AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 1320
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.... the nature of secondary evidence and no primary evidence in the form of producing the relevant parties has been done to prove the genuineness of the purchases. 4) On the facts and circumstance of the case the Ld.CIT(A) has failed to appreciate the findings of the Assessing Officer that the purchases have been made out of undisclosed income and the same remained unexplained which required to be added to the total income of the assessee. 5) On the facts and circumstance of the case the Ld.CIT(A) erred in sustaining the addition only to the extent of Rs. 4,08,049/- by taking the 20% of the bogus purchases of Rs. 20,40,244/- and not considIering the fact that the entire purchases are bogus. 6) On the facts and circumstance of the case the Ld.CIT(A) has erred by asking the AO not to reduce Rs.l,00,31,881/- from WIP. Since the AO has factually proved the nongenuineness of 35 unsecured loan parties during the assessment proceedings. 7) On the facts and circumstance of the case the appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 2. The brief facts of the case are that the assessee is a partnership fir....
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....n'ble Gujarat High Court in the case of CIT vs Simit P Sheth (2013) 356 ITR 451 (Guj) upheld the findings of the Ld.CIT(A) for estimating 20% profit on alleged bogus purchases. The relevant observations of the Tribunal are as under:- ISSUE NOs.1 to5:- 4. Issue Nos. 1 to 5 are inter-connected therefore are being taken up together for adjudication. Under these issues, the revenue has challenged the deletion of the addition to the tune of Rs. 4,51,839/-. The Assessing Officer has raised the addition on account of nonproving the genuineness of the claim of the purchase regarding the three parties i.e., (i) Ajay Ston to the tune of Rs. 3,09,818/- (ii) Raj Traders to the tune of Rs. 1,30,493/- (iii) Riya Enterprises to the tune of Rs. 1,24,488/- and the total to the tune of Rs. 5,64,799/-. The AO raised the total addition of bogus purchase and added to the income of the assessee. The CIT(A) restricted the claim to the extent of 20% of the bogus purchase in view of the law settled in CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. and CIT Vs. Simit P. Sheth ITA. No.553 of 2012 order dated 16.01.2013. Before going further, we deemed it necessary to advert the finding ....
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....aterials purchased from them. Such verification of the sale price shown on the invoices/bills was necessary to ascertain the correctness of the profits shown by the appellant for the period under consideration. This verification was also vital to determine as to whether the purchase prices shown on the are as per prevailing market prices of The materials purchased and to ascertain that the price paid for the materials purchased from these parties are not over invoiced In the absence of any such verification of the correctness of the price paid for the materials purchased by The appellant, the purchase price paid as mentioned on the invoices/bills cannot be accepted as the correct price paid for the goods purchased from such parties. In view of the same, the possibility of over-invoicing of the materials purchased to reduce the profits, cannot be ruled out. Therefore, the gross profit rate shown by the appellant for the year under consideration cannot be relied upon In the circumstances, [he correct approach in such transactions would be to estimate the additional baneful or profile eared on these purchases and noi to disallow entire purchases from these parties. The disall....
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....ire purchase price but only profit element embedded in such purchases can be added to the income of the assessee. So much is dear by decision of this Court. In particular, Court has also taken a similar view in case of Commissioner of Income Tax-IV vs. Vijay M Mistry Construction Ltd. vide order dated W.01, 2011 passed in Tax Appeal No. 1090 of 2009 and in case of Commissioner of Income Tax-I vs Bhofenath Poty Fab Pi/t Ltd vide order dated 23 10.2012 passed in Tax Appeal No. 63 of 2012. f. Similarly while dealing with an identical issue, in the case or CIT, Vs. Bhofanath Poly Fab (P) Ltd., ITA No. 63 of 2012, in the order dated 23/10/2012, the Hon'bles High Court of Gujarat has held as under:- 'We ere 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 reason came to the conclusion that the assesses did purchase She 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 pro....
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....ds to be added to the total income of the assessee on account of alleged bogus purchase from the three parties and the balance addition of Rs. 4,51,839/- is hereby deleted. Thus, grounds of appeal no. 3-9 are partly allowed." 5. On appraisal of the above said finding, we noticed that the CIT(A) has restricted the addition to the extent of profit element embedded in the purchase by relying upon the law settled in CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. and CIT Vs. Simit P. Sheth ITA. No.553 of 2012 order dated 16.01.2013 (supra). No distinguishable material has been produced before us from deviating the finding of the CIT(A) on these issues. Therefore, taking into account of all the facts and circumstances mentioned above, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage." 6. In this view of the matter and consistent with the view taken by the coordinate bench, we are of the considered view that there is no error in the findings recorded by the Ld.CIT(A) while scaling down addition made by the AO towards alleged bogus purchases and restricting 20% profit on suc....