TaxTMI 
TaxTMI 
2025 (2) TMI 448
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....d issues involved in the captioned appeals are more or less inextricably interlinked and in fact interwoven, therefore, the same are being taken up and disposed off by way of a consolidated order. 2. We shall first take up the cross-appeals filed by the assessee and the revenue in ITA No.122/RPR/2024 & ITA No.135/RPR/2024 for assessment year 2013-14, wherein the assessee has assailed the impugned order on the following grounds of appeal before us: "1. On the facts and circumstances of the case and in law, reopening u/s. 148/147 is invalid; it is merely on change of opinion as based on findings of survey conducted upon assessee u/s. 133A on 15-3-16 which had been considered in original assessment made u/s. 143(3) dt.31-3-16 and addition had also been made on such count; reopening of concluded assessment made u/s. 143(3) dt.31-3-16 in absence of any fresh/new material, be treated merely on change of opinion on the same material facts, is not permissible in the eyes of law, is liable to be quashed; relied on Siemens Energy Industrial Turbo India (P) Ltd (2024) (Bom HC); Mira Bhavin Mehta (2024) (Bom HC); Godrej Projects Development (P) Ltd (2024) (Born HC); Kelvinator (2010) (SC); ....
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.... on record; addition is unjustified and is liable to be deleted. 6. On the facts & circumstances of the case and in law, ld. CIT(A) has erred in sustaining addition of Rs. 5,99,982 on the count of mistake in the original assessment made u/s. 143(3) dt.31-3-16 as in such assessment, expenses of Rs. 26,70,479 was disallowed while addition was made mistakenly of Rs. 20,70,497; it is a factual mistake which is liable to be deleted. 7. The appellant craves leave to add, urge, alter, modify or withdraw any grounds before or at the time of hearing." On the other hand, the revenue has assailed the impugned order on the following grounds of appeal before us: "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 2,38,25,061/- out of total addition of Rs. 3,60,33,063/-, ignoring his own finding in his order that "there is no doubt regarding bogus purchases of Rs. 14,41,32,250/- had been made by the assessee" whereby he has upheld the basic finding of AO in entirety? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 2,38,25,061/- out of....
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.... Raipur 22,12,500/- 3,68,750/- 10.12.2012 5. M/s. Shiv Shankar Chawal Udyog, Raipur 37,70,000/- 4,71,250/- 11.12.2012 6. M/s. Hardha Agency 77,60,000/- 5,35,000/- 27.11.2012 Total 14,41,32,250/- 6. The A.O observed that a survey operation u/s. 133A of the Act was conducted at the business premises of Shri Sanjay Sharma, Hanuman market, Raipur and the assessee, viz. Shri Kamlesh Kesharwani, commission Agent, Ramsagarpara, Raipur, as well as three rice millers of Tilda on 15.03.2016, which revealed that certain rice millers would procure bogus bills from brokers/entry operators without any actual purchase of goods. It was observed by the A.O that substantial incriminating material evidencing the aforesaid facts were found in the course of the survey proceedings. The A.O also noticed that survey action was carried out in the case of Nagarik Sahakari Bank, Raipur where some of the brokers/entry operators maintained their bank accounts. It was further observed by him that the brokers/entry operators had in their respective statements recorded on oath u/s. 131 of the Act had admitted of having provided bogus bills to rice traders and millers withou....
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....led to produce transportation details evidencing the supply of goods from the aforementioned parties; and (iv) that the suppliers had neither accounted for the purchases made by the assessee nor paid taxes thereon, thus, concluded that the assessee had not made any genuine purchases of Rs. 14.41 crore (approx.) from the aforementioned parties. Accordingly, the A.O after drawing support from certain judicial pronouncements held the purchases that the assessee had claimed to have made from the aforementioned parties as bogus and disallowed 25% of the aggregate value of the same i.e. Rs. 3,60,33,063/- (25% of Rs. 14,41,32,250/-). 8. Apart from that, the A.O made an addition towards peak amount of Rs. 10 lacs towards unexplained investment which the assessee would have made for carrying out the aforementioned unaccounted transactions. Accordingly, the A.O vide his order passed u/s. 143(3) r.w.s. 147 of the Act, dated 24.12.2028 after, inter alia, making the aforesaid additions determined the income of the assessee at Rs. 4,09,00,425/-. 9. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) who partly allowed the same. Apropos the addition of Rs. 3,60,33,063/- ....
