KANADE ANAND UDYOG P.LTD, MUMBAI V. ITO 6(2), MUMBAI

ITA 3842/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5482 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIRENDER SINGH
• Keywords: Bogus purchase; Rejection of books of accounts; Unexplained expenditure; Opportunity of cross examination; Peak credit; Third party statement; Accommodation entries
• Section: 69C; 143(3); 133(6); 147; 148

Judgement Text

1 ITA 3842/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI MAHAVIR SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.3842/MUM/2016 (ASSESSMENT YEAR: 2009-10) M/S KANADE ANAND UDYOG PVT LTD, KANADE HOUSE, PLOT NO.148, INSIDE SAHAR CARGO INDUSTRIAL ESTATE, D.P. ROAD J.B . NAGAR, ANDHERI (E), MUMBAI-400 099 PAN : AACCK6061E VS DCIT-6(2), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI RAKESH JOSHI RESPONDENT BY SHRI VIRENDER SINGH DATE OF HEARING 29-05-2018 DATE OF PRONOUNCEMENT 18-07-2018 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST ORDER OF THE CIT(A)-12, MUMBAI DATED 04-03-2016 AND IT PERTAINS TO AY 2009-10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNE D ASSESSING OFFICER IN REOPENING THE ASSESSMENT COMPLETED U/S. 143(3) OF T HE INCOME TAX ACT, 1961, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNE D ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNTS U/S.145{3) OF THE I NCOME TAX ACT, 1961, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE . 3. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNE D ASSESSING OFFICER IN MAKING 2 ITA 3842/MUM/2016 AN ADDITION OF RS. 1,66,68,5827- U/S.69C OF THE INC OME TAX ACT, 1961, ON ACCOUNT OF ALLEGED BOGUS PURCHASES (ON THE BASIS OF PEAK THEORY), WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE . V 4. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F LEARNED ASSESSING OFFICER IN MAKING AN ADDITION ON ACCOL5NT L OFSUPPRESSION OF GROSS PROFIT OF RS. 3, 33, 3727- (BEING 2% OF ALLEGED BOGUS PURC HASE' OF RS. 1,66,68,5827-), WITHOUT CONSIDERING THE FACTS AND C IRCUMSTANCES OF THE CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING ELECTRO FO RGED GRATINGS, CABLE TRAYS, DUCTS AND EARTHING MATERIALS, FILED ITS RETU RN OF INCOME FOR AY 2009-10 ON 30-09-2009 DECLARING TOTAL INCOME AT RS. 1,39,00,742. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) ON 14-12-2 011 ASSESSING TOTAL INCOME AT RS.1,43,55,790. SUBSEQUENTLY, THE CASE HAS BEEN REOPENED U/S 147 OF THE INCOME-TAX ACT, 1961 FOR TH E DETAILED REASONS RECORDED AS PER WHICH INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT ON ACCOUNT OF INFLATION OF PURCHASES BY TAKING ACCOMMODATION ENTRIES FROM SUSPICIOUS / HAWALA DEAL ERS FOR RS.1,66,68,582. THEREFORE, NOTICE U/S 148 DATED 04 -03-2013 WAS ISSUED. IN RESPONSE TO THE NOTICE, ASSESSEE VIDE L ETTER DATED 3-04-2013 STATED THAT ORIGINAL RETURN FILED U/S 139(1) ON 30- 09-2009 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF TH E ACT. THEREAFTER, THE CASE HAS BEEN SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REP RESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED VARIO US DETAILS, AS CALLED 3 ITA 3842/MUM/2016 FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF ACCOMMO DATION ENTRIES PROVIDED BY SUSPICIOUS / HAWALA DEALERS AS PER THE LIST PREPARED BY SALES-TAX DEPARTMENT. DURING THE COURSE OF HEARING , THE ASSESSEE WAS PROVIDED THE LIST OF TRANSACTIONS WITH THOSE PARTIE S WHO HAVE CONFIRMED TO SALES-TAX DEPARTMENT THAT THEY HAD PROVIDED ACCOMMO DATION ENTRIES. THE LIST CONTAINED THE NAME OF ACCOMMODATION ENTRY PROVIDERS, QUANTUM OF TRANSACTIONS AND FINANCIAL YEAR IN WHICH SUCH TR ANSACTION HAS BEEN TAKEN PLACE. THEREFORE, CALLED UPON THE ASSESSEE T O EXPLAIN AS TO WHY THE PURCHASE FROM THOSE PARTIES SHOULD NOT BE TREAT ED AS UNEXPLAINED EXPENDITURE. IN RESPONSE TO NOTICE, THE ASSESSEE, VIDE LETTER DATED 15- 09-2013 SUBMITTED DETAILS OF PURCHASES FROM THOSE P ARTIES ALONG WITH NAME PURCHASE BILLS AND PAYMENT PROOF FOR SUCH PURC HASES TO PROVE THAT PURCHASES FROM THOSE PARTIES ARE GENUINE WHICH ARE USED IN THE MANUFACTURING PROCESS. THE AO, AFTER CONSIDERING R ELEVANT SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THOUGH ASSESSEE HAS F URNISHED PROOF OF PURCHASES BY PRODUCING PURCHASE BILL AND PAYMENT PR OOF, ON VERIFICATION OF DETAILS FILED BY THE ASSESSEE, THE PURCHASE BILL S SHOWED DEFICIENCY SUCH AS ABSENCE OF VEHICLE DETAILS, PROOF OF PAYMEN T OF OCTROI, LEDGER ACCOUNT OF TRANSPORTERS, TRANSPORTED GOODS, ETC. T HEREFORE, DETERMINED THE PURCHASES MADE FROM THE ABOVE PARTIES FOR THE 3 ASSESSMENT YEARS 4 ITA 3842/MUM/2016 STARTING FROM AY 2008-09 TO 2010-11 AND WORKED OUT PEAK BALANCE OF RS.1,66,68,582. SINCE THE ASSESSEE FAILED TO PROVE PURCHASES FROM THE SAID PARTIES WITH CREDIBLE EVIDENCE AND ALSO THE FA CT THAT THE NAMES OF THOSE PARTIES ARE APPEARING IN THE LIST OF HAWALA O PERATORS, MADE ADDITION TOWARDS PEAK BALANCE OF RS.1,66,68,582 U/S 69C OF THE INCOME- TAX ACT, 1961. FURTHER, THE AO ALSO MADE ADDITION ON ACCOUNT OF GROSS PROFIT ON BOGUS PURCHASES @2% ON PEAK CREDIT AND MA DE ADDITION OF RS.5,33,372. 