TaxTMI 
TaxTMI 
2024 (7) TMI 651
X X X X Extracts X X X X
X X X X Extracts X X X X
....in maintaining 5% of alleged bogus purchases out of 25% addition made by the AO without comparing actual difference in purchase rate of alleged bogus purchase and other genuine purchases as per decision of this Hon'ble ITAT Bench in ITA No.168/RPR/2019 dated 17.10.2022 which is binding on all lower authorities under the jurisdiction. 3. On the facts and in the circumstances of the case the learned CIT(A) erred in maintaining @5% of alleged bogus purchase which works out to Rs. 436000/- while the rate of alleged bogus purchase is equal to or less than the rate of other genuine purchases. 4. On the facts and in the circumstances of the case the learned CIT(A) is not justified in maintaining 1% of purchase value which works out to Rs. 87200/- as hypothetical commission paid out of 5% added by the AO. 5. On the facts and in the circumstances of the case the learned CIT(A) erred in neither taking into notice nor considering the written submission filed by the appellant on 07.02.2024 in which the decision of jurisdictional bench of ITAT Raipur in the case of Balaji Rice Industries Vs. ITO in ITA No.168/RPR/2019 dt. 17.10.2022 on the same issue has been reli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and find substance in the claim of the Ld. DR. Accordingly, the appeal filed by the revenue is admitted as maintainable. 9. Succinctly stated, the assessee who is engaged in the business of rice/broken-rice grading through sortex machine, had filed his return of income for A.Y. 2015-16 on 26.09.2015 declaring an income of Rs. 4,66,860/-. The return of income filed by the assessee was processed as such u/s. 143(1) of the Act. 10. The A.O based on information shared with him by the Dy. DIT (Inv-1), Raipur, observed that the assessee during the subject year was a beneficiary of bogus/fictitious purchase bills of Rs. 87,20,000/- that were received from a bogus entity, viz. M/s. Maa Sharda Process, Prop. Shri Rakesh Sharma, Raipur. Also, the A.O observed that as per information shared by the Dy. DIT (Inv.-1), Raipur, there were heavy cash withdrawals from the current account No.134905000427 of M/s. Maa Sharda Process during the year under consideration. The A.O further observed that Shri Rakesh Sharma (supra) had admitted before the ADIT (Inv.1), Raipur that the bank account of M/s. Maa Sharda Process was used for facilitating bogus purchases and all the transactions made through ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... goods transported has been mentioned in the Bills itself. The purchase consideration has been made through banking channel only. ix. That we have purchased goods, which are duly entered in our books of accounts. The entire goods have been used for making of sortex rice and softex broken rice, and the finished goods have duly been sold. The purchase as well as sale transactions were made through banking channel only, and there is no cash transaction for purchase as well as sell. x. That profit realized on sale against above purchase has been duly accounted for and offered to tax. In view of the above, it is requested to kindly file the proceedings u/s. 144 of the IT Act, 1961 and oblige." The aforesaid explanation of the assessee did not find favour with the A.O. Thereafter, the A.O after referring to the modus-oparandi that was adopted by the accommodation entry providers and drawing support from the statement of Shri Rakesh Sharma (supra) recorded u/s. 131 of the Act on 30.10.2015, was of the view that M/s. Maa Sharda Process had provided bogus purchase bills to the assessee. The A.O observed that the assessee was a beneficiary of the bogus bills iss....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in making/sustaining additions as regards the bogus purchases which were highly exorbitant. Carrying his contention further, it was submitted by the Ld. AR that the disallowance, if any, was liable to be restricted to the extent of the profit element which the assessee would have made by procuring the goods at a discounted value from the open/grey market, as against the inflated value at which the same had been booked on the basis of the bogus bills in its books of account. The Ld. AR in support of his aforesaid contention had pressed into service the order of ITAT, Raipur in the case of M/s. Balaji Rice Industries Vs. ITO-1(2), ITA Nos. 168 & 181/RPR/2019 dated 17.10.2022. It was submitted by the Ld. AR that the addition in the present case be restricted in the hands of the assessee qua the impugned bogus/unverified purchased by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. 17. Per contra, the Ld. DR relied on the orders of the lower authorities. 18. Admittedly, it is a matter of fact borne from record that both the lower authorities had admitted that the assessee had procured goods not from the aforementioned tainted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lls, thus, in all likelihood would have inflated such purchases. As our indulgence in the present case is confined to the quantification of the profit which the assessee would have made by procuring the goods in question at a discounted value from the open/grey market, therefore, we restrict our adjudication to the said aspect alone. 