ITO 8 (2)(1), MUMBAI vs. BHAIRAV STEEL ENTERPRISES PVT. LTD., MUMBAI

O R D E R

PER AMARJIT SINGH, JM:

I. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in restricting the suppressed profit to the extent of 3% of bogus purchases, when the assessee could not produce any parties or evidence that the said goods were purchased and the onus of proving genuineness of purchases was not discharged by the assessee. A.Y.2009-10

2. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary."

3. The brief facts of the case are that the assessee filed its return of income on 26.09.2009 declaring total income to the tune at Rs.8,25,010/- for the A.Y.2009-10. The case of the assessee was reopened after recording the reasons and accordingly notice u/s 148 of the Act dated 28.02.2014 was issued and served upon the assessee. Thereafter, notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee was engaged in the business Mercantile. The case of the assessee was reopened on the basis of an information received from the Sales Tax Department through O/o the DGIT(Inv.) Mumbai in which it was conveyed that the assessee has taken the bogus purchase entries from the twelve parties in sum of Rs.8,64,19,368/- which are hereby as under: - Tin No. of the Hawala Party Amount Tin Cancellation Hawala Party date as per the information available on mahavat, com 27530626228V Accure Impex Private Limited 15,97,501 12.09.2007 27760622173V Dhruv Sales Corporation 1,81,73,766 01.10.2008 27210521062V Forum Steels. 213,533 01.04.2006 27140347810V Jai Krishna Enterprises 2,70,75,435 01.04.2006 27490641576V Jay Industries 5,01,446 30.01.2008 27860643070V Kohinoor Corporation 27,64,075 08.02.2008 27780306524V SB Metal Corpn 5,18,493 01.04.2006 27030637270V Shree Mahavir Enterprises 1,35,07,611 27.12.2007 27030637270V Shree Sai Trading Co 1,03,54,550 03.06.2008 27800620987V Shubh Labh Metal and 11,33,766 31.07.20007 Alloys/Bright Enterprise 2 A.Y.2009-10 27110671176V Stelco Steel Endustries 12,36,144 12.08.2008 27490582406V Vidhi Metal Industries. 93,43,048 04.01.2007 Total 8,64,19,369 Thereafter, the AO raised the addition to the extent of total bogus purchase of Rs.8,64,19,368/-. The total income of the assessee was assessed to the tune of Rs.1,16,27,430/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 3% of the bogus purchase in sum of Rs.8,64,19,368/-. The revenue was not satisfied, therefore, the revenue has filed the present appeal before us.

(2017) Supreme Court. On the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record: - “6.2.1 1 have carefully gone through the assessment order, submission of the AR of the appellant and the facts of the case. The Ld. AO made the addition on the basis of information received from the Sales Tax Authorities. The Sales Tax (VAT) department, State of Maharashtra had recorded the statements of certain 3 A.Y.2009-10 hawala operators who have confirmed to have given bogus bills to certain assessee incident The appellant company. The-appellant company was asked to submit the - details of purported purchases made from these parties and a show cause was issued asking the appellant why the same should not be disallowed as bogus purchases. The appellant had filed their reply stating that purchases were made from regular parties supported by proper bills and the accounting entries. During the assessment proceedings, assessee asked to furnish the copies of ledgers of transactions made with the above parties and the supporting documents like weighment receipts, delivery challans, lorry receipts, stock register, octroi bills and transport bills. The Ld. AO after verification of the details it is observed that assesse produced ledgers and copies of purchase bills. However, no documentary evidence in the form of delivery challans, stock register, octroi bills and transport bills were furnished. The Ld. AO was not in agreement with the submissions of the appellant and observed that the appellant failed to furnish the supporting documentary evidence to support that the purchases were actually made by them. The Investigation Wing of Mumbai had provided a list of hawala bill racketeers who were involved in issuing bills and also the list of beneficiaries. The Sales Tax Department of Mumbai had investigated all these cases thoroughly and prepared a list of such hawala operators and their beneficiaries which had been uploaded in their website. The Ld. AO observed that these hawala. operators were providing only accommodation entries and the appellant was also in the list of beneficiaries. Accordingly, the Ld. AO treated the 4 A.Y.2009-10 amount of Rs.1,08,02,420/- as bogus purchases and added back to the total income of the appellant.

