TaxTMI 
TaxTMI 
2017 (11) TMI 1234
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....essment u/s 143(3) was completed by the Ld. AO on 28-03-2014 determining the total income of Rs. 1,23,50,530/-. During the course of reassessment proceedings, in order to verify the genuineness of purchases, notice u/s 133(6) of the Act issued to the parties at the addresses provided by the assessee. In respect of five parties the notices could not be served and returned back by the postal authorities with remarks 'not known', or 'left' etc., AO also noticed that the Sales Tax Department publicly displayed a list of nearly persons on their website who have admitted, issuing bogus purchase bills. AO issued show cause notice for verifying the genuineness of the five parties and also to produce the parties along with their books of account. The assessee furnished the ledger accounts, Xerox copies of sale invoices, delivery challans etc., along with submissions. AO, after examining the submissions and contentions of the assessee, concluded that the assessee did not .purchase any goods, from the above parties and hence total accommodation bills amounting to Rs. 1,15,95,928/- was treated as bogus purchases in order to inflate the purchases and / or expenses, sources for w....
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....al amount of such purchases had to be added as unexplained expenditure U/s 69C of the Act, since the expenditure was not verifiable, is the contention of the AO for considering the addition. 6.2 ' Brief summary of the submissions of the appellant in support of the grounds of appeal are that he is in the business, of last 20 years and is a law abiding citizen and the business affairs replicate true and fair picture, AO without considering the submissions of the appellant disallowed the entire purchases and if no purchases are made there cannot be any sales. AO never disputed the sales it is not practical to produce the details of the seller, appellant discharged his primary onus by submitting all documentary evidences such as bills and invoices during the assessment proceedings, that the GP rate is comparable from year to year, and addition is made by the AO with the only reason that notices are returned unserved. For the said reason the appellant requested to delete the addition made by the AO u/s 69C of the Act taking the peak credit of the purchases made from the 5 parties. Appellant relied on case laws of CIT-I Vs. Simith P Sheth of Gujarat High Court and Bholanath Poly F....
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....as received by the appellant from these parties. But, the appellant is not able to produce any evidence whatsoever to prove that the goods in terms of quantity and quality from the above said parties were actually received by the appellant. The appellant has not produced copies of the consignments, if any, received from the transport contractor showing that the material purchased from the consignors was actually delivered to the appellant and freight has been paid thereon. The Appellant is also not able to provide copies of the CRN evidencing the receipt/delivery of the goods along with the relevant purchase orders in respect of impugned purchases. The appellant is also not able to produce Goods consignment note, transport bills or octroi receipts issued to substantiate delivery of goods to the appellant. Thus, the appellant has not brought on record any independent and reliable evidence to prove complete trail in so far as movement of consignment from the said parties to the place of the appellant is concerned..Thus, the appellant is not able to prove at all the movement of consignment from the consignors and delivery of goods to the appellant in: case of alleged purchases from th....
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....ently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether the purchase price reflected in the books of account matches the purchase price stated to have been paid to other persons. The issue is whether the purchase price paid by the assesses is reflected as receipts by the recipients. The assesses has, by set of evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee nave been actually received by the apparent sellers. Hence, the estimate made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should be at a. particular sum or at a different sum, can never be an issue of law." 6.7. In Bholanath Polyfab Pvt. Ltd. 355 ITR 290 (Guj), the facts of the case were that the asses....
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....ribunal's decision in the case of Vijay Proteins Ltd. vs. Asstt.CIT [1996] 58 ITD 428 (Ahd). On appeal by the Department, the Hon'ble Gujarat High Court held as follows: "We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the doth and sell the finished goods. In 'that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this Court in the case of Sanjay Oilcake Industries vs. CFT (2009) 316 ITR 274 (Guj.). Such decision is also followed by this Court in a judgment dated August 16, 2011, in Tax Appeal No. 679 of 2010 in the case of CIT vs. KishorAmrutlal Patel. In the result, tax appeal is dismissed". 6.8 The facts in the present case are similar to the facts in the above mentioned case. In the present case, the Ld. AO has shown that the five parties in question were non-exi....
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.... Vijay M. Mistry Construction Ltd. 355 ITR 498 (Guj) and further approved the decision of Ahmedabad Bench, ITAT in the case of Vijay Proteins 58 ITD 428. In the case of Vijay Proteins, the Hon'ble ITAT was seized with a suppliers of oil cakes where 33 parties were found to be bogus by the departmental authorities even though payments were made to the said parties by cross cheques and in fact the A.O. in that case had brought adequate material on record to prove that the cross cheques had not been given to parties from whom supplies were allegedly procured but these were encashed from a bank account in the name of another entity, possibly hawala dealer. Subsequently, the money deposited in that account was .withdrawn in cash almost on the same day. The Tribunal however, held that if the purchases were made from open market without insisting for .genuine bills, the suppliers may be willing to sell the product at a much less rate as compared to a rate which they may charge in which the dealer has to give genuine sale invoice in respect of that sale, Keeping allsuch factors in mind, the Tribunal estimated an element of profit percentage of the overall purchase price accounted fo....
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....pheld by the Hon'ble Courts depending upon the nature of the business. As held in the case of Simit P. Sheth (supra) no uniform yardsticks could be applied to estimate the rate of profit and it varies with the nature of business. Taking all the facts into consideration and the assessee is offering reasonably good percentage of average GP of above 5% and also taking into the findings of the Hon'ble "Courts on this issue, I am of the view that estimation of 17.5% of profit would meet the * ends of justice. Therefore, I direct the AO to estimate profit of 17.5% on the total alleged bogus purchases from the five parties as the profit element embedded in such purchases. While estimating the GP on the bogus purchases, the percentage of average GP already offered in the books of account on the relevant sales out of the purchases is to be reduced from such estimated profit, since the same is already offered in the total purchases. Accordingly, the AO is directed to reduce 5% of the average GP from the estimated profit of 17.5% of the total bogus purchases. The net addition sustained is 12.5% on the total amount of purchases of Rs. 1,15,95,928/- which is also in tune with the decisi....