NAYAN SHUKLA, MUMBAI V. ITO 22(1)(4), MUMBAI

ITA 1629/MUM/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7378 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 09-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: THARIAN OOMEMEN
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 69C; 133(6); 274; 22

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH MUMB AI BEFORE SHRI MAHAVIR SINGH, VICE- PRESIDENT AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.1629/MUM/2017 (ASSESSMENT YEAR 2010-11) ITA NO.1630/MUM/2017 (ASSESSMENT YEAR 2009-10) SHRI NAYAN SHUKLA SHOP NO. 6, MANI BHAVAN, PHATHAKWADI, LOHAR CHAWL, MUMBAI- 400002 P AN: AARPS9193D VS. ITO-21(2)(4), MUMBAI. APPELLANT RESPONDENT APPELLANT BY : NONE REVENUE BY : SHRI THARIAN OOMEMEN (DR) DATE OF HEARING : 12.01.2021 DATE OF PRONOUNCEMEN T : 22.01.2021 ORDER PER MAHAVIR SINGH, VP: 1. THESE TWO APPEALS BY ASSESSEE ARE ARISING OUT OF TH E COMMON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-25, MUMBAI [FO R SHORT THE LD. CIT(A)] IN APPEAL NO. CIT(A)-25/IT-276/2014-15 & IT -277/2014-15 ORDER DATED 27.12.2016. ASSESSMENTS WERE FRAMED BY ITO WA RD-22(1)(4), MUMBAI VIDE ORDER OF EVEN DATE 22.03.2014 UNDER SECTION 14 3(3) R.W.SEC. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) FOR TH E ASSESSMENT YEARS 2009- 10 & 2010-11. 2. THE ONLY COMMON ISSUE IN THESE TWO APPEALS OF ASSES SEE IS AGAINST THE ORDER OF CIT(A) RESTRICTING THE DISALLOWANCE OF BOGUS PUR CHASES AT 12.5% BEING PROFIT EARNED BY ASSESSEE ON UNEXPLAINED/UNVERIFIED PURCHASES AND ADDED THE ITA NO. 1629 & 1630 MUM 2017-SHRI NAYAN SHUKLA 2 SAME AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C O F THE ACT. FOR THIS ISSUE, THE FACTS AND CIRCUMSTANCES IN BOTH THE YEARS ARE S AME AND EVEN THE GROUNDS RAISED ARE IDENTICALLY WORDED AND HENCE WILL TAKE U P THE GROUNDS FROM ASSESSMENT YEAR 2009-10. THE RELEVANT GROUND NO.2 R AISED BY ASSESSEE READS AS UNDER: 2 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX(A) ERRED IN A) CONFIRMING THE DISALLOWANCE AMOUNTING TO RS. 6,8 4,266/- BEING 12.5% OF TOTAL PURCHASES OF RS. 54,74,132/- BY WAY OF UNEXPL AINED EXPENDITURE U/S 69C. B) CONFIRMING THE DISALLOWANCE AMOUNTING TO RS. 6,8 4,266/- BEING 12.5% OF TOTAL PURCHASES OF RS. 54,74,132/- BY WAY OF UNEXPL AINED EXPENDITURE U/S 69C, JUST BECAUSE NOTICES U/S 133(6) WERE ISSUED BUT NOT SERVED TO THE SUPPLIERS. C) CONFIRMING THE DISALLOWANCE AMOUNTING TO RS. 6,8 4,266/- BEING 12.5% OF TOTAL PURCHASES OF RS. 54,74,132/- BY WAY OF UNEXPL AINED EXPENDITURE U/S 69C, EVEN THOUGH THE PAYMENT FOR PURCHASES IS MADE FROM THE BOOKS AND CANNOT BE TERMED AS UNEXPLAINED EXPENDITURE. D) CONFIRMING THE DISALLOWANCE AMOUNTING TO RS.6,84 ,266/- BEING 12.5% OF TOTAL PURCHASES OF RS. 54,74,132/- BY WAY OF UNEXPL AINED EXPENDITURE U/S 69C WITHOUT ALLOWING CROSS-EXAMINATION OF THE SAID SUPP