6.2.2. The AO. has pointed out that necessary supporting evidences in support of its claim were not produced by the appellant. The supplier was in fact the appellant's witness and the Ld. A.O was not required to force its attendance. It was for the appellant to produce it as per Civil Procedure Code which applies to the income-tax proceedings also. It is trite that once a transaction is shown to be of the nature of income, the onus shifts to the assessee to show that the same was not taxable. It can thus be safely assumed that the appellant has grossly failed in its duty to mitigate the burden cast upon it in so far as proving the genuineness of the transaction from the said parties is concerned.

6.2.3. In this regard it is also pertinent to mention that while dealing with the concept of burden of proof, onus of proving is always on the person who makes the claim and not on the Revenue as being made out by the Ld. AR in his submission. While dealing with the issue of deciding the burden of proof, Hon'ble Supreme Court in the cases of CIT Vs. Durgaprasad More 82 ITR 540 and Sumati Dayal Vs. CIT 214 ITR 801 has held that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not real and that taxing authorities are entitled to look into surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. The Hon’ble court also held that, it is no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is 5 A.Y.2009-10 within the taxing provision and if a receipt is in the nature of income, the burden to prove that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. In the case of Durgaprasad More (Supra), the Hon’ble Court went on to add that a party who relies on a recital in a Deed has to establish the truth of this recital, otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party who relied on those recitals. If all that an assessee who wants to evade tax has to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. The Hon’ble Court further held that the Taxing Authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look in to the surrounding circumstances to find out the reality of the recitals made in those documents.

6.2.4. In yet another case of casting of onus viz. Jamnaprasad Kanhaiyalal Vs. CIT 130 ITR 244(SC), Hon’ble Apex Court while considering the scope of immunity u/s. .24 of F. No.(2) Act 1965 held that the immunity provided cannot be invoked in assessment proceedings relevant to any person other than the person making declaration under the Act. In that case, the firm Jamnaprasad Kanhaiyalal had -shown cash credits in the names of 5 sons Kanhaiyälal who had made voluntary disclosure under the Voluntary Disclosure Scheme of 1965 but the Ld. A.O. had not found the explanation satisfactory regarding the credit worthiness of the parties and the same came to be confirmed by the Hon’ble Supreme Court. If against such strict terms of immunity, the Hon’ble Supreme Court could confirm the rejection of explanation 6 A.Y.2009-10 of cash credit, in the instant case the appellant has failed to even corroborate the claim before the Ld. AO.

6.2.5. Reliance is also placed on the judgement of Hon’ble Supreme Court in the case of Sri Meenakshi Mills Ltd 63 ITR 609 where it was held that the I.T. Authorities are entitled to pierce the veil of Corporate Entity and to look into reality of transaction. In the case of McDowell & Co. 154 ITR 148(SC) it was stated that implications of tax avoidance are manifold. First, there is substantial loss of much needed public revenue; Next, there is serious disturbance caused to the economy of the country due-to piling of mountains of black money, causing inflation. Thus; there is "die large hidden loss" to the community (as pointed out by Master Sheatcroft in 18 Modern Law Review 209) by some of the members in the country being involved in the perpetual war waged between the tax payer and his expert team of advisors, and accountants on the one side and the tax gatherer and his perhaps not so successful advisors on the other side. Hon’ble Court further held that it was for the Court to take stock to determine the nature of new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices would be related to the existing legislation with the aid of emerging techniques of interpretation as was done in Ramsay, Burmah Oil and Dawson to expose the devices for what they really are and to refuse to give judicial benediction.

