TaxTMI 
TaxTMI 
2025 (3) TMI 359
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....ary 2017, (2017) 84 taxmann.com 195 (SC) ? (ii) On the facts and circumstances of the case and in law, the ITAT has erred in restricting the disallowance to profit margin on unproven purchases without considering the position of law established by the Hon'ble Apex Court in the case of N.K. Proteins Ltd, that 100% disallowances on bogus purchases is upheld ?" Brief Facts : 2. The assessee is a firm engaged in the business of Real Estate. The assessee filed its return of income declaring income of Rs. 61,05,420/-. The said return was selected for scrutiny assessment. 3. On 25 March 2013, an assessment order under Section 143 (3) of the Income-tax Act, 1961 ('the Act') was passed assessing income at Rs. 15,41,95,860/-. In the assessment order Rs. 14,30,90,442/- was added on account of alleged bogus purchases from various parties. A sum of Rs. 50,00,000/- was also added under Section 68 of the Act. The said order was challenged by filing an appeal to the Commissioner of Income Tax (Appeals) [CIT (A)]. 4. On 29 May 2015, the CIT (A) with respect to the alleged bogus purchases deleted the additions with regard to all the suppliers except M/s Neptune Trading Co. and Hari Om T....
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.... the transactions were found to be genuine and, therefore, the appeal filed by the appellant-revenue is required to be dismissed. He further submitted that both the authorities have given concurrent findings of the fact for coming to the conclusion that the purchases are not bogus and, therefore, the additions made by the AO were not justified. He further submitted that merely because M/s Neptune Trading Co. and Hari Om Traders have not given bank statements, on this ground itself purchases cannot be non-genuine. 9. Mr. Ajay Singh, learned counsel for the respondent-assessee relied upon the following case laws in support of his submissions :- (i) Pr. CIT Vs. M/s. Mohommad Haji Adam & Co. [2019] 103 taxmann.com 459 (Bom). (ii) Pr. CIT Vs. Vaman International Pvt. Ltd. ITXA/1940/2017, dated 29 January 2020 (Bombay HC). (iii)Pr. CIT Vs. JK Surface Coatings Pvt. Ltd. ITXA/1850/2017, dated 20 October 2021 (Bombay HC). (iv) Pr. CIT Vs. Shapoorji Pallonji and Co. Ltd. [2020] 423 ITR 220 (Bombay). (v) Pr. CIT Tejua Rohitkumar Kapadia. [2018] 94 taxmann.com 324 (Guj.)(HC). (vi) CIT Vs. Century Plyboards (I) Ltd. [2019] 103 taxmann.com 178 (Cal.)(HC). (vii) PCIT Vs. Ram ....
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....important to note that M/s Neptune Trading Co. and Hari Om Traders did not file their bank statements with the AO pursuant to the summons issued under Section 133 (6) of the Act and, therefore, the Officer could not verify whether there were any cash withdrawals from the bank accounts of these parties for coming to the conclusion as to whether the purchases should be treated as having explained. 14. The CIT (A) and the Tribunal with respect to all the suppliers except M/s Neptune Trading Co. and Hari Om Traders gave a concurrent finding of fact that the assessee has proved the purchases made from these suppliers by furnishing all the details available. The fact of the AO examining the bank statements and coming to the conclusion that there were no cash withdrawals after deposit of cheque issued by the respondent-assessee was a crucial factor which the Appellate Authorities considered for coming to the conclusion that the purchases made from various suppliers except M/s Neptune Trading Co. and Hari Om Traders were genuine. 15. In our view, the respondent-assessee has not only provided all the details with respect to these suppliers but the AO independently in remand proceedi....
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....hat with respect to the suppliers other than M/s Neptune Trading Co. and Hari Om Traders, the concurrent findings by both the Appellate Authorities clearly show that the purchases have been proved, the additions made by the AO with respect to these parties cannot be sustained. However, the crucial factor for arriving at these purchases as genuine has been the examination of the bank statements of the suppliers by which the Officer has given a finding that there has been no cash withdrawal after the deposit of the cheque issued by the respondent-assessee. This crucial factor is missing when purchasing from M/s Neptune Trading Co. and Hari Om Traders. Therefore to that extent by applying the submissions of the respondent-assessee with respect to other suppliers on the factual findings, the purchases from M/s Neptune Trading Co. and Hari Om Traders could not be verified and, therefore, these findings of facts have to be held against the respondent-assessee. 20. It is also important to note that the respondent-assessee has accepted the addition of 12.5% of the purchases from these two parties. By accepting the said percentage, the respondent-assessee has impliedly accepted that the tr....
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.....5%. 23. Similar situation arose before the Calcutta High Court in the case of Principal Commissioner of Income-tax Vs. Mrs. Premlata Tekriwal (2022) 143 taxmann.com 173 (Calcutta), where on very similar fact situation, the Calcutta High Court too echoed the same view that in such a case, the entire purchases should be added and not certain percentage. The view which have taken also finds support from the decision of Allahabad High Court in the case of Assistant Commissioner of Income-tax Vs. Shanti Swarup Jain (2015) 55 taxmann.com 378 (Allahabad) and judgment of the Gujarat High Court in the case of N.K. Industries Vs. DCIT (2016) 72 taxmann.com 289 (Guj.). 24. If the approach of the Appellate Authorities of estimating the profit on such purchases is to be accepted, then, in effect, the consequence would be that even if respondent-assessee has failed to prove its claim of deduction of purchases, still by estimating profit, impliedly deduction of purchases is given. For example, if the purchases by accommodation entries are Rs.100/- and a profit of 10% is estimated, then to the extent of Rs.90/- deduction on account of purchases is deemed to have been given by the Appellate Aut....
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....ected the contention of the revenue that the purchases were bogus and, therefore, the provisions of Section 69C of the Act were not attracted. In the instant case before us, M/s Neptune Trading Co. and Hari Om Traders did not furnish the bank statements and, therefore, parameters on the basis of which the other suppliers were proved to be genuine could not be satisfied in these two cases and, therefore, this factual finding distinguishes the judgment in the case of Vaman International Pvt. Ltd. (supra). Even in this judgment, the decision in the case of Shoreline Hotel (P.) Ltd. (supra) was not brought to the notice of the Court. (iii) The decision of this Court in the case of JK Surface Coatings Pvt. Ltd. (supra) is also distinguishable since in that case, the additions were made by invoking Explanation to Section 37 of the Act. Secondly, the provision of Section 69C of the Act was not for consideration before the Court. Thirdly, the decision in the case Shoreline Hotel (P.) Ltd. (supra) was not brought to the notice of the Court and the only issue canvassed before the High Court was what should be the rate of profit. In the present case, these facts do not exist and, therefore....