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREF ERRED APPEAL BEFORE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS WHICH HAS BEEN REPRODUCED AT PA RA 7.2 ON PAGES 3 TO 6 OF LD.CIT(A)S ORDER. THE SUM AND SUBSTANCE O F ARGUMENTS OF THE ASSESSEE BEFORE THE CIT(A) ARE THAT THE PURCHASES F ROM THE ABOVE PARTIES CANNOT BE CONSIDERED AS BOGUS WHEN ASSESSEE HAS FURNISHED PURCHASE BILLS, PAYMENT PROOF AND OTHER EVIDENCES. THE ASSESSEE FURTHER SUBMITTED THAT MERELY ON THE BASIS OF STATE MENT OF THIRD PARTIES, THE PURCHASES FROM THE ABOVE PARTIES CANNOT BE CONS IDERED AS BOGUS, THAT TOO, WITHOUT CONFRONTING THE STATEMENT GIVEN B Y THE PARTIES TO THE ASSESSEE FOR ITS CROSS EXAMINATION. 4. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMIS SIONS OF THE ASSESSEE HELD THAT THE ASSESSEE FAILED TO FILE ANY EVIDENCE TO PROVE 5 ITA 3842/MUM/2016 PURCHASES FROM THE SO-CALLED PARTIES WITH CREDIBLE EVIDENCES IN THE BACKDROP OF CLEAR FINDING OF THE SALES-TAX DEPARTME NT THAT THEY WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. THOUG H, ASSESSEE FILED PURCHASE BILLS COPIES, SUCH PURCHASE BILLS ARE INC OMPLETE AS VITAL INFORMATION IN RESPECT OF VEHICLE NO. WAS MISSING I N THE PURCHASE BILLS. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAS N OT MAINTAINED STOCK REGISTER WHICH IS CONFIRMED BY THE AUDITOR IN HIS T AX AUDIT REPORT STATING THAT THEY ADOPTED STOCK IN ITS FINANCIAL STATEMENTS AS CERTIFIED BY THE MANAGEMENT WITHOUT ANY STOCK REGISTER. THEREFORE, HE OPINED THAT THE ASSESSEE FAILED TO JUSTIFY PURCHASES FROM THE ABOVE PARTIES AND ACCORDINGLY, SUSTAINED ADDITION MADE BY THE AO TOWA RDS BOGUS PURCHASES. THE RELEVANT PORTION OF THE ORDER OF CI T(A) IS EXTRACTED BELOW:- 8 I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND CONSIDERED THE ABOVE SUBMISSION MADE BY THE APPELLANT . THE APPELL ANT HAS ARGUED THAT PURCHASE BILLS NEVER CONTAIN THE DETAILS OF TR ANSPORTER. I DO NOT FIND MERIT IN THIS ARGUMENT. INVARIABLY THE PURCHAS E BILL CONTAINS THE DETAILS OF TRANSPORTATION. IF NO SUCH DETAILS ARE A VAILABLE IN THE PURCHASE BILLS, THEN APPELLANT SHOULD FURNISH ALL THE PURCHASE BILLS WHICH CONTAIN SUCH DETAILS AND HE WOULD 'ALSO INVAR IABLE FIND THAT SUCH DETAILS ARE MENTIONED IN THE BILLS. THE APPELLANT'S ARGUMENT IS THAT IT HAD DISCHARGED ITS PRIMARY ONUS BY GIVING PROOF / EVIDENCE AND HENCE NO ADDITIONS W ERE CALLED FOR MERELY ON THE BASIS OF STATEMENT GIVEN BY THE THIRD PARTY BEFORE SALES TAX DEPARTMENT, WITHOUT CONDUCTING ANY OTHER INVESTIGATION. THE APPELLANT'S ARGUMENT THAT IN ITS CASE ADDITION WAS MADE ON THE BASIS OF STATEMENT ONLY IS FOUND TO BE NOT TENABLE FOR THE FOLLOWING REASONS:- 1 THE APPELLANT