6.2.6. It is also a settled legal propositioning that if no evidence is given by the party on whom the burden is cast, the issue must be found against him. Therefore, onus is always on a person who 7 A.Y.2009-10 asserts a proposition or fact, which is not self evident. The onus, as a determining factor of the whole case can only arise if the Tribunal, which is vested with the authority to determine, finally all questions of fact, finds the evidence pro & con, so evenly balanced that it can come to no conclusion, then; the onus will determine the matter. Needless to say that the onus is heavy or light, depending on the facts and circumstances of each case. There cannot be any doubt that onus as a determining factor comes into play where, either there is no evidence on either side, or where it is equally worthless or where it is equally balanced. It is imperative to mention is not the case and all available evidence is considered, without reference to the onus and without relying on the 6.2.7. The Hon’ble Supreme Court, in the case of Chuharmal v. CIT (1988] 172 ITRR 250/ 38 Taxman 190 highlighted the fact that the principle of evidence law are not to be ignored by the authorities, but at the same time, human probability has to be the guiding principle, since the AO is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT (1954] 26 ITR 775. The Hon'ble Supreme Court, in the case of Chuharmal (supra) held that what was meant by saying that Evidence Act did not apply to the proceedings under Income-tax Act11961, was that the rigours of Rules of evidence, contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act, in proceedings before them, they were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 8 A.Y.2009-10 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law jurisprudence viz, where a person was found in possession of anything, the onus of proving that he was not its owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings.

6.2.8. In such type of cases, reliance is often placed on a number of decisions inck4ing those in the cases of Nikunj Eximp in of 2010 (Bombay High Court); Balaji Textiles 49 ITD 177 (Bom) to suggest that no addition could be made on account of disallowance of purchases.

6.2.9. Having gone through the above case laws, it is seen that in none of those cases so much of investigation was done including those by another Government authority, viz., Maharashtra Sales Authority before whom affidavit was filed stating that only bogus bills without delivery of goods. Further, no vehicle numbers have been given in so far as delivery of the purchases are concerned and therefore, it is certain that no such purchases were actually made from the parties from whom bills were procured and hence, no delivery could have been made by them.

6.2.10. Hon’ble Bombay High Court in the case of Killick Nixon Ltd. v. Deputy Commissioner of Income-tax 12012] 20 taxmann.com 703 (Born.) was similarly faced with the question of sham transactions and it inter alia, held as under:

Section 254 of the Income-tax Act, 1961; read With rule 71 of the income-tax (Appellate Tribunal) Rules, .1963 - Appellate Tribunal- 9 A.Y.2009-10 - Orders of - Assessment year 2001-02 - Assessee transferred certain land to bank - Assessee claimed to have incurred long-term and short-term capital losses on share trading transactions - Accordingly, it set off said losses against capital gain earned on sale of land - Assessing Officer found that assessee entered into sham and bogus share trading transactions resulting in capital loss with purpose to reduce tax liability arose on capital gain - Assessing Officer, therefore, discarded capital losses - Commissioner (Appeals) confirmed order of Assessing Officer - Tribunal also confirmed order of Assessing Officer, and while doing so, referred to a decision of Supreme Court in case of Stimuli Dayal v. CIT 09951 214 ITR 801 / 80 Taxman 89 to held that evidence produced must be analyzed by applying theory of surrounding circumstances and human probabilities - Assessee alleged that without bringing said case to notice of parties, revenue had caused prejudice to its case; all in violation of principles of natural justice and of rule 11 - Whether since decision of Supreme Court in Sumati Dayal case (supra) was cited by Tribunal only for purpose of reiterating well settled and established position of law, it and el not be said to have caused prejudice to assessee - Held, yes - Whether when a transaction is sham and not genuine as in instant case, then it could not be considered to be a part of tax planning or legitimate avoidance of tax liability - Held, yes - whether thriller since issues in instant case were purely questions of facts on winch there were concurrent of authorities below, it was to be held that there was no question J. makes a number of observations regarding the reed to depart from the Westminster" and tax avoidance- these are clearly only 10 A.Y.2009-10 in the context of artificial and colorable devices. Reading McDowell, in the manner indicated hereinabove, in cases of treaty shopping and/or tax avoidance, there is no conflict between McDowell and Azadi Bachao or between McDowell and Mathurin Agarwal.