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....broken rice and had only provided accommodation entries. The Ld. AR submitted that the A.O based on his aforesaid observation had after, inter alia, treating the assessee as an accommodation entry provider made an addition of commission income @ Rs. 5/- per Qntl. i.e. 143295 Qntl X Rs. 5/- per Qntl.=Rs. 7,76,475/-. 13. Carrying his contention further, the Ld. AR submitted that purchases of Rs. 14,41,32,250/- that were held by the A.O as bogus purchases formed part of his total purchases of Rs. 2,03,12,76,610/- i.e. 143295 Qntls. of paddy/rice/broken rice made during the subject year. The Ld. AR on being called upon to fortify his aforesaid claim had taken us through the synopsis filed by him dated 28.10.2024. The Ld. AR on being called upon to substantiate the veracity of the aforesaid facts and figures as was canvassed before us, had drawn our attention to the assessee's trading and profit and loss account dated 31.03.2013, which revealed the total purchases of Rs. 20,31,27,610/- and the corresponding sales of Rs. 20,39,52,845/-. Carrying his contention further, the Ld. AR submitted that the alleged bogus purchases of Rs. 14,41,32,250/- (supra) pertained to the purchases that wer....
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....foresaid concerns had by their respective "affidavit" deposed that they were merely acting on behalf of the assessee, viz. Shri Kamlesh Keshwarni. Accordingly, it transpires that the A.O had initiated the reassessment proceedings inter alia, for the reason that as per the information that had surfaced in the course of the survey proceedings conducted u/s. 133A of the Act u/s. 133A of the Act on 15.03.2016, revealed that the purchases of Rs. 14,41,32,250/- made by the assessee in his proprietary concern, viz. M/s. Keshwarni Rice Mills (supra) were actually bogus purchases i.e. goods which though were projected to have been purchased from the aforementioned 6 parties were actually procured from the open/grey market. Apart from that, the case of the assessee was, inter alia, reopened for the reason that the commission income of Rs. 5/- per Qntl. earned by the assessee by providing bogus purchase bills through his bogus benami concerns had escaped assessment. 15. As the reopening of the concluded assessment in the case of the assessee was, inter alia, based on the aforesaid reasons i.e. facts which were not there before the A.O while framing the original assessment, therefore, we are ....
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....n.com 730, but the same being distinguishable on facts would not carry his case any further. In the aforesaid case, the Hon'ble High Court had observed that as the A.O while framing the original assessment u/s. 143(3) of the Act, dated 28.02.2014 had scrutinized the transaction of sale of land and accepted the assessee's claim, therefore, he could not have thereafter, based on a mere "change of opinion" that the sale transaction of the subject land was on capital account and provisions of Section 50C of the Act were applicable, initiated the proceedings u/s. 147 of the Act. As observed by us hereinabove, in the present case of the assessee, the facts, viz. (i) that the assessee owned 10 bogus benami concerns through which accommodation entries were being provided by him to certain beneficiaries was not there before the A.O in the course of the original assessment proceedings; and (ii) that the post survey investigation of the bank accounts of the 6 hawala parties revealed that the assessee had during the subject year made purchases of Rs. 14.41 crore (supra) from them, were not there before his predecessor while framing the original assessment vide his order passed u/s. 143(3), dat....