HAS NOT MAINTAINED STOCK REGISTER. THE AUDITOR HAS PLACED THE REMARK THAT DUE TO COMPLEXITY IN PRO DUCTION 6 ITA 3842/MUM/2016 STAGE QUANTITATIVE DETAILS ARE NOT MAINTAINED BY TH E FIRM AS CERTIFIED BY THE DIRECTOR. THIS REMARK CLEARLY INDI CATES THAT ONLY ON THE BASIS OF CERTIFICATE OF DIRECTOR THE APPELLA NT TAKES CONSUMPTION FIGURE AND CLOSING STOCK VALUATION. THE APPELLANT CANNOT PROVE FROM ITS RECORD THAT THE MATERIAL IS A CTUALLY CONSUMED. THE APPELLANT HAS SUBMITTED A TWO PAGE ST ATEMENT VIDE PAPER BOOK PAGE NO 2 & 3 AND SHOWN THAT THE MATERIAL IS CONSUMED. THESE TWO PAGES CANN OT PROVED THAT / - THE MATERIALS WERE ACTUALLY UTILI SED. 2 THE APPELLANT SUBMITTED THE BILLS BUT IT IS SEEN THAT THE BILLS DO NOT CONTAIN TRANSPORT DETAILS. THE APPELLANT DUR ING APPELLATE PROCEEDINGS, SUBMITTED A WORK SHEET PREPARED BY JAY ANT ROADLINE AND ONLY ON SUCH WORK SHEET THE APPELLANT TRIES TO EXPLAIN THAT THE MATERIAL WERE RECEIVED. ON THAT WO RK SHEET ONLY SIGNATURE ONLY APPEARS BUT OTHER DETAILS SUCH AS WH O PREPARED IT AND CORRESPONDING BILLS OF TRANSPORTATION WERE N OT ATTACHED. THE WORK SHEET DOES NOT MENTION FROM WHERE GOODS WE RE TAKEN AND TO WHERE GOODS WERE DESPATCHED. THEREFORE, IT I S HELD THAT THE WORK SHEET IS NOT A RELIABLE DOCUMENT. IN THE ABSENCE OF DIRECT EVIDENCE, I CANNOT HOLD TH AT THE APPELLANT HAD DISCHARGED ITS ONUS TO ESTABLISH THAT THE PURCHASES ARE GENUINE. ACCORDINGLY, I DO NOT FIND M ERIT IN THE ARGUMENT THAT THE ADDITION WERE MADE ONLY ON THE BA SIS OF STATEMENT RECORDED BY SALES TAX AUTHORITIES. THE APPELLANT ALSO SUBMITTED VARIOUS CASE LAWS AND ARGUED THAT IN THOSE CASES THE HON'BLE ITAT HAS HELD THAT AO WA S NOT JUSTIFIED IN MAKING ADDITION ON THE BASIS OF STATEM ENT GIVEN BY THE THIRD PARTY BEFORE SALE TAX DEPARTMENT. SUCH DE CISION ARE RESPECTFULLY FOLLOWED, BUT IN THE INSTANT CASE, THE APPELLANT IS NOT ABLE TO DISCHARGE ITS ONUS TO SUBSTANTIATE THAT THE PURCHASE ARE GENUINE FROM ITS OWN RECORDS. IT IS THE APPELLANT W HO HAS CLAIMED THAT THE PURCHASES ARE GENUINE AND ACCORDIN GLY ONUS IS ON THE APPELLANT TO PROVE THAT THE SAME HAS OEEN AC TUALLY CONSUMED IN ITS BUSINESS.' 1 THE APPELLANT HAS NOT ESTABLISHED FROM ITS RECORDS THAT THE MATERIAL IS ACTUALLY TRAN SPORTED TO THE DESTINATION OF APPELLANT'S FACTORY AND THAT THE IMP UGNED PURCHASES WERE ACTUALLY CONSUMED. ACCORDINGLY, THER E IS NO MERIT IN THE APPELLANT'S ARGUMENT THAT THE ADDITION S WERE MADE MERELY ON THE BASIS OF STATEMENT RECORDED. I DO NOT FIND MERIT IN SUCH ARGUMENT, .HENCE IT IS RESPECTFULLY HELD THAT THE DECISIONS REFERRED TO BY THE APPELLANT