6.2.11. Hon’ble Allahabad High Court while; dealing with the issue of bogus purchase in the case of Sri Ganesh Rice Mills v. Commissioner of Income-tax 120071 294 ITR 316 (ALL.) , held as under:

"Where Assessing Officer had recorded a finding that in order to lower profits, bogus purchases had been introduced and Tribunal 11 A.Y.2009-10 it such finding, addition on account of disallowance of such purchases was justified (Assessment year -1984-85)

The assessee was engaged in the production of grain, pulses, rice chunni-bhusi etc. The Assessing Officer treated five purchases as bogus. That was done after making enquiries wherein he found that the parties mentioned at item Nos. 4 and 5 never existed. He treated addition. The Tribunal also held that the than actually earned. This in turn could be to bring the gross profit rate to near about the earlier years' performance in order to avoid a deeper probe by the taxing authorities and/or to avoid paying higher taxes. Thus, when once bogus purchase is entered in the books without a corresponding sales or increase in stocks, the obvious result would be lowering of g.p. rate. .11 these bogus purchases are removed, the g.p. rate would automatically go up. Under the assumption that the purchases are bogus, one situation visualized is that there are no corresponding sales, then addition at what rate can be more justifiable, than by the bogus purchase itself?

6.2.14. In Samurai Software (P.) Ltd. v. Commissioner of Income- tax 120081 299 ITR 324 (RAJ), it was held as under:

"8. The Tribunal considered the matter in paragraph 6 of its order thus:

6. We have carefully considered the rival submissions of the parties, perused the material available on record and the decision relied upon by the learned Departmental representative. We find that as a result of search on the assessee-company, the purchases totaling to Rs. 4,37,048 were not found recorded in the seized books of account of the assessee-company. No surrender was made on behalf of the company by any of the directors of the assessee company. The surrender was made by Shri Mattes)! Toshniwal, one of the directors of the company in his individual capacity and not on behalf of the assessee-company and the same was considered in his personal assessment. Under the law, the company is a separate juridical person. The surrender made by Shri Mahesh Toshniwal, in his individual capacity is not binding on the assessee-company. Shri Mahesh Toshniwal in his personal state4nts, has nowhere stated that the surrender was Made on behalf of the assessee-company. We also find that even in the return filed in response to a notice under section 748, the assessee- company did not include the said amount of bogus purchases. The assessee-company has not placed any material as to show that the said purchases, in fact, belong to Shri Mahesh Toshniwal and not the assessee these circumstances, we do not find any merit in the plea of the Learned authorized representative that since the said 14 A.Y.2009-10 genuineness of the transaction regarding purchase of 'wool from 11w parties, (lie assessee had failed to discharge the onus to prove the genuineness of the transactions, mere mentioning of section 68 did not affect (lee addition made when transactions were found bogus.

6.2.16. In Sanjay Oilcake Industries vs. Commissioner of Income- tax (2009) 316 ITR 274 (Guj), it was held as under "22. Thus, it is apparent that both the Commissioner (Appeals) and the Tribunal leave concurrently accepted the finding of the Assessing Officer that the apparent sellers who had issued sale bills were not traceable. That goods were received from the parties other than the persons who had issued bills for such goods. Though the purchases are shown to have been made by making payment thereof by account payee cheques, the cheques have been deposited in hank accounts ostensibly in the name of the apparent sellers, thereafter the entire amount have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount front the bank accounts. In the light of the aforesaid nature of evidence it is not possible to record a different conclusion, different from the one recorded by the Commissioner (Appeals) and the Tribunal concurrently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, Collie to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether (lie 15 A.Y.2009-10 purchase price reflected in the books of account matches the purchase price staled to have been paid to other persons. the issue is whether the purchase price paid by the assessee is reflected as receipts by (lie recipients. The assessee has, by set of evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payment made by the assessee have been actually received by the apparent sellers. Hence the estimation made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should at a particular sum or at a different sum, can never be an issue of law.”

6.2.17 6.2.17. In the case of Assistant Commissioner of Income-tax v. Tribhovanclas Bhimji Zaveri (2000) 74 ITD 92 (MUM.), Hon’ble Mumbai Bench of ITAT while dealing with the issue of bogus purchases where similar arguments were advanced to buttress the claim of purchases, held as under:

."Considering the number of coincidences involved in the scheme, we are of the view that the entire scheme has been planned and coordinated by the assessee-Jinn. In the case of Homi Jehangir Gheesta v. CIT 119611 41ITR 135, the Apex Court held that while deciