TaxTMI 
TaxTMI 
2020 (3) TMI 474
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.... Income-tax (Appeals) restricting the disallowance to only 17.5% of the total alleged bogus purchase of Rs. 1,14,92,970/- ignoring the fact that the said seller parties were found to be Hawala operators/bogus billers as per findings given by the Sales Tax Department, Government of Maharashtra and the Investigation Wing of the Income Tax Department ? (ii) Whether on the facts and in the circumstances of the case, Tribunal was correct in law in confirming the order of the Commissioner of Income-tax (Appeals) restricting the disallowance to only 17.5% of the total alleged bogus purchase of Rs. 1,14,92,970/-, ignoring the fact that the assessee had neither filed any documentary evidence nor confirmation for purchase nor produced any evidence in the form of stock register during the course of assessment proceedings to substantiate its claim that the goods claimed to have been purchased from alleged parties were actually consumed/sold? (iii) Whether on the facts and in the circumstances of the case, Tribunal was correct in law in relying upon the decision of CIT Vs.Nikunj Eximp Enterprises Pvt. Ltd. 372 ITR 612 case ignoring that the facts of the said case are distinguishable from t....
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....purchases. Accordingly, the amount of Rs. 1,14,92,970.00 was added to the total income of the assessee. 6. Assessee preferred appeal before the Commissioner of Income Tax (Appeals)-22, Mumbai (briefly referred to hereinafter as "CIT (A)") 7. In the appellate proceedings, CIT(A) while accepting the contention of the Assessing Officer about the bogus nature of the transactions however held that the entire purchases from the eight parties could not be added as bogus, but what needed to be taxed is the profit element embedded in such transaction. Following Gujarat High Court decision in the case of CIT Vs. Simit P. Sheth, 356 ITR 451 (Guj), CIT(A) vide its appellate order dated 18th August, 2014 took the view that the estimation of 17.5% of profit would meet the ends of justice. Accordingly, direction was issued to the Assessing Officer. 8. In appeal before the Tribunal by the Revenue, Tribunal held that there was no reason to intervene in the finding of the CIT(A) which was a reasonable view. Accordingly, vide the order dated 21st September, 2016, Tribunal affirmed the findings of the CIT(A). 9. Hence, Revenue is in further appeal before us under Section 260-A of the Act. 10. Sub....
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....s purchase which works out to Rs. 20,11,270(17.5% of Rs. 1,14,92,970/-). The appellant get the relief of the balance Rs. 94,81,700/-. The grounds raised are partly Allowed." 13. Thus as can be seen from the above, CIT (A) had relied upon the decision of the Gujarat High Court in Simit P. Sheth (Supra) and took the view that entire purchases from the eight parties could not be added as bogus but what needed to be added to the total income of the assessee was the profit element embedded in such transaction. CIT (A) noted that assessee carried out only the job work of designing the clothes on contract basis; profit estimation ranged from 12.5% to 25%. In the circumstances of the case, CIT(A) took the view that taking of 17.5% as the profit would meet the ends of justice. Accordingly, Assessing Officer was directed to estimate profit of 17.5% on the total alleged bogus purchases and thereafter, to delete the balance amount of addition. 14. In further appeal Tribunal referred to the above finding of the CIT(A), whereafter it was held as under:- "6. Thus, from the aforesaid analysis, conclusions and findings recorded by the Ld. CIT(A), it is evident that total purchases were wrongly ....
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.... that payment for such purchases were made through regular banking channels, etc., to establish the genuineness of the purchases. Thereafter, Tribunal held that Assessing Officer could not bring on record any material evidence to show that the purchases were bogus. Mere reliance by the Assessing Officer on information obtained from the Sales Tax Department or the statements of two persons made before the Sales Tax Department would not be sufficient to treat the purchases as bogus and thereafter to make addition under Section 69C of the Act. Tribunal has also held that if the Assessing Officer had doubted the genuineness of the purchases, it was incumbent upon the Assessing Officer to have caused further enquiries in the matter to ascertain genuineness or otherwise of the transaction and to have given an opportunity to the assessee to examine/crossexamine those two parties vis-a-vis the statements made by them before the Sales Tax Department. Without causing such further enquiries in respect of the purchases, it was not open to the Assessing Officer to make the addition under Section 69C of the Act. 18. We are in agreement with the view expressed by the Tribunal. In fact, Tribunal....