TaxTMI 
TaxTMI 
2022 (6) TMI 404
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....e Revenue) and the cross objector Mr. Hemantkumar Sumermal J. Bhansali (hereinafter referred to as the assessee) by filing present appeal and cross objections sought to set aside the impugned order dated 24.06.2021 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] on the grounds inter alia that: ITA No.2034/M/2021 (Revenue's appeal) "1. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in restricting the addition to @12.5% of total bogus purchases and computing the profit for the purpose of section 28 of the I.T. Act, 1961 taking in to consideration the bogus bills against which no goods have been receiv....
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.... CO No.31/M/2021 (Assessee's Cross Objections) "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in estimating profits @ 12.5% on alleged bogus purchases of Rs.95,36,617/- without pointing out any defects from sales records and stock records." 3. Briefly stated facts necessary for adjudication of the controversy at hand are : the assessee is into the business as dealers in ferrous and non ferrous metals, filed its return at Rs.40,42,980/- which was completed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') by making disallowance of Rs.95,36,617/- as peak balances from the alleged purchases and added the same under section 69C of the Act by treating the same ....
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....case of CIT vs. Simit P. Sheth, ITA No.553 of 2012, order dated 16.01.2013 and Vijay Proteins Ltd. vs. ACIT (1996) 58 ITAT 428 (Ahd). 7. In the backdrop of the aforesaid undisputed facts the Ld. CIT(A) decided the issue "as to how the bogus purchases made by the assessee ought to be brought to tax" by returning following findings: "6.1.11 Further, the fact remains that the parties from whom the appellant was supposed to have made the purchases were not existing. Thus, from the above analysis of the facts, it is crystal dear that the purchases shown to have been made by the assessee from the above parties and claimed as expenses in his profit and loss account are not genuine. Since the purchases to that extent remain unverifiable....
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....nt of a higher margin of profit would be fair and equitable, if the gross profit (@ 12.5 is taken on non genuine purchases recorded in the books o account of the assessee of Rs.42,21,237/' during the year under consideration and the profit to that extent is added .back to the income of the assessee for the year under consideration. Having regard to the facts and circumstances of the case as well as Gujarat high Court decision in the case of Simit P Sheth (2013) (356 ITR 451 (Guj).) being the possible profit out of the purchases made through non-genuine parties known as tainted purchases and thereby, the addition to be restricted to an extent of Rs.2,11,062/(12.5% of Rs.42,21,237/-). 6.1.12 Further the courts have taken a view t....
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....e as to the bogus purchases has not been specifically challenged by the assessee restricting the addition to the 12.5% of the bogus purchases, there was no basis with the Ld. CIT(A) to restrict the addition to the tune of 12.5% of the bogus purchases. 9. However, to repel the argument addressed by the Ld. D.R. for the Revenue, the Ld. A.R. for the assessee contended that in case of bogus purchases the issue is to be decided on the basis of settled principle of law that only gross profit of the bogus purchases is to be estimated keeping in view the past history qua bogus purchases of the assessee. Assessee placed on file and relied upon the decision of Shri Zaheerahmed Khatizama Khan vs. ITO in ITA 183/M/2021 and also brought on record wo....
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....e but the profit element embedded therein would be subject to tax." 11. So we are of the considered view that when no discreet enquiry has been made by the AO qua the alleged bogus purchases by perusing/rejecting the books of accounts of the assessee rather proceeded to make the addition by taking peak balances of the alleged purchases of Rs.1,55,19,372/- and at the same time the Ld. CIT(A) has also estimated the addition being the 12.5% of the bogus purchases as gross profit, the view taken by the Ld. CIT(A) is a plausible view which is in consonance with the decision rendered by the Hon'ble Gujarat High Court in the case of Simit P. Sheth (supra) and JK Surface Coatings Pvt. Ltd. (supra) cases. 12. No doubt, the reasoning given by t....