12. On the issue of quantification of the profit which the assessee would have made by procuring the goods in question from the open/grey market, we find that the Hon'ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company, ITA No1004 of 2016, dated 11.02.2019, while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate as that of other genuine purchases. The Hon'ble High Court while concluding as hereinabove had observed as under: "8. In the present case, as noted above, the assessee was a trader of brics. The A.O found three entities who were indulging in bogus billing activities. A.O. found that the purchas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of other genuine purchases. On the basis of the aforesaid observations of the Hon'ble High Court, we are of the considered view that on the same lines the profit made by the assessee in the case before us by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases. 13. Our attention was drawn by the ld. AR towards the bifurcated details of bogus purchases in question aggregating to Rs. 6,84,65,775/- a/w. the average rate of purchase of the various items, viz. (i) purchase of 27350 quintals of rice: Rs. 4,67,45,125/-; (ii) purchase of 10,500 quintals of broken rice (Kanki) : Rs. 1,48,64,000/- and (iii) purchase of 4470 quintals of paddy Rs. 51,07,400/-, which reads as under:- (Purchase rate of Kanki) Qty. ( Qntls) Amount (Rs.) Average rate Kanki purchase (from alleged bogus parties) 10,500.00 1,48,64,000 1,415.62/qntls Kanki purchase (from genuine parties) 12,213.10 1,75,55,969 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the assessee. We, say so, for the reason that the Hon'ble High Court in the case of M/s. Mohhomad Haji Adam & Company (supra), had held, that for the purpose of quantifying the profit which the assessee would have made by carrying out bogus/unproved purchases the addition is to be made to the extent that the GP rate of the bogus/unproved purchases is brought to the same rate as that of other genuine purchases. As in the case of the assessee before us the rate of bogus purchases of broken rice (kanki) i.e Rs. 1415.62 per quintal (average rate) is lower than the rate of genuine purchases of broken rice (kanki) i.e Rs. 1437.47 per quintal (average rate), therefore, as a consequence thereto [by taking the sale rate (average) as static] the GP rate of bogus purchases of broken rice (kanki) as in comparison to the GP rate of genuine purchases of broken rice( Kanki) is already on the higher side, therefore, no addition on the said count could have validly been made in its hand. We, thus, in terms of our aforesaid observations vacate the addition of 3.92% of the value of bogus/unproved purchases of broken rice (10500 quintals) as sustained by the CIT(Appeals). Accordingly, the A.O is di....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., it transpires that the bogus purchases of paddy had been made by the assessee @ Rs. 1142.60 per quintal (average rate), as against the purchase of the genuine paddy that was made by him @ 1232.32 per quintal (average rate). On the basis of the aforesaid facts, now when the assessee had made bogus purchase of paddy (average rate) at a value lower than that at which it had made genuine purchase of paddy (average rate), therefore, as per the ratio of the judgment of the Hon'ble High Court of Bombay in the case of M/s. Mohhomad Haji Adam & Company (supra) there could be no occasion much the less any justification for making any addition on the said count in the hands of the assessee. We, say so, for the reason that the Hon'ble High Court in the case of M/s. Mohhomad Haji Adam & Company (supra), had held, that for the purpose of quantifying the profit which the assessee would have made by carrying out bogus/unproved purchases the addition is to be made to the extent the GP rate of the bogus/unproved purchases is brought to the same rate as that of other genuine purchases. As in the case of the assessee before us the rate of bogus purchase of paddy i.e Rs. 1142.60 per quintal (average ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the Hon'ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company (supra). Needless to say, the A.O shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee. Thus, the Grounds of appeal Nos. 1 to 3 & 5 raised by the assessee and Ground of appeal No.1 raised by the revenue are allowed for statistical purposes in terms of the aforesaid observations. 22. Apropos the addition towards alleged commission which was made by the A.O @ 5%, which thereafter, was scaled down by the CIT(Appeals) to 1%, I am unable to find any substance in the same. As nothing have been placed on the record that would prove to the hilt that the assessee had incurred any such expenditure, therefore, the addition so made/sustained by the lower authorities on a presumptive basis cannot be sustained. Accordingly, I, herein vacate the addition of Rs. 87,200/-. Thus, the Ground of appeal No.4 raised by the assessee is allowed, while for, the Ground of appeal No.2 raised by the revenue is dismissed in terms of the aforesaid observations. 23. Ground of appeal No.6 raised by the assessee and Ground of a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....131(3) and other matters related to Audit. It will not be out of place to mention here that, the CBDT, New Delhi only recently i.e. on 15.03.2024 has notified a circular containing detailed instructions for filing of appeals in Supreme Court of India, High Courts and also Income Tax Appellate Tribunals where earlier instructions issued in this regard were superseded. As in the month of March-April, 2024 the workload of the PCIT office increases manifold due to work related to time barring in nature and also the month of March-April was the transitional period in view of the recent circular no. 05/2024 dated 15.03.2024." In view of the above facts, it is requested to kindly allow the appeal with condonation of delay in the above case. Encl. as above Copy to:- Yours Faithfully, Rila (R.K. Satpute) Income Tax Officer-Dhamtari 1. The Pr. Commissioner of Income Tax-1, Raipur for kind information. 2. The Joint Commissioner of Income-tax, Range-1, Raipur for kind information. 3. The Joint Commissioner of Income-tax, ITAT, Raipur for kind information. Income Tax Officer- Dhamtari Document 2 NANDKISHOR MAHESHKUMAR SADARBAZAR, DHA....