TaxTMI 
TaxTMI 
2019 (6) TMI 1462
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....fore CIT(A). B) ASSESSMENT BASED ON SUSPICION & ON SURMISES 1. The learned CIT(A) has erred in law & in facts to confirm action of A.O. on the basis of conjunction, suspicion & surmises. 2. The learned CIT(A) has erred in law & in facts that when the books being not rejected & accepted as true, the book results cannot be disturbed by making addition for bogus purchases. 3. The learned CIT(A) has erred in law & in facts to appreciate that the books of accounts has to be treated as evidence except proving is to be wrong. 4. The learned CIT(A) has erred in law & in facts in rejecting the explanation by the appellant without proving that it is false & purely on the basis of predetermined mind without looking to the facts & evidences produced. 5. The learned CIT(A) has erred in law & in facts to held that material was purchased from different source only on the basis of suspicion and without any corroborative evidences & specially when turnover & Gross Profit in percentage terms is higher than earlier previous year. 6. The learned CIT(A) has erred in law & in facts for treatment of declaration of hawala dealer by vat authorities as evidence when the statements made by haw....
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....ed in law & in facts to treat purchase parties as non-genuine just for non-production of purchase parties & on the basis of finding of VAT authorities without anything found by AO & also to held that delivery of goods is not proved. 8. The learned CIT(A) has erred in law & in facts to give more weightage on secondary evidence i.e. affidavit by hawala dealers than primary evidences available in the form of bills, cheque payments subsequent sales etc. and confirming addition on the basis of third party statements without any corroborative evidences. 9. The learned CIT (A) has erred in law & in facts to make addition in current year even if it is held of suppression of stock of earlier year. 10. The learned CIT(A) has erred in law & in facts to note that the some of the purchase parties were " VAT cancelled" dealers & not hawala parties & the parties are treated genuine by the VAT Department before cancellation & even purchases in case of appellant has been treated genuine in vat penalty order by VAT authorities. 11. The learned CIT(A) erred in law & in facts to apply the rate of G.P. rather than the rate of N.P & also estimating very high rate of GP. D) REASSESSMENT 1. T....
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....son for verification, but the assessee failed to produce parties and also failed to file necessary evidences to justify purchases from the above parties. Therefore, the AO, on the basis of information received from DGIT(Inv.), which was further supported by enquiries conducted by Maharashtra Sales Tax Department, Govt. of Maharashtra, coupled with enquiries conducted during the course of survey, came to the conclusion that purchases from above parties are bogus in nature which is not supported by necessary details or evidence, therefore, he came to the conclusion that the assessee has failed to produce the parties and accordingly made additions towards total purchase from above parties amounting to Rs. 4,14,03,447/- under section 69C of the act. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld CIT(A). 3. Before the Ld CIT(A), the assessee had challenged reopening of assessment on the ground that the AO has reopened assessment on the basis of change of opinion without there being any material to suggest that income chargeable to tax had been escaped assessment. The assessee had also challenged additions made by the AO towards purchases on the ground....
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....ivery of goods. In view of above, the AO's view of treating the purchases from the 5 parties as bogus Ir upheld. Now the quantum of disallowance/ addition is to be decided based on facts of this case. On the issue of bogus purchases, there are contrary decisions of High courts and Tribunals. 5.3 In some of the decisions, it has been held that the fact that supplier's name appeared in list of hawala dealers of sales tax department and the assessee is to produce him does not mean that the purchases are bogus if the paymentis made through banking channels and the G.P. ratio becomes abnormally high if the additions made by the AO is accepted. The entire additions have been deleted in such cases on the ground that there is no proof that the amount has been received back by the assessee and on the ground that the opportunity of cross examination was not allowed to assessee. 5.4 In another set of decisions, disallowance of a particular percentage of the purchase price has been upheld on the ground that it is a matter of fact that the goods were not received from the parties who issued bills but from a different source which is exclusively within the knowledge of the assessee a....
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....nding that the estimation of rate of profit must necessarily vary with the nature of business and no uniform yardstick can be adopted. Normal G.P. was 3.56 %. 5.8 The appellant has filed particulars of purchase and the corresponding sales, summary of stock registers, bank statements etc. Disallowance of 100% of purchase as bogus does not seem to be justified for the reason that in-depth enquiries were not conducted by the AO. The AO did not carry out further investigation from Bank to examine whether the supplier has withdrawn cash from his account. However, the appellant has also failed to prove that the goods were purchased from the aforesaid parties. Moreover, the suppliers are in the list of hawala dealers of Sales Tax Department who have issued bills only and the appellant failed to produce the supplier for examination. The transportation bills were also missing in this case which is the adverse finding of assessment proceedings. The notice u/s 133 (6) issued by the assessing Officer to 4 parties out of 5 were returned back unserved. The one party on whom the notices u/s 133(6) was served did not submit any reply. The assessee was asked to produce the parties for verificatio....
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....s in facts brought out by the Tribunal of its order dated 04/08/2017. During the current proceedings, the assessee neither appeared nor filed any details to controvert the findings of the fact recorded during course of earlier proceedings. We further noted that the additions made by the AO towards alleged bogus purchases from certain parties is on the basis of report of the DGIT(Inv.) which was further supported by the report of M-Vat Department, Govt. of Maharashtra, where certain parties admitted that they are involved in the providing accommodation entries without their being any business activity. Even during the course of assessment proceedings, when the AO called upon the assessee to justify the purchases with necessary evidences, the assessee could able to furnish purchase bills and payment proof, but could not file further evidences in the backdrop of clear findings from the AO that the parties from whom purchases claimed to have been made are non-existence on the basis of 133(6) notices issued during the course of assessment proceedings, where all notices issued to above parties are returned unserved with remark 'not known' or 'left'. Further, when the AO called upon the a....
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....e amount of profit needs to be estimated. The ITAT Mumbai, in number of cases, after considering the facts of each case has directed the AO to adopt 12.5% to 15% profit on alleged bogus purchases. In this case, on perusal of facts available on record, the assessee is engaged in the business of manufacturing of steel products. Considering the nature of business carried out by the assessee and also taken support from the judicial precedence, where it was held that only profit element embedded in bogus purchases needs to be taxed, we are of the considered view that the AO is incorrect in making additions towards 100% alleged bogus purchases from the so called Hawala/suspicious dealers. Although, the ld. CIT(A) has accepted the fact that only profit element embedded in bogus purchases, needs to be taxed but yet adopted 25% profit without bringing on record any comparable cases of similar nature. Therefore, considering the nature of business carried out by the assessee and also consistent with view taken by the Co-ordinate Bench of ITAT Mumbai, in number of cases, we deem it appropriate to scale down additions made by the AO towards alleged bogus purchases to the extent of 12.5% of such....