TaxTMI 
TaxTMI 
2021 (6) TMI 267
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.... or add a new ground which may be necessary." 4. The brief facts of the case are that the assessee filed its return of income on 28.09.2009 declaring total income to the tune of Rs. Nil. The return was processed u/s 143(1) of the I. T. Act, 1961 accepting the returned income. Thereafter, the case of the assessee was reopened u/s 147 of the Act I. T. Act, 1961 and accordingly, notice u/s 148 of the Act was issued and served upon the assessee on 19.02.2014. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. An information was received from the DGIT(Inv.) Wing, Mumbai, in which it was conveyed that the assessee has taken the bogus purchases accommodation entries from the following six parties in sum of Rs. 4,505,620/-. Name of the party FY Amount Total Romex Metal & Tubes Pvt. Ltd. 2008-09 31,755 Siddhivinayak Steel 2008-09 886,934 Chanchal Tube Corporation 2008-09 613,819 Asian Steel 2008-09 1,223,591 Surat Tube Corporation 2008-09 1,544,520 Montex Metal & Steel Pvt. Ltd. 2008-09 205,001 4,505,620 Notice issued and after the reply ....
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....ged to have been made. The appellant has also failed to produce corroborative evidence in the form of transportation bills etc. to establish that the alleged purchases were actually transported to its premises and entered in the stock register. It is also a fact that the AO has not confronted the assessee "with all the information in his possession like statements of the alleged hawala operators. He did not go ahead with money trail of cheques debited in the appellant s bank account towards the alleged purchases though such investigation do not lead to concrete results in the case of hawala dealers and investigators of the dead end in such cases. It is not the case of the AO that. the impugned purchases have conclusively been established as not having been effected at all. The AO has only found the impugned supplier as bogus parties and he has not disputed the corresponding sales. The AO has only estimated the profit element embedded in the impugned purchases. 5.3.1 In the facts and the circumstances of the case, the total purchases shown to be made from the aforesaid parties could not be held to be entirely bogus. It needs to be appreciated that in order to achieve the re....
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....e but not from the parties from which it was claimed to have been made and instead may have been purchased from: grey market without proper billing or documentation. 5.3.3 In many judicial pronouncements on the issue, the Courts have taken a consistent view that in "case of non-existent parties from which the purchases are shown to have been made, only a part of such purchases can be disallowed, particularly in such cases where the corresponding sales are not doubted. Alternatively, the profit embedded in such sales against the alleged bogus purchases should be brought to tax. 5.3.3.1 In the case of CIT-1 Vs Simit P. Sheth, ITA no. 553 of 2012, order dated 15/01/2013, while deciding a similar issue, the Hon'ble High. Court of Gujarat bas held that: "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 purchased the steel did not own up to such Sales. However, vital question while considering whether the entire ° amount of purchases should be added back to the income of the as....
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....v. KishorAmrutlal Patel. In the result, tax appeal is dismissed." (emphasis supplied) 5.3.5 In view of the facts and circumstances of the case and the judicial pronouncements cited above, what can be disallowed or taxed in the instant case, is the excess profit element embedded in. such purchases shown to have been made from aforesaid parties. As narrated earlier, the AO in this case has held that various parties from whom the purchases were made by the appellant were found to be bogus, estimations ranging from 12.5% to 25% have been upheld by the Hon'ble Gujarat High Court, depending upon the nature of the business. 5.3.5.1 In a number/series of recent cases involving the scam unearthed by the Sales Tax Dept of Maharashtra whereby the hawala dealers were found to be issuing bogus purchase bills without delivery of goods, the. Hon'ble Mumbai Tribunal has estimated the G.P addition on account of such bogus purchases as 12.5%, some of which are listed below: Smt. KiranNavinDoshi in ITA No. 2601/Mum/2016 dated 18.01.2017. ii) Ashwin Purshotam Bajaj @ & Anr. Vs ITO & Anr, in ITA No.4736/Mum/2014, 5207/Mum/2014, dated:14-12-2016. iii)....