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....tax was underassessed. Apart from that, we find that the A.O while recording the "reasons to believe", had at the threshold stated that scrutiny assessment in the case of the assessee was framed u/s. 143(3) r.w.s. 144 of the Act, dated 31.03.2016, wherein his income was assessed at Rs. 33,00,380/- as against the returned income of Rs. 7,38,440/-. We find that the aforesaid facts were stated in the "reasons to believe" dated 05.02.2018 that had been approved by the Jt. CIT vide his approval dated 06.02.2018. 20. Although we are not in oblivion of the fact that at Sr. No.8 & 9 of the "proposal form" (supra) the Jt. CIT had wrongly mentioned that the assessment in the case of the assessee is proposed to be made for the first time, and also had failed to provide the details of the original assessment that was earlier framed u/s. 143(3) of the Act, dated 31.03.2016, but the same would not be fatal to the assumption of jurisdiction for initiation of proceedings u/s. 147 of the Act in case of the assessee before us. We are of a firm conviction that as both the A.O and the Jt. CIT, Range-1, Raipur, had taken cognizance of the fact that it was a case of a reassessment within the meaning of....
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....'trading concern' in a proprietary concern M/s.Kesharwani Rice Mill, Raipur, which deals in trading in paddy, rice & broken rice, thus, it is engaged in 'trading activities' of paddy, rice & broken rice. The total sales for the F.Y. 2012-13 comes to Rs. 20.39 crores as per audited trading & P & L account. No 'manufacturing activity' has been done by the assessee during the F.Y. 2012-13, in other words, there is no question of any kind of suppression of 'yield' of any item traded in. Working of manufacturing and trading portion during the year is as under:- Total turnover (i.e. sales) Rs. 20,39,52,845 Manufacturing portion (Rs.Nil (0%) Trading portion (Rs.20,39,52,845 (100%)] Paddy sales at Rs. 1175.35L + rice sales at Rs. 703L + Broken Rice sales at Rs. 161.17L Trading portion treated as genuine by the Ld. AO Rs. 610.84L (29.95%) Trading portion treated as bogus by the Ld. AO Rs. 1428.69L (70.05%) Thus, out of the "whole books" the Ld. AO has accepted 29.95% as genuine and 70.05% as bogus. "That the Ld. AO has dully accepted the 'book results' of 30% portion of its trading activities in terms of quantity and value, ....
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....purchase expenses of the assessee are not allowed on account of being bogus purchases. The facts mentioned above reveals the said amounts of bogus purchase which leads to rejection of books of account for the limited purpose as per sec.145(3). For the reasons detailed above, the purchases recorded in the books of account of the assessee amounting to Rs. 14,41,32,250 are held to be bogus and 25% of such purchase amount works out at Rs. 3,60,33,063 is hereby added to the total income of the assessee." 3.1.6 It further submitted that the assessee's case does not fall in the category of Sanjay Oil Cake Industries (2009) (Guj HC) being on distinguishable facts which is enumerated in Para No.1.20, Pg No.15 of this submission in the sense that, the case of Sanjay Oil Cake Industries was a 'manufacturing concern' and in that case the revenue has proved by clinching evidence on record that yield has been suppressed and to cover up such suppressed yield, bogus purchases of raw material has been introduced from bogus parties and purchase price of raw material has also been inflated according to their own will, since, the parties were not traceable; they opened the bank accounts ....
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....ock and the quantity traded during the year under consideration i.e. AY 13-14, in other words, where sales made out of such purchases were not disputed or questioned and the resultant profit on such sales had been accepted in toto by the Ld.AO, disallowing such purchases as bogus purchases is unjustifiable, invalid. Alternatively, not the entire amount, but the profit margin embedded in such amount may be subjected to tax. Further, the Ld.AO did not find any 'inflation' in purchase price for coming to the conclusion that the purchases are bogus, the addition made at Rs. 3,60,33,063 may kindly be deleted." 3.1.8 From the reply of assessee contention is coming out that the case of assessee is not a manufacturing concern but a trading concern, hence it is distinguishable from 'Sanjay Oil Cake Industries' case. If the case of assessee is not manufacturing, disallowance of 25% should not be applicable in his case, only certain NP/GP may be applied in case, after rejection of books of account. I have gone through the detailed investigation in this rice miller's case assessment order of assessee and the reply of assessee during the appeal proceeding. I thoroughly e....
