TaxTMI 
TaxTMI 
2024 (1) TMI 850
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....assessee's premise was also covered under section 132 (1) of the Act. Accordingly, notice u/s 153A of the Act was issued to the assessee. Thereafter, after enquiry and responses from the assessee, the AO concluded that assessee has made purchases but not from the parties which were entered in the books of account. Instead AO was of the opinion that purchases were made from grey market and disallowance of 25% of the bogus purchases was necessary. The conclusion of the AO is as under :- "In the instant case, it is observed that the purchases were actually made but not from the party from whom it was claimed to have been made and instead purchased from grey market without proper billing or documentation. Thus, the purchases' were bogus in a manner that purchases were made from the parties other than those mentioned in the books of account. That being the position, on the basis of principles laid down by the judicial authorities from time to time, entire purchase price cannot be disallowed, but only the profit element embedded in such purchases to be added to the income of the assessee. Then, the next question is that what should be the fair profit rate out of the bogus pu....
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.... persons and Sh Jogender Singh confirm that M/s Aster Commodities is involved in the business of Mentha oil, doing procurement from farmers and selling it to various parties. The handwritten impounded registers of one collection centre, other related documents and sale/purchase bills of MCX dealers also confirm the activities of M/s Aster Commodities. The books of accounts in tally have been impounded from his Auditor in subsequent survey on 12.4.2017. He had produced the supporting documents of all collection centres and MCX dealers purchases in response to the summons on 12.3.2021 and these documents have been verified in the presence of AO for which report of the AO is on record. It had been observed that M/s Aster commodities is maintaining all hand written centre wise records of Form 6R, daily purchase registers, daily stock registers, Mandi Tax receipts, Copies of sales invoices, Form XXI of UP VAT, Mandi Gate Pass, transport bilties etc. for all the assessment years under consideration. These records were test checked with certain purchases of the appellant with all the documents in chain from purchase to sales by M/s Aster Commodities, which shows that all the primary recor....
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....entres. The centre visited by the survey team. had no stock as per its stock register impounded and as per statement of Shri Jogender Singh, the last purchase . transaction at this centre was on 21.1.2017 and last sale transaction at this centre was on 22.1.2017, after which the stock at this centre was nil as per the impounded register from this centre. Thus, there may be issues relating to reconciliation of Tally data which have been analysed by comparisons of incomparable data. Further the appellant cannot interfere with the accounting process of M/s Aster Commodities and the discrepancies, if any, in the maintenance of financial data of M/s Aster Commodities had to be acted upon in his case. The records of the appellant are complete in all respects for the purchases made from/through M/s Aster Commodities. All the discrepancies pointed by the AO and discussed in the above para are subject to reconciliation of accounts of M/s Aster Commodities and cannot lead to automatic conclusion that it is a bogus entity involved in only providing sales bills. The facts mentioned at para (i) above and the fact that * M/s Aster Commodities was searched subsequent to earlier search on....
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.... made by the appellant through similar process, routed through other C & F agent M/s Rishi Chemical, but had concluded that these purchases through M/s Aster Commodities are bogus, without bringing any adverse material on record to support his contention. All these purchases are independently verifiable, but no effort was done in this direction either by the DOIT or the AO. * The farmers purchase of M/s Aster Commodities are all documented, which were test checked and found to be in order. Here also in my opinion, there were inadequate efforts on the part of DOIT/ AO to reach Mr Jogender Singh - in spite of vast powers conferred by the statue and point specific defects in the maintenance of its records & financial recording of transactions. Even this exercise could not have affected the appellant unless there were credible evidences of leading to conclusion of it being a paper entity. 14.1.2 It is submitted that Mr Jogender Singh was summoned u/s 131 of the IT Act to produce its records and submissions on certain points. He had attended on 12.3.2021 with the records of purchases/sales/stock & other documents as per the report of the AO reproduced above and these r....
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....ove discussion and on evaluation of various evidences on record, it is held that M/s Aster Commodities is not a bogus/paper entity as alleged by the AO, but is a real entity, actually involved in trading and C & F activities of Mentha oil etc. All the purchases made by the appellant from/through M/s Aster commodities have been made by it as per the records of the appellant and there is not any other source for such purchases. 14.2 On the issue of inflation of purchases @25% of purchases made by the appellant through M/s Aster Commodities, the observations are summarized as under: 14.2.1 The MCX authorised dealers purchases are made by the appellant directly from all India players and all the payments have been made by the appellant through banking channels. The purchases are dispatched from Barabanki authorised MCX warehouse by M/s Aster commodities. M/s Aster commodities bills these sales at the same price as the procurement price of the appellant from MCX authorised dealers and any difference in prices is settled through debit/credit notes issued by the appellant at the end of financial year. The AO had accepted. purchase price of purchases made by the appellant....
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....tion over here that the appellant had submitted the comparative Industry GP with data of companies before the AO to show that it is showing one of the highest GP in the Industry, however the AO had presumed the GP of Industry in the range of 12%- 15% without any reference of comparative industry & its financials. Further after making the additions by the AO, the GP of the appellant for various AY's is as under: Table - 12: Comparison of G.P before & after addition by the AO Particulars Assessment Year 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 Turnover (Net)(Rs.) 14,055,824,832 20,994,632,258 14,444,302,232 15,298,246,726 16,390,274,880 19,732,530,820 Gross Profit (Rs.) 1,192,910,825 1,357,674,924 1,889,583,294 1,491,303,463 1,365,932,668 1,612,153,171 Gross Profit % 8.49% 6.47% 13.08% 9.75% 8.33% 8.17% Additions made (Rs.) 39,237,475 273,995,872 202,557,021 320,413,253 769,083,768 396,070,572 GP after additions (Rs.) 1,232,148,300 1,631,670,796 2,092,140,315 1,811,716,7....
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....e find that AO has made the addition on estimate basis. AO has himself stated that it cannot be said that assessee had not made purchases but, according to the AO, purchases were made from parties different than the parties entered in the books of account. On this account, AO has made addition for bogus purchases @ 25% of the purchases. This can only be said to be surmise. It is settled law that no addition is permissible on the basis of surmise and conjecture. When corresponding sales have been accepted, disallowance for bogus purchase is not sustainable. Further, ld. CIT (A) vide his elaborate order has dealt with all the issues raised by the AO in his assessment order and has come to the conclusion that the addition on account of bogus purchases is not sustainable. We do not find any infirmity in the well reasoned order of ld. CIT (A). We further note that ITAT in assessee's own case in AYs 2012-13 to 2017-18 vide order dated 11.07.2023 has deleted the addition on bogus purchases and expenses by concluding as under :- "10. Thus, once the CESTAT has held the purchases made by four Jammu bases entities to be genuine, the entire case of the Revenue based on the investigati....