TaxTMI 
TaxTMI 
2021 (2) TMI 1007
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....ses disallowed as non-genuine/bogus by the Assessing Officer. 2. Briefly stated the facts are that, the assessee engaged in the business of trading in plastic bags and has not filed return of income for the A.Y: 2009-10. Subsequently, Assessing Officer received information from the Sales Tax Department, Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. The assessment was reopened U/s.147 of the Act based on the information received from Sales Tax Department, 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 p....
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....ing Officer. 6. Heard Ld.DR, perused the orders of the authorities below. On a perusal of the order of the Ld.CIT(A), I find that the Ld.CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and following the decision of Hon'ble Gujarat High Court in the case of CIT v. Simit P. Sheth [356 ITR 451] restricted the disallowance to 12.5% of the non-genuine purchases. While holding so, the Ld.CIT(A) observed as under: - "5.2. I have given anxious thought to the entire dispute at hand which is regarding 100% addition made by the AO in relatio to the total amount of bogus purchase as described above. Further, I have also duly perused the i....
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.... Finance Pvt. Ltd. 208 ITR 465 Cal. (1994). It was held that transaction through bank is not sufficient to prove a transaction as bonafide. Merely because the money is transferred through the bank account does not prove that the money is explained. It is essential to prove the creditworthiness of the persons or genuineness of the transactions. Merely furnishing of particulars is not enough. It was held that mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. The ratio laid down in the case of Precision Finance is squarely applicable to the facts and circumstances in the present case of the appellant as well which is commensurate with the information received by the AO from the Investigat....
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....bove. Therefore, it is observed that only the embedded profit element in the transaction could be justifiably taxed and not the cent percent amount taken by the Ld.AO. 5.8. In this context, therefore, it is pertinent to note that the High Court of Gujarat in the case of Commissioner of Income-tax v. Simit P.Sheth [2013] 356 ITR 451 (Gujarat) has held that where purchases were not bogus but were made from parties other than those mentioned in books of account, not entire purchase price but only profit element embedded in such purchases can be added to income of assessee. In that case the Assessing Officer noticed that some of the alleged suppliers of steel to the assessee had made their statements on oath to the effect that they had....
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....only the profit element embedded in such purchases can be added to the income of the assessee. 5.9. I, therefore, find that in the case of the appellant as well, the ratio of the above said decision would largely apply, in as much as the fact that here also it would be a question of a reasoned estimate of the profit element embedded in the transaction. This is also based on sound logic that the embedded profit element of the transaction would be a correct approach to take, since, the rival contentions are resolved in the fine balance of convenience. This is more so because the stand of the AO in taxing the entire amount of transaction would be a classic case of executive overreach. 5.10. I have also duly considered the arg....