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.... however, to recover any further leakage of revenue, 0.25% was to be added to the rate offered by the assessee. Basing on this premise, Ld. AO recalculated the GP at 9% of the sales turnover by rejecting the books of account of the assessee u/s. 145. According to AO the difference ween 9% of the turnover, the aggregate amount of the GP already declared by the assessee and the additions made during the earlier assessment u/s. 153A had to be added. Decision on similar line has been given by ITAT Mumbai in case of Ratnagiri Stainless Pvt. Ltd. Vs ITO ITA No. 4463/Mum/2016 Dated 04.04.2017. Facts are as under- "The AO, on the basis of information received from Dy. Director of IT (Inv.) that assessee had received bogus purchase invoice from 28 entry providers, reopened assessment. No evidence was produced by assessee to show that purchases were genuine by actual delivery of goods on said parties. Notice u/s 133(6) were returned unserved. One of the parties appeared before the AO and confirmed that the transaction were bogus. Assessee having purchased the goods from grey market for earning higher profits, GP rate 12.5% applied by AO and confirmed by CIT(A) was justified. However the ....
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....ce the year in question i.e. F.Y.2012-13 (i.e. the year under consideration). Also, the assessee in reply to Question No.58 of his said statement had stated that he was in receipt of commission of Rs. 5/- per Qntl (in cash) for providing bogus bills which, however, was not disclosed by him in his return of income. Further, the assessee in reply to Question No.3 of his statement recorded on 30.03.2016, had stated that there was no actual supply of goods but only bogus bills were provided to the beneficiaries. Apart from that, the assessee in reply to Question No 5 & 7 of his statement recorded on 30.03.2016 (supra), had also explained as to how the mandi-anugya receipts were obtained and provided to the beneficiaries concerns to whom bogus bills were issued. Although the assessee who is proprietor of M/s. Keshwarni Rice Mills, i.e. a concern engaged in the business of trading in rice/by products, had admitted that he was deriving commission income @ Rs. 5/- per quintal from providing bogus purchase bills, but independent of and in addition of his said stream of income he was deriving income from the business of trading in rice/by products. 24. The fact that the assessee had made ac....
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....alue from the open/grey market, as against the value booked in his books of accounts based on the bogus purchase bills of the aforesaid bogus/hawala parties, had after by taking cognizance of the fact that in the business of rice millers/traders the GP rate varied between 3% to 10% adopted GP rate of 10% had after allowing credit of the GP rate of 1.53% that was already disclosed by the assessee in his audited books of accounts, thus, made a balance addition of 8.47% of the value of the bogus purchases. As such, the CIT(Appeals) had sustained the addition of Rs. 1,22,08,002/- (out of the addition of Rs. 3,70,33,063/- made by the A.O). 27. We have thoughtfully considered the view taken by the CIT(Appeals) and find no infirmity in the same. As the CIT(Appeals) had fairly quantified the profit element which the assessee would have made by procuring the subject goods not from the aforementioned six bogus concerns, but from the open/grey market, by adopting the GP rate prevailing in the business of rice miller/traders, therefore, we find no infirmity in the view taken by him, and, thus, sustain the addition to the extent that was upheld by him. Thus, the Grounds of appeal No. 3 & 4 rai....
