2017 (12) TMI 1467

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....s to 12.5% of the bogus purchases and thereby deleting the addition of Rs. 2,69,30,806/- without appreciating the fact that the assessee could not produce any evidence in support of purchases during the course of either survey conducted at its premises or assessment proceedings. ii. On the facts and circumstances of the case and in law the CIT(A) erred in restricting the addition on account of peak credit of bogus purchases to 12.5% of the bogus purchases without appreciating that method of peak credit adopted by the Assessing Officer was the most appropriate method to avoid double addition and to bring the actual income of the assessee where there are large number of unexplained credit and debit entries. 2. The appellant craves to add, to amend and/ or alter any grounds of appeal, if need to be. 3. The Appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-48, Mumbai may be set aside and that of the Assessing Officer restored." 2. Briefly stated, the facts of the case are that the assessee company which is engaged in the business of trading in chemicals, solvent, and bulk drugs had filed its return of income on 29.09.200....

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....he purchases of the assessee company for AY: 2009-10 to AY: 2011-12 were inflated by an amount aggregating to Rs. 12,77,22,576/- in the 'books of account', and had offered the same for tax. That during the course of the assessment proceedings the A.O called upon the assessee to place on record the documentary evidence in the form of purchase order, gate pass, MRN/GRN, weighment bridge slips, lorry receipts, goods receipt notes, delivery challans, octroi receipts, transportation invoices, stock register etc, and also to produce the respective parties from whom the purchases were made, viz. (i) M/s Manav Impex; (ii) M/s Navpad exports Pvt. Ltd.; and M/s Saileela Trading Pvt. Ltd., so that the genuineness and veracity of the purchase transactions may be proved beyond any scope of doubt. The assessee in reply to the aforesaid directions of the A.O though placed on record certain documentary evidence, but however, the A.O after deliberating on the same concluded that the assessee had failed to produce the requisite documents to establish the genuineness and veracity of the purchase transactions. 4. The A.O being of the considered view that in the backdrop of the details gathered duri....

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....s were genuine transactions and were duly accounted for in the books of accounts. It however came to the notice of the CIT(A) that the director of the assessee company had during the course of the survey proceedings filed an affidavit dated 11.03.2015, retracting his earlier statement on the ground that at the time of recording of the statement he was in stress and confused state of mind. It was claimed by the assessee that the goods purchased from the aforementioned supplier parties under consideration were sold to genuine customers, and in a similar manner the sales made to the aforementioned parties were sourced from genuine suppliers. It was thus the contention of the assessee before the CIT(A) that while for the sales of the goods purchased from the aforementioned parties stood duly recorded in the books of account, on the other hand the sales to the aforesaid parties under consideration were from the purchases made by the assessee from genuine suppliers. It was submitted by the director of the assessee company that during the course of the survey proceedings he had not offered the entire disputed transactions of purchase and sales for tax, but rather had agreed to pay the tax....

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.... remand report dated 27.02.2012 had stated that following the judgment of the Hon'ble High Court of Gujarat in the case of Simit P. Sheth (supra), the suppressed profit of the assessee on the bogus purchases may be estimated at the rate of 12.50%. The CIT(A) thereafter arrived at a material observation that the finding of the A.O in the assessment order and also in the remand report clearly established that there was no dispute with regard to purchase and sales of goods made by the assessee, however, the only dispute was with regard to the fact that such purchase and sale of goods had not been made from the parties declared as hawala parties by the sales tax department. The CIT(A) thus restricting the issue to the estimation of the profit element embedded in making of such bogus purchases by the assessee from the open/grey market, therein relying on the judgment of the Hon'ble High Court of Gujarat in the case of Simit P. Sheth (supra) estimated the same at the rate of 12.5% of the aggregate of the value of bogus purchases , viz. purchases claimed by the assessee to have been made from the hawala parties. That on the basis of his aforesaid observations the CIT(A) restricted the add....

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....see to have been made from the hawala parties. We find that though the assessee had submitted before the CIT(A) that the estimation of profit in the hands of the assessee in light of the lower VAT rate of 4% applicable in its trade line may be adopted, but however, the CIT(A) observed that the Hon'ble High Court of Gujarat had made an adhoc disallowance in respect of bogus purchases at the rate of 12.5% without referring to the Sales Tax rate applicable in respect of trade line of the assessee before them. The CIT(A) thus on the basis of his aforesaid observations restricted the addition in the hands of the assessee to 12.5%, as was suggested by the A.O in his 'remand report'. 9. We have given a thoughtful consideration to the facts of the case and are of the considered view that now when the A.O himself had agreed that the addition in the hands of the assessee be restricted to 12.5% of the aggregate value of the bogus purchase, therefore, no dispute survives as regards the estimation of such profit/margin element involved in making of such bogus purchases. We are of the considered view that even otherwise in the backdrop of our aforesaid observations, it remains as a matter of ....