M/S.D. MANISH AND CO., MUMBAI V. ACIT-19(1), MUMBAI

ITA 5958/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8169 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 16-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDI
• Keywords: Bogus purchase; Search and seizure; Question of law; Accommodation entries; Set aside
• Section: 143(3); 133(6); 274; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUM BAI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.5958/MUM/2018 ( ASSESSMENT YEAR: 2010-11 ) D.MANISH & CO. EC-3100, BHARAT DIAMOND BOURSE, BKC COMPLEX BANDRA(E) MUMBAI-400 051 VS. ACIT-19(1) MATRU MANDIR TARDEO ROAD MUMBAI-400 007 PAN/GIR NO. AAAFD2847A ( APPELLANT ) .. ( RESPONDENT ) & ITA NO.6325/MUM/2018 ( ASSESSMENT YEAR: 2010-11 ) DCIT-19(1) ROOM NO.203, 2 ND FLOOR MATRU MANDIR TARDEO ROAD MUMBAI-400 007 VS. D.MANISH & CO. EC-3100, BHARAT DIAMOND BOURSE, BKC COMPLEX BANDRA(E) MUMBAI-400 051 PAN/GIR NO. AAAFD2847A ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY MS. SAMATHA MULLAMUDI, DR ASSESSEE BY SHRI RAHUL SARDA, AR DATE OF HEARING 18/06/2020 DATE OF PRONOUNCEME NT 18 / 0 6 /20 20 / O R D E R PER BENCH: THESE CROSS APPEALS FILED BY THE ASSESSEE, AS WELL AS THE REVENUE ARE DIRECTED AGAINST ORDER OF THE LD. C OMMISSIONER OF INCOME TAX (APPEALS)-30, MUMBAI, DATED 08/08/2018 F OR THE ASST.YEAR 2010-11. SINCE, FACTS ARE IDENTICAL AND I SSUES ARE ITA NO.5958 & 6325/MUM/2018 D.MANISH & CO. 2 COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT (APPEALS) HAS ERRED BY TREATING 3% OF T HE ALLEGED BOGUS PURCHASES AMOUNTING TO RS.5,97,06,315/- AND DISALLO WING THE SAME AND ADDING IT TO THE TAXABLE INCOME OF YOUR APPELLANT. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASES AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDITION MADE BY THE AO. ON ACCOUNT OF BOGUS PURCHASES TO 3% OF RS.5,97, 06,315/- NOT WITHSTANDING THAT THE ADDITION MADE ON THE BASIS OF CREDIBLE INFORMATION FROM DGIT(INV.) MUMBAI BASED ON THE SEARCH AND SEIZ URE ACTION U/S 132 IN THE CASE OF BHANWARLAL JAIN GROUP? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE ADDI TION MADE BY THE AO ON ACCOUNT OF ACCOMMODATION ENTRIES OF PURCHASE, IGNOR ING THAT THE ASSESSEE HAD NOT DISCHARGED ITS ONUS OF PROVING THE GENUINENESS OF THE PURCHASE? 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 4. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPOR T AND EXPORT OF DIAMONDS. THE RETURN OF INCOME FOR THE YEAR UNDE R APPEAL WAS FILED ON 04.09.2010 DECLARING TOTAL INCOME OF RS.42 ,09,210/-. THE CASE WAS REOPENED U/S 147, BY ISSUING NOTICE U/S 14 8 OF THE ACT, ON 30.03.2017. THE REASONS FOR REOPENING OF THE ASSESS MENT IS BASED ON THE INFORMATION THAT SEARCH & SEIZURE OPERATIONS WERE CONDUCTED ON 03.10.2013 BY THE INVESTIGATION WING, MUMBAI, IN THE GROUP CASES OF ONE SHRI BHANWARLAL JAIN AND DURING THE COURSE O F THE OPERATIONS, IT WAS FOUND THAT SEVERAL NAME LENDING DUMMY DIRECT ORS, PARTNERS/PROPRIETORS OF VARIOUS CONCERNS BELONGS TO THE NATIVE PLACE ITA NO.5958 & 6325/MUM/2018 D.MANISH & CO. 3 OF SHRI BHANWARLAL JAIN & FAMILY THROUGH WHICH ACCO MMODATION ENTRIES ARE PROVIDED FOR BOGUS SALES AND BOGUS UNSE CURED LOANS. IT IS ALSO NOTICED THAT THE CONCERNS WERE LITERALLY CO NTROLLED, OPERATED AND MANAGED BY SHRI BHANWARLAL JAIN AND HIS FAMILY. THE PERSONS IN CHARGE OF THE CONCERNS ADMITTED THIS, IN THEIR SWOR N STATEMENTS RECORDED DURING THE COURSE OF SEARCH OPERATION AND THEY HAVE ALSO ADMITTED THAT THEY WERE MADE TO THE POSITION BY BHA NWARLAL JAIN. POST SEARCH INVESTIGATION REVEALS THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES OF PURCHASES FROM M/S MAYUR E XPORT, PRIME STAR, MOHIT ENTERPIRSES AND DAKSHA DIAMONDS AMOUNTI NG TO RS.5,97,06,315/-. ASSESSMENT U/S 143(3) R.W.S. 147 OF THE I.T.ACT, 1961 WAS COMPLETED BY THE LD. AO ON 29.12.2017 DETE RMINING THE TOTAL INCOME AT RS.6,39,15,530/- BY ESTIMATING PROF IT MARGIN @100% ON SUCH PURCHASES. 5. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE TH E LD.CIT(A), THE ASSESSEE HAS FILED DETAILED WRITTEN SUBMISSIONS, W HICH HAS BEEN REPRODUCED AT PARA 4 ON PAGES 3 TO 5 OF LD.CIT(A). THE SUM AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE L D.CIT(A) ARE THAT PURCHASE FROM THOSE PARTIES ARE GENUINE IN NAT URE, WHICH ARE SUPPORTED BY NECESSARY EVIDENCES, THE ASSESSEE HAS FILED ALL DETAILS INCLUDING PURCHASE BILLS AND PROOF OF PAYMENT AGAI NST SAID PURCHASES BY ACCOUNT PAY CHEQUES. THE LD.CIT(A) AFT ER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO, BY R ELIED UPON CERTAIN JUDICIAL PRECEDENTS, INCLUDING THE DECISION OF HONBLE GUJARAT HIGH COURT, IN THE CASE OF SIMITH P.SHETH (2013) 35 TAXMANN.COM 385 HAS SCALED DOWN ADDITIONS MADE BY THE LD. AO TO WARDS ALLEGED ITA NO.5958 & 6325/MUM/2018 D.MANISH & CO. 4 BOGUS PURCHASE TO 3% PROFIT ON TOTAL PURCHASE FROM THOSE PARTIES. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER :- 6.10 IN THIS CASE, I FIND THAT QUANTITATIVE DETAI LS WERE MAINTAINED, LD. AO NOT DOUBTED THE GENUINENESS OF SALES ESTIMATED THE PROF IT @100% ON THE TOTAL PURCHASES MADE FROM THE CONCERNS OF SHRI BHANWARLAL JAIN BY RECORDING A FINDING THAT THE APPELLANT MADE THE PURCHASES FROM SOME OTHER PARTY. THUS, THE ISSUE WOULD BOIL DOWN TO FINDING OUT WHAT IS THE CO RRECT ELEMENT OF PROFIT EMBEDDED IN BOGUS PURCHASES WHICH THE APPELLANT WOU LD HAVE MADE FROM SUCH UNKNOWN ENTITIES. IN THIS REGARD, IT IS APT TO REFE R CERTAIN DECISIONS DEALING THE SIMILAR ISSUE OF BOGUS PURCHASES. THE DECISION OF G UJARAT HIGH COURT IN THE CASE OF BHOLANATH POLY FAB PVT.LTD. 355 ITR 290 (GUJ.) W HERE THE HONBLE COURT WAS BATTLING WITH THE FINDING OF HONBLE ITAT THAT PURC HASES WERE MADE FROM BOGUS PARTIES SINCE NOTICE ISSUED BY THE AO TO THESE PART IES WERE ALLEGEDLY RECEIVED RETURNED/UNSERVED AND THE ASSESSEE WAS UNABLE TO PR ODUCE ANY CONFIRMATION FROM THESE PARTIES. THE TRIBUNAL