AI Drafter 
TaxTMI 
TaxTMI 
2020 (6) TMI 236
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessment is incorrect and invalid. 2.a) On the facts and in the circumstances of the case and in law, the Id.ClT(A) erred in confirming the addition to the extent of Rs. 4,49,435/-( @ 12.5% of the impugned purchases) made by the AO to the income of the Appellant on account of possible profit element of Rs. 7,47,860/- being @ 25% embedded in purchases made through alleged nongenuine parties on the basis of information of the Sales Tax Department about auspicious dealers after allowing set off @4.20% in respect of gross profit shown in the books of account. b) The Ld, C1T(A) failed to appreciate that :- i] all the purchases are genuine beyond doubt and supported by sufficient materials; ii) all the goods purchased from these parties have been backed by corresponding sales which are accepted to be genuine; iii) the gross profit ratio shown by the Appellant is quite reasonable; iv} nothing has been brought on record by the AO that money has exchanged the hands in lieu of payment made for these purchases by account payee cheque; and vi) the AO had neither provided copy of materials and statements relied upon by him nor allowed an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stance 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) has 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:- 8.13 In The present case, The adverse evidence and material, relied upon in the order. To reach [he finality, were disclosed to the assessee. However, the appellant could not establish [he genuineness of the Transaction either and The basis evidence in support of delivery of goods, or by producing The parties from whom The purchase were made. Hence the purchase transaction cannot be considered as genuine. 8. 14 Nonetheless, from the farts recorded above in this case. A has emerged that the material in question was realty received because....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n'ble ITAT, Bombay Tribunal has upheld disallowance @12.5% of such purchases in the decision date 4th April, 2017 in the case of Ratnagiri Stainless Pvt.Ltd vs Income Tax Officer in ITA No.4463/Mum/2016 as well as in Income Tax Officer 5(3)(1) vs. M/s RBS Copper Products Pvt.Ltd. in ITA Nos 1057 & 1058 dated 04/07/2017. Therefore, in light of the above decisions, taking into account the totality of the facts, it will be reasonable to estimate the profit embedded in the accommodation entries of bogus purchases @12.5% of the purchase amount. As it is an estimate of the profit embedded in purchase, it cannot be subject to any adjustment on account of any subsequent profit arising from the sale of the materials as held by the Hon'ble ITAT, Mumbai Bench in the decision in ITA No.6555/Mum/2017 for AY 2009-10 in the case of M/s Muhta Markfin (P) Limited vs ITO 5(2)(3) has held as under:- "We are of the considered view that as the profit element accounted for by the assessee in its regular books of accounts pertains to the profit which it would have made from selling the goods under consideration, therefore, the same would have no bearing on the qualification of the monetary benef....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in nature. It is the contentions of the assessee before the lower authorities that purchases from the above party are supported by necessary evidences. It has furnished all possible evidences, including books of accounts; stock details and bank statement to prove that payment against said purchases have been made through proper banking channels. 7. Having considered arguments of the Ld. DR 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. Further, mere payment by cheque does not prove the genuineness of purchase, more particularly when other circumstantial evidence says otherwise. 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. The AO neither pointed out any descrepanices in books of accounts n....