Akash Fashion Prints Pvt. Ltd., Ahmedabad V. The DCIT, Circle-1(1)(1), Ahmedabad

ITA 2396/AHD/2018

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0977 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 09-08-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 09-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Depreciation; Search and seizure; Document seized; Principle of natural justice; Question of law; Cost of acquisition; Difference of opinion; Accommodation entries; Reason to believe; Documents seized; Change of opinion; Reassessment proceedings; Borrowed satisfaction
• Section: 147; 131; 148; 132; 69C; 143(3); 142(1); 133(6); 143(1); 143(2); 139(1); 153

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD BEFORE SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ITA No. 2396/AHD/2018 Assessment Year: 2013-14 M/s. Akash Fashion Prints Pvt. Ltd., 238, SaijpurGopalpur Road O/s Shahwadi Octroi Naka, Narol, Ahmedabad- 382405,Gujarat v. The Dy. Commissioner of Income Tax Circle-1(1)(1), Ahmedabad PAN:AABCA8319C (Appellant) (Respondent) Assesseeby: CA Sh. Sanjay R. Shah, AR Revenue by: Sh. Ashok Kumar Suthar, Sr. DR Date of hearing: 10.08.2023 Date of pronouncement: 06.10.2023 O R D E R PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: This appeal, filed by assessee, arising out of the appellate order passed by the learned Commissioner of Income-Tax(Appeals)-1 (hereinafter called “the CIT(A)”), Ahmadabad , dated 28.09.2018 in Appeal No. CIT(A)-1/DCIT Circle- 1(1)(1)/10353/2017-18 for assessment year 2013-14 , which in turn has arisen from assessment order dated 26.12.2017 passed by learned Assessing Officer( hereinafter called “the AO”) u/s 143(3) read with Section 147 of the Income-tax Act, 1961(hereinafter called “the Act”). 2. The assessee has raised following grounds of appeal in Memo of Appeal filed with Income Tax Appellate Tribunal, Ahmadabad Bench, Ahmadabad, which reads as under:- ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 2 “1.0 The learned CIT(A) erred in law and on facts in upholding the reassessment made by the learned A.O. u/s 147 of the Act. 1.1 The learned CIT(A) failed to appreciate that there was no reason to believe on the part of the learned A.O. that income has escaped assessment and that the entire exercise of reassessment was done on the basis of borrowed satisfaction of Investigation Wing. 1.2 The learned CIT(A) also erred in law and on facts in upholding reassessment u/s 147 in spite of the fact that original assessment was u/s 143 (3) of the Act and the reassessment was done on change of opinion. It is submitted that reassessment done by the learned A.O. and confirmed by CIT(A) be quashed. 2.0 Without prejudice to the Ground No. I alongwith its sub-grounds above, the learned CIT(A) erred in upholding disallowance of Rs.41,70,774/- as bogus purchase made by the appellant and claimed from its income. 2.1 Without prejudice to the foregoings, if at all the disallowance/addition is to be made toward bogus purchases, the same has to be restricted to Rs.37,66,550/- being the amount of purchase from Sampada Chemicals Ltd. debited in the books of the appellant and not Rs.41,70,774/- as mentioned by the learned A.O, and as confirmed by the learned CIT(A). 3.0 Without prejudice to any of the earlier grounds, the learned CIT(A) erred in making addition by disallowing the entire purchase of Rs.41,70,774/- as bogus purchase without appreciating the fact that in such kind of cases only the percentage of gross profit is only to be added and not the entire purchase. It is submitted that it be so held now.” 3. The brief facts of the case are that the assessee filed his return of income on 28.09.2013 declaring total loss of Rs. 1,73,67,374/-. The case of the assessee was selected by Revenue for framing scrutiny assessment , and assessment order under section 143(3) was originally passed by the AO on 30.10.2015 assessing total loss at Rs. 1,57,75,211/-. 3.2 Subsequently, information was provided by Deputy Director of Income-tax (Inv) Unit-7(4), Mumbai that a search and seizure action was carried out in the case of Shri. Vipul Vidur Bhatt, and other related entities on 05.02.2016. In the statement recorded on oath, Shri Vipul Vidur Bhatt accepted that he is an Entry Operator and all the entities / companies are bogus entities/companies which were used by him ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 3 for providing various bogus accommodation entries to various beneficiaries for commission. It was further gathered that the assessee company has received bogus accommodation entries from Sampada Chemicals Limited (Bogus Entity related to Shri Vipul Vidur Bhatt) of Rs. 82,38,462/- [Rs. 41,70,774 (Debit) and Rs. 40,67,688 (Credit). The reasons for reopening of the concluded assessment were recorded that income of Rs. 82,38,462/- had escaped assessment within the meaning of Section 147 of the 1961 Act. The AO issued notice under section 148 dated 24.03.2017 , after recording reasons for re-opening of the concluded assessment and after taking prior approval from the competent authority. The reopening of the concluded assessment was done within four years from the end of the assessment year. The reasons recorded by the AO are reproduced hereunder:- “The assessee had filed return of Income for A.Y. 2013-14 on 28.09.2013 declaring total loss at Rs. 1,73,67,374/-. The same was processed u/s 143(1) of the I.T. Act on 25.03.2015. The case was selected for scrutiny and order u/s 143(3) was passed assessing total at Rs. 1,57,75,211/-. In this case information has been received from the Investigation Wing Mumbai that a Search and Seizure action was carried out in the case of Shri Vipul Vidur Bhatt and other related entities on 05.02.2016. In the statement recorded on oath, Shri Vipul Vidur Bhatt accepted that he is an entry operator and all the entities/ companies are bogus entities/companies which were used by him for providing various bogus accommodation entries to the various beneficiaries for commission. It is gathered that the assessee has received bogus accommodation entries from Sampada Chemicals Limited (Bogus Entity related to Shri Vipul Vidur Bhatt) of Rs. 82,38,462/- Rs. 41,70,774/- (Debit) and Rs. 40,67,688(credit)]." 3.3 In response to notice issued by AO under section 148, the assessee submitted copy of acknowledgment of return filed on 7.4.2017 and requested to provide reasons recorded for reopening of the concluded assessment , which were provided by the AO to the assessee. The assessee vide letter dated 14.07.2017 filed objections to the reopening of the assessment ,and the same were disposed of by the AO by passing a speaking order dated 30.11.2017. The AO issued show cause notice under section 142(1) of the Act on 30.11.2017, wherein the AO confronted assessee that as per the evidence gathered during the course of search action conducted in ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 4 the case of Shri Vipul Vidur Bhatt and other related entities, it was revealed that Sh. Vipul Vidur Bhatt is an Entry Operator and all the entities/companies are bogus entities /companies which are used by Sh. Vipul Vidur Bhatt to provide various bogus accommodation entries to various beneficiaries against commission. It was also gathered by Revenue that the assessee has received bogus accommodation entries from Sampada Chemicals Limited (bogus entity related to Shri Vipul Vidur Bhatt) of Rs. 82,38,462/- , and assessee was show-caused by AO to explain why the entries taken from Sampada Chemicals Limited to the extent of Rs. 82,38,462/- should not be added to total income of the assessee treating the same as bogus accommodation entries. 