TaxTMI 
TaxTMI 
2024 (9) TMI 1117
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.... the assessee for proving genuineness of the transactions. However, the AO stated that assessee could not explain the transaction satisfactorily therefore, the entire amount of Rs. 88,98,967/- was treated as unexplained expenditure and added to the total income of the assessee. 3. The assessee filed appeal before the ld. CIT(A). The ld. CIT(A) after relying on the decision of Hon'ble Bombay High Court and the other Courts restricted the addition to the extent of profit element embedded in the transaction to 12.5% of the amount of bogus purchases of Rs. 88,98,967/- i.e. Rs. 11,12,371/-. The relevant extract of the decision of CIT(A) is reproduced as under: "4.0 I have perused the assessment order and the appeal documents. In grounds of appeal, the assessee challenged the rejection of books of accounts u/s. 145(3) stating that without providing opportunity of being heard, the AO rejected the books of accounts. The AO in the assessment order has clearly stated the reason(s) for rejection of books of accounts of the assessee. The relevant part of the order is produced as following; 3.4 From the above discussions and on the basis of materials available on record, th....
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....channels is not sacrosanct. iii. If the seller is found to be non-existent then purchase price can be treated as income. 6.1 It is well settled law that strict rules of evidence do not apply to Income tax proceedings and conclusive proof is also not necessary to arrive at any conclusion or to establish a fact. The AO is entitled to arrive at a conclusion on appreciation of several facts, the cumulative effect whereof may be considered to judge the soundness of the conclusion. It is conceivable that a mere denial by the assessee is not sufficient to rebut the circumstantial evidence which considered along with the conduct of the assessee has led to the inescapable conclusion that the assessee had taken accommodation entries and alleged purchases were not genuine. 6.2 The Hon'ble Gujarat High Court in the cases of M/s. Sanjay Oil Cake Industries Vs. CIT (10 DTR 153) and Hon'ble Ahmedabad Tribunal in the case of M/s. Vijay Proteins Ltd. Vs. ACIT (58 ITD 428) has extensively dealt with this issue and came to conclusion that disallowance of 25% of impugned purchases would suffice the matter. Similarly, the Hon'ble Jaipur Tribunal in the case of Deepak DalelaVs....
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....se in entirety stating that the purchases shown from the respective parties were found ingenuine. It was not a matter to be looked into whether the assessee had made purchases from different parties other than the alleged ones. It was also worth mentioning that the appeal against the decision of Hon'ble ITAT was not admitted by the Hon'ble Gujarat High Court and the assessee had also lost before the Hon'ble Supreme Court. So, the decision over the issue had become final. There were judicial decisions wherein the whole amount of bogus purchases was disallowed and the said orders were also confirmed by the High Courts. It was held that after invocation of provisions of section 145(3) of the Act, the Assessing Officer acquired the mandate even to add the whole amount of purchases found as bogus to the total income of the assessee. One such case was Sri Ganesh Rice Mills Vs. CIT 294 ITR 316 (All) wherein the entire amount of bogus purchases, from 5 parties, was disallowed and same was also upheld. The relevant portion of the order of the Tribunal as confirmed by High Court of Allahabad is reproduced, here as under: "Once it is found that the purchases were bogus, addition has ....
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....y Protein Ltd. (supra) are however distinguishable on facts since in case of Sanjay Oil Cake Industries, a specific finding was given by the Assessing Officer that purchases were made from the alleged bogus suppliers at higher rate as compared to the other parties. In the case of Vijay Proteins Ltd. (supra), after examining the bank account, it was established that cheques issued to various parties were deposited in one of the accounts, which were found to be owned by the assessee himself but there are no such circumstances in the present case. Moreover, the question whether entire purchases should be disallowed or addition should be restricted to the profits embodied on sale proceeds was answered by Hon'ble Gujarat High Court in the case of CIT Vs. President Industries (258 ITR 654) and Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Balchand Ajit Kumar (263 ITR 610). 6.8 Considering the above decisions, and a catena of recent decisions passed by the Tribunals relying on the aforesaid decisions, only the profits embodied on sale proceeds should be taxed instead of addition on account of entire purchases. Looking to the circumstantial evidence in the present case,....
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....ever controverted by Hon'ble ITAT? 6.3 Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in overlooking the fact that addition made by AO based on details of scam unearthed by Sales Tax Department wherein it was established that the assessee had taken bills from bogus parties without actually making purchases from them? 6.4 whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in ignoring that the purchases from bogus parties are debited in P & L Account for which the assessee had not submitted any evidences, and the same was not allowable? 6.5 Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in upholding the order of the Ld.CIT(A) who had limited and disallowance to the extent of 12.5% of the total alleged purchase without verification and confirmation of quantitative data of material sourced and its subsequent movement during the year?" 3. Briefly stated the material facts are as under: The Assessee undertakes civil contract works awarded mostly by Municipal Corporation of Greater Mumbai (MCGM). Return of....
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....ssessee procured the materials and goods, if not from the declared sources but from some other sources, it would not be possible on the part of the assessee to execute work awarded by MCGM. The Tribunal, therefore, held that the entire purchase made by the assessee could not be added back as income, but only profit element embedded therein, be treated as income of the assessee. 5. We have gone through the well reasoned order of the Tribunal, which has taken into account all relevant facts before passing the order impugned. In our opinion, the order does not warrant any interference. No substantial questions of law arise in the present appeal and the same is, accordingly, dismissed." (emphasis supplied) 6.11 In view of the matter, considering the factual matrix of the case, I am of the opinion that the ratio of the decision of the Hon'ble High Court of Bombay in the case of PCIT vs. S.V. Jiwani [2022] 145 taxmann.com 230 (Bombay) (supra), PCIT vs Ashwin Purshotam Bajaj in ITA. 576 of 2018 dated 12-07-2023 and the decision of Hon'ble High Court of Gujarat in the case of CIT vs. Simit Sheth (supra) are squarely applicable mutatis mutandis to the instant case. Accordi....