HAD HELD THAT THOU GH PURCHASES WERE MADE FROM BOGUS PARTIES, NEVERTHELESS, THE PURCHASES THE MSELVES WERE NOT BOGUS AS THE ENTIRE QUANTITY OF OPENING STOCK, PURCHASES AND SALES WERE TALLYING AND HENCE, ONLY THE PROFIT MARGIN EMBEDDED IN SUCH AMOU NT WOULD BE SUBJECTED TO TAX. THE HONBLE GUJARAT HIGH COURT TAKING COGNIZAN CE OF THE FAT HELD THAT WHETHER PURCHASES THEMSELVES WERE BOGUS OR WHETHER PARTIES FORM WHOM SUCH PURCHASES WERE MADE WERE BOGUS, IS ESSENTIALLY A QU ESTION OF FACT AND THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD AND CONCLUDED THAT THE ASSESEE DID PRODUCE CLOTH AND SELL FINISHED GOODS, THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASE WOULD NOT BE SUBJECTED TO TAX A ND ONLY PROFIT ELEMENT EMBEDDED THEREIN WAS TO BE TAXED. WHILE COMING TO T HE ABOVE CONCLUSION, THE HONBLE HIGH COURT ALSO RELIED ON THE DECISION IN T HE CASE OF SANJAY OIL CAKE IND. 316 ITR 274 (GUJ.) 6.11 SIMILARLY, IN YET ANOTHER DECISION OF HONBL E GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT SHETH (2013) 38 TAXMANN.COM 385 GU J.), HONBLE COURT WAS SEIZED WITH A SIMILAR ISSUE WHERE THE AO. HAD FOUND THAT SOME OF THE ALLEGED SUPPLIERS OF STEEL TO THE ASSESSEE HAD NOT SUPPLIED ANY GOODS BUT HAD ONLY PROVIDED SALE BILLS AND HENCE, PURCHASES FROM THE S AID PARTIES WERE HELD TO BE BOGUS. THE A.O. IN THAT CASE ADDED THE ENTIRE AMOUN T OF PURCHASES TO GROSS PROFIT OF THE ASSESSEE. LD. CIT(A) HAVING FOUND THA T THE ASSESSEE HAD INDEED PURCHASED THOUGH NOT FROM NAMED PARTIES BUT OTHER P ARTIES FROM GREY MARKET, PARTIALLY SUSTAINED THE ADDITION AS PROBABLE PROFIT OF THE ASSESSEE. THE TRIBUNAL HOWEVER, SUSTAINED THE ADDITION TO THE EXTENT OF 12 .5%. TAKING INTO ACCOUNT THE ABOVE FACTS, THE HONBLE GUJARAT HIGH COURT HELD TH AT SINCE THE PURCHASES WERE NOT BOGUS, BUT WERE MADE FROM PARTIES OTHER THAN TH OSE MENTIONED IN BOOKS OF ACCOUNTS, ONLY THE PROFITS ELEMENT EMBEDDED IN SUCH PURCHASES COULD BE ADDED TO THE ASSESSEES INCOME AND AS SUCH NO QUESTION OF LAW AROSE IN SUCH ESTIMATION. THE TRIUBNAL FOR ARRIVING THE PROFIT EM BEDDED IN THE TRANSACTIONS @12.5% HELD AS UNDER:- HAVING HEARD THE SUBMISSIONS OF BOTH SIDES, WE HAV E BEEN INFORMED THAT THE MALPRACTICE OF BOGUS PURCHASE IS MAINLY TO SAVE 10% SALES TAX ET. IT HAS ALSO ITA NO.5958 & 6325/MUM/2018 D.MANISH & CO. 5 BEEN INFORMED THAT IN THIS INDUSTRY ABOUT 2.5% IS T HE PROFIT MARGIN. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO-ORDI NATE BENCH PRONOUNCED ON IDENTICAL CIRCUMSTANCES, WE HEREBY DIRECT THAT THE DISALLOWANCES IS REQUIRED TO BE SUSTAINED AT 12.5% OF THE PURCHASE FROM THOSE PA RTIES. WITH THESE DIRECTIONS, WE HEREBY DECIDE THE GROUND OF THE RIVAL PARTIES WH ICH ARE PARTLY ALLOWED. 