TaxTMI 
TaxTMI 
2019 (3) TMI 796
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....n'' ble Supreme Court in the case of N K Protein Ltd dated 16.01.2017, which is on the similar issue of bogus purchases and when the apex court order was already the law of the land when the Ld. CIT(A) has given his decision vide order dated 03.07.2017 ?" 2. "Whether on the facts and in the circumstance of the case and in law, the Learned. CIT(A) has erred in directing the A.O. to restrict the estimation of the profit at 3% instead of 100% of the total non-genuine purchases when he himself has accepted that these purchases are non genuine as held by A.O.? 3. "Whether on the facts and in the circumstance of the case and in law, the Learned. CIT(A) is justified in confirming the addition of only 3% in view of the deicison of Hon....
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.... as Survey operations were conducted on 03-10-2013 by the DGIT, Investigation Wing, Mumbai, in the case of Shri Praveen Kumar Jain and also in the group cases of Shri Gautam Jain and others. During the course of the operation, it was found that several name lending dummy directors, partners/ proprietors of various concerns which were literally controlled, operated and managed by Shri Rajendra Kumar Jain, Sanjay Choudhary and Dharmichand and the persons-in-charge belongs to their native place. This was "admitted by those persons in the sworn statements' recorded during the course of search operation and they have also admitted that they were made to the position by Shri Rajendra Kumar Jain and others. It was found that the group concerns....
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....e Act. The AO also stated that in the given facts and circumstances of the case, the assessee have indulged in non-genuine transactions and the intention of indulging in such activity is to suppress the true profits and to reduce the tax liability. Therefore the total purchases from the party amounting to Rs. 86,74,54l/- is treated as non-genuine purchases and is added to the total income of the assessee. 6. Upon the assessee's appeal, the ld. CIT(A) noted that he was in agreement with the findings of the A.O. that the purchases are not made from the party. However, he noted that the A.O. has added the entire amount of purchases from the party. But at the same time, the A.O. did not disturbed the sale, ignoring the fact that there will not....
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....ies, the appellant must have purchased from some other parties. In such a situation, adding the entire amount of purchase to the total income is not correct because it will give a distorted picture of the profit margin. In my considered opinion, which is supported by several judicial forums, estimating the profit percentage on such purchases is the correct way to bring the income to tax. Thus, the issue would boil down to finding out what is the correct element of profit embedded in bogus purchases which the appellant would have made from such unknown entities. 7. Thereafter, the ld. CIT(A) quoted several case laws. He proceeded to disallow 3% on the total purchases by holding as under: 6.13 Taking into consideration the above facts, the....
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....tivity and @3% for manufacturing activity or @ 2.5% across the board. It is also ascertained that the operating profit in case of diamond trading for computation of ALP by the TP wing is consistently in the region of around 1.75% to 3%. It is also brought to my notice that the AOs are also adopting 3% on the purchases made from Bhanwarlal group concerns, as the profit element embedded, in the subsequent assessments finalized on the similar set of facts. In view of the same and also since the profit margin is lesser in this sector, addition of the amount of entire purchases is not realistic. Considering the lesser profit margin in this sector i.e. around 2 to 3 percent and the taxes saved is around 1% and also on purchases made from places l....