2020 (4) TMI 544

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....e Ld. C1T(A) erred in restricting the disallowance @ 12.5% of bogus purchase without appreciating the fact that the AO has held it to be non-genuine after carrying out proper independent investigation in the case". 2. "On the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance made by AO to Rs. 504,560/- i.e. 12.5% of bogus purchases of Rs. 40,36,4767 - only on the basis that purchases were duly supported by bills and all the payments were made by account payee cheques by overlooking findings of the Sales Tax Department & DGIT (Inv.), Mumbai that during the year under consideration the assessee was the beneficiary of bogus purchases and billings from hawala dealers and there was n....

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.... Para 2.1 on pages 2 of Ld.CIT(A) order. The sum and substance of arguments of the assessee before the Ld.CIT(A) are that purchase from the above party is genuine, which is supported by necessary evidences. Therefore, no additions could be made on the basis of information received from third party. The Ld.CIT(A), after considering relevant submission of the assessee and also, by following the decision of Hon'ble Gujarat High Court, in the case of CIT vs. Simith P. Sheth (356 ITR 451) scaled down addition made by the AO towards alleged bogus purchases to 12.50% gross profit on total purchases from those parties. The relevant findings of the Ld.CIT(A) are as under:- 5.1 I have considered the assessment order and the submission of the....

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....dition of entire purchases is not sustainable in law and facts. Only corollary that follows in such situation is that the appellant could have obtained the bills in lieu of the material purchased locally. In this regard it is found that many Benches of HAT and Hon'ble High Courts have held that when purchases are supported by sufficient documentary evidences, then merely because of non-appearance before the AO, one cannot conclude that the purchases were not made by the appellant. Therefore, the saving on account of VAT and other incidental charges made by the appellant on the said bogus purchases can be brought to tax as additional profit, Keeping in view the totality of facts and circumstances of the case, the disallowance made by the....

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....onsidered arguments of both parties and also, material available on record, we find that both the sides have failed to prove the case in their favour with necessary evidences. Although, assessee has filed certain basic evidences, but failed to file further evidences to conclusively prove purchases to the satisfactions of the Ld.AO. At the same time, the Ld. AO had also failed to take the investigation to a logical conclusion by carrying out necessary enquires, but he solely relied upon information received from investigation wing, which was further supported by information received from Maharashtra Sales Tax Department. Under these circumstances, it is difficult to accept arguments of both the sides. Further, in a case where purchases ar....