ARE ALSO NOT APPLICABL E IN THIS CASE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE I DO NOT FIND ANY INFIRMITY IN THE REJECTION OF BOOKS OF ACCOUNTS OF THE APPELLANT BY THE AO. 7 ITA 3842/MUM/2016 ON CAREFULLY PERUSAL OF THE RETURN OF INCOME AND IT S SCHEDULE, IT IS SEEN THAT, THE TURNOVER OF THE APPELLANT IS RS.88.27 CR. AND GROSS PROFIT IS RS.L4,73,06,931/- IN PERCENT AGE IT WORKS OUT AT 16.68%%. IF THE BOGUS PURCHASES OF RS.96,44,384 /- FOR THE YEA UNDER CONSIDERATION ARE ADDED TO THE GP, THE NE W GROSS PROFIT WILL BE RS.15,69,51,315/- AND IN PERCENTAG E TERMS IT WILL BE 17.78%. IT IS SEEN THAT THE GP OF 17.78% IS NOT UNREALISTIC/ OR UNREASONABLE. EVEN THE APPELLANT IN AY 2010-11 AND A.Y. 2011-12 HAS SHOWN GP OF 18.34% AND 18.43 % RESPECTI VELY. AS FAR AS PEAK THEORY IS CONCERNED I ALSO DO NOT FI ND MISTAKE IN THE AOS WORKING AS NO ADDITIONS WERE MADE IN SUBSE QUENT YEARS DUE TO PEAK THEORY I.E. A.Y. 2010-11 AND 2011 -12. ACCORDINGLY, I DO NOT FIND ANY INFIRMITY IN THE ASS ESSMENT ORDER. HENCE, GROUND OF APPEAL NO.1 IS DISMISSED. 5. THE LD.AR FOR THE ASSESSEE SUBMITTED THT THE LD. CIT(A) WAS ERRED IN SUSTAINING ADDITION MADE BY THE AO TOWARDS PURCH ASES OF RS.1,66,68,582 U/S 69C, WITHOUT APPRECIATING THE F ACT THAT THE PURCHASES ARE SUPPORTED BY VALID EVIDENCES AND THE ASSESSEE HAS FILED NECESSARY EVIDENCES BEFORE THE AO. THE LD.AR FURTH ER SUBMITTED THAT THE LD.AO MADE ADDITION TOWARDS BOGUS PURCHASES BY WORKING OUT PEAK BALANCE FOR LAST 3 FINANCIAL YEARS AND ALSO MADE AD DITION OF 2% GP ON SUCH PURCHASES ONLY ON THE BASIS OF STATEMENT OF TH IRD PARTY WITHOUT CONFRONTING SUCH STATEMENTS TO THE ASSESSEE FOR ITS REBUTTAL. THE ASSESSEE HAS FILED PURCHASE BILLS AND PAYMENT PROOF FOR SUCH PURCHASES; HOWEVER, THE AO HAS IGNORED ALL EVIDENCE S FILED BY THE ASSESSEE ONLY ON THE BASIS OF STATEMENT OF THOSE PA RTIES AND ALSO ON THE BASIS OF NON RESPONSE BY THE PARTIES TO THE NOTICES ISSUED BY THE AO U/S 133(6). THE ADDITIONS MADE BY THE AO IS NOT BASED ON ANY DEFICIENCY IN 8 ITA 3842/MUM/2016 THE BOOKS OF ACCOUNT OF THE ASSESSEE THAT THE BOOKS OF ACCOUNT ARE NOT GIVING TRUE AND CORRECT RESULT OF THE ASSESSEE BUT PURELY ON ASSUMPTION AND PRESUMPTIONS, THEREFORE, THE ADDITION MADE BY T HE AO SHOULD BE DELETED. 