TaxTMI 
TaxTMI 
TaxTMI 
2023 (7) TMI 331
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....leged bogus purchases. (b) Partial confirmation of addition relating to Corporate Guarantee commission. (c) Addition towards alleged cash component in purchase of agricultural lands. 5. The first issue relates to the addition made on account of alleged bogus purchases. Since the Ld CIT(A) has given partial relief, both the parties are in appeal before us on this issue. 5.1 During the course of search proceedings, it was noticed that the assessee has purchased goods from M/s Samnik General Trading Company, M/s GSP International, M/s Ankit International, M/s SPA Heights P Ltd, M/s Godwin Metal Trade P Ltd, M/s. Saj Trading Company, M/s. Rashmi Steels, M/s. Kshemkari Steel and M/s. Manohar Manak Alloys P Ltd. The revenue carried out enquiries from these parties either u/s 131 of the Act or by taking survey and search operations u/s 133A/132 of the Act. From the result of these investigations, the revenue came to the conclusion that these entities have provided only accommodation bills without actually supplying materials. In this regard, the AO placed reliance on the statements given by some of the suppliers and also statement given by the employees of the assessee concern. Acco....
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....ifferent parties. Under these set of facts, the Ld CIT(A) restricted the addition to 6% of the value of purchases in all the above said years. 5.5 The Ld A.R further submitted that the assessee has furnished all the details to prove the genuineness of purchases. He further submitted that the statement given by the employee was general in nature and not with regard to any specific bills and his statement has been denied by the CMD Shri Neeraj Raja Kochhar. He further submitted that the AO has also relied upon a statement given by a person named Shri Chandra Shekar Nair, which has later been retracted by him. Hence his statement cannot be relied upon. In any case, the above said person was not director in any of the suppliers concerns when he made the statement. He further submitted that the search team could not find any material to show that the cheque payments made towards alleged bogus purchases have been flowed back to the assessee in the form of cash. He further submitted that the Excise department, which examines the production details of the assessee, did not find fault with the books of accounts of the assessee. Accordingly, the Ld A.R contended that the entire disallowance....
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.... In the manufacturing of products, the materials purchased by it is melted and converted into the finished products. In the case of trading of goods, the sales quantity could be reconciled with the purchase quantity. However, in the case of manufacturing of goods and when the raw materials is converted into other type of finished goods, the receipt of material can be judged on comparing the manufacturing loss. The gross profit rate declared by the assessee vis-à-vis other comparable companies is another measure to judge the genuineness of purchases. If an assessee has introduced bogus bills without actually receiving the materials, then the natural tendency is to show higher manufacturing loss in order to adjust the quantity details and the same would result in showing lower gross profit rate. 5.10 The submissions made by the assessee with regard to the observations made by the AO are summarized below:- "a. The assessee has submitted the entire documentary evidences such invoices, purchase order, Goods receipt note, stock register showing receipt, bank statement, etc. to establish the genuineness of the purchases and no doubt raised by the AO. b. The acceptance of emplo....
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....ne correlation. Therefore, in such case, input output ratio needs to be accepted. k. Accordingly, the receipt of material and its consumption in the manufacture cannot be doubted. This is moro-so when the AO has himself stated that the material has been received by the assessee from open market in para 17 of the assessment order. l. Further it is also submitted that the majority of the suppliers have appears before the Id. AO and confirmed that the they have supplied the material to the appellant. m. Further, we also rely on the findings of the DGCEI in the assessee's own case wherein after extensive search, they have concluded that the material has been duly received by the assessee. Kindly refer to conclusion of the DGCEI at page 136 of the CIT (A) order. n. Thus, it is submitted that assessee has duly purchased material from the suppliers. It is possible that the suppliers have themselves procured the material from open market and the same has been supplied to assessee. However, the said fact cannot lead to a conclusion that the purchases are bogus." 5.11 We notice that the AO himself has observed at paragraph 17 of the assessment order that the purchases have been ....
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....re bogus but the purchases in themselves were not bogus, only a gross profit ratio could be added to the income of an assessee. We notice that the Ld CIT(A) has estimated the said incremental profit @ 6% of the value of purchases, but did not give any basis for arriving at the above said rate of 6%. 5.14 It is the contention of the assessee that, in the facts and circumstances of the case, no disallowance of purchases is warranted, since the manufacturing loss and the gross profit rate declared by the assessee compares well with industry standards. The assessee itself, in the alternative, has submitted that the addition towards incremental gross profit may be restricted to 2% of the value of purchases. In support of this contention, the Ld A.R also relied upon certain case laws (referred supra). 5.15 We find merit in the said contentions under the facts of the present case. We noticed earlier that the manufacturing loss declared by the assessee was less than the SION standards prescribed by DGFT. The gross profit rate declared by the assessee was more than the industry average. Hence, in the normal circumstances, no disallowance of purchases is called for. However, since some of ....
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....ue and perused the record. We notice that the co-ordinate bench of Tribunal has examined an identical issue in the assessee's own case in AY 2010-11 and the Tribunal has restricted the rate of commission at 0.50% of the value of loan actually availed by the Associated Enterprises. In this regard, the Tribunal has followed the decision rendered by the jurisdictional Hon'ble Bombay High Court in the case of Everest Canto Cylinders Ltd (supra). Since the decision rendered by Ld CIT(A) on this issue is covered by the decision rendered by the jurisdictional High Court and the Tribunal, we do not find any reason to interfere with the decision so taken by Ld CIT(A) on this issue. Accordingly we uphold the same. 7. The next issue urged by the assessee relates to the addition made towards cash component paid in purchase of agricultural land amounting to Rs. 1,23,19,000/-. 7.1 The facts relating to this issue are stated in brief. During the course of search proceedings, soft copy of draft sale agreement was found in the laptop of Shri Shilan Thaker. The said agreement showed that a piece of land was proposed to be purchased at Rs. 11,14,44,000/- from Shri Rahul J Sankhe. In the above said ....
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....raft agreement. In this regard, he placed reliance on the decision rendered by Hon'ble Delhi High Court in the case of CIT vs. AKME Projects Ltd (2014)(42 taxmann.com 379)(Delhi). On the contrary, the Ld D.R supported the order passed by Ld CIT(A). 7.5 We have heard the parties on this issue and perused the record. We notice that the assessing officer has made the addition on the basis of a draft agreement found in the laptop of Shri Shalin Thaker. Following discrepancies were found with regard to this document. (a) No physical copy of the agreement was found during the course of search. The soft copy was also unsigned one. (b) The name of purchaser was not mentioned in the draft agreement. (c) There was difference in the sale consideration mentioned in the sale agreement and the Sale deed. The consideration mentioned in the draft agreement was Rs. 11.14 crores and in the Sale deed was Rs. 9.91 crores. As per the draft agreement, the cheque amount was mentioned as Rs. 8.14 crores, whereas the assessee has actually paid cheque amount to the tune of Rs. 9.91 crores. Though the cash component was mentioned as Rs. 3.00 crores in the draft agreement, the AO could make addition to....