TaxTMI 
TaxTMI 
2018 (2) TMI 735
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.... reopened u/s 147 on the basis of information received from investigation wing which stated that the assessee is one of the beneficiaries of bogus purchase bills issued by suspicious / hawala dealers as per the list prepared by Maharashtra Sales-tax department. Subsequently, the case has been selected for scrutiny and notices u/s 143(2) and 142(1) of the Act were issued. In response, authorized representative of the assessee submitted various details, as called for. During the course of assessment proceedings, the AO noticed that the assessee has purchased materials from certain parties, who were listed in the list of hawala / suspicious dealers prepared by Maharashtra Salestax department. Those parties, in their statements, admitted that they have not actually delivered any goods, but have merely provided the bills and refunded back cash to the buyers after deducting their commission. The details of purchases made from such parties are as under:- Sr.No. Name of the party AY 2010-11 AY 2011-12 1 M/s Sunny International 51,480/- 18,73,361 2 M/s Triveni Metal India 5,16,462/- 4,81,419 3 M/s Osian Steel Impex 18,27,174/- 4 M/s Subham Steel Impe....
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....were appearing in the list of suspicious / hawala dealers prepared by the Maharashtra Sales-tax department. The CIT(A), after considering relevant submissions of the assessee and also by relying upon certain judicial precedent rejected ground raised by the assessee challenging validity of reopening of assessment on the ground that the AO has valid reasons for reopening of assessment which is evident from the fact that the information received from investigation wing clearly establishes the fact that the assessee is one of the beneficiaries of bogus purchase bills issued by certain suspicious / hawala dealers prepared by the Maharashtra Salestax department. Insofar as addition made towards bogus purchases u/s 69C, the CIT(A), after analyzing the raw material consumption details and gross profit declared by the assessee in the past and subsequent years determined gross profit on the basis of gross profit declared by the assessee for the assessment year 2013-14 and worked out addition sustained towards bogus purchases for both the assessment years. The relevant portion of the order of the CIT(A) is extracted below:- "7.13 Considering the above facts and in view of the decision of th....
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....91 and Lakshimaratan Cotton Mills Co. Ltd. v. CIT (SC) 73 ITR 634, has held that in order to claim that an expenditure falls u/s 37(1) of the Act, the burden of proving the necessary facts in that connection is on the assessee and not on the Department. Similarly, the Apex Court, in the case of Lakshminarayan Madan Lal v. CIT (SC) 86 TTR 439 and in the case of Swadeshi Cotton Mills Co. Ltd. v. CIT 63 7.17 Since the suppressed GP of Rs. 11,19,5467- and Rs. 33,76,0257-, in these years, is more than 25% of bogus purchases, i.e. Rs. 5,98,7797- & Rs. 17,61,0467-, therefore, the disallowance to the extent of suppressed GP i.e. Rs. 11,19,5467- & RS.33,76,0257-, as against total disallowance of Rs. 23,95,1167- & Rs. 70,44,1847-, is hereby sustained and balance disallowance of Rs. 12,75,5707- & Rs. 36,68,1597-, respectively, is deleted. All the grounds of appeal are partly allowed." 5. Aggrieved by the order of the CIT(A), the assessee as well as the revenue are in appeal before us. 6. The Ld.AR for the assessee submitted that the Ld.CIT(A) erred in confirming addition towards alleged bogus purchases from certain parties on the basis of estimation of gross profit on total turnover by tak....
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....as affidavits filed by the entry providers before sales-tax authorities to make addition towards purchases from the above parties and his order should be upheld. 8. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The AO disallowed purchases from certain parties on the ground that those are involved in providing accommodation entries without there being any actual delivery of goods. According to the AO, the information collected during the course of assessment proceedings coupled with enquiries affidavits filed by the entry providers before sales-tax authorities clearly prove that the assessee is not able to justify purchases from above parties except furnishing purchase invoices and payment proof. Mere furnishing of purchase bills and payment proof would not sufficient to justify purchases from above parties in the backdrop of clear findings by the sales-tax department that they are involved in providing accommodation entries. The entry providers also admitted before the sales-tax department that they actually issued bogus purchase bills without actual delivery of goods and returned cash back to the parties....
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....et profit depends upon facts of each case. The ITAT, Mumbai Bench in a number of cases have taken a consistent view and estimated net profit of 12.5% on bogus purchases. The sum and substance of ratios of the decisions of Courts and Tribunals are that in the case of bogus purchases only profit element embedded in bogus purchases needs to be taxed but not the total alleged bogus purchases. Therefore, we are of the considered view that the AO was erred in making 100% addition towards alleged bogus purchases u/s 69C of the Act. The CIT(A), without appreciating the facts has gone on a different footing and estimated gross profit by adopting assessment year 2013-14 gross profit to sustain the addition made by the AO towards alleged bogus purchases. 11. Coming to the case laws relied upon by the Ld.DR. The Ld.DR relied upon the case of Hon'ble Supreme Court in the case of NK Proteins Ltd vs CIT (2017)-TIOL-23-SC-IT. We have gone through the case law relied upon by the Ld.DR with the facts of the present case and find that in the case before the Hon'ble Supreme Court, the facts are entirely different inasmuch as the department has gathered various information including unsigned cheque bo....