3.4 The assessee submitted before the AO that the assessee is a textile process house, and it consumes various colours and chemicals for its production process. One of the colour chemical is Sodium Alginate (Textile Grade) which is used for finishing of cloth. The assessee submitted before the AO that it has purchased the material from various parties including one Sampada Chemicals Ltd having address at 5/5/9,Navjivan Commercial Society No. 3, Lamington Road, Mumbai-400008. The assessee submitted the e-mail address of the said party as well the VAT and CST number of the party. The assessee denied any knowledge about the Directors of Sampada Chemicals Ltd. and their activities. The assessee submitted that it had purchased colour chemicals from said Sampada Chemicals Ltd. which is normally consumed in its factory. It was submitted that the assessee have no knowledge about the activities of any Directors of Sampada Chemicals Ltd. It was also submitted that the assessee is not aware of the 347 bogus activities controlled by said Mr. Vipul Vidur Bhatt. It was submitted that the assessee has genuinely purchased chemicals from Sampada Chemicals Ltd. and paid the purchased amount by banking channel. The assessee submitted that the assessee has complete record to prove the genuineness of its business dealings with Sampada Chemicals Limited. The assessee submitted before the AO ledger account of the Sampada Chemicals ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 5 Limited in its books of accounts. It was submitted that there were credit entries of Rs. 37,66,650/- and debit entries of Rs. 36,67,688/-. The assessee submitted that as per AO , the credit entries are Rs. 40,67,688/- and debit entries of Rs. 41,70,774/-. The assessee requested AO to provide copy of statement received by AO from Sampada Chemicals Ltd. in order to verify the statement and point out the differences, if any.The assessee also submitted before the AO , copies of invoices for supply of materials as under:- Bill No. Dated Rs. 12091308 13.09.12 9,13,500 12112602 27.11.12 10,77,300 13022610 26.02.13 3,04,500 3.5 The assessee also submitted copies of transport bilti with each and every supply invoice for verification by the AO. The assessee also submitted bank statement of the assessee’s bank account with Bank of India ,from where the payments were made to Sampada Chemical Ltd by the assessee, were reflected. The assessee also submitted copy of credit note no. 3 issued by Sampada Chemical Ltd. for return of 675 kg of Sodium Alginate returned by the assessee to Sampada Chemicals Ltd.. The assessee also enclosed credit note issued by Sampada Chemicals Limited alongwith copy of the Transport Receipt of Premal Road Lines.The assessee also submitted abstract of purchase register for Sodium Alginate(Textile Grade) for the year 2012- 13. The assessee submitted that it purchased this item from other parties also besides Sampada Chemicals Limited. The assessee submitted statement of quantity details of Soldium Alginate(Textile Grades) purchased by it during the year 2012-13. The assessee also submitted consumption register showing opening balance, receipt and issue, closing stock of Sodium Alginate(Textile Grade) during the year under consideration. Thus ,in nutshell, the assessee submitted that it has genuinely purchased the material Sodium Alginate(Textile Grade) from Sampada Chemicals Ltd. in normal course of business for its consumption , and it was submitted that ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 6 there was no need for the assessee to know that who are the Board of Directors of the said company Sampada Chemicals Limited and their background. It was submitted that the material was supplied on credit basis by the supplier Sampada Chemicals Limited ,and payment was made through banking channel against their invoice. The assessee submitted that they are not aware of any other activities of Directors of Sampada Chemicals Ltd., and assessee is not involved in any illegal activities with the said Shri Vipul Vidhur Bhatt or with any body else. The assessee submitted that it has nothing to do with the statement given by Mr. Vipul Vidhur Bhatt before investigation wing in Mumbai. It was also submitted that the assessee has no connection with 347 entities, the said Sh. Vipul Vidur Bhatt is running. The assessee also submitted that the said Director of Sampada Chemical Ltd. be called to appear before the AO and prove that business transaction entered by the assessee with Sampada Chemicals Limited are ingenuine. Thus, it was submitted that the reliance cannot be placed on statement ignoring all the facts placed before the authorities. 3.6 The AO rejected the contention of the assessee. The AO observed that search and seizure action u/s 132 was carried out in the case of Sh. Vipul Vidur Bhatt and his other related entities. Statement of Sh. Vipul Vidur Bhatt under section 132(4) was recorded on oath wherein he accepted that he is an Entry Operator , and all the 347 entities/companies are bogus entities/companies which are used by him for providing various bogus accommodation entries to various beneficiaries for commission. That Sh. Vipul Vidur Bhatt also confessed that he controls entire activities and affairs of the entities / companies ,and these entities/ companies were incorporated for providing bogus accommodation entries only. During the search operation under section 132, the entire books of accounts, income tax related documents, company law and other matter related documents, VAT / Sales Tax rubber stamp and common seals and PAN of all the 347 bogus entities/companies were found at an undisclosed premise 1407, 14 th Floor, New Jaiphalwadi, Police ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 7 Colony, Tardeo, Mumbai-400034.On perusal of the ledger accounts of these bogus entities/companies controlled , managed and operated by Shri.VipulVidur Bhatt, it was seen that the assessee has taken bogus accommodation entries to the extent of Rs. 82,38,462/- from Sampada Chemicals Ltd., [Rs. 41,70,774/- Debit] and Rs. [40,67,688/- Credit]. 3.7 The AO also observed that the assessee has tried to justify that the purchases made by assessee from Sampada Chemicals Limited were genuine, and in order to justify its contention, the assessee has submitted bills/vouchers . It was also observed by AO that entire books of accounts, income tax related documents, company law matter related documents, VAT / Sales Tax rubber stamp and common seals and PAN of all the 347 bogus entities/companies were found and seized by the department, and thus the bills/ vouchers submitted by the assessee cannot be considered to be genuine. In order to examine the identity of Sampada Chemicals Ltd. and to verify the genuineness and creditworthiness of the aforesaid transactions, the AO issued notice under section 133(6) as also summons under section 131(1) to Sampada Chemicals Ltd. and its Directors, but no reply was received by AO from the said company , and none of the Directors appeared before the AO which led AO to conclude that the creditworthiness and genuineness of the transaction in the form of purchase could not be proved and Sampada Chemicals Ltd. is merely a paper entry. 