TaxTMI 
TaxTMI 
2025 (7) TMI 1970
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....the assessee M/s. Palmon Impex Pvt. Ltd., being a Private Limited Company, is engaged in the business of trading, export & import of garments, textiles, metal and computers. The assessee filed its Return of Income (ROI) for the impugned AY 2011-12 on 29.09.2011, declaring a total income of Rs. 5,36,685/-. The ROI was processed u/s. 143(1) of the Act, accepting the returned income and the case was not selected for regular scrutiny u/s 143(3) of the Act. Subsequently, based on the information that, during the FY 2010-11, the assessee had availed accommodation entries in the form of bogus purchases from three concerns i.e. (i) M/s. Monica InternationalRs.18,21,402/-, (ii) M/s. Arihant Trading Co .- Rs.11,42,688/-; and (iii) M/s. Gold Star Trading Co .- Rs. 1,89,69,081/-, totaling to Rs. 2,19,33,171/-, the AO initiated proceedings u/s. 147 of the Act. 4. Accordingly, the AO issued a notice u/s. 148 of the Act dated 18.03.2014 requiring the assessee to file ROI for the impugned AY 2011-12 within 30 days from the date of receipt of the notice. However, the assessee did not file the ROI within the due date stipulated in the notice u/s. 148 of the Act. Later, the assessee filed a letter....
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....ng the disallowance of bogus purchases to 12.5% instead of sustaining the full addition of 18.5% made by the Assessing Officer, despite the assessee's failure to substantiate the genuineness of the transactions. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate that the addition made by the Assessing Officer was based on credible information and was justified considering the nature and extent of non-genuine purchases; hence, the full addition ought to have been upheld. 9. We have heard Ld. AR and Ld. DR and examined the record. At the outset, Ld. AR on behalf of the assessee submitted that assessee does not want to press ground no. 1 and 2 raised in his appeal which pertains to legality of the re-assessment order u/s 147 of the Act. Hence, the ground no. 1 and 2 are dismissed as not pressed. 10. Ground No. 3 raised by the assessee and Ground no. 1 and 2 raised by the revenue are real controversy raised before us pertaining to the addition of 12.5% on account of bogus purchase on estimation basis in the impugned order, therefore we proceed to consider these grounds simultaneously. Ld. AR argued that assessee is prima....
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....cted the criteria of making addition on estimation of profit embedded in the bogus purchases and sales and directed to make addition @ 100% of the alleged bogus sales. Ld. AR further submitted that the grounds of the revenue in that regard be allowed and addition be made @ 100% on the alleged bogus purchases. 14. We have noticed that in the case of Kanak Impex (India) Ltd. (supra), the AO has added 100% of the alleged purchases and in appeal, the Ld. CIT(A) has reduced the addition @ 12.5% and it was argued by the revenue before the Hon'ble Bombay High Court that the addition made by the AO be restored to the extent of 100% of the bogus purchases and the Hon'ble High Court accepted the contention of the revenue in the circumstances when the assessee did not appear before the AO during the re-assessment proceedings to prove the deduction claimed and no justification for non- appearance was given. It was further observed that assessee has failed to prove the purchases on which claim for deduction was made before the AO and in the instant case, since the purchases are recorded by accommodation entry in the books of account and sales have not been disputed and the Ld. CIT(A)....
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....se made from these parties are bogus or hawala transactions or accommodation entries. Assessee has brought on record the fact that these concerns run into heavy losses and to avoid the payment to the creditors, they have left their premises and are absconding for which copy of the case filed by these parties against these suppliers for dishonoring the cheques against the supply of goods to them was filed. The assessee has also linked the purchases made from these parties with the corresponding sales and the GP rate and NP rate declared by the assessee during the year is comparable with earlier years ...... " ii) ACIT CC-7(3) vs. Dhiraj Parbat Gothi (ITA No. 580/Mum/2025) dated 30.05.2025 (Mumbai Tribunal) "12. We also take note of the additional ground raised by the revenue for which Ld.SR DR referred to the decision of Hon'ble Jurisdictional High Court of Bombay in the case of Kanak Impex (India) Ltd. (supra). We have perused the said judgment. For the reliance placed by Ld. SR DR on the decision of Hon'ble Jurisdictional High Court of Bombay in the case of PCIT us Kanak Impex (India) Ltd (supra) calling for addition of 100% of the alleged bogus purchases....