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.... substantiate his baseless proposition in this respect, thus the addition of Rs. 10,00,000/- on account of unexplained investment in purchase shown, in absence of any evidence/material brought on record by the Ld. AO, may kindly be deleted, Reliance is placed on: It is submitted in Vishnu Prasad Maharwal (2014) (Jai-Trib) dated 31.03.2014 held as under:- "3.6 We find force in the contention of the Ld. AR that this year was the second year of the assessee in contract business. However, in current year the contract receipts of the assessee have increased by more than 6 times from last year. The NP rate declared by the assessee in A.Y. 2008-09 was 6.01% which increased to 7.02% in A.Y. 2009-10. Therefore, in view of Bhawan VA Path Nirman (Bohra) & Co (Raj), the past history of the assessee is best guiding factor. Further, the result shown by the assessee is better than M/s.Rishabh construction (P) Ltd. Further the trading result is better because the entire cash and other found as the result of the search were surrendered as business income for A.Y. 2010-11. Further, if trading addition for A.Y. 2009-10 is sustained then the same is entitled for telescoping benefit in A.Y. 2010-11....
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....d the revenue for A.Y.2014-15, wherein the assessee has assailed the impugned order on the following grounds of appeal before us: "1. On the facts & circumstances of the case and in law, Id CIT(A) has erred in sustaining addition of Rs. 1,36,78,421 on count of adhoc estimation of GP of 10% on alleged bogus purchases of Rs. 15,99,81,541 without giving any basis for such arbitrary estimation; while the assessee is a trader in goods i.e., paddy, rice and broken rice; corresponding sales has been accepted; there cannot be a case of "bogus purchase" in case of a "trader in goods" wherein corresponding sales quantity of goods is not disputed by the revenue; addition of Rs. 1,36,78,421 is unjustified; is liable to be deleted. 2. On the facts & circumstances of the case and in law, Id CIT(A) has erred in sustaining addition of Rs. 1,36,78,421 on count of adhoc estimation of GP of 10% on alleged bogus purchases of Rs. 15,99,81,541 without giving any basis for such arbitrary estimation; revenue has rejected books of account; applied sec.145(3); estimation of GP made @10% but assessment not made u/s. 144; in such a situation, assessment made u/s. 143(3) would be invalid; addition is liabl....
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....s under: Sr. No. Name of the Bogus firm Amount of purchase Peak purchase amount Date of peak purchase 1. M/s. Agrawal Agro, Dunda, Raipur Rs.3,83,06,950/- Rs.5,58,750/- 11/11/2013 2. M/s. Shrikhand Agrotech, Raipur Rs.1,14,89,000/- Rs.5,43,750/- 03/09/2013 3. M/s. Hardaha Agency, Abhanpur, Raipur Rs.1,60,81,691/- Rs.4,48,750/- 02/05/2013 4. M/s. Sakshi Gopal Corporation, Raipur Rs.1,18,35,000/- Rs.3,81,250/- 13/02/2014 5. M/s. Bajrang Food Products Rs.7,96,24,600/- Rs.5,35,000/- 30/08/2013 6. M/s. Eden Rice Mill Rs.3,32,27,500/- Rs.5,10,000/- 19/07/2013 7. M/s. Shri Shyamji Rice Agrotech Rs.2,98,04,500/- Rs.5,71,250 26/09/2013 8. M/s. Shree Annapurna Foods Rs.45,63,750/- Rs.3,33,750/- 28/12/2013 9. M/s. Shri Laxmi Agrotech Rs.7,23,750/- Rs.3,75,000/- 28/02/2014 Total Rs.23,26,56,741/- Rs.42,57,500/- 33. The A.O observed that in the course of the aforesaid survey operation conducted u/s. 133A of the Act at the business premises of Shri Kamlesh Kumar Keshwarwani i.e. the assessee, it was admitted by him that he had acted as an intermediary for arranging the bogus sale and purchase bills between the parties without ....