3.8 The AO issued summons dated 10.11.2017 to the Directors of the assessee company to attend personally before the AO , but none of the Directors appeared before the AO , which as per AO indicated that the Directors of the assessee company are trying to avoid the questions to be asked them with respect to said transactions. The AO held that this also proves that the transactions are non- genuine. The AO , therefore, observed that the transactions entered into by the assessee with the Sampada Chemicals Ltd. are non-genuine and are merely accommodation entries, therefore the same was added by the AO to the total income ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 8 of the assessee, vide reassessment order dated 26.12.2017 under section 143(3) r.w.s. 147 of the Act. 4. The assessee being aggrieved by the reassessment order passed by the AO, filed first appeal with ld. CIT(A) , and reiterated its contention as were made before the AO. The assessee further submitted before ld. CIT(A)(recorded at para 10/page 12 of ld. CIT(A) order) that the assertions of ld. AO in paragraph 9 of reassessment order are not correct. The assessee submitted that in response to SCN and summons issued by the AO to the assessee, the Authorized Representative of the assessee CA Mr.Raichand Lunia appeared before the AO on 16.11.2017 and informed the AO that the assessee has filed objections on 14.07.2017 challenging reopening of the assessment, and the assessee was not informed about the decision by the AO about the same. The said objections were submitted again before the AO. On being asked by the assessee’s AR orally, the AO told the AR orally that there is no need for Directors to appear before the AO. Thereafter, the assessee did not received any call or communication from the AO. It was submitted thereafter mail was received from AO on 01.12.2017 , wherein the copy of order dated 30.11.2017 passed by the AO disposing off the objections filed by the assessee against reopening of the assessment , was received. The assessee submitted that , thereafter, the counsel of the assessee appeared before the AO and submitted replies to SCN on 08.12.2017. It was submitted thereafter no further queries were raised by the AO, and rather the office of the AO indicated orally that the additions would have to be made as it is a case referred to by the Investigation Wing, Mumbai. The assessee submitted before ld. CIT(A) that the AO totally ignored the evidences and proofs of transactions made by assessee with Sampada Chemicals Ltd.. It was submitted that no enquiry was made by the AO on the evidences submitted by the assessee. The assessee submitted that the AO completely ignored the statement of account, purchase bills, transport receipts, bank statements, consumption register , and has merely relied on the information received from Investigation Wing of Mumbai to make the additions. It ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 9 was also submitted that the AO made general statement that all the 347 entities / companies of Sh. Vipul Vidur Bhatt are bogus entities, but the AO did not allowed any opportunity to the assessee to inspect any of the seized documents from the Sampada Chemicals Ltd..The assessee further submitted before ld. CIT(A) that the AO has mentioned that he has issued notice under section 133(6) as well as summons under section 131 to Sampada Chemicals Ltd and its Director , but no date has been mentioned as to which the notices/summons were issued, and what steps were taken by the AO to force compliance by Sampada Chemicals Ltd.. It was also submitted by the assessee before ld. CIT(A) that the AO never informed the assessee about the notice and the summons issued , and never did asked the assessee to present the supplier. The assessee submitted that ld. AO has arbitrarily observed that all the transactions of Shri. Vipul Vidur Bhatt who was a Director in Sampada Chemical Ltd., are bogus. It was submitted that the AO did not made any third party enquiry about the genuineness of the transactions. The assessee duly supplied the copy of invoices, transport receipts, bank statement, purchase register, consumption register, VAT number, CST registration number and e-mail address of Sampada Chemicals Ltd. before the AO, but all these evidences were ignored by the AO. 4.2 The assessee enclosed copy of Company Master Data of Sampada Chemicals Ltd., downloaded from MCA web-site, which showed that the company Sampada Chemicals Ltd., was formed on 20.02.1983 having a paid up capital of Rs. 4,98,00,000/-. Sh. Vipul Vidur Bhatt became Director of the company on 13.08.2010, and thus the claim of AO that this company Sampada Chemicals Limited was formed by Sh. Vipul Vidur Bhatt for accommodation entries is not supported, as the company is in existence since 1983. The said company is still active as per MCA records ,though they have defaulted in filing of Annual Return and Balance Sheet for the financial year 2015-16. 4.3 It was submitted by assessee before ld. CIT(A) that complete proof and evidences to prove genuineness of purchases made by the assessee from said ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 10 Sampada Chemicals Limited were submitted , and the assessee offered to submit any other information, if required. It was submitted that no further enquiry was made by AO ,and the additions were made by the AO without any application of mind by treating the purchases as bogus without verification of facts and evidences submitted by the assessee. It was also submitted that no opportunity was provided by the AO to the assessee to cross examine Shri Vipul Vidur Bhatt, and If the statement of Shri Vipul Vidur Bhatt was to be relied , the AO ought to have forced Shri Vipul Vidur Bhatt to appear before him , so that the assessee could have cross examined him. 4.4 It was also submitted by the assesse before ld. CIT(A) that the assessee is a business entity and it was not necessary for assesse to enquire the salesman of the suppliers of Colour Chemicals about who is the Director of the company and what are his other activities. It was submitted that the assessee company had bought Colour Chemical from Sampada Chemicals Ltd. in ordinary course of business on credit terms for which payments were made through banking channel, and there was no necessity for the assesse to make enquiries about the ownership of Sampada Chemicals Ltd..It was also submitted that the AO has erred in adding Rs. 82,38,462/- without application of mind wherein the sum of debit entries of Rs. 41,70,774/- and credit entries of Rs. 40,67,688/- were clubbed together, wherein the purchases made by the assessee as well payment made towards these purchases were added. It was submitted that the purchases were only to the tune of Rs. 37,66,650/- and the payments were made to the tune of Rs.36,67,688/-. The assessee submitted that it had asked the AO for the copy of information received from Mumbai for the purpose of re-conciliation but the same was also not supplied. It was submitted that there were goods return of Rs. 2,05,538/-, which could be the reasons for difference. The assesse submitted that both purchases made as well payments made towards such purchases were added by the AO. It was submitted that how the said entire amount could be treated as profit of the assessee. ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 11 4.5 The ld. CIT(A), on careful consideration of the entire facts, observed that the assesse has claimed to have purchased chemical from Sampada Chemicals Limited and in support thereof the assesse has submitted copies of bills issued by said party, transport receipts and claim is made that the payments were made through banking channel. The ld. CIT(A) observed that information was provided by the Deputy Director of Income-tax(Inv) Unit 7(4), Mumbai that a search and seizure action was carried out in the case of Shri Vipul Vidur Bhatt and other related entities on 05.02.2016 and in the statement recorded on oath, Shri Vipul Vidur Bhatt accepted that he is an entry operator and all the companies/entities are bogus which were used for providing various bogus accommodation entries to various beneficiaries for commission. The ld. CIT(A) observed that Shri Vipul Vidur Bhatt has admitted that bogus entries includes entries (i) entries of bogus LTCG and STCG (ii) One time Share Capital/Share Premium entries(iii) Unsecured Loan Entries (iv) Turnover Entries(bogus sales entries). The ld. CIT(A) observed that Shri Vipul Vidur Bhatt has used Sampada Chemicals Limited for providing accommodation entries and which fact was revealed during searches conducted by department. The said Mr. Vipul Vidur Bhatt is Director of Sampada Chemicals Limited since 13.08.2010, and the impugned assessment year is ay: 2013-14. The ld. CIT(A) observed that the AO issued summons u/s. 131 to said company Sampada Chemicals Limited and also information was called u/s 133(6) , but no replies were received nor Directors appeared before the AO, which clearly proves that the said company was providing bogus sale bills. The ld. CIT(A) observed that the onus was on the assessee to establish genuineness of the transaction. The ld. CIT(A) further observed that it is the assessee company who purchased the material from Sampada Chemicals Limited , and hence onus was on assessee company to prove genuineness of the transactions. The ld. CIT(A) further observed that even AO asked Directors of assessee company to be present before the AO as summons were issued as well notices were issued u/s 133(6), but that remained un-complied with, but rather the assessee is now claiming that the AO told them orally to be not present. The ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 12 assessee ought to have complied with directions of the AO. The ld. CIT(A) observed that merely submitting invoices as well making cheque payments are not sufficient, when searches conducted on the other party reveals that the said party was providing bogus accommodation entries. The ld. CIT(A) observed that the supplier was assessee’s witness and the AO was not required to force his attendance. When the amount is shown to be in the nature of income, the onus shifts to the assessee to show that the same was not taxable. The ld. CIT(A) relied upon decision(s) of Hon’ble Supreme Court in the case of CIT v. Durgaprasad More 812 ITR 540(SC) , Sumati Dayal v. CIT 214 ITR 801(SC) , Chuharmal v. CIT(1988) 172 ITR 250(SC) and Dhakeswari Cotton Mills Limited v. CIT(1954) 26 ITR 775(SC) , and the decision of Hon’ble Allahabad High Court in the case of ACIT v. Shanti Swarup Jain (2015) 55 taxmann.com 378. The ld. CIT(A) upheld the decision of the AO in making additions u/s 69C to the extent of purchases made by the assessee from Sampada Chemicals Limited , to the tune of Rs. 41,70,774/- during the year under consideration as per information received from the Investigation Wing, Mumbai although the assessee claimed that it had made purchases to the tune of Rs. 37,66,650/- from Sampada Chemicals Limited during the year under consideration . The ld. CIT(A) accepted the contention of the assessee that no addition can be made for payments made by the assessee through banking channel w.r.t. these purchases made by the assessee as it will lead to double addition. Thus, the ld. CIT(A) granted part relief to the assessee, vide appellate order dated 28.09.2018 passed by ld. CIT(A), wherein additions to the tune of Rs. 41,70,774/- were upheld by ld. CIT(A) as against additions to the tune of Rs. 82,38,462/- made by the AO. 5. Still aggrieved, the assessee filed second appeal with Tribunal . The learned counsel for the assessee C.A. Sh. Sanjay R. Shah opened arguments before the Bench and submitted that legal challenge to reopening of the assessment by invoking provisions of Section 147 was not taken by the assessee before ld. CIT(A) and is now taken for the first time before the Tribunal. Our attention was drawn to ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 13 Ground No. 1,1.1 and 1.2 raised by the assessee in memo of appeal filed with Tribunal. It was submitted that legal ground can be taken at any time . The ld. Counsel for the assessee placed reliance on the decision of Hon’ble Gujarat High Court in the case of P.V. Doshi v. Commissioner Of Income-Tax, reported in (1978) 113 ITR 22(Guj. HC) . The learned counsel for the assessee submitted that the AO invoked section 147 and reopened the concluded assessment based upon the report of the Investigation Wing, Mumbai, but the AO did not applied his own mind, and it was a borrowed satisfaction. Our attention was drawn to page 3 of the paper book wherein reasons recorded for reopening of the concluded assessment were placed. It was submitted that original assessment was made under section 143(3) and re- opening of the assessment was done within four years from the end of the assessment year , as notice u/s 148 was issued on 24.03.2017 and impugned assessment year is 2017-18. Our attention was also drawn to page 4-16 of the paper book, wherein reply/objections to the reasons recorded for reopening of the assessment , was made by the assessee before the AO. It was submitted that the assessee was not confronted with the relied upon documents. The assessee relied upon the following decision(s) , as under:- “1. PCIT v. Ganga Glazed Tiles (P.) Ltd. (2020) 117 taxmann.com 108 (SC). 2. PCIT v. Ganga Glazed Tiles (P.) Ltd. - (2020) 117 taxmann.com 107 (Guj- HC). 3. Ashapura Minechem Ltd. v. DCIT - (2020) 116 taxmann.com 860 (Mumbai- Trib.) 4. PCIT v. Shodiman Investments (P) Ltd. - (2018) 93 taxmann.com 153 (Bombay-HC) 5. Surani Steel Tubes Ltd. v. ITO – (2022) 136 taxmann.com 139 (Guj-HC).” 5.2 Our attention was drawn by ld. Counsel for the assessee to page to 20-24 of the paper book , wherein the AO disposed off the objections raised by assessee to reopening of the assessment. It was submitted that original assessment was framed u/s 143(3) in which enquiry was duly made with respect to purchases made by the assessee, and our attention was drawn to page 120 of the paper book wherein the ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 14 reply dated 19.08.2015 filed by the assessee before the AO during original assessment proceedings was placed. Our attention was also drawn to page 122 of the paper book where the Trading and Profit & Loss account of the assessee is placed , and it was submitted that the colour chemical consumed by the assessee during the year under consideration was Rs. 15,32,87,087/- as against Rs. 13,63,54,109/- during immediately preceding year. Our attention was drawn to page 124 of the paper book wherein the details of the creditors are placed wherein Sampada Chemicals Ltd., is appearing at Sr. No. 23 and the purchases made during the year from said party by the assessee were Rs. 37,66,650/-. Our attention was drawn by ld. Counsel for the assessee to page 127 of the paper book wherein the reply dated 23.10.2015 filed with the AO during original assessment under section 143(3) is placed. Our attention was also drawn to page 151 to 154 of the paper book wherein Manufacturing Expense account as well detail of Raw Material consumed including colour chemical consumed is placed, being part of audited