6. ON THE OTHER HAND, THE LD.DR STRONGLY SUPPORTED THE ORDER OF THE LD.CIT(A). THE LD.DR FURTHER SUBMITTED THAT IT IS AN ADMITTED FACT THAT THE PARTIES WERE APPEARING IN THE LIST OF HAWALA O PERATORS PREPARED BY SALES-TAX DEPARTMENT AND ALSO THOSE PARTIES DID NOT RESPOND TO THE NOTICES ISSUED U/S 133(6). THE ASSESSEE FAILED TO FILE NECESSARY EVIDENCES TO PROVE PURCHASES FROM THE ABOVE PARTIES , EXCEPT FILING PURCHASE BILLS AND PAYMENT PROOF. THEREFORE, THE L OWER AUTHORITIES WERE RIGHT IN MAKING ADDITION TOWARDS PURCHASES FROM THE ABOVE PARTIES AND, THEREFORE, THEIR ORDERS SHOULD BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. THE AO MADE ADDITION TOWARDS BOGUS PURC HASES ON THE BASIS OF INFORMATION RECEIVED FROM SALES-TAX DEPART MENT THAT CETIN PARTIES WERE INVOLVED IN PROVIDING ACCOMMODATION EN TRIES WITHOUT ACTUAL DELIVERY OF GOODS. THE AO FURTHER OBSERVED THAT TH E ASSESSEE HAS SHOWN TO HAVE PURCHASES FROM THE ABOVE PARTIES. HO WEVER, FAILED TO FILE NECESSARY EVIDENCES TO PROVE PURCHASES FROM THE SAI D PARTIES IN THE BACKDROP OF CLEAR FINDING BY SALES-TAX AUTHORITIES AND ALSO THAT THOSE 9 ITA 3842/MUM/2016 PARTIES HAVE NOT RESPONDED TO THE NOTICES ISSUED U/ S 133(6). THE AO HAS MADE ADDITION TOWARDS BOGUS PURCHASES BY WORKIN G OUT PEAK PURCHASES OF LAST 3 ASSESSMENT YEARS AND DETERMINED ADDITION OF RS.1,66,68,582. THE AO ALSO MADE ADDITION OF RS.3, 33,372 TOWARDS GROSS PROFIT ON ALLEGED BOGUS PURCHASES @2% ON TOTA L PURCHASES. IT IS THE CONTENTION OF THE ASSESSEE THAT MERELY ON THE B ASIS OF THIRD PARTY STATEMENT, PURCHASES FROM THE ABOVE PARTIES CANNOT BE CONSIDERED AS BOGUS, MORE PARTICULARLY, WHEN ASSESSEE HAS FILED P URCHASE BILLS AND PAYMENT PROOF FOR SUCH PURCHASES. THE ASSESSEE FUR THER CONTENDED THAT THE AO HAS MADE ADDITIONS WITHOUT RECORDING AN Y OBSERVATIONS WITH REGRD TO THE INCORRECTNESS IN BOOKS OF ACCOUNT. TH E AO NEITHER GAVE ANY PLAUSIBLE REASON FOR REJECTING BOOKS OF ACCOUNT AND ESTIMATION OF ADDITION TOWARDS ALLEGED BOGUS PURCHASES FROM THE A BOVE PARTIES EXCEPT STATING THAT THE NAMES OF THOSE PARTIES WERE APPEAR ING IN THE LIST OF HAWALA DEALERS PREPARED BY SALES-TAX DEPARTMENT. 8. HAVING HEARD BOTH THE SIDES, WE FIND THAT THE AO HAS MADE ADDITION SOLELY ON THE BASIS OF INFORMATION RECEIVED FROM SA LES-TAX DEPARTMENT IGNORING EVIDENCE FILED BY THE ASSESSEE IN THE FORM OF PURCHASE BILLS AND PAYMENT PROOF FOR SUCH PURCHASES. IT IS AN ADMITTE D FACT THAT THE ASSESSEE HAS FILED NECESSARY PURCHASE BILLS TO PROV E PURCHASES FROM THE ABOVE PARTIES. THOUGH, THE PURCHASE BILLS FILED BY THE ASSESSEE DID NOT 10 ITA 3842/MUM/2016 CONTAIN NECESSARY INFORMATION ABOUT THE VEHICLE NO. FOR TRANSPORTATION OF GOODS, BUT THAT ITSELF, CANNOT BE A GROUND FOR THE AO TO TAKE ADVERSE INFERENCE ON THE PURCHASES OF THE ASSESSEE WHEN THE ASSESSEE HAS FILED CERTAIN BASIC EVIDENCES TO PROVE THE PURCHASES. AT THE SAME TIME IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE FAILED TO F ILE FURTHER EVIDENCE IN THE BACKDROP OF CLEAR FINDINGS FROM THE SALES-TAX D EPARTMENT THAT THESE PARTIES ARE INVOLVED IN PROVIDING ACCOMMODATION ENT RIES. FURTHER, THE PARTIES DID NOT RESPOND TO THE NOTICES ISSUED BY TH E AO U/S 133(6) OF THE ACT. UNDER THESE CIRCUMSTANCES, IT IS VERY DIFFICU LT TO ACCEPT THE ARGUMENTS OF THE ASSESSEE THAT PURCHASES FROM THOSE PARTIES ARE GENUINE IN NATURE AND ALSO THE VERSION OF THE AO TH AT PURCHASES FROM THOSE PARTIES ARE FULLY BOGUS IN NATURE. IN SUCH S CENARIO WHAT IS NEEDED TO BE CONSIDERED FOR ADDITION IS WHETHER TOTAL AMOU NT OF SUCH BOGUS PURCHASES OR ONLY THE PROFIT ELEMENT EMBEDDED IN SU CH PURCHASES. VARIOUS COURTS AND TRIBUNALS HAVE TAKEN A CONSISTEN T VIEW THAT IN THE CASE OF BOGUS PURCHASES, WHAT IS NEEDED TO BE TAXED IS ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES, BUT NOT THE WHO LE BOGUS PURCHASES. THE HONBLE GUJARAT HIGH COURT IN THE V ASE OF VIJAY PROTIENS LTD VS CIT 2015 TMI 828 (GUJARAT HC) HAS HELD THAT IN THE CASE OF BOGUS PURCHASES, PROFIT ELEMENT EMBEDDED IN SUCH PURCHASE S CAN ONLY BE ADDED. IN YET ANOTHER CASE, IN SIMIT P SHETH 56 IT R 451 (GUJ), THE 11 ITA 3842/MUM/2016 HONBLE GUJARAT HIGH COURT HELD THAT NO UNIFORM YA RDSTICK CAN BE ADOPTED FOR ESTIMATION OF NET PROFIT ON BOGUS PURCH ASES. THE CO- ORDINATE BENCHES OF ITAT, IN A NUMBER OF CASES HAVE TAKEN A CONSISTENT VIEW AND DIRECTED THE ASSESSING OFFICERS TO ESTIMAT E 12.5% TO 15% PROFIT ON ALLEGED BOGUS PURCHASES, DEPENDING UPON FACTS OF EACH CASE. IN THIS CASE, THE AO HAS ADOPTED A DIFFERENT METHOD FOR DET ERMINATION OF ADDITION U/S 69C TOWARDS BOGUS PURCHASES. THE AO H AS ADDED PEAK AMOUNT OF BOGUS PURCHASES FOR THE LAST 3 FINANCIAL YEARS AND MADE ADDITION OF RS.1,66,68,582. THE AO FURTHER ADDED 2 % ON ALLEGED BOGUS PURCHASES TOWARDS GROSS PROFIT AND DETERMINED ADDIT ION OF RS.3,33,372. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE B ENCH IN NUMBER OF CASES, WE DEEM IT APPROPRIATE TO DIRECT THE AO TO E STIMATE 12.5% NET PROFIT ON ALLEGED BOGUS PURCHASES INCLUDING 2% NET PROFIT ALREADY ESTIMATED BY THE AO. ACCORDINGLY, WE DIRECT THE AO TO DELETE ADDITION MADE TOWARDS PEAK AMOUNT OF BOGUS PURCHASES AND DIR ECT HIM TO ESTIMATE 12.5% NET PROFIT ON TOTAL ALLEGED BOGUS PU RCHASES. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. 12 ITA 3842/MUM/2016 ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JULY, 2018. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 18 TH JULY, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER SR.PS, ITAT, MUMBAI