TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 1843
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....faction, presumption and surmises. 3) In the facts and circumstances of the case and in law, the Assessing Officer erred in disallowing Rs. 6,46,545/- as alleged Non-genuine- purchases being 12.5% of the total purchases amounting to Rs. 51.72.357/- which has been further wrongly confirmed by the learned Commissioner of Income Tax(A) by ignoring detailed written submissions and case laws filed. a) even though the payment for purchases is made from the books by A/C payee cheques and cannot be termed as non-genuine even though the same has been fully allowed by the jurisdictional Mumbai Tribunal in recent case of Rajeev M Kalathil 6727/M/12, Ganpatraj A Sanghavi [I .T.A. No.2826/Mum/20l3], Ramesh Kumar & Co. Appeal No. 2959/Mum/20]4, Deepak Popatlal Gala [ITA No 5920/M/13], Ramila P Shah [ITA No 5246/M/13] Paresh Gandhi [ITA NO-5706/M/2013], Hiralal Chunilal Jain [ITA No 4547/M/14], Tarla Shah [ITA No. 5295/Mum/2013J and M/s. Imperial Imp. & Exp [ITA No, 5427/MUM/2015J, Shivshankar R. Sharma, [ITA No. 5149/Mum/2014 & 4260/Mum/20I5], Govind Rathod [ITA NO ;439/MUM/2016], Shri Mahesh K. Shah ITA No. 5I94/Mum/20I4, Shri Sanjay Dhokad [ITA No. 929/Mum/2015], Manohar and Anita Kanda [I....
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....he AO issued notices u/s 133(6); however, such notices have been returned unserved with remark "left or unknown". The AO, based on the information received from the DGIT (Inv) coupled with further enquiries made during the course of assessment proceedings, came to the conclusion that purchases from the above parties are bogus in nature and accordingly, estimated net profit of 12.5% on total purchases made from those parties and made addition of Rs. 6,46,545 to the total income. The relevant portion of the order of the AO is extracted below:- "8. In view of the above facts, it is clear that even if the material in question shown as purchase from the abovementioned parties through fictitious invoice was actually purchased by the assessee, it was purchased from a source best known to the assessee, and not from the above mentioned bogus parties. The receipt of material is not in much doubt because the assessee is a trader and without receiving such material the corresponding sales would not have-been possible. However, it is amply clear that bill from the said party has been procured for accommodating purchase from the grey market, for accommodating purchase from the grey market. 8....
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....ideration, and the same is accordingly, disallowed and added back to the total income of the assessee. Penalty proceedings u/s 271(1) (c) are separately initiated for furnishing inaccurate particulars of income and for concealing the income." 3. Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), assessee has challenged reopening of assessment on the ground that the AO has reopened the assessment on mere change of opinion without there being any fresh material to form reasonable belief of escapement of income which is evident from the fact that the AO has recorded reasons for reopening of assessment on the basis of information received from DGIT (Inv). The assessee also filed elaborate written submissions on the issue of addition made by the AO towards estimation of net profit on alleged bogus purchases. The sum and substance of the arguments of the assessee are that the AO has made addition towards bogus purchases only on the basis of third party statements without providing an opportunity of cross examination of the parties to the assessee ignoring all evidences filed by the assessee including purchase bills and payment proof for su....
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....t the appellant also placed reliance on the judgement in the case of Bholanath Poly Fab Pvt. Ltd. and has admitted that profit element is required to be taxed. xiv. Thus in view of the above facts and circumstances of the case and the recent judgements quoted as above, it is observed that the likelihood of the purchase price being inflated cannot be ruled out and therefore in view of the above, the AO has not treated the entire purchases from the aforesaid parties to be bogus but held to have been made from the parties other than those mentioned in the books of accounts and that being the position, not the entire purchase price but only the profit element embedded in such purchases has been taxed by the AO @ 12.5%. xv. Therefore the possible profit out of purchases made through non genuine parties has been estimated by the AO which is commensurate with the judgment in the case of CIT vs. Simit P Sheth 356 ITR 451 (Guj.) of Hon'ble Gujrat High Court wherein disallowance on account of bogus purchases in the case of traders was sustained at 12.5% of the alleged bogus purchases. I xvi. The AG has only added the profit element embedded in the aforesaid bogus purchases @1....