TaxTMI 
TaxTMI 
2021 (2) TMI 711
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....he information received from DGIT (Inv.,), Mumbai, that the assessee has availed accommodation entries from various dealers who are said to be providing accommodation entries without there being transportation of any goods. In the reassessment proceedings, the assessee was required to prove the genuineness of the purchases made from various dealers as referred in Assessment Order. In response assessee furnished copies of purchase bills and bank statements and submitted that the purchases made are genuine. Assessee further submitted that the payments are made through account payee cheques as such contended that all the purchases are genuine. However, parties were not produced before the Assessing Officer. and no explanation was offered. 3. Not convinced with the submissions of the assessee the Assessing Officer treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there being any transportation of materials and the assessee might have made purchases in the gray market. It is the finding of the Assessing Officer that assessee failed to produce the parties and as such the purchases to the extent made from the pa....
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....tc. received from the Sales Tax Department through DGIT(Inv.), the Ld. AG held that these details clearly establish that the parties/concerns under consideration were providing bogus bills without any actual delivery of goods. 7.4.2 It is also an admitted fact that neither at the time of assessment proceedings nor during the appellate proceedings, the appellant could submit the evidences of actual movement of goods under consideration from said party, i.e. neither Lorry receipt nor any proof of transportation was submitted. Further, copy of inward register was also not submitted. In absence of any third party evidences, it cannot be held that the appellant has proved that the goods/materials under considerations were purchased from the above referred party and hence the appellant's contentions in this respect are rejected. 7.4.3. Now the question arises that in the event of appellant not proving that it had purchased goods/materials from above referred dealer/party, whether entire such bogus purchases can be disallowed. The Ld. AC has accepted the sales/works made by the appellant and since there cannot be sales without corresponding purchases, so entire purch....
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....ng "dalali". The modus operandi was that on issuance of sales bills the amount of cheque was received and on encashment of the said cheque after deducting "dalali" the balance amount was withdrawn in cash and returned to the respective parties. Therefore, the issuance of bogus sale bills was confirmed by those parties. On the basis of these facts, the Assessing Officer has held that barring invoices and delivery challans, there was no other document to prove that the purchases have actually been made by the assessee. There was no lorry receipt, transportation details, number of weighment, excise gate pass etc., no document was produced during the assessment proceedings. After examining the bank accounts and other evidences AO has held that alleged purchases from Bhayna Trading Co., Minaxi Enterprise and Arun Ind. Corporation was not genuine purchase and therefore the said amount of bogus purchases of Rs. 41,04,903/- was taxed in the hands of the assessee. It may not be out of place to mention that books of account u/s.145(3) of the Act was rejected and profit of the assessee was estimated at Rs. 5 lakh. Both the additions were contested before the Ld. CIT(A). ....
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.... and obtaining bogus bills of some other parties, would do so for getting some benefit. But what would be the magnitude of the benefit would depend upon facts of each case. In the case of Vijay Proteins, ITAT held that such benefit to be 25% and therefore sustained the disallowance for bogus purchase at 25%. In the case of Sunsteel (supra), the ITAT deemed it fit to sustain the disallowance for a lumpsum amount of Rs. 50,000/-. However, we find that in the case of Shri Anubhai Shivlal (supra) the ITAT has considered both the decisions in the case of Vijay Proteins and Sunsteel (supra) and thereafter sustained the disallowance at 12.5%. Relevant findings of the ITAT in the case of Anubhai Shivalal reads are under: 3. At the time of hearing before us, it is submitted by the learned counsel that the addition sustained is excessive. In support of this contention he referred to the decision of the Tribunal in the case of ITO Vs. Sun Steel 92 TTJ (Ahd) 1126 wherein the Tribunal has sustained the addition of Rs. 50,000/-on account of bogus purchases. However, we find that the facts in the above case were different. In the above case, the assessee has shown purchases of Rs. 27,39,....
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....the Ld. AO and confirmed by the Ld. CIT(A). The Id. AO is hereby directed to make addition, as indicated above. Thus, this ground of the assessee is partly allowed." 7. Having heard the submissions of both sides, we have been informed that the malpractice of bogus purchase is mainly to save 10% sales tax etc. It has also been informed that in this industry about 2.5% is the profit margin. Therefore, respectfully following the decisions of the co-ordinate bench pronounced on identical circumstances, we hereby direct that the disallowance is required to be sustained at 12.5% of the purchases from those parties. With these directions, we hereby decide. The grounds of the rival parties which are partly allowed". The above referred decision of the Hon'ble ITAT, Ahmedabad has been upheld by the Hon'ble Gujarat High Court in the same case reported in 38 taxmann.com 385, and has held as Linder. "It is this judgment of the Tribunal which is in challenge before us at the hands of the Revenue. Learned counsel, Mr. Parikh, vehemently contended that the Commissioner (Appeals) and the Tribunal both committed a serious error in overturning the Assessing Officer&....
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..... 5. We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed purchases of steel. It may be that the three suppliers from whom the assessee claimed to have purchases the steel did not own up to such sales. However, the vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and non-existent or that the purchases were actually made but not from the parties from whom it was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. 6. In the present case, the Commissioner of Income-tax (Appeals) believed that when as a trader in steel the assessee sold certain quantity of steel, he would have purchases the same quantity from some source. When the total sale is accepted by the Assessing Officer, he could not have questioned the very basis of the purchases. In essence, therefore, the Commissioner (Appeals) believed the assessee's theory that the purchases wer....
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....les Tax Department, Government of Maharashtra, who as per Government of Maharashtra web-site are suspicious parties providing accommodation entries and are thus bogus bill giving entities without doing any business. In view of the facts and circumstances of said case, the Assessing Officer therein observed that human probability is that goods mentioned in the paper transactions have been purchased by the assessee through an undisclosed entity the assessee does not wish to disclose and purchases were made from undisclosed source of income. Accordingly, the Assessing Officer added the said sum of Rs. 1,13,44,778/- to the total income of the assessee u/s 69C of the Act. The Ld. CIT(A) after considering the materials on records held that when the Assessing officer has not doubted the genuineness of Sales, could not have gone ahead and made the addition in respect of maximum credit balance of purchase especially when the AO himself recorded a finding that the assessee made purchases from some other party and the Ld. CIT(A) observed' that the element of profit embedded in bogus purchases which the assessee would have made from some unknown entities needs to be computed and e....