accounts. Our attention was also drawn to page 164 of the paper book wherein details of trade payable for goods is placed , wherein amount payable to Sampada Chemicals Ltd. as on 31.03.2013 is shown payable at Rs. 98,962/-. Our attention was also drawn by ld. Counsel for the assessee to assessment order dated 30.10.2015 passed by AO under section 143(3) in original assessment proceedings, which is placed in paper book at page no. 70 . It was submitted that no additions were made towards purchases made by assessee in original assessment proceedings . Our attention was further drawn to page 28 of the paper book wherein ledger account in the books of the assessee of the Creditor Sampada Chemicals Ltd. is placed , and it was submitted that total purchases made during the year were Rs. 37,66,650/-and the total debit is Rs. 36,67,688/-, out of which goods return were to the tune of Rs. 2,05,538/-. Our attention was also drawn by ld. Counsel for the assessee to page 29 of the paper book, wherein Company Master Data of Sampada Chemical Ltd., as downloaded from the MCA web-site is placed , and it was submitted that the company status is showing ‘Active’ , although the said company has defaulted in filing of Annual Return ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 15 and Balance Sheet for the financial year 2015-16. Our attention was also drawn to page 50 of the paper book wherein credit note of Rs. 2,05,538/- issued by Sampada Chemicals Ltd. is placed w.r.t. goods returned by the assessee. Our attention was also drawn to page 51 of the paper book wherein transport receipt issued by ‘Premal Road Links’ with respect to material returned by assessee to Sampada Chemicals Ltd. is placed. Our attention was also drawn by ld. Counsel for the assessee to page 62-67 of the paper book, wherein consumption record of material purchased from Sampada Chemicals Limited is placed. Our attention was also drawn to Form no. 35 filed before ld. CIT(A), and it was submitted that Directors did not appeared before AO, and our attention was drawn to Para 9 of the Statement of Facts filed before ld. CIT(A). With regard to Ground no. 2 which is an alternate ground, it was submitted by ld. Counsel for the assessee , without prejudice, that if additions are upheld then it should be restricted to Rs. 37,66,550/- which are the purchases made by the assessee from Sampada Chemicals Limited and not to Rs. 41,70,774/- as were upheld by ld. CIT(A). Further, as per alternative ground number 3 , it was submitted , without prejudice, that if additions are to be upheld then only profit element is to be added to the tune of 5% of the purchase amount. Our attention was drawn to the appellate order of ITAT , Ahmedabad in the case of ITO v. Balaji Builders dated 18.06.2018 in ITA No. 593/Ahd/2016 & C.O. No. 57/Ahd/2016 in which additions w.r.t. Bogus purchases were restricted to 5%. The assessee further relied upon judgment and order of Hon’ble Bombay High Court in the case of CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. , reported in (2015) 372 ITR 619(Bom HC). 5.3. Sh. Ashok Kumar Suthar, ld. Sr. DR, on the other hand submitted that reopening was done within four years from the end of the assessment year. There was a search and seizure operations conducted by Investigation Wing, Mumbai in the case of Sh. Vipul Vidur Bhatt, wherein search report was prepared and statement under section 132(4) of Sh. Vipul Vidur Bhatt were recorded wherein he ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 16 stated that he is involved in providing accommodation entries , and 347 entities were being used by Sh. Vipul Vidur Bhatt to provide bogus accommodation entries. Sh. Vipul Vidur Bhatt was Director of the Sampada Chemicals Ltd. and he stated that Sampada Chemicals Limited was one of the 347 entities engaged in providing bogus accommodation entries. The case of the assessee was reopened by invoking provisions of Section 147. The assessee has purchased material from Sampada Chemical Ltd., which is not denied by the assessee. The AO wanted to verify the purchase transactions, and summons under section 131 as well as notice under section 133(6) were issued , but none appeared for Sampada Chemicals Ltd. nor any reply was received. The assessee never asked for documents / cross examination of the said Mr. Vipul Vidur Bhatt . It was submitted that summons u/s 131 were issued by AO but the Directors of the assessee did not appear before the AO. The ld. Sr. DR relied upon the appellate order passed by ld. CIT(A) and the assessment order passed by the AO. 5.4 The ld. Counsel for the assessee submitted in rejoinder that cross examination was asked for by the assessee of Shri Vipul Vidhur Bhatt as as well statements and other documents were asked for by the assessee which were not provided by the Revenue. Our attention was drawn to Statement of Facts filed before ld. CIT(A) 6. We have carefully considered rival contentions and perused the material on record . We have also carefully gone through the cited case laws. We have elaborately culled out the factual background of the instant appeal in preceding para’s of this order, and for the sake of brevity the same are not repeated again . We have observed that the assessee has claimed itself to be engaged in the business of Cloth Dying, Printing and Processes. It has claimed that it owns a processing house which has machinery for Bleaching, Dyeing , Printing and Finishing of Cloth, and mainly does Job Work for its customers. The assessee filed its return of income originally on 28.09.2013 u/s 139(1) for the impugned assessment year 2013-14, returning loss of Rs. 1,73,67,374/-. The said return of income was originally selected ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 17 by Revenue for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act assessing/computing loss of Rs. 1,57,75,211/- vide assessment order dated 30.10.2015 passed by AO u/s 143(3). There were three additions made by the AO aggregating to Rs. 26,83,874/- in original scrutiny assessment , firstly towards delayed deposits of employee contribution to PF u/s 36(1)(va)read with Section 2(24)(x) of the 1961 Act (Rs. 1,97,040/-) , secondly towards disallowance of depreciation (Rs. 1,25,216/-) and thirdly towards disallowance of interest in respect of capital work-in-progress(Rs. 23,61,618/-). The assessment order dated 30.10.2015 u/s 143(3) is placed on record in paper book at page 70-78. Subsequently, information was provided by Deputy Director of Income-tax (Inv.) , Mumbai that a search and seizure action u/s 132 was carried out by Revenue in the case of Mr. Vipul Vidur Bhatt and other related entities/companies on 05.02.2016, wherein in the statement recorded u/s 132(4) , the said Mr. Vipul Vidur Bhatt admitted that he is an entry operator running 347 entities/company which are used for providing accommodation entries in lieu of commission. The said companies/entities were put to use for providing alleged accommodation entries for (i) bogus capital gains (ii) bogus purchases (iii) bogus unsecured loans and (iv) bogus share capital/share premium. There was seizure of incriminating material by Revenue during aforesaid search operations conducted on 05.02.2016 w.r.t. 347 entities/companies operated by said Mr. Vipul Vidur Bhatt for providing accommodation entries in lieu of commission. On further enquiries conducted by AO of the assessee based on the information received from DDIT, Inv. , Mumbai, it transpires that one of the company named by said Mr. Vipul Vidur Bhatt in the statement