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....by the assessing officer @100% of the bogus purchases, which was restricted to 12.5% by the Ld. Commissioner, and subsequently got affirmed by the Hon'ble Tribunal, restricting the disallowance qua profit margin, on unproven purchases. 7. Ld. Counsel Mr. Dhaval Shah, on the contrary has demonstrated that this case is factually dissimilar to the case dealt with the Hon'ble High Court, as the Hon'ble High Court considered the case, wherein the assessing officer has made the addition @100%, but in the instant case, the Assessing Officer himself has estimated the profit @12.5%. 8. This Court observe that the Hon'ble High Court, while deciding the issue, has also taken into consideration the relevant fact specific to the effects that the Assessee in that case failed to prove the purchases including source of expenditure, by not offering any explanation in the course of reassessment proceedings and therefore in the absence of any explanation qua source of expenditure, the AO had applied the provisions of section 69(c) of the Act and therefore, the Hon'ble High Court justified the action of the AO, in making the addition @100%. Whereas in the instant ....
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....anics Ltd. (ITA No. 5279/Mum/2015) dated 08.05.2025 (Mumbai Tribunal) "20. The ld DR submitted that the CIT(A)'s finding that the AO without rejecting the sales cannot hold the purchases is not correct in the light of the latest decision of the Hon'ble Bombay High Court in the case of PCIT us Kanak Impex (India) Ltd (ITA No.791 of 2021 dated 03.03.2025). In our considered view, the facts considered in the said case are distinguishable. The Hon'ble High Court in the said case had dealt with the fact where the goods are purchased from grey market using cash against which purchase bills were obtained from a different party. The ground on which the Hon'ble High Court held that rejecting sales is not required is that in the said case the source for the real purchase from grey market is unexplained and therefore the Hon'ble High Court held that adding only the profit element in incorrect. The decision of the Hon'ble High Court in the said case was also on the ground that the assessee has not discharged the onus of proving genuineness, has been non- cooperative during the assessment proceedings. In assessee's case, the assessee's contention is that....
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....ssment order on the ground that the assessee did not produce the parties in person for the purpose of examination and recording statement on oath regarding the transactions they had with the assessee. The assessee on the other hand made a request to restrict 5% of alleged bogus purchase in place of 12.5% on the ground that assessment was made without disclosing the information to the assessee and without providing opportunity of cross examination, which was violation of principle of natural justice. Thus, it is evident from the submission of the assessee and the findings of Ld. CIT(A) that assessee in the present case has admittedly submitted at the stages from assessment proceedings till the first appellate authority as well as before us all that necessary documents to establish the purchases made and the payment made through banking channel, etc. 18. We have noticed that the case of Kanak Impex (India) Ltd. (supra) relied by the Ld. DR has been rightly distinguished in the various judgments of Tribunals including the Jurisdictional Tribunals as referred (supra). Further we have noticed that the Hon'ble Allahabad High Court in the case of Commissioner of Income-tax vs. Smt.....
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.... decision of the court takes its colour from the questions involved in the case in which it is rendered and while applying decision to a later case, the court must carefully try to ascertain the true principle laid down by the decision of the court. The court should not place reliance upon the decision without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed as it has to be ascertained by analysing all the material facts and issue involved in the case and argued by both sides. The judgment has to be read with reference to and in context with a particular statutory provisions interpreted by the court, as the court has to examine as to what principle of law has been decided and the decision cannot be relied upon in support of a proposition that it did not decide (vide H. H. Maharajadhiraja Madhav Rao Jivaji Rao Scindia Bahadur v. Union of India, AIR 1971 SC 530, Amar Nath Om Parkash v. State of Punjab, AIR 1985 SC 218, Rajpur Ruda Meha v. State of Gujarat, AIR 1980 SC 1707, CIT v. Sun Engineering Works P. Limited Hume Pipe Co. Limited (1993) 2 SCC 386 and Makhija Construction and Enggr. Put. Limited v. Indore Devel....
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....assessee and referred by us in preceding paras, we are of the considered opinion that the case of Kanak Impex (India) Pvt. Ltd. (supra) is not applicable to the case of the assessee because the facts and circumstances are distinguishable on various counts as discussed by us in the preceding paras. We are also not convinced with the arguments of the assessee, in appeal, for reducing the addition to 5% instead of 12.5% as done by the Ld. CIT(A) because there is no illegality or perversity in the order passed by the Ld. CIT(A) wherein the assessee has failed to produce the parties for their examination to prove the transactions done by them with the assessee and the Ld. CIT(A) has applied holistic view in this regard to restrict the addition from 18.5% to 12.5% of alleged bogus purchases. Therefore, we do not find any need to interfere with the order passed by the Ld. CIT(A). Accordingly, we uphold the order passed by the Ld. CIT(A). Resultantly, the Ground No. 3 raised by the assessee and Ground no. 1 and 2 raised by the revenue in their respective appeals are dismissed. 21. In the result, both the appeals filed by the assessee and revenue are dismissed in above terms. Order pr....