ITO WARD-1(1), KALYAN vs. SHRI KANTILAL KACHARA GADA, KALYAN

Not convinced with the submissions of the assessee the Assessing Officer treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there being any transportation of materials and the assessee might have made

Inspite of issue of notice none appeared on behalf of the assessee nor any adjournment was sought by the assessee. Therefore, I proceed to dispose off this appeal on hearing Ld. DR on merits.

Ld. DR vehemently supported the orders of the Assessing Officer.

Heard Ld. DR, perused the orders of the authorities below. On a perusal of the order of the Ld.CIT(A), I find that the Ld.CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and following various judicial pronouncements restricted the addition to 25% of the (A.Y. 2009-10) Shri Kantilal Kachara Gada non-genuine purchases. While holding so, the Ld.CIT(A) observed as under: - “7. Ground No. 3 of appeal relates to challenge of the addition of Rs.10,48,320/- made on account of hawala purchases. As the relevant purchases have been debited to the P&L Account and claimed as deduction in computing the profits of the business chargeable to tax, the onus was on the appellant to prove the genuineness of the purchases with satisfactory evidences. It is observed that the appellant, during the course of appellate proceedings has produced the copy of statement of income and financial statement, copies of bank statement, etc. However, it is noted that the AO was in possession of information received from the Sales Tax Department, indicating strongly that the suppliers concerned were only providing accommodation entries and were not carrying out any real business. Thus, the onus that was cast on the appellant was of a greater degree to prove the genuineness of the parties as well as of these purchases. Under these circumstances the claim of the appellant that the said purchases are genuine cannot be accepted in totality. 7.1 There cannot be any dispute about the well settled legal proposition that tax can be levied only on real income. It is elementary rule of accountancy as well as of taxation laws that the profit from business cannot be ascertained without deducting the cost of purchase from sales, otherwise it would amount to levy of income tax on gross receipts or sales. Disallowance @ 25% out of Bogus purchases was held as reasonable in the case of Vijay Proteins Ltd. by the Hon'ble Gujarat High Court, in view of the fact that the savings occurred to the suppliers on account of sales tax, duties and Income-tax, by buying the goods from grey market at lower rates and booking the purchases at normal rate, the assessee got the benefit of this proportion. It is pertinent to mention here that the Hon'ble Supreme Court, vide order dated 6.4.2015, dismissed the SLP filed by the assessee and confirmed the finding of the Hon'ble Gujarat HC in the case of Vijay Protein and other decisions of the Gujarat HC in the case of Sanjay Oilcake Industries Vs. CIT (2009) 316 ITR 274 and N.K Industries Ltd. Vs. DCIT. 7.2 Considering the facts of case and in view of various decisions as discussed above, it is held that the appellant has made sales so the purchases cannot be totally bogus. Therefore only 25% of the (A.Y. 2009-10) Shri Kantilal Kachara Gada bogus purchases, i.e. Rs. 2,62,080/-, out of total purchases of Rs.10,48,320/- may be added to the income of the appellant. Accordingly the disallowance of Rs. 2,62,080/- is confirmed and balance amount of Rs.7,86,240/- is deleted. The above ground of appeal is partly allowed.”