recorded u/s 132(4) was M/s Sampada Chemicals Limited , which company was used by said Mr. Vipul Vidur Bhatt to provide accommodation entries towards bogus purchases, wherein the assessee is one of the beneficiary of the said bogus purchases from Sampada Chemicals Limited . The said Mr. Vipul Vidur Bhatt is admittedly Director of Sampada Chemicals Limited since 2010 , and was Director of Sampada Chemicals Limited during the year under consideration. The assessee’s ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 18 name emerged as one of beneficiary of the accommodation entries towards bogus purchases provided by said company M/s Sampada Chemicals Limited to the assessee during the year under consideration , wherein the assessee has allegedly taken accommodation purchase entry of purchasing Color Chemical(Sodium Alginate(Textile Grade) from said company to the tune of Rs. 41,70,774/- and correspondingly there were credit entries for Rs. 40,67,688/-. The AO made additions of the aggregate amount of Rs. 82,38,462/-, while ld. CIT(A) restricted the additions to the tune of Rs. 41,70,774/- towards accommodation entries for bogus purchases made by the assessee from said Sampada Chemicals Limited during the year under consideration , wherein the credit entry was held by ld. CIT(A) to be duplication of the addition and consequently deleted by ld. CIT(A), as the same were towards payments made by assessee to said Sampada Chemicals Limited through banking channel for aforesaid accommodation entries towards bogus purchases made during the year under consideration . We are now concerned with the additions to the tune of Rs. 41,70,774/- sustained by ld. CIT(A). Coming back, based on information received from DDIT, Inv. , Mumbai and further enquiries as were made by the AO, it was concluded by the AO that income of the assessee has escaped assessment for which reasons for reopening of the concluded assessment u/s 147 were recorded by the AO on 17.03.2017(PB/page 3) . The copies of the reasons recorded were forwarded by AO to the assessee(Page 1-3/PB). The assessee objected to the reasons recorded (Page 4-16/PB),and the same were disposed of by the AO vide speaking order dated 30.11.2017(Page 20-24/PB). During all proceedings , the assessee consistently claimed that these purchases made by the assessee from Sampada Chemicals Limited were genuine. The assessee filed copies of invoices, transport bilti, purchase register, consumption register and bank statements , to contend that purchases are genuine which were purchased in normal course of business on credit basis by assessee from said Sampada Chemicals Limited for which payments were made by assessee through banking channel in ordinary course of business. The assessee has also produced its audited accounts, ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 19 which clearly shows that the assessee holds tangible fixed assets of Rs. 35.63 crores(Gross Block) and Rs. 19.63 crores(Net Block) , as at 31.03.2013. The said assets include Land , Factory buildings ,Staff quarters, Plant and Machinery, Electrification, Water Treatment Plant and so on and so forth. The assessee has declared gross turnover of Rs. 48.00 crores during the year under consideration. There is no adverse finding of the authorities that the assessee is not engaged in the business of Job Work of Cloth Dying, Printing and Processes , or that the assessee is itself engaged in providing bogus accommodation entries. The assessee , during proceedings before authorities below , did asked for providing statement of said Mr. Vipul Vidur Bhatt as well asked for providing relied upon incriminating material , but the same were not provided by the AO as well by ld. CIT(A). The assessee did asked for cross examination of Mr. Vipul Vidur Bhatt , but the same was not allowed by AO as well ld. CIT(A). If the AO has not provided incriminating material or not allowed the cross examination , it was incumbent on ld. CIT(A) to do so . It is well settled that the powers of ld. CIT(A) are co-terminus with the powers of the AO. The proceedings before ld. CIT(A) are merely extension of the assessment proceedings. It is well settled that principles of natural justice demands that before prejudicing anybody , the relied upon incriminating documents/material be furnished to the person likely to be prejudiced by said incriminating material/documents, and opportunity of cross examination be granted although the right to cross examination is not absolute. Thus, clearly principles of natural justice are breached. The assessee on its part provided all the necessary documents to support that purchases made from Sampada Chemicals Limited were genuine. The copies of the invoices, transport bilti, bank statements, credit notes for returning the goods, purchase register, consumption record etc. were all produced before the authorities below. The AO as well ld. CIT(A) did not find any fault with the records produced by the assessee, except that in the search and seizure proceedings conducted by Revenue u/s 132 on 05.02.2016 in the case of Mr. Vipul Vidur Bhatt , it emerged that Mr. Vipul Vidur Bhatt was using 347 entities/companies for providing bogus ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 20 accommodation entries by way of bogus capital gains, bogus purchases , share capital/share premium and unsecured loans, and Sampada Chemicals were one of the company used by Mr. Vipul Vidur Bhatt to provide bogus accommodation entries , and the said Mr. Vipul Vidur Bhatt was admittedly Director of the said company during the year under consideration . The assessee has admittedly dealt with Sampada Chemicals Limited, and had allegedly made purchases of Sodium Alginate(Textile Grade) during the year under consideration from the said entity , which is now in dispute because of the statement recorded u/s 132(4) of Mr. Vipul Vidur Bhatt as well incriminating material found and seized during aforesaid search operations by Revenue, as well also in the post search enquiries made by the AO of the assessee. It is true that some enquiries were made by the AO during original assessment proceedings(concluded vide assessment order dated 30.10.2015) concerning purchases made and consumption of material, but with the discovery of the fresh incriminating material found and seized during the aforesaid search conducted by Revenue in 2016 , the statement recorded u/s 132(4) and post search enquiries made by the AO of the assessee, the onus had once again shifted back to the assessee to prove that the purchases are genuine as the said purchases are existing in the books of the assessee. In order to verify the genuineness of the transactions of the assessee with said Sampada Chemicals Limited, the AO of the assessee during reassessment proceedings issued summons u/s 131 to Directors of the said company Sampada Chemicals Limited, as well notices u/s 133(6) were issued by the AO to the said company to seek relevant information . The said Mr. Vipul Vidhur Bhatt on being summoned u/s 131 by the AO during assessment proceedings did not appear before the AO, nor the notices issued to Sampada Chemicals Limited u/s 133(6) were complied with by the said company . It is undisputed that Mr. Vipul Vidur Bhatt was Director of M/s Sampada Chemicals Limited during the impugned year under consideration. The MCA- Company Master data downloaded from MCA Web-site(page 29/PB) clearly evidences that Mr. Vipul Vidur Bhatt is Director of Sampada Chemicals Limited since 13.08.2010 , and ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 21 presently we are concerned with financial year 2012-13(ay:2013-14). The said company has defaulted in filing of Annual Return and Balance Sheet for the financial year 2015-16. The said company held last AGM on 27.09.2012 and date of Balance sheet is 31.03.2012. The summons issued by the AO u/s 131 to the assessee’s Directors also remained un-complied with as well the notices issued u/s 133(6) were not complied with by the assessee, and the explanation offered by assessee before ld. CIT(A) is that the AO orally told the AR of the assessee that there was no need to comply with the same. The ld. CIT(A) did not called for the Directors of the assessee to appear before him for recording their statements , nor any fresh summons were issued by ld. CIT(A) to the Directors of Sampada Chemicals Limited, nor notices u/s 133(6) were issued by ld. CIT(A) to the said company, during appellate proceedings. The powers of ld. CIT(A) are co-terminus with the powers of the AO, and proceedings before ld. CIT(A) are extension of assessment proceedings. It is also observed that the reassessment proceedings were initiated within 4 years from the end of assessment year and proviso to Section 147 is not applicable. It is also true that information was received by the AO from DDIT, Inv., Mumbai as to the 347 entities / companies operated by said Mr. Vipul Vidur Bhatt to provide accommodation entries towards bogus capital gains, bogus purchases , share capital/share premium and unsecured loans which was supported by statement u/s 132(4) of Shri Vipul Vidur Bhatt. On further enquiries by the AO of the assessee , it also transpired that the assessee is beneficiary of accommodation entries to the tune of Rs.82,38,462/- ( both aggregate of debits and credits) received from Sampada Chemicals Limited, of which Mr. Vipul Vidur Bhatt is Director. The assessee has infact dealt with the said Sampada Chemicals Limited during the year under consideration, and the same is not denied by the assessee. Reasons were recorded by the AO and the assessee was furnished with the copies of the reasons recorded for reopening of the concluded assessment. The assessment was reopened within 4 years from the end of the assessment year, and first proviso to Section 147 is not applicable. The assessee objected to reopening of the assessment, and the AO ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 22 disposed off the objections by a speaking order. In view of the information received by the AO and further enquiries made by the AO, wherein the assessee was named as beneficiary of the accommodation entries towards bogus purchases from said company namely Sampada Chemicals Limited as detailed above , and the said company Sampada Chemicals Limited was named by Mr. Vipul Vidur Bhatt who was searched in the statement recorded u/s 132(4) that it was used to provide bogus accommodation entries, we donot find any merit in the contention of the assessee that reopening of the assessment was not validly made nor it could be said that there is no application of mind by the AO before reopening of the concluded assessment in the case of the assessee, as the AO after receipt of information from DDIT, Inv. , Mumbai made its own enquiries before reopening of the assessment u/s 147 in the case of the assessee . There was a live nexus between the incriminating material available with the AO and reasons to believe that income of the assessee has escaped assessment, as at the time of reopening , the sufficiency of material to conclusively prove that income has escaped assessment is not required but a prima- facie view is required based on material on record having live nexus with formation of reasons to believe that income has escaped assessment. Thus, it is not a case of borrowed satisfaction , but there was application of mind by the AO also as he made enquiries after receipt of material from DDIT, Inv., Mumbai , and then arrived at the decision that income of the assessee has escaped assessment based on incriminating material available with the AO and it is a fit case which warrant invocation of Section 147. However, we have observed that there is a breach of principles of natural justice as copies of statements as well other relied upon incriminating material ought to have been provided by AO to the assessee, before condemning assessee and saddling with tax liabilities. Further, before prejudicing assessee and saddling with tax liability , the said Mr. Vipul Vidur Bhatt ought to have been offered by Revenue for cross examination by the assessee. If the AO did not do so, it was incumbent on ld. CIT(A) to have provided the copies of relied upon documents including statement of Mr. Vipul Vidur Bhatt as well offered said Mr. Vipul Vidur ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 23 Bhatt for cross examination by the assessee. Right of cross examination is a valuable right but at the same time the said right is not absolute. It will depends upon the factual matrix of the case. Fair hearing as well adherence to principles of natural justice are the two important pillars in robust judicial delivery system. The Revenue has also not brought on record as to the manner in which assessments were framed in the case of Mr. Vipul Vidur Bhatt as well in the case of M/s Sampada Chemicals Limited, and whether finality was achieved in the tax-proceedings against them under the 1961 Act. The assessee on its part has also not produced its Directors before the AO despite being called for by the AO, as well before ld. CIT(A) for recording their statements. It also could not produced any confirmation from the said Sampada Chemicals Limited nor produced affidavit from the said company. The assessee also could not produce Mr. Vipul Vidur Bhatt or any other relevant functionary of Sampada Chemicals Limited before the authorities below, so that truth could have been unraveled by Revenue. The purchases were made by assessee from said entity and onus was on the assessee to prove its genuineness, more-so the onus is very heavy and shifted back to assessee after discovery of incriminating material as well recording of statement of Mr. Vipul Vidhur Bhatt during search operations and post search enquiries.The assessee has declared turnover of Rs.48.82 crores and consumption of color chemicals were to the tune of Rs. 15.32 crores. The assssee has allegedly purchased colour chemicals(Sodium Alginate(Textile Grade)) to the tune of Rs.41,70,774/- from Sampada Chemicals Limited, as per information provided by the Investigation Wing, Mumbai . The invoices, transport bilti, bank statements, purchase register, store consumption record of material including colour chemicals were produced by the assessee before the authorities below, and no specific defect is pointed out by AO as well ld. CIT(A). The purchases are appearing in the books of the assessee, and it was for the assessee to have proved genuineness of the transaction , more so burden is heavy after the aforesaid search proceedings and discovery of incriminating material, for which the assessee ought to have brought conclusive evidences to prove that the ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 24 purchases were genuine by way of bringing Balance Sheet of Sampada Chemicals Limited to prove that it is infact engaged in manufacturing of Sodium Alginite(Textile Grade), and the supplies were genuine. The allegation is that Sampada Chemicals Limited is merely a paper entity used by Mr. Vipul Vidur Bhatt to provide bogus accommodation entries. The