LIERS. E) CONFIRMING THE DISALLOWANCE AMOUNTING TO RS. 6,8 4,266/- BEING 12.5% OF TOTAL PURCHASES OF RS. 54,74,132/- BY WAY OF UNEXPL AINED EXPENDITURE U/S 69C WITHOUT REBUTTING THE FACT THAT NO SALES CAN BE MAD E BY TRADER WITHOUT PURCHASES. F) CONFIRMING THE DISALLOWANCE AMOUNTING TO RS. 6,8 4,266/- BEING 12.5% OF TOTAL PURCHASES OF RS. 54,74,132/- BY WAY OF UNEXPL AINED EXPENDITURE U/S 69C BY WRONGLY ADOPTING THEORY OF CUMULATIVE PEAK OF 3 YEARS' BALANCES IN THE SUPPLIERS' ACCOUNT AND THEREBY ASSUMING AND ADOPTIN G ASTRONOMICAL GP OF THE APPELLANT WHICH IS HIGHLY UNREALISTIC. G) CONFIRMING THE DISALLOWANCE AMOUNTING TO RS. 6,8 4,266/- BEING 12.5% OF TOTAL PURCHASES OF RS. 54,74,132/- BY WAY OF UNEXPL AINED EXPENDITURE U/S 69C ONLY ON THE BASIS OF THE INFORMATION ON THE WEBSITE WWW.MAHAVAT.GOV.IN ABOUT SUSPICIOUS DEALERS WHOSE COPY OF STATEMENT RECORDED WERE NOT FURNISHED TO THE APPELLANT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFI CER RECEIVED INFORMATION FROM SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTR A THAT THE ASSESSEE IS BENEFICIARY OF RECEIVING BOGUS PURCHASE BILLS FROM FOLLOWING PARTIES: ITA NO. 1629 & 1630 MUM 2017-SHRI NAYAN SHUKLA 3 1. AMAR ENTERPRISES. RS. 13,34,257/- 2. SUNRISE ENTERPRISES RS. 14,45,027/- 3. SARADGI SYNDICATE RS. 5,58,763/- 4. COSMOS ENTERPRISE RS. 1,10,392/- 5. SURACHI MULTIRADE PVT. LTD. RS. 14,11,020/- 6. SACHI MERCANTILE PVT. LTD. RS. 3,77,755/- 7. K.V.TRADING CO. RS. 2,36,918/- 4. ACCORDING TO THE SALES TAX DEPARTMENT THESE PARTIES , ABOVEMENTIONED, ARE INDULGING INTO ISSUING BOGUS BILLS WITHOUT DELIVERY OF ACTUAL GOODS. THEREFORE, THE ASSESSING OFFICER ISSUED SHOW-CAUSE NOTICE DATE D 19.02.2014, WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 01.03.201 4 THAT THE ASSESSEE HAD PURCHASED MATERIAL IN THE NORMAL COURSE OF BUSINESS AND HAS RECEIVED THE MATERIAL AND MADE PAYMENT BY ACCOUNT PAYEE CHEQUE W HICH HAS BEEN CLEARED FROM THE BANK ACCOUNT. IT WAS CLAIMED BEFORE THE AS SESSING OFFICER THAT THE ASSESSEE HAS RE-SOLD THE MATERIAL PURCHASED FROM TH ESE PARTIES AND WHICH IS ALSO REFLECTED IN THE STOCK REGISTER AS WELL AS SAL ES REGISTER, WHICH WERE PRODUCED BEFORE THE ASSESSING OFFICER DURING THE CO URSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE ALSO PROVED ACTUAL DELIVE RY BY PLACING DELIVERY CHALLANS/TRANSPORT RECEIPTS BEFORE THE ASSESSING OF FICER IN SUPPORT OF ITS CLAIM. THE ASSESSING OFFICER DISALLOWED THE ENTIRE PURCHAS ES FROM THESE PARTIES, AS THESE PARTIES COULD NOT RESPOND TO THE NOTICES ISSU ED UNDER SECTION 133(6) OF THE ACT. THE ASSESSING OFFICER TREATED THE ENTIRE P URCHASES FROM THESE PARTIES AS UNEXPLAINED AMOUNTING TO RS. 54,74,132/-. AGGRIE VED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). ITA NO. 1629 & 1630 MUM 2017-SHRI NAYAN SHUKLA 4 5. THE CIT(A) RESTRICTED THE PROFIT RATE AT 12.5% AS A LLEGED BOGUS PURCHASES BY OBSERVING IN PARA-11 AS UNDER: 11. GROUND NO. 3 TO 9: THESE GROUNDS OF APPEAL EFFECTIVELY PERTAINS TO THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE IN FORM OF BOGUS PURCHASES. THE AO HAS FORMED HIS VIEW ABOUT THE BOGUS NATURE OF THE PURCHASES MADE B Y THE APPELLANT FROM THE ABOVE PARTIES ON THE BASIS OF STATEMENTS RECORDED B Y THE SALES TAX AUTHORITIES AS WELL AS FURTHER ENQUIRIES CARRIED OUT BY THEM. ACCO RDINGLY, A LIST WAS FORWARDED TO THE INCOME TAX DEPARTMENT FOR TAKING NECESSARY A CTION. THE AO OBSERVED THAT THE LIST CONTAINS THE NAMES OF ABOVE MENTIONED PART IES, WITH WHICH THE APPELLANT HAD SHOWN PURCHASES. 11.1 IN THIS REGARD, IN MY OPINION, ONLY ON THE BAS IS OF INFORMATION RECEIVED FROM THE SALES TAX AUTHORITIES REGARDING BOGUS NATURE OF PURCHASES FROM THE ABOVE MENTIONED SEVEN PARTIES, CANNOT BE TAKEN AS THE BAS IS TO TREAT THE PEAK OF THE CUMULATIVE PURCHASES FROM THESE PARTIES AS BOGUS OR NON-GENUINE. THE INFORMATION RECEIVED FROM THE SALES TAX AUTHORITIES WAS A PIECE OF EVIDENCE TO INITIATE IN-DEPTH INDEPENDENT INVESTIGATION ON THE ISSUE. HOWEVER, THE AO HAS PRIMARILY RELIED ON THE INFORMATION RECEIVED FROM S ALES TAX AUTHORITIES. ON THE GIVEN SET OF FACTS AND CIRCUMSTANCES AND WITHOUT AP PRECIATING THE EVIDENCES SUBMITTED BY THE APPELLANT DURING ASSESSMENT PROCEE DINGS, PEAK OF THE CUMULATIVE PURCHASES FROM THESE PARTIES SHOWN TO BE MADE FROM THE SEVEN PARTIES CANNOT BE HELD TO BE BOGUS. IT HAS NOT BEEN APPRECI ATED THAT THE GOODS SHOWN TO BE PURCHASED FROM THESE PARTIES WERE USED IN THE BU SINESS AND WITHOUT WHICH, CORRESPONDING TURNOVER WOULD NOT POSSIBLE. THUS, TH ERE OUGHT TO BE PURCHASES MADE AND HENCE, ENTIRE DISALLOWANCE IS NOT JUSTIFIE D. 11.2 IN THIS REGARD, I FIND THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT V. NIKUNJ EXIMP ENTERPRIS ES (P.) LTD., QUITE RELEVANT WHEREIN HON'BLE HIGH COURT HAS HELD THAT - 'WHEN THE ASSESSEE HAVE FILED LETTER OF CONFIRMATIO NS OF THE SUPPLIERS, BANK STATEMENTS HIGHLIGHTING THE PAYMENT ENTRIES THROUGH ACCOUNT PAYEE CHEQUE, COPIES OF INVOICES, STOCK RECONCILIATION STATEMENTS BEFORE THE AO; AND MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO, ONE CANNOT CONCLUDE ITA NO. 1629 & 1630 MUM 2017-SHRI NAYAN SHUKLA 5 THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. T HE AO CANNOT DISALLOW THE PURCHASES ON THE BASIS OF SUSPICION BECAUSE THE SUPPLIERS WERE NOT PRODUCED BEFORE THEM.' 11.3 THE FACTS AND CIRCUMSTANCES AS OUTLINED ABOVE, CLEARLY SUGGEST THAT THE PURCHASES OF MATERIALS BY THE APPELLANT CANNOT BE D OUBTED BUT A MAJOR LACUNA IN THESE TRANSACTIONS IS THE UNVERIFIABLE NATURE OF TH E PURCHASES FROM THE PARTIES IN QUESTION, AS THEY COULD NOT BE LOCATED AT THE GIVEN ADDRESSES. THUS THE PURCHASES PRICES SHOWN ON THESE INVOICES ARE NOT SUBJECTED TO VERIFICATION AND AS SUCH IT WAS DIFFICULT TO ESTABLISH THE CORRECTNESS OF THE PURCH ASE PRICES PAID FOR THE MATERIALS PURCHASED FROM THEM. SUCH VERIFICATION OF THE PRICE SHOWN ON THE INVOICES/BILLS WAS NECESSARY TO ASCERTAIN THE CORRECTNESS OF THE P ROFITS SHOWN BY THE APPELLANT FOR THE PERIOD UNDER CONSIDERATION. THIS VERIFICATI ON WAS ALSO VITAL TO DETERMINE AS TO WHETHER THE PURCHASE PRICES SHOWN ON THE BILLS/I NVOICES, ARE AS PER PREVAILING MARKET PRICES OF THE MATERIALS PURCHASED AND TO ASC ERTAIN THAT THE PRICE PAID FOR THE MATERIALS PURCHASED FROM THESE PARTIES ARE NOT OVER INVOICED. IN THE ABSENCE OF ANY SUCH VERIFICATION OF THE CORRECTNESS OF THE PRICE PAID FOR THE MATERIALS PURCHASED BY THE APPELLANT, THE PURCHASE PRICE PAID AS MENTIONED ON THE INVOICES/BILLS CANNOT BE ACCEPTED AS THE CORRECT PR ICE PAID FOR THE GOODS PURCHASED FROM SUCH PARTIES. IN VIEW OF THE SAME, THE POSSIBI LITY OF OVER-INVOICING OF THE MATERIALS PURCHASED TO REDUCE THE PROFITS, CANNOT B E RULED OUT. THEREFORE, THE GROSS PROFIT RATE SHOWN BY THE APPELLANT FOR THE YE AR UNDER CONSIDERATION CANNOT BE RELIED UPON. IN THE CIRCUMSTANCES, THE CORRECT A PPROACH IN SUCH TRANSACTIONS WOULD BE TO ESTIMATE THE ADDITIONAL BENEFIT OR PROF IT EARED ON THESE PURCHASES AND NOT TO DISALLOW' PEAK OF THE CUMULATIVE PURCHASES F ROM THESE PARTIES. THE DISALLOWANCE OF PEAK OF THE CUMULATIVE PURCHASES FR OM THESE PARTIES WOULD NOT BE LOGICAL AND WOULD AMOUNT TO TRAVESTY OF JUSTICE. IN MY VIEW EITHER THE PURCHASES FROM THESE PARTIES ARE OVER INVOICED OR THE PURCHAS ES WERE ACTUALLY MADE BUT NOT FROM THE PARTIES FROM WHICH IT WAS CLAIMED TO HAVE BEEN MADE AND INSTEAD MAY HAVE BEEN PURCHASED FROM GREY' MARKET WITHOUT PROPE R BILLING OR DOCUMENTATION. 11.4 AS OF NOW THE ISSUE OF SUCH TYPES OF UNVERIFIA BLE PURCHASES HAVE BEEN MUCH DISCUSSED AND DEBATED BY THE VARIOUS COURTS AND TRI BUNALS. IN MANY JUDICIAL PRONOUNCEMENTS ON THE ISSUE, THE COURTS HAVE TAKEN A CONSISTENT VIEW THAT IN CASE OF NON-EXISTENT PARTIES FROM WHICH THE PURCHASES AR E SHOWN TO HAVE BEEN MADE, ITA NO. 1629 & 1630 MUM 2017-SHRI NAYAN SHUKLA 6 ONLY PART OF SUCH PURCHASES CAN BE DISALLOWED, PART ICULARLY IN THE SUCH CASES WHERE THE CORRESPONDING SALES ARE NOT DOUBTED. ALTERNATIVELY THE PROFIT EMBEDDED IN SUCH SALES AGA INST THE ALLEGED BOGUS PURCHASES SHOULD BE BROUGHT TO TAX. 11.5 IN THE CASE OF CIT-1 VS SIMIT P. SHETH, ITA NO . 553 OF 2012, ORDER DATED 16/0112013, WHILE DECIDING A SIMILAR ISSUE, THE HON 'BLE HIGH COURT OF GUJARAT HAS HELD THAT: WE ARE BROADLY IN AGREEMENT WITH THE REASONING ADO PTED BY THE COMMISSIONER (APPEALS) WITH RESPECT TO THE NATURE O F DISPUTED PURCHASES OF STEEL. IT MAY BE THAT THE THREE SUPPLIERS FROM WHOM THE ASSESSEE CLAIMED TO HAVE PURCHASED THE STEEL DID NOT OWN UP TO SUCH SAL ES. HOWEVER, VITAL QUESTION WHILE CONSIDERING WHETHER THE ENTIRE AMOUN T OF PURCHASES SHOULD BE ADDED BACK TO THE INCOME OF THE ASSESSEE OR ONLY TH E PROFIT ELEMENT EMBEDDED THEREIN WAS TO ASCERTAIN WHETHER THE PURCH ASES THEMSELVES WERE COMPLETELY BOGUS AND NON-EXISTENT OR THAT THE PURCH ASES WERE ACTUALLY MADE BUT NOT FROM THE PARTIES FROM WHOM IT WAS CLAIMED T O HAVE BEEN MADE AND INSTEAD MAY HAVE BEEN PURCHASED FROM GREY MARKET WI THOUT PROPER BILLING OR DOCUMENTATION. IN THE PRESENT CASE, CIT BELIEVED THAT WHEN AS A TR ADER IN STEEL THE ASSESSEE SOLD CERTAIN QUANTITY OF STEEL, HE WOULD HAVE PURCH ASED THE SAME QUANTITY FROM SOME SOURCE. WHEN THE TOTAL SALE IS ACCEPTED B Y THE ASSESSING OFFICER, HE COULD NOT HAVE QUESTIONED THE VERY BASIS OF THE PURCHASES. IN ESSENCE THEREFORE, THE COMMISSIONER (APPEALS) BELIEVED ASSE SSEES THEORY THAT THE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM THE PAR TIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNTS. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PR ICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCO ME OF THE ASSESSEE. SO MUCH IS CLEAR BY DECISION OF THIS COURT. IN PARTICU LAR, COURT HAS ALSO TAKEN A SIMILAR VIEW IN CASE OF COMMISSIONER OF INCOME TAX- IV VS. VIJAY M MISTRY CONSTRUCTION LTD. VIDE ORDER DATED 10.01.2011 PASSE D IN TAX APPEAL NO. 1090 OF 2009 AND IN CASE OF COMMISSIONER OF INCOME TAX-I VS. BHOLANATH POLY FAB PVT. LTD. VIDE ORDER DATED 23.10.2012 PASS ED IN TAX APPEAL NO. 63 OF 2012. ITA NO. 1629 & 1630 MUM 2017-SHRI NAYAN SHUKLA 7 11.6 SIMILARLY WHILE DEALING WITH AN IDENTICAL, ISS UE, IN THE, CASE OF CIT, VS. BHOLANATH POLY FAB (P) LTD., I.T.A. NO. 63 OF 2012, IN THE ORDER DATED 23/10/2012, THE HON'BLE HIGH COURT OF GUJARAT HAS H ELD AS UNDER:- WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTED NO ERROR. WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PART IES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS IS ESSENTI ALLY A QUESTION OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE THE CLOTH AND SELL THE FINISHED GOODS. IN THAT VIEW OF THE MATTER, AS NATURAL COROL LARY, NOT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT' ELEMEN T EMBEDDED THEREIN WOULD BE SUBJECT TO TAX. THIS WAS THE VIEW OF THIS COURT IN THE CASE OF SANJAY OILCAKE INDUSTRIES V. CIT [2009J 316 ITR 274 (GUJ). SUCH DECISION IS ALSO FOLLOWED BY THIS COURT IN A JUDGMENT DATED AUGUST 1 6, 20 11, IN TAX APPEAL NO.679 OF 2010 IN THE CASE OF CIT V. KISHOR AMRUTLA L PETEL. IN THE RESULT, TAX APPEAL IS DISMISSED. 11,7 IN VIEW OF THE FACTS AND CIRCUMSTANCES AND THE JUDICIAL PRONOUNCEMENTS CITED ABOVE, WHAT CAN BE DISALLOWED OR TAXED IN THE INSTA NT CASE, IS THE EXCES PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES SHOWN TO HAVE BE EN MADE FROM THESE PARTIES. IN THIS REGARD, THE YARDSTICK LAID DOWN BY AFORESAID JUDICIAL PRONOUNCEMENTS BY DISALLOWING 12.5% OF PURCHASES AS THE BENEFIT GARNERED IN SUCH UNVERIFIABLE PURCHASES WHERE SALES ARE NOT DIS APPROVED, IS A SOUND BENCHMARK THAT IS BEING ADOPTED IN THE PRESENT CASE TOO. 11.8 THEREFORE IN THE INSTANT CASE, IT IS FOUND THA T ALL THE FACTS AND CIRCUMSTANCES OUTLINED ABOVE LEAD TO THE CONCLUSION THAT ALTHOUGH THE PURCHASES MADE BY THE APPELLANT FROM THE SEVEN PARTIES MENTIONED ABOVE DU RING THE YEAR UNDER CONSIDERATION CANNOT BE SUMMARILY REJECTED BUT AT T HE SAME TIME IT DIFFICULT TO ACCEPT THAT THE PURCHASES SHOWN ON THE INVOICES/BIL LS ISSUED BY THESE PARTIES ARE AS PER THE PREVAILING MARKET PRICE OF THOSE MATERIA LS OR ACTUALLY BEEN MADE FROM SUCH PARTIES AND MIGHT HAVE BEEN PURCHASED IN THE G REY MARKET. THE APPELLANT HAS NOT PLACED ANY EVIDENCE ON RECORD THAT THAT THE GOO DS WERE PURCHASED FROM THE ABOVE PARTIES AT ARMS' LENGTH PRICE. THE APPELLANT HAS ALSO NOT PLACED ON RECORD ANY COMPARABLE BILLS/INVOICES FOR PURCHASES OF SIMI LAR ITEMS MADE FROM OTHER PARTIES TO ESTABLISH THAT THE PURCHASES FROM THE PA RTIES IN QUESTION WERE AT PAR WITH ITA NO. 1629 & 1630 MUM 2017-SHRI NAYAN SHUKLA 8 THE PURCHASES MADE FROM OTHER PARTIES DURING THE PE RIOD UNDER CONSIDERATION. THE POSSIBILITY OF SUCH PURCHASES FROM UNREGISTERED DEA LERS WITHOUT INVOICES CANNOT BE RULED OUT. IN VIEW OF THE ABOVE, THE CORRECTNESS OF THE PURCHASE PRICES MENTIONED ON SUCH BILLS/INVOICES ISSUED BY THE ABOV E PARTIES IN QUESTION CANNOT BE ACCEPTED AND SOME ADDITIONAL PROFIT NEEDS TO BE ESTIMATED ON SUCH PURCHASES MADE FROM THE ABOVE PARTIES IN QUESTION. 11.9. AS STATED ABOVE, FOLLOWING THE GUIDELINES LAI D DOWN IN THE ABOVE JUDICIAL DECISIONS, DISALLOWANCE OF 12.5% ON SUCH ALLEGED BO GUS PURCHASES OF RS. 54,74,132/- I.E., RS.6,84,266/- FOR A.Y. 2009-10 IS CONFIRMED, WHICH NEEDS TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUN T OF ALLEGED BOGUS PURCHASES AND THE BALANCE ADDITION OF RS. 30,29,960/- IS HERE BY DELETED. THUS, GROUNDS OF APPEAL NO. 3-9 ARE PARTLY ALLOWED. 6. SIMILARLY IN ASSESSMENT YEAR 2010-11 ALSO THE CIT(A ) RESTRICTED THE PROFIT RATE AT 12.5% OF THE BOGUS PURCHASES. AGGRIEVED, TH E ASSESSEE CAME IN APPEAL BEFORE THE TRIBUNAL IN BOTH THE YEARS. 7. WE HAVE HEARD THE SR. DR AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTICED THAT THE CIT(A) HAS APPLIED PR OFIT RATE AT 12.5% BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH [355 ITR 290 (GUJ.)]. AS THE CIT(A) HAS APPLIED A REASONABLE PROFIT RATE, WE DO NOT WANT TO INTERFERE IN THE SAM E. HENCE, THE ORDER OF CIT(A) IS UPHELD IN BOTH THE YEARS AND APPEALS OF A SSESSEE ARE DISMISSED. 8. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY 2021. SD/- SD/- MANOJ KUMAR AGGARWAL MAHAVIR SINGH ACCOUNTANT MEMBER VICE-PRESIDENT MUMBAI, DATE: 22.01.2021 SK ITA NO. 1629 & 1630 MUM 2017-SHRI NAYAN SHUKLA 9 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR B BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST . REGISTRAR ITAT, MUM BAI