TaxTMI 
TaxTMI 
2021 (1) TMI 1002
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.... facts and circumstances in both the years are same and even the grounds raised are identically worded and hence will take up the grounds from Assessment Year 2009-10. The relevant ground no.2 raised by assessee reads as under: 2 In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax(A) erred in a) confirming the disallowance amounting to Rs. 6,84,266/- being 12.5% of total purchases of Rs. 54,74,132/- by way of unexplained expenditure u/s 69C. b) confirming the disallowance amounting to Rs. 6,84,266/- being 12.5% of total purchases of Rs. 54,74,132/- by way of unexplained expenditure u/s 69C, just because notices u/s 133(6) were issued but not served to the suppliers. c) confirming the disallowance amounting to Rs. 6,84,266/- being 12.5% of total purchases of Rs. 54,74,132/- by way of unexplained expenditure u/s 69C, even though the payment for purchases is made from the books and cannot be termed as unexplained expenditure. d) confirming the disallowance amounting to Rs. 6,84,266/- being 12.5% of total purchases of Rs. 54,74,132/- by way of unexplained expenditure u/s 69C without allowing cross-examinat....
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.... support of its claim. The Assessing Officer disallowed the entire purchases from these parties, as these parties could not respond to the notices issued under section 133(6) of the Act. The Assessing Officer treated the entire purchases from these parties as unexplained amounting to Rs. 54,74,132/-. Aggrieved, the assessee preferred appeal before the CIT(A). 5. The CIT(A) restricted the profit rate at 12.5% as alleged bogus purchases by observing in para-11 as under: 11. Ground No. 3 to 9: These grounds of appeal effectively pertains to the addition on account of unexplained expenditure in form of bogus purchases. The AO has formed his view about the bogus nature of the purchases made by the appellant from the above parties on the basis of statements recorded by the Sales Tax Authorities as well as further enquiries carried out by them. Accordingly, a list was forwarded to the Income Tax Department for taking necessary action. The AO observed that the list contains the names of above mentioned parties, with which the appellant had shown purchases. 11.1 In this regard, in my opinion, only on the basis of information received from the Sales Tax autho....
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....whether the purchase prices shown on the bills/invoices, are as per prevailing market prices of the materials purchased and to ascertain that the price paid for the materials purchased from these parties are not over invoiced. In the absence of any such verification of the correctness of the price paid for the materials purchased by the appellant, the purchase price paid as mentioned on the invoices/bills cannot be accepted as the correct price paid for the goods purchased from such parties. In view of the same, the possibility of over-invoicing of the materials purchased to reduce the profits, cannot be ruled out. Therefore, the gross profit rate shown by the appellant for the year under consideration cannot be relied upon. In the circumstances, the correct approach in such transactions would be to estimate the additional benefit or profit eared on these purchases and not to disallow' peak of the cumulative purchases from these parties. The disallowance of peak of the cumulative purchases from these parties would not be logical and would amount to travesty of justice. In my view either the purchases from these parties are over invoiced or the purchases were actually made but n....
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....ar view in case of Commissioner of Income Tax-IV vs. Vijay M Mistry Construction Ltd. vide order dated 10.01.2011 passed in Tax Appeal No. 1090 of 2009 and in case of Commissioner of Income Tax-I vs. Bholanath Poly Fab Pvt. Ltd. Vide order dated 23.10.2012 passed in Tax Appeal No. 63 of 2012. 11.6 Similarly while dealing with an identical, issue, in the, case of CIT, Vs. Bholanath Poly Fab (P) Ltd., I.T.A. No. 63 of 2012, in the order dated 23/10/2012, the Hon'ble High Court of Gujarat has held as under:- 'We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit" element embedded therein would be subject to tax. This was the view of this court in the case of Sanjay Oilcake Industries v. CIT [2009J 316 ITR 274 (Guj). Such decision is also....