fresh confirmation letters post search, affidavits from the said company, production of the responsible functionaries of the said company Sampada Chemicals Limited before authorities, the Audited Accounts of Sampada Chemicals Limited for the relevant period etc. could have been produced by the assessee to prove that purchases were genuine, as discovery of the incriminating material during search and post search enquiries have cast serious doubt on the purchases made by the assessee from said company. There could be several reasons for arranging bogus accommodation entries towards bogus purchases, which could be to suppress profits and evade taxes, or to arrange for the invoices at higher value to reflect purchases in the books of accounts etc. so on and so forth. Reference is drawn to the judgment and order of Hon’ble Gujarat High Court in the case of CIT v. Simit P. Sheth , reported in (2013) 38 taxmann.com 385(Guj.), wherein Hon’ble High Court of Gujarat held as under: “4. In the present case, however, we notice that before the Commissioner (Appeals), the assessee pointed out that the assessee was trading in steel. Once his sale of "x" quantity of steel is accepted, the purchases of the same quantity had to be believed. It was canvassed that the assessee had made sales of 1,10,786 metric tons of steel. Therefore, there had to be a matching quantity of purchase of steel also. It was argued that since the Assessing Officer accepted the sales of the steel, equivalent of purchase also must be believed. It was in this background that the Commissioner (Appeals) made the following observations : "4.3 I have considered the submissions of the authorized representative and the order of the Assessing Officer. It has been admitted that there was a regular arrangement for providing accommodation sales bills. The appellant has not been able to provide a confirmation from the supplier that the goods where indeed supplied to the appellant. It is an established fact that the onus lies on the appellant to prove that the purchases are genuine. The appellant has made the payments in cheque and the sales made by the appellant have been accepted in toto by the Assessing Officer. Hence, it is to be presumed that though the bills made have been given by M/s. Bhavna Trading Co., M/s. Minakshi Enterprises and M/s. Arun Industrial Corporation the actual purchases have not been made for them. It can, therefore, be concluded that the appellant has made ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 25 purchases from persons in the open market. Taking into account all the relevant facts of the case I hold that 30 per cent of the purchase cost would be a reasonable amount to be confirmed, to cover the profits of the appellant. Hence, the addition to the extent of Rs. 12,31,471 is confirmed and the balance of Rs. 28,73,432 is directed to be deleted." 5. We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of 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 sales. However, the vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and non-existent or that the purchases were actually made but not from the parties from whom it was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. 6. In the present case, the Commissioner of Income-tax (Appeals) believed that when as a trader in steel the assessee sold certain quantity of steel, he would have purchased the same quantity from some source. When the total sale is accepted by the Assessing Officer, he could not have questioned the very basis of the purchases. In essence, therefore, the Commissioner (Appeals) believed the assessee's theory that the purchases were not bogus but were made from the parties other than those mentioned in the books of account. 7. That being the position, not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. So much is clear by the decision of this court. In particular, the court has also taken a similar view in the case of CIT v. Vijay M. Mistry Construction Ltd. [2013] 355 ITR 498 (Guj) and in the case of CIT v. Bholanath Poly Fab (P.) Ltd. [2013] 355 ITR 290 (Guj). The view taken by the Tribunal in the case of Vijay Proteins Ltd. v. Asstt. CIT [1996] 58 ITD 428 (Ahd.) came to be approved. 8. If the entire purchases were wholly bogus and there was a finding of fact on record that no purchases were made at all, counsel for the Revenue would be justified in arguing that the entire amount of such bogus purchases should be added back to the income of the assessee. Such were the facts in the case of Pawanraj B. Bokadia (supra). 9. This being the position, the only question that survives is what should be the fair profit rate out of the bogus purchases which should be added back to the income of the assessee. The Commissioner adopted the ratio of 30 per cent of such total sales. The Tribunal, however, scaled down to 12.5 per cent. We may notice that in the immediately preceding year to the assessment year under consideration the assessee had declared the gross profit at 3.56 per cent of the total turnover. If the yardstick of 30 per cent, as adopted by the Commissioner (Appeals), is accepted the gross profit rate will be much higher. In essence, the Tribunal only estimated the possible profit out of purchases made through non-genuine parties. No question of law in such estimation would arise. The estimation of rate of profit return must necessarily vary with the nature of business and no uniform yardstick can be adopted. 10. In the result, the tax appeal is dismissed.” ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 26 Thus, keeping in view the entire facts and circumstances of the instant case before us and in the interest of justice and fairness, and also with a view to end this litigation, it will be fair that profit element embedded in the aforesaid purchase @12.5% be brought to tax instead of bringing to tax the entire purchase price as the assessee had produced purchase register, consumption register but no defect per-se in consumption of Sodium Alginate(Textile Grade) was pointed out by the AO or by ld. CIT(A), which lead to the conclusion that the purchases of Sodium Alginate(Textile Grade) were made by the assessee from some other suppliers but the bogus invoices were taken from Sampada Chemicals Limited to suppress the profits , and end of justice will be met if profit embedded in these purchases are estimated @12.5% which shall be brought to tax. Thus, the assessee gets part relief, wherein additions to the tune of Rs. 5,21,347/- are sustained. The estimation requires some guess work, but the same has to be reasonable,fair and honest, which we hold that 12.5% estimated profit embedded in purchases as held by us to be added to the income of the assessee is fair, reasonable and honest. The reference is drawn to the decision of Hon’ble Supreme Court in the case of Kachwala Gems v. JCIT, Jaipur (2007) 288 ITR 10(SC) . The assessee gets part relief. We clarify that we have adjudicated this appeal keeping in view peculiar facts and circumstances of the case, and it shall not have any precedential value for future judicial reference. We order accordingly. 7. In the result, the appeal of the assessee is partly allowed Order pronounced on 06/10/2023 at Ahmadabad in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 Sd/- Sd/- [MS MADHUMITA ROY] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06/10/2023 Sh ITA No.2396/Ahd/2018 Assessment Year: 2013-14 Akash Fashion Prints Pvt. Ltd. 27 Copy forwarded to: 1. Appellant – 2. Respondent – 3. CITDR , ITAT, 4. CIT, 5. The CIT(A)