TaxTMI 
TaxTMI 
2023 (1) TMI 363
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....ppeals) further erred in maintaining addition of Rs.35,73,000/- for alleged bogus purchases @12% on purchase of Rs.2,97,75,000/-, though the sales were accepted, day to day quantity records kept GP already considered in accounts, rejecting the explanation filed. Prayed to delete the addition of Rs.35,73,000/-. 3. That under the facts and the law, the learned AO erred in passing the assessment order without allowing opportunity to the appellant to examine persons whose statement/report of Inspector was relied upon by the learned AO in making the addition. Prayed that the assessment order is against nature justice and the addition maintained by the Ld. CIT(A) at Rs35,73,000/- be deleted." On the other hand the revenue is aggrieved with the impugned order on the following grounds of appeal: "1. Whether in facts and in the law, the Ld. CIT(A) was justified in deleting the addition of Rs.2,62,02,000/- out of the total addition of Rs.2,97,75,000/- being under bogus purchase ignoring the statements taken on oath by the parties from whom the purchase was made by the assessee firm. 2. Whether in facts and in law the Ld. CIT(A) was justified in deleting the addi....
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....e persons available at the said respective address denied to accept the summons and stated that they were not aware of any such party; or the party was not found at the address provided by the assessee firm. As is discernible from the assessment order, the Inspector of the Income Tax Department, Dhamtari who was deputed by the A.O to affect service of the summons u/s.131(b) of the Act on the aforementioned parties, had in his report stated the factual position, which, for the sake of convenience is culled out as under: Sr. No. Particulars Remark 1. M/s. Eadan Rice Mill The owner of the aforesaid rice mill could not be located and it was intimated by the peoples staying nearby area that rice mill is not in operation from the last 6- 7 years. On contact, the owner of the rice mill Shri Badruddin Khokar on phone, it was intimated that the rice mill is not in operation since the year 2011-12. 2& 3. Shri Ganpati Paddy, and Zin Mata Rice Mill C/o. Kailash Khandelwal It was informed by Shri Sourabh Khandelwal S/o. Kailesh Khandelwal that his father was not aware about both the aforesaid concerns and in no way related with them. 4 & 5. Shri Krishna Processo....
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....ons. As the assessee had failed to substantiate the authenticity of the purchases claimed to have been made from the aforementioned parties on the basis of supporting documentary evidences, viz. delivery challan, bilties etc., therefore, the A.O called upon it to put forth an explanation as regards the same. In reply, it was the claim of Shri. Sanjay Agrawal (supra) that the goods which were purchased from the aforementioned 8 parties, i.e rice and broken rice were duly recorded in its stock register, and in lieu thereof aungya was deposited with the concerned mandi. Also, the assessee declined of having carried out any bogus purchases. 6. Considering the aforesaid facts involved in the present case before us, the A.O was of the view that the assessee had failed to substantiate on the basis of any supporting documentary evidence the authenticity of the purchase transactions with the aforesaid 8 tainted parties, i.e., delivery challans, bilties etc. which would have otherwise proved to the hilt the delivery of goods from the said parties. Also, it was observed by the A.O that the assessee on being confronted with the statement(s) of the proprietors/partners of the aforementioned ....
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....r, observing that the assessee had during the year declared GP rate of 7.52%, the A.O disallowed GP rate of 7.52% of the sales of Rs.2,97,75,000/- (out of the total sales of Rs. 10,99,39,751/-), i.e., the profit element corresponding to the impugned purchases, and made an addition/disallowance of Rs. 22,39,080/- on the said count. Accordingly, the A.O on the basis of his aforesaid deliberations vide his order passed u/s. 143(3) r.w.s. 147 of the Act, dated 08.12.2018 assessed the income of the assessee firm at Rs.3,24,49,530/-. 9. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) who had scaled down the addition to Rs.35,73,000/- by applying the overall profit rate of 8% to the value of impugned purchases of Rs.2,97,75,000/- (supra). Apropos the addition of Rs.22,39,900/- (supra) that was made by the A.O qua the sales corresponding to the bogus purchases, the CIT(Appeals) being of the view that now when the assessee had duly recorded the purchases in its books of account and also, the corresponding sales, therefore, there was no justification in sustaining the said addition. Accordingly, the CIT(Appeals) partly allowed the assessee's appeal. 10. Both....
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....rsuade ourselves to subscribe to the addition of the entire amount of impugned purchases of Rs.2.97 crore (approx.) made by the A.O. As stated by the Ld. AR, and, rightly so, the purchases of the rice/broken rice which the assessee firm had claimed to have made from the aforementioned tainted parties was duly entered in its stock register for the year under consideration, Page 56 to 73 of APB. The Ld. AR in support of his aforesaid claim had also taken us through the quantitative purchase/sale details of rice/broken rice as had been culled out from its stock register, Page 9 to 16 of APB. On a perusal of the said details, it transpires beyond doubt that the impugned purchases of rice/broken rice claimed by the assessee firm to have been made from the aforementioned 8 parties were duly incorporated by it in its said stock register, which details for the sake of clarity are being culled out as under: Sr. No. Particulars Page No. of APB 1. Shri Shyam Trading, Gondia 2000 Qtls- Rice Date : 03.07.2013 9 2. Shri Shyam Trading, Gondia 2000 Qtls- Rice Date : 07.10.2013 10 3. Eadan Rice Mill, Raipur 1250 Qtls-Broken rice Date: 08.04.2013 11 4. Maa S....
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....hases of Rs.2.97 Crore (approx.) and thus, had made an addition on the said count of Rs.22.39 lac (approx.). Also, the CIT(Appeals) while vacating the aforesaid addition of Rs. 22.39 lac (supra), had observed that as all the purchases and sales have duly been recorded by the assessee, therefore, there was no justification for sustaining the said addition. 17. Be that as it may, it is matter of fact which is evidenced from record that the impugned bogus/unverified purchases of rice/broken rice of the assessee (quantitative vise) had duly been accounted for by the assessee in its books of account, and thus, had found its way in the sales/closing stock for the year under consideration. Considering the aforesaid fact, we are of the considered view that it can safely, or in fact inescapably be concluded that the assesee firm had purchased the goods in question, i.e., rice/broken rice though not from the aforementioned 8 tainted parties, but at a discounted value from the open/grey market. In fact, we are of the considered view that services of the aforesaid 8 tainted parties who are admittedly only in the business of providing bogus/accommodation bills were availed by the assessee fi....
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....on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sale declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trade. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under "So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales....