ii) It may al....
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....of the aforementioned purchases aggregating to Rs. 3,61,50,427/- (supra), made an addition of Rs. 90,37,607/- in the hands of the assessee. 5. The assessee being aggrieved with the order of the A.O carried the matter in appeal before the CIT(A). The CIT(A) at the very outset upheld the reopening of the assessment u/s 147 which was assailed before him by the assessee. The assessee further submitted before the CIT(A) that in the backdrop of the fact that the GP Rate for the year under consideration was 4.2%, therefore, disallowance of 25% of the total alleged non-genuine purchases of Rs. 3,61,50,427/-(supra) resulting into an addition of Rs. 90,37,607/- (supra) made by the A.O was uncalled for. The assessee submitted before the CIT(A) that the A.O discarding the substantial documentary evidence, viz. bank statements, copies of ledger accounts along with details of payments made to the aforementioned parties towards purchase consideration, as well as details therein correlating the sales made against the aforesaid purchases were placed on the record of the A.O during the course of the assessment proceedings, had therein merely on the basis of suspicion characterized the transaction....
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....ses with the items sold, therefore, it could safely be presumed that either the parties under consideration were non-existent or even if they did exist, they were not backed by sufficient evidence to undergo the test of scrutiny. The CIT(A) in the backdrop of his aforesaid observations concluded that as the purchases claimed by the assessee to have been made from the aforementioned 13 parties who were into providing bogus bills without supply of any material had thus remained unverified, therefore, taking support of the judgment of the Hon'ble High Court of Gujarat in the case of CIT Vs. Simit P. Sheth (2013) 38 Taxmann.com 385 (Guj), wherein the High court in respect of the case before it had restricted the addition @ 12.5% (Additional advantage towards tax benefit 10% + Profit margin 2.5%), concluded that as the assessee was also in the same line of business, i.e. trading in ferrous and non-ferrous metals, therefore, logically the profit margin could safely be adopted @ 2.5%. Thus, in the backdrop of his aforesaid observations the CIT(A) restricted the addition in the hands of the assessee to 6.5% (i.e. 4% of VAT levied + 2.5% towards Profit margin) of the aggregate value of the ....