2023 (12) TMI 95

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....1% as against 100%. 2. In spite of issue of notices none appeared on behalf of the assessee. In fact on both the occasions the notices issued by Speed Post were returned back from the Postal authorities un-served with the remarks "Left Without Address". Therefore, we dispose off this appeal on hearing the ld. DR. 3. Briefly stated the facts are that the Assessing Officer while completing the assessment under section 143(3) read with section 147 of the Income Tax Act, 1961 (the Act) disallowed entire purchases of Rs. 3,86,87,155/- on the ground that the assessee has not proved the identity of the seller, namely, S.S. Engineering Enterprises. The Assessing Officer observed that the seller of goods is not found in the address provided by....

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....n received in lieu of such cheque but no purchases have been made, then clearly there would be a difference in quantitative tally of purchases as well as in the stock and such a discrepancy has been found the purchases can be held to be bogus, But in this case no such difference in the quantitative tally has been found by the AO. Further, if assessee after receiving the cash in lieu of the cheque has made purchases from the grey market for getting the same quantity of material in cash from some different vender, then at the most if could be a case of the suppressing of gross profit, In other words, assessee has debited higher amount for the purchase which in fact has purchased the same material and quantity at a lesser amount, thereby suppr....

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....bove discussion and the facts of the case, undoubtedly there are corresponding sales in respect of the bogus purchases. Therefore, the A.O was not justified in making the addition of whole purchases holding the same to be bogus. Respectfully following the judicial pronouncements as quoted supra it is held that the addition on account of bogus purchases is to be restricted to the gross profit embedded in such purchases. It is seen from the records that the gross profit rate of the appellant for the year was 4.81%. It is seen from the assessment order that the said bogus purchases during the year are from M/s. SS Engg. Enterprises of Rs. 3,86,87,155/-. The A.O. is, therefore directed to restrict the addition to the extent of 4.81% of gross pr....

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....elves were not bogus. The Tribunal adverted to the facts and data on record and came to the conclusion that the entire quantity of opening stock, purchases and the quantity manufactured during the year under consideration were sold by the assessee. Therefore, the purchases of the entire 1,02,514 metres of cloth were sold during the year under consideration. The Tribunal, therefore, accepted the assessee's contention that the finished goods were purchased by the asses- see, may be not from the parties shown in the accounts, but from other sources. In that view of the matter, the Tribunal was of the opinion that not the entire amount, but the profit margin embedded in such amount would be subjected to tax. The Tribunal relied on its earli....

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....missioner (Appeals) believed the assessee's theory that the purchases were not bogus but were made from the parties other than those mentioned in the books of account. 7. That being the position, not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. So much is clear by the decision of this court. In particular, the court has also taken a similar view in the case of CIT Vs. Vijay M. Mistry Construction Ltd. vide order dated January 10, 2011 passed in Tax Appeal No. 1090 of 2009-since reported in [2013] 355 ITR 498 (Guj) and in the case of CIT Vs. Bholanath Poly Fab P. Ltd. vide order dated October 23, 2012, passed in Tax Appeal No. 63 of 2012-since report....