6.12 AS NARRATED EARLIER, THE LD. AO IN THIS CA SE HAS HIMSELF HELD THAT THE PURCHASES WERE NOT BOGUS THOUGH THE PARTY FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WAS FOUND TO BE BOGUS AND THA T IS THE REASON FOR WHICH AO CONSIDERED THE ADDITION ON THE BASIS OF THE PROF IT ELEMENT EMBEDDED ON SUCH PURCHASES WHICH IS ESTIMATED @100% OF THE TOTA L PURCHASES. THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE IN FLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA) ESPECIALLY IN THE CASE OF C IT VS. SIMIT P.SHETH(SUPRA) I AGREE WITH THE ACTION OF THE AO ESTIMATING THE ADDI TION ON THE PROFIT ELEMENT EMBEDDED ON SUCH BOGUS PURCHASES. 6.13 HOWEVER, AO ESTIMATED THE PROFIT MARGIN @100 % SOLELY RELIED ON THE DECISION OF APEX COURT IN THE CASE OF M/S N.K.PROTI ENS LTD.. IN SIMILAR CASES ASSESSING OFFICERS HAVE ESTIMATES PROFIT MARGIN AT 3% OF THE PURCHASES. THOUGH I AM IN AGREEMENT WITH THE REASONING OF THE AO FOR ESTIMATING OF THE PROFIT PERCENTAGE @100% IN THIS NATURE OF TRADE. FURTHER, THE APPELLANT HAS STATED THAT THE FACTS OF THE N.K.PROTIENS LTD. CASE ARE COMPLET ELY DIFFERENT. THE CHART FURNISHED BY APPELLANT DURING THE APPELLATE PROCEED INGS TO DISTINGUISH THE FACTS, IS REPRODUCED AS UNDER:- SR.NO. N.K.PROTIENS LTD. CASE APPELLANTS CASE 1 THE SEARCH HAD TAKEN PLACE AT ASSESSEE PREMISES THE SEARCH HAD NOT TAKEN PLACE AT YOUR APPELLANTS PREMISES 2 NO DOCUMENTS RELATING TO SUCH PURCHASE WERE DISCOVERED AT THE TIME OF SEARCH ALL DOCUMENTS RELATION TO SUCH ALLEGED BOGUS PURCHASES WERE PRODUCED BEFORE YOUR GOODS SELF. 3 THE INVOICE WERE TAKEN FROM BILLING AGENCIES THERE IS NO SUCH CASE. ALL THE INVOICES ARE GENUINE AND PRODUCED FROM BOTH THE SIDES (I. BUYER AND SELLER) 4 THE FACT OF BOGUS PURCHASE CAME TO KNOWLEDGE OF THE DEPARTMENT ONLY BECAUSE OF THE SEARCH TAKEN PLACE AT THE PREMISES OF M/S N.K. PROTEINS LTD. PLACE THE ALLEGED BOGUS PURCHASES WERE ADDED ON THE BASIS OF SEARCH TAKEN PLACE AT THE PREMISES OF MR RJENDRA JAIN/BHANWARLAL JAIN GROUP AND NOT AT YOUR APPELLANTS PREMISES. HOWEVER, YOUR APPELLANT HAD PURCHASED DIAMONDS FROM THEM AND SAME ITA NO.5958 & 6325/MUM/2018 D.MANISH & CO. 6 WERE ACCEPTED BY THE SELLER OF THE DIAMONDS 6.14 THUS IT IS SEEN THAT THE FACTS OF THE I NSTANT CASE ARE COMPLETELY DIFFERENT AND DISTINCT THEN THE FACTS OF THE CASE R ELIED UPON BY THE AO TO ESTIMATE THE PROFIT MARGIN AT 100% OF SUCH PURCHASES. WHILE DECIDING THE PROFIT ELEMENT EMBEDDED IN THE BOGUS PURCHASES CASES, GUJARAT HIGH COURT ADOPTED THE PROFIT @12.5% BY TAKING THE BENEFIT DERIVED OUT OF THE SAV ING OF TAXES, CONSIDERING THE PROFIT MARGIN IN THAT LINE OF TRADE. IN THE LIGHT O F THE ABOVE, ONE HAS TO SEE IN THE PRESENT CASE, WHO ARE IN THE MANUFACTURING AND TRAD ING OF DIAMONDS, THE PROFIT ELEMENT EMBEDDED ESTIMATION @100% IS CORRECT OR NOT . COMING TO THE PROFIT MARGIN IN THE TRADE, THE TASKFORCE GROUP FOR DIAMON D INDUSTRY CONSTITUTED BY THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUS TRY, AFTER CONSIDERING THE BAP SCHEME, RECOMMENDED PRESUMPTIVE TAX FOR NET PRO FIT CALCULATED @2% OF TRADING ACTIVITY AND 3% FOR MANUFACTURING ACTIVITY OR @2.5% ACROSS THE BOARD. IT IS ALSO ASCERTAINED THAT THE OPERATION PROFIT IN C ASE OF DIAMOND TRADING FOR COMPUTATION OF ALP BY THE TP WING IS CONSISTENTLY I N THE REGION OF AROUND 1.75% TO 3%. IT IS ALSO BROUGHT TO MY NOTICE THAT THE AOS ARE ALSO ADOPTING 3% ON THE PURCHASES MADE FROM SHRI BHANWARLAL JAIN GROUP CONC ERNS, AS THE PROFIT ELEMENT EMBEDDED, IN THE SUBSEQUENT ASSESSMENTS FIN ALIZED ON THE SIMILAR SET OF FACTS. IN VIEW OF THE SAME AND ALSO SINCE THE PR OFIT MARGIN IS LESSER IN THIS SECTOR, ADOPTING 100% BY THE AO, IS NOT BASED ON CO RRECT FOOTING. CONSIDERING THE LESSER PROFIT MARGIN IN THIS SECTOR I.E. AROUND 2 TO 3 PERCENT AND THE TAXES SAVED IS AROUND 1% AND ALSO ON PURCHASES MADE FORM PLACES LIKE SURAT, THERE IS NO LEVY OF TAX, I AM OF THE CONSIDER OPINION THA T IF THE ADDITION IS SUSTAINED TO THE EXTENT OF 3% OF THE PURCHASES MADE AS THE PROFI T ELEMENT EMBEDDED IN SUCH PURCHASES FROM THE THREE PARTIES BELONGING TO THE S HRI BHANWARLAL JAIN GROUP CONCERNS, THE SAME WILL MEET THE ENDS OF JUSTICE. A CCORDINGLY I DIRECT THE AO TO RESTRICT THE ADDITION @3% ON THE TOTAL PURCHASE OF RS.5,97,06,315/- AS THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. GROUNDS OF APPE AL RAISED ON THIS ISSUE ARE TREATED AS PARTLY ALLOWED. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE LD. AO HAS MADE 100% ADDITION ON ALLEGED B OGUS PURCHASES ON THE GROUND THAT THE ASSESSEE IS ONE OF THE BENEFICIARY OF ACCOMMODATION ENTRIES OF BOGUS PURCHASE BILLS IS SUED BY HAWALA DEALERS. ACCORDING TO THE LD. AO, ALTHOUGH ASSESEE HAS FILED CERTAIN BASIC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENC E IN THE BACKDROP OF CLEAR FINDING BY INVESTIGATION WING THAT THOSE PART IES ARE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES WITHOUT ACTUAL DELI VERY OF GOODS. THE LD. AO HAD ALSO TAKEN SUPPORT FROM THE INVESTIG ATION CONDUCTED ITA NO.5958 & 6325/MUM/2018 D.MANISH & CO. 7 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS PER WHICH NOTICE ISSUED U/S 133(6) TO THE PARTIES WERE RETURNED UN-S ERVED BY THE POSTAL AUTHORITIES. THEREFORE, HE CAME TO THE CONCL USION THAT PURCHASES FROM THE SAID PARTIES ARE BOGUS IN NATURE . IT IS THE CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHOR ITIES THAT PURCHASES FROM THE ABOVE PARTY ARE SUPPORTED BY NEC ESSARY EVIDENCES. IT HAS FURNISHED ALL POSSIBLE EVIDENCES, INCLUDING BOOKS OF ACCOUNTS; STOCK DETAILS AND BANK STATEMENT TO PROVE THAT PAYMENT AGAINST SAID PURCHASES HAVE BEEN MADE THROUGH PROPE R BANKING CHANNELS. 7 HAVING CONSIDERED ARGUMENTS OF BOTH THE PARTIES A ND ALSO, CONSIDERED MATERIAL AVAILABLE ON RECORD, WE FIND TH AT BOTH THE SIDES HAVE FAILED TO PROVE THE CASE IN THEIR FAVOUR WITH NECESSARY EVIDENCES. ALTHOUGH, ASSESSEE HAS FILED CERTAIN BAS IC EVIDENCES, BUT FAILED TO FILE FURTHER EVIDENCES TO CONCLUSIVELY PR OVE PURCHASES TO THE SATISFACTIONS OF THE LD.AO. FURTHER, MERE PAYMENT B Y CHEQUE DOES NOT PROVE THE GENUINENESS OF PURCHASE, MORE PARTICU LARLY WHEN OTHER CIRCUMSTANTIAL EVIDENCE SAYS OTHERWISE. AT THE SAME TIME, THE LD. AO HAD ALSO FAILED TO TAKE THE INVESTIGATION TO A L OGICAL CONCLUSION BY CARRYING OUT NECESSARY ENQUIRES, BUT HE SOLELY RELI ED UPON INFORMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS FURTHER SUPPORTED BY SEARCH AND SEIZURE OPERATIONS IN THE C ASE OF BHANWARLAL JAIN GROUP. THE AO NEITHER POINTED OUT A NY DISCREPANCIES IN BOOKS OF ACCOUNTS NOR MADE OUT A C ASE OF SALES OUTSIDE BOOKS OF ACCOUNTS. IN FACT, THE AO DID NOT DISPUTED SALES DECLARED FOR THE YEAR. UNDER THESE CIRCUMSTANCES, I T IS DIFFICULT TO ACCEPT ARGUMENTS OF BOTH THE SIDES. FURTHER, IN A C ASE WHERE PURCHASES ARE CONSIDERED TO BE PURCHASED FROM SUSPI CIOUS/HAWALA ITA NO.5958 & 6325/MUM/2018 D.MANISH & CO. 8 DEALERS, VARIOUS HIGH COURTS AND TRIBUNALS HAD CONS IDERED AN IDENTICAL ISSUE IN LIGHT OF INVESTIGATION CARRIED O UT BY THE SALES TAX DEPARTMENT AND HELD THAT IN CASE OF PURCHASES CLAIM S TO HAVE MADE FROM ALLEGED HAWALA DEALERS, ONLY PROFIT ELEMENT EM BEDDED IN THOSE PURCHASES NEEDS TO BE TAXED, BUT NOT TOTAL PURCHASE FROM THOSE PARTIES. THE HONBLE GUJARAT HIGH COURT, IN THE CAS E OF CIT VS SIMITH P.SHETH 356 ITR 451 HAD CONSIDERED A SIMILAR ISSUE AND HELD THAT AT THE TIME OF ESTIMATION OF PROFIT FROM ALLEGED BOGUS PURCHASES NO UNIFORM YARDSTICKS COULD BE ADOPTED, BUT IT DEPENDS UPON FACTS OF EACH CASE. THE ITAT, MUMBAI, IN NUMBER OF CASES HAD CONSIDERED AN IDENTICAL ISSUE AND DEPENDING UPON FACTS OF EACH CASE, DIRECTED THE LD.AO TO ESTIMATE GROSS PROFIT OF 10% TO 15% ON TOTAL ALLEGED BOGUS PURCHASES. IN THIS CASE, CONSIDERING THE NATU RE OF BUSINESS OF THE ASSESSEE THE LD. AO HAS MADE 100% ADDITIONS, WH EREAS THE LD.CIT(A) HAS SCALED DOWN ADDITION TO 3% GROSS PROF IT ON TOTAL ALLEGED BOGUS PURCHASE. ALTHOUGH, BOTH AUTHORITIES HAVE TAKEN DIFFERENT RATE OF PROFIT FOR ESTIMATION OF INCOME F ROM ALLEGED BOGUS PURCHASE, BUT NO ONE COULD SUPPORT SAID RATE OF GRO SS PROFIT WITH NECESSARY EVIDENCES OR ANY COMPARABLE CASES. HOWEVE R, THE RATE OF PROFIT ADOPTED BY THE LD. CIT(A) IS SUPPORTED BY VA RIOUS DECISIONS OF TRIBUNAL. THEREFORE, CONSIDERING FACTS AND CIRCUMST ANCES OF THIS CASE AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDIN ATE BENCH IN NUMBER OF CASES, WE ARE OF THE CONSIDERED OPINION T HAT THE LD. CIT(A) HAS TAKEN A FAIR VIEW AND ESTIMATED 3% GROSS PROFIT ON ALLEGED BOGUS PURCHASES TO SETTLE DISPUTE BETWEEN T HE PARTIES IN RESPECT OF PURCHASES FROM ALL PARTIES. WE, THEREFOR E, UPHELD THE FINDINGS OF LD. CIT(A) AND DISMISSED APPEAL FILED B Y THE REVENUE AS WELL AS THE ASSESSEE. ITA NO.5958 & 6325/MUM/2018 D.MANISH & CO. 9 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE AND APPEAL FILED BY THE REVENUE FOR ASST. YEAR 2010-11 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 18/06/ 2020 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED 18/06/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//