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.... parties. Also, the A.O observed that the assessee could not explain the peak investment that was made by him for carrying out the aforementioned bogus purchase transactions in the cases other than the aforementioned three firms which were declared as his own firms. Considering the aforesaid facts, the A.O held the amount of Rs. 40,41,225/- (supra) as the income of the assessee u/s. 68 of the Act. 35. The A.O further called upon the assessee to substantiate the authenticity of the purchases which were claimed to have made from the aforementioned parties by placing on record documentary evidences viz. gate entry pass, proof of transportation, delivery challans of goods, entry in purchase and stock register, confirmations from the respective parties etc. Also, the A.O had offered the assessee to cross-examine the brokers and the persons whose statements were recorded by the department. However, the assessee could not substantiate the authenticity of the aforesaid purchases by placing on record the documentary evidence that was called for by the A.O. Accordingly, the A.O held a view that the assessee had failed to substantiate the authenticity of his claim of having made genuine purc....
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....ear, scaled down the addition to an amount of Rs. 1,36,78,421/- (8.55% of Rs. 15,99,81,541/-). For the sake of clarity, the observations of the CIT(Appeals) are culled out as under: "I have gone through the detailed investigation in this rice miller's case assessment order of assessee and the reply of assessee during the appeal proceeding. I thoroughly examined the reply of assessee with the facts of the case. Now, it is clear that the present case is a case of trading concern and there is not any manufacturing activity hence the case is little bit distinguishable from Vijay Proteins Ltd, relied by the Ld. AO Secondly, there is no doubt regarding bogus purchases of Rs. 15,99,81,541/- had been made by the assessee. Thirdly, a detailed investigation has been done to prove these purchases as bogus and even cross examination was also done by rice millers during the investigation. As the Ld. AO has rejected books of account for limited purpose, but he had not questioned the sales. This is a well settled proposition that the sales cannot be made without purchases. So, if the purchases have not been made from the six parties mentioned in assessment order then the assesses shou....
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....nuine by actual delivery of goods on said parties. Notice u/s 133(6) were returned unserved. One of the parties appeared before the AO and confirmed that the transaction were bogus. Assessee having purchased the goods from grey market for earning higher profits, GP rate 12.5% applied by AO and confirmed by CIT(A) was justified. However the assessee will get credit of GP ratio declared on these bogus. purchase in the return of income filed with the Revenue." In the line of business of rice millers and traders in the state, the GP varies from 3% to 10% depending on various factors such as price of paddy paid by the government, level of crop production and quantity of procurement committed by the statement government. Adopting a GP of 10%, since the GP shown by the assessee is 1.45%, an addition of 8.55% on the suspicious purchases is hereby sustained, attributing to the extra profit earned by showing purchases. Therefore on a purchase of Rs. 15,99,81,541/- an amount of Rs. 1,36,78,421/- is hereby sustained and balance addition is deleted." 39. Apropos the addition of Rs. 27,93,750/- that was made by the A.O towards unexplained investment which the assessee would have made for carr....
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....nt in purchases shown, in absence of any evidence/material brought on record by the Ld. AO, may kindly be deleted, Reliance is placed on: It is submitted in Vishnu Prasad Maharwal (2014) (Jai-Trib) dated 31.03.2014 held as under:- "3.6 we find force in the contention of the Ld. AR that this year was the second year of the assessee in contract business. However, in current year the contract receipts of the assessee have increased by more than 6 times from last year. The NP rate declared by the assessee in A.Y. 2008-09 was 6.01% which increased to 7.02% in A.Y. 2009-10. Therefore in view of Bhawan VA Path Nirman (Bohra) & Co (Raj), the past history of the assessee is best guiding factor. Further, the result shown by the assessee is better than M/s. Rishabh construction(P) Ltd. Further the trading result is better because the entire cash and other found as the result of the search were surrendered as business income for A.Y. 2010-11. Further, if trading addition for A.Y. 2009-10 is sustained then the same is entitled for telescoping benefit in A.Y. 2010-11 against the cash and other assets found as the result of search in view of Anantharam Veerasinghaiah & Co (1980) (SC) and Tyarya....
