TaxTMI 
TaxTMI 
2022 (5) TMI 294
X X X X Extracts X X X X
X X X X Extracts X X X X
.... NO.2017/M/2020 & CROSS OBJECTION NO. 148/M/2021 2. The Revenue as well as assessee have filed the above mentioned appeal as well as cross-objection against the order dated 08.09.2020 passed by the Commissioner of Income Tax (Appeals)-02, relevant to the A.Y.2010-11. 3. The revenue has raised the following grounds: - "1. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in not appreciating the fact that the assessee could not establish the genuineness of the purchases from the non-existent vendors as per information received from Law enforcement agency of State Govt. of Maharashtra i.e. Sales Tax Department, and established by the Assessing Officer. 2. On the facts and in the cir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eave to add, amend, alter or delete any ground of appeal." 4. The assessee has raised the following cross objection: - "1) Ld. CIT (A) ignored the fact as well as of Law that proceeding under section 147 of Income Tax Act, 1961 initiated by the Assessing Officer is itself bad in Law void ab initio and illegal and liable to quash for the Assessment Year 2010-11. 2) Ld. CIT(A) erred of law as well as of fact that the re-opening of the assessment cannot be done solely on the basis of the information received from the sales tax department without providing documentary evidence and cross examination of the so called hawala dealers to the appellant. 3) Ld. CIT (A) ignored the submissions of Appellant and also ignored....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pted the entire sales of the appellant and there cannot be sales without purchases. 7) The Ld. CIT(A) erred of fact as well as of law by restricting the estimated addition on so called bogus purchases to the extent of 25% without appreciating the fact that the gross profit of the appellant is around 4% only. Comparison of Gross Profit Ratio: - Particulars / Assessment Year 10-11 11-12 12-13 Sales 2,04,25,888 7,39,59,250 5,84,16,024 Purchases 2,01,18,559 6,52,87,706 4,98,45,522 Gross Profit 8,59,330 17,46,817 14,68,030 Net Profit 4,836,353 10,90,538 10,02,360 % of G.P. to Sales 4.21% 2.36% 2.51% 8) The Order of Ld. CIT (A) was against the Princ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 25% of the bogus purchase i.e. 30,12,081/- out of total purchases of Rs.1,20,48,325/- but the revenue was not satisfied, therefore, the revenue has filed the present appeal before us and the assessee filed the cross-objection before us to the delete the addition. 6. The matter of controversy in the appeal as well as cross-objection is that what should be the addition on account of bogus purchase. The contention of the Ld. Representative of the Department is that there should be 100% addition of the bogus purchase. However, on the other hand, the Ld. Representative of the assessee has refuted the said contention and argued that the ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e relied upon the order passed by the AO that in such cases total amount of the bogus purchases needs to be added to the income of the assessee. However, on the other hand, the Ld. A.R. for the assessee to repel the argument addressed by the Ld. CIT(A) contended that in such type of cases entire addition or the addition @ 25% as has been done by the Ld. CIT(A) is not sustainable because sales in this case have not been disputed by the Revenue Authorities and in these circumstances addition of the gross profit on average basis in the range of 5% to 12.5% can be made and relied upon the decision rendered by the Hon'ble Bombay High Court in the case cited as Pr. CIT vs. JK Surface Coatings Pvt. Ltd. in ITA No.1850 of 2017 order dated 28 Octobe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o determine what would be the actual profit margin in the business that Assessee was carrying on and the matter of calculations by the concerned authority. According to the Tribunal, in all such similar cases, it is ranged between 5% to 12.5% as reasonable estimation of profit element embedded in the bogus purchase when material consumption factor do not show abnormal deviation. 5. Whether the purchases were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. When the Tribunal has concluded that the assessee did make the purchase, as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be subject to tax." ....