TaxTMI 
TaxTMI 
2024 (10) TMI 475
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.... Under the facts and circumstances the Learned CIT(A) has erred in sustaining the amount of Rs. 6,88,603/- against an addition of Rs. 31,58,913/- made on account of alleged commission payment. 3. Under the facts and circumstances the Learned (CIT(A) has erred in confirming the action of the Learned AO on account of reopening of assessment by appreciating wrong facts and without making proper enquirers only on the basis of information received. 4. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing." 3. In this case, the appeal of the revenue as well as that of the assessee was decided by the Bench on 15.09.2022 taking into consideration the judgment of clarity gold rendered by our High Court decided issue of bogus purchase in the case of CIT(Central), Jaipur vs. M/s Clarity Gold (P.) Ltd. (100 CCH 0396 Rajasthan High Court). In that case Hon'ble High Court estimated profit of the assessee's case @ 12% of such bogus purchase. Thereafter, the assessee filed Misc. Application contending that our High Court in that case while estimating the profit also held that in para 6 that "in our consider opin....
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....quiry was conducted by the ADIT (Investigation)(Hq-2), New Delhi wherein, it was observed that the assessee has shown purchases found from M/s. Unnati Alloys Private Limited and obtained bogus entry in the form of bogus purchases amounting to Rs. 21,05,94,215/- during the year under consideration. Based on these facts, information u/s. 133(6) of the Act was called from M/s. Unnati Alloys Private Limited to check the veracity of claim of purchase of the assessee. The AO has called for following information; (i) Copy of confirmations of account with M/s. Kandoi Metal Powders Manufacturing Company Private Limited duly certified in their books for FY 2011-12. (ii) Copy of detailed descriptions of the source from where the funds have been received including the Name, PAN and postal address of the source and proof of creditworthiness of the source for AY 2012-13. (iii) Copy of Bank account statement showing receipts of payment against sale of goods to the above party for F. Y. 2011-12. (iv) Copy of sales vouchers. 7. The above entity has not provided any information except the ledger account of the assessee in its books of account. The remaining ....
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....hat the proceeds might not actually pertain to the business activities. All these entities have offered very low income as compared to very high turnover and even the director of these companies have offered very low income. It is also observed that the summons were issued and the letter were sent but no satisfactory replies were received. The ld. AO further observed that two biggest intermediary entities which transferred funds to Moral Alloys Private Limited during the FY 2011-12 were Unnati Alloys Private Limited and Misawa Impex Private Limited, their bank account statements were analyzed and it was seen that almost all fund credited in the bank account was transferred further to other entities on the same day and accounts are left with minimal balance which strengthens the fact that this is layering of funds through various accounts. 10. Based on the above back ground ld. AO held that Major entities which transferred to Unnati Alloys Private Limited (i.e. Purchases claimed by them from Unnati Alloys Private Limited or credits extended by them to Unnati Alloys Private Limited) were identified and assessee was found to be one of the beneficiaries of such accommodation entries....
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....ed that in the subsequent years the appellant has declared consistently higher GP. Thus, in such a case, once the provisions of section 145 were invoked, the best course of action would be to apply GP ratio and confirm certain percentage of sales to cover any leakage of revenue. Therefore, the AO is directed to apply a GP rate of 6% on the total turnover of Rs. 1,05,29,10,586/ to cover any possible leakage of revenue on account of bogus purchases which works out to Rs. 6,31,74,635/-. Since the appellant has already declared Rs. 5,16,97,909/- as the GP for the year under consideration, therefore addition to the extent of Rs. 1,14,76,726/- is sustained and the appellant gets a relief of Rs. 4,11,71,827/-. As regards the second addition he has based on the reduction in GP rate relief also granted relief on account of alleged commission from Rs. 31,58,913/- to 6,88,603/-. 13. The departmental representative supported the findings of the assessing officer and vehemently argued that the assessee is engaged in the bogus purchases and thereby inflating their purchase and thereby reducing the profit. The ld. DR further draw our attention to the findings of the AO recorded at para 7 of hi....
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.... "The above matter was recalled because the profit rate applied by Hon'ble Bench in ITAT Order dated 15.09.2022 was of jewelry trade as per Hon'ble Rajasthan High Court Order in the case of M/s Clarity Gold Pvt. Ltd. in DB Income Tax Appeal No. 125/2014 order dated 19.09.2017. In this High Court order it was observed by the Hon'ble High Court that the GP Rate shown by identical industry should be applied. The assessee company is engaged in the manufacturing and trading of Copper Wires and Other Copper Items. Therefore, the rate of identical industry should be applied. In the Hon'ble Rajasthan High Court Order the GP Rate applied was of the assessee himself average GP Rate. In our case the GP Rate chart is as under :- Fin. Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 Turnover 1966466609 1052910586 709061300 829795056 1205046686 1180457391 1224619368 1350149424 Gross profit 49358311.9 51697909.8 54640923 56757982 43252739 52311550 59050842 67179120 Net Profit 2753053.25 2316403.29 1559934.9 4209201 3651098.2 2154203 4772765 46....
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....e finding of ld. CIT(A) wherein he stated that when the books are rejected and provision of section 145 is invoked, the best course of action is to apply the GP ratio and confirm certain percentage of sales to cover up any leakage of revenue. The profit declared in the year under consideration is higher than the previous year and the same should be accepted as the assessee has shown better results. He therefore submitted that to that extent i.e. in deleting addition of CIT(A) is proper but while estimating the GP the ld. CIT(A) has made mere guess work and confirmed the addition at another estimate only ignoring the book results. 16. We have considered the rival contentions, perused the material available on record and also gone through the findings of the lower authorities recorded in their respective orders. We have also gone through the various judicial ruling placed before us by both the parties to drive home to their contentions. The bench noted that against the allegation made by the revenue the assessee has not demonstrated that the contentions of the department can be put a side. He has even in the reassessment proceeding remained silent and has not made any effort to re....