TaxTMI 
TaxTMI 
2023 (11) TMI 285
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....al income of Rs. 1,90,633/-. The same was processed u/s. 143(1) of the Act on 24.07.2015 accepting the returned income. It is thereafter the assessment was reopened issuing notice u/s. 148 of the Act on the information received from DGCEI, in respect of the persons/parties who purchased goods from M/s. Chauhan Suppliers the bogus suppliers, whose TIN number had been cancelled ab initio. Further the assessee itself agreed on the bogus purchase and paid its tax liability to the Commercial Tax Department. Therefore the bogus purchase of Rs. 1.05 crores required to be disallowed and brought to tax which has escaped assessment. In response to the 148 notice, the assessee filed its return of income admitting the same income as in the original return. After calling upon various details, the Assessing Officer added the purchase from M/s. Chauhan Suppliers as bogus and added as the income of the assessee. 3. Aggrieved against the same, the assessee filed an appeal before Commissioner (Appeals). After considering the various submissions of the assessee and gross profit and net profit ratio of the assessee, Ld. CIT(A) estimated the profit of the assessee at 7.5% on the bogus purchase and r....
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.... the case of PCIT Vs Sandeep Kumar Chandak in Tax Appeal No. 210 of 2020, wherein the identical issue has been dealt with and the relevant para of the findings of the Hon'ble Court is reproduced as under:- 9. We take notice of the findings recorded by the Tribunal. The findings are as under: "10.2 From the preceding discussion we also note that the assessee has claimed to have made sales against such purchases which have been admitted by the Revenue. As such in our considered view, such sales cannot be executed without having the corresponding purchases. There was no defect pointed out by the authorities below insofar the sales made against such purchases. Moreover, there is also no allegation regarding the genuineness of the books of accounts which were duly audited under the Income Tax Act. 10.3 However, before parting we cannot ignore the practice prevailing in the business industries to purchase the goods from the grey market and subsequently justify such purchases by obtaining a purchase bill from the parties engaged in providing accommodation entries. It is because the assessee in the present case has claimed to have purchased the goods from the....
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.... Department was tallied, it is concluded that the appellant might have purchased the raw-material from any other sources and not from M/s. Chouhan Supplier. Under such circumstances, purchase should not be added to the income of the appellant but only element embedded therein it to be added. 8.12. Therefore, considering the appellant's GP of 9.52% and NP of 2.09% and probable saving in the cost of purchase by avoiding burden of VAT of 5% and some other savings and discrepancies noticed by the AO in the assessment order, it is reasonable to estimate the probable benefit derived by the appellant at 7.5% of the total purchase made from M/s. Chouhan Suppliers, which works out to Rs. 7,90,739/-. Hence, the addition is restricted to the tune of Rs. 7,90,739/- and thus, the AO is directed to delete the balance amount of addition of Rs. 97,52,444/-.Thus, the grounds of appeal no. 3 & 4 are partly allowed. 4. Aggrieved against the same, the Revenue is in appeal before us raising the following Grounds of Appeal: 1. The Ld. CIT (A)-11, Ahmedabad has erred in law and on facts in reducing the disallowance of bogus purchase from Rs. 1,05,43,183/- to Rs. 7,90,739/-. ....
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....roduction, sales, yield ratio and other financial ratio declared by the assessee and the A.O. has not rejected the book results. It is the above circumstances, Ld. CIT(A) followed Jurisdictional High Court Judgment in the case of Sandeep Kumar Chandak and considering the assessee's G.P. and N.P. ratio estimated the profit derived by the assessee at 7.5% of the total purchase made from M/s. Chauhan Suppliers which does not require any interference. Therefore the Revenue appeal is liable to be dismissed. 7. We have given our thoughtful consideration and perused the materials available on record. The Commercial Tax (VAT) Department had carried out spot inspection at the business premises of the assessee on 04.04.2016 wherein nothing abnormal was found except the fact, the supplier M/s. Chauhan Supplier had not deposited VAT collected by it from the assessee thereby assessee is not entitled for input credit of tax on the so called purchases. However, the assessee in order to avoid long turn litigation and to buy peace of mind, paid the VAT liability of Rs. 7,13,779/- on account of reversal of input tax credit availed by it. In fact, the Commercial Tax Department accepted the payment....
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....ent embedded in such purchases could be added to assessee's income Held, yes Whether hence, order of Tribunal needed no interference - Held, yes (Paras 6, 7 & 9 In favour of assessee]" (ii) CIT vs. Sathyanarayan P. Rathi [2013] 38 taxmann.com 402 (Guj HC): in this case it is held that: "Section 143 of the Income-tax Act, 1961. Assessment Additions to income [Purchases from market] - Assessment year 2003-04 - Assessing Officer made addition of entire amount of purchase on ground that concerned suppliers had never supplied goods as named by assessee. Commissioner (Appeals) as well as Tribunal having found that though purchases were not made from parties from whom assessee claimed but such materials were purchased from open market incurring cash payment and bills were procured from various sources, held that only profit element at rate of 12.5 per cent was to be added to income of assessee Whether present case being one of only purchase but not from disclosed sources it would be only profit element embodied in such purchase which could be added in income of assessee and thus, rightly so done by Commissioner (Appeals) and Tribunal - Held, yes [Paras 6 & 7] [In fav....