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....6/RPR/2024 for A.Y.2014- 15. 43. At the same time, for the sake of clarity, we briefly cull out our observations qua the facts involved in the present cross-appeals, as under: (A) the A.O observed that the assessee had during the subject year made bogus purchases from 6 parties (out of 9 parties) aggregating to Rs. 15,99,81,541/- (aggregate of purchases made by the assessee from 6 parties). Accordingly, the A.O after rejecting the books of account u/s. 145(3) of the Act quantified the profit which the assessee would have made by purchasing the subject goods not from the aforementioned bogus parties, but from the open grey/market and worked out the addition @25% of the value of the bogus purchases of Rs. 14,41,32,250/- i.e. at Rs. 3,99,95,285/- (wrongly taken by the A.O in the assessment order as Rs. 39,99,538/-). (B) On appeal, the CIT(Appeals) principally concurred with the A.O that the assessee would have made profit by procuring the subject goods not from the aforementioned 6 bogus/hawala parties but at a discounted value from the unknown parties operating in the open/grey market. At the same time, the CIT(Appeals) was of the view that the profit which the assessee would ha....
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....ng such mechanical approval on his part; in absence of a valid approval as mandated by law u/s. 151, reopening u/s148/147 would be invalid and would be liable to be quashed; relied on Kalpana Shantilal Haria (2017) (Bom HC); Sea Glimpse Investments (P) Ltd (2021) (Bom HC); 2. On the facts and circumstances of the case and in law, approval u/s. 151(2) by Jt.CIT is invalid as Jt.CIT has granted approval by mentioning "Yes, satisfied"; there is completely non application of mind by Jt.CIT while granting such mechanical & routine approval on his part; in absence of a valid approval as mandated by law u/s 151, reopening u/s 148/147 would be invalid and would be liable to be quashed; relied on Synfonia Tradelinks (P) Ltd (2021) (Del HC); S Goyanka Lime & Chemicals Ltd (2015) (SC); Chhugamal Rajpal (1971) (SC); Arjun Singh (2000) (MP). 3. On the facts & circumstances of the case and in law, ld CIT(A) has erred in sustaining addition of Rs. 1,32,65,272 on count of adhoc estimation of GP of 10% on alleged bogus purchases of Rs. 15,44,26,911 without giving any basis for such arbitrary estimation; while the assessee is a trader in goods i.e., paddy, rice and broken rice; corresponding sal....
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.... 2960/Mum/2016? 3. Without prejudice to the above, whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 2,53,41,456/- out of total addition of Rs. 3,86,06,728/- by assuming that the assessee had made alternative actual purchases when the assessee has not proved the same with any verifiable documents?" 48. Succinctly stated, the assessee had filed his return of income for A.Y.2015-16 on 29.09.2015, declaring an income of Rs. 12,75,640/-. Subsequently, the A.O based on information that had surfaced while framing the assessment for the immediately preceding assessment year i.e. A.Y.2014-15 that the assessee had made bogus purchases from 9 tainted parties, initiated proceedings u/s. 147 of the Act. Notice u/s. 148 of the Act, dated 30.03.2017 was issued to the assessee. In response, the assessee filed his return of income on 17.11.2017, declaring an income of 12,75,640/-. 49. During the course of the assessment proceedings, the A.O observed that the assessee had claimed to have made purchases aggregating to Rs. 15,44,26,911/- from ten tainted parties, as under: Sr. No. Name of the Bogus firm Amount of purchas....
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.... of his claim of having made genuine purchases from the aforementioned parties. Thus, the A.O held the impugned purchases made, except for, the purchases made from six firms viz. (i) M/s. Agrawal Agro; (ii) M/s. Annapurna Foods; (iii) M/s. Shri Shyamji Rice Agrotec; (iv) M/s. Saraswati Paddy Process; (v) M/s. Hanuman Food Products; and (v) M/s. Shrinath Paddy process which were stated to be the assesses's own concerns, as bogus. Thereafter, the A.O after rejecting the assessee's books of accounts u/s. 145(3) of the Act held the balance amount of purchases pertaining to the remaining four parties amounting to Rs. 15,44,26,911/- as bogus, and disallowed 25% of the value of the same resulting to an addition of Rs. 3,86,06,728/-. 52. Apart from that, the A.O being of the view that the assessee would have made unaccounted investment by rolling his unaccounted money in his business activities, thus, made an addition of peak purchase amount pertaining to the aforesaid bogus firms (except for six concerns) of Rs. 26,80,650/- u/s. 68 of the Act. Accordingly, the A.O based on his aforesaid observations vide his order passed u/s. 143(3) of the Act, dated 30.11.2017 after, inter alia, making ....
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....ray purchases. Hence, actual GP will be much higher then declared in the books of account. There are some judicial pronouncements, on the similar facts. The Delhi Tribunal in the case of NKG has held that since purchase debited by the assessee has already been considered in audited accounts in arriving at the income, therefore if purchase is considered bogus and a profit ratio is decided then only the difference of GP so decided and the GP shown by the assessee should be added as the profit element on account of bogus purchase. The decision of the ITAT is as under - The Assessment order clearly indicates that before passing assessment order dt. 31.03.2016, Ld. AO conducted a thorough inquiry on the aspects including the purchases made by the assessee from Sharma group aggregating Rs. 63.90 crores and having considered the contentions of the assessee, Ld. AO reached a conclusion that the material purchased from the Sharma was bogus, and since the assessee itself offered rate of GP in business at approximately 8% however, to recover any further leakage of revenue, 0.25% was to be added to the rate offered by the assessee. Basing on this premise, Ld. AO recalculated the GP at 9%....
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....ition. For the sake of clarity, the observations of the CIT(Appeals) are culled out as under: "3.2 Ground No.3:- On the facts & circumstances of the case and in law, the Ld. AO has erred in making addition of Rs. 4,80,650 (i.e. Rs. 22,00,000 accepted by the assessee as unaccounted investment out of total addition made by the Ld. AO at Rs. 26,80,650) as unaccounted investment on these bogus purchases considered by the Ld. AO, which is without bringing any clinching material evidence on record and in absence of the addition of Rs. 4,80,650 is liable to be deleted. 3.2.1 During the assessment proceeding the assessee making bogus purchase of Rs. 15,44,26,911/- the assessee must have invested his unaccounted income which is being rolled into its business activities. hence the element of unaccounted investment has to be determined which is taken as the peak purchase amount from theses bogus firms (except six as above) and stands at Rs. 26,80,650/-. The same is added to the total income of the assessee us/ 68 of the I.T.Act, 1961. 3.2.2 During the appeal proceeding the appellant company to submitted the reply as under:- "It is submitted that the Ld. AO has made this addition on me....
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....dition for A.Y. 2009-10 is sustained then the same is entitled for telescoping benefit in A.Y. 2010-11 against the cash and other assets found as the result of search in view of Anantharam Veerasinghaiah & Co (1980) (SC) and Tyaryamal Bal Chand (1987) (Raj) and such telescoping benefit has not been given by the AO and Ld. CIT (A)." 3.2.3 Consider the above discussion, the AO has added possible investment in effecting the unaccounted purchases added by him, from a seller the assessee has made several purchases. Ld. AO has picked up the largest amount out of purchases from each seller. Such largest amounts from all sellers have been added and total has been treated as unaccounted investment. On the facts of the case, the assessee making bogus purchase of Rs. 15,44,26,911/-.The case of purchases made out of unknown sources. The transactions reflected in the bank accounts of assessee are having the same pattern. The assessee giving check/online transfer to six parties and these six parties withdraw the same amount from their bank accounts in form of cash. This cash is handed over to the assessee by the entry operator. Then this cash is used for purchases from gray market in cash at l....