AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 980
X X X X Extracts X X X X
X X X X Extracts X X X X
....gh the same and in the interest of justice we condone the delay of 280 days which in our considered view has occurred due to reasonable cause and thus admit the Cross Objections for adjudiciation on merits. 4. Respective I.T.A Numbers, grounds., Cross Objections and Ground are as under; ITA No.882/Ind/2016 by Revenue Assessment Year 2009-10 "1. The Ld. CIT(A) was not justified in restricting the disallowance made out of bogus purchase of Rs. 5,49,177/- as against total addition made of Rs. 62,50,997/-. 2. The appellant craves leave to add or otherwise amend the above grounds of appeal. ITA.No.883/Ind/2016 by Revenue Assessment Year 2010-11 C.O.No.51/Ind/2017 by Assessee Assessment Year 2009-10 1. Without prejudice to addition deleted by Ld. CIT(A), the addition of Rs. 5,49,117/- being 12.5% of the total alleged purchases liable to be deleted since the profit element in the sales against the alleged purchases have already been disclosed in the profit & Loss Account of the appellant. 2. Without prejudice to addition deleted by Ld. CIT(A), the addition Rs. 5,49,177/- to be deleted since the GR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....purchased at Rs. 12,57,012/-and Rs. 20,43,392/- respectively. Though the assessee has submitted the purchase bills, audited financial statements with respective Permanent Account No as well as VAT registration numbers, he was unable to satisfy the Ld. A.O who was of the confirmed view that the alleged purchases including VAT paid @ 12% and commission paid at 5% are part of the bogus purchases and added them to the income. Income of the assessee assessed at Rs. 1,37,58,671/- after making following additions; Income as per Return Rs. 82,04,180/- 1. Shares written off Rs. 50,000/- 2. Service Tax & Bonus Rs. 6,01,291/- 3. Addition on low withdrawals Rs. 1,80,031/- 4. Donation disallowed Rs. 21,500/- 5. Disallowed u/s 40A(3) Rs. 63,050/- 6. Unaccounted purchases Rs. 38,61,472/- 7. Interest income not shown by assessee Rs. 7,77,147/- Total income Rs. 1,37,58,671/- 7. Aggrieved assessee preferred appeal before Ld. CIT(A) challenging various additions made by the Ld.A.O and partly succeeded. As far as addition relating to unaccounted purchases is concerned Ld. CIT(A) restricted disallowance to Rs. 4,12,550/- being 12.5% of the disput....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave been accepted by the department (Pg. 129 of PB for audited P&L a/c) 5. To justify the genuineness of disputed purchase the and payments there on, following documents and details were submitted at the time of assessment proceedings: a. Name, address, PAN, TIN of supplier b. Ledger account of suppliers c. Purchase bills d. Bank statement evidencing the payments by the AI c payee cheque e. Stock registers f. Comparative GP NP chart for 3 years (Enclosed in PB at page 1- 114) 9. The addition of entire purchase would be seriously unjustified as it would lead to a case of taxing entire sales without along with the rebate if corresponding purchase. 10. The Ld. AO without any justification and purely on basis of assumption and surmises erred in making the addition of sales tax (VAT) of Rs. 2,29,394/- and unexplained commission of Rs. 2,86,743/- without any corroborating material in hand. 11. Further, additional case laws enclosed Pgs (C )to (O) 12. Suppliers have been doubted, purchases have not been doubted. 11. Ld. Counsel for the assessee placed reliances on the following judgments;....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unts are regularly audited. Cash book, ledger sale, purchase bills and vouchers were produced. Books of accounts are not rejected u/s 145(3) of the Act. Quantitative details are regularly maintained. Sales declared by the assessee not been doubted by the revenue authorities at any stage. The issue raised before us relates to purchases from two concerns M/s. Soham International and M/s. Shweta Enterprises and lifeline Pharmaceuticals and Madhur Impex at Rs. 12,57,012/- and Rs. 20,43,392/-respectively. Ld. A.O had doubted the genuineness of the purchases and treated them as bogus purchases and added it to the income of the assessee along with VAT paid thereon and commission of Rs. 1,65,020/- calculated @5%. Ld. CIT(A) restricted the disallowance to 12.5% of the alleged purchases bring down the addition toRs. 4,12,550/- placing reliance on various judgments inclujding that of Hon'ble Gujarat High Court in the case of Cit Vs. Simit P. Sheth (supra) giving following finding of facts; "Ground No. 9 9. This ground of appeal has been raised against the addition on account of bogus purchases of Rs. 38,61,472/-. The AO has discussed the issue at para 9 of the assessment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owing entries of payment through account payee cheque to suppliers and stack reconciliation statement -Sales of the purchased goods were no doubted and substantial amount: of sales made by assessee was to Government Department - further ,books of accounts of the assessee has not been rejected -Tribunal deleted disallowance - Whether merely because suppliers had not appeared before Assessing Officer or Commissioner (Appeals), it could not be concluded that purchases were no made by assessee -Held yes". In case of ITO vs. Deepak Popatlal Gala ITA No.5930 /Mum /2013, Hon'ble Mumbai -ITAT decided that- "In all the above cases the Co-ordinate Benches of the Tribunal has held that the A.O. was not justified in makinq the addition on the basis of statements given by third parties before the Sales Tax Department without conducting any other investigation. In the instant case also, the assessing officer has made the impugned addition on the basis of statements given by the parties before the Sales Tax Department. We notice that the Ld.CIT (A) has taken note of the fact that no sales could be effected without purchases .He has further placed reliance on the decision ren....
X X X X Extracts X X X X
X X X X Extracts X X X X
....estigation and take it to the logical end. But ,he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for details of the bank account of suppliers to find out as to whether the was any immediate cash withdrawal from their account. We find that no such exercise was done . Transportation of goods to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of the closing stock. As far as the case of Western Extrusion Industries ITA/6727/ Mum/ 2012/RGK 4 (supra) is concerned, we find that in that manner cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But , in the case before us, there is nothing, in the order of the A. 0., about the cash trial. Secondly, proof of movement of goods is not in doubt. Therefore, considering the peculiar facts and circumstances of the cases under appeal, we are of the opinion that the order of the FAA does not suffer any legal infirmity and there is not sufficient evidence on file to endorse the view taken by the A. O. So ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng but for this reason itself total purchase cannot be disallowed else abnormal and distorted profits will appear in the profit and loss account. 14. We find that similar issue has came up before the Co-ordinate Bench in the case of V.R. Enterprises V/s ITO (supra) and the Mumbai Tribunal following the recent judgment of Hon'ble High Court of Bombay in the case of PCIT V/s Mohommad Haji Adam & Co (supra) also estimated the addition for alleged various purchases @12.5% being the profit element therein observing as follows; "5. We have carefully heard the rival submissions and perused relevant material on record and deliberated on judicial announcements cited before us. We find that assessee was in possession of primary purchase documents and the payments to the suppliers was through banking channels. The assessee had established corresponding sales before Ld. AO. The books of accounts were audited wherein quantitative details of stock was provided. We are of the considered opinion that there could be no sale without actual purchase of material keeping in view the fact that the assessee-was engaged in trading activities. At the same time, the assessee failed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- " So far as the question regarding addition of Rs. 3, 70, 78,125/- as gross profit on sales of Rs. 37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of th8 view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6% gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result 01 which profit comes to 5.66. Therefore, considering 5.66 01 Rs. 3, 70, 78,125/- which comes to Rs. 20,98,621.88 we think it lit to direct the revenue to add Rs. 20,98,621 88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favor of the assessee and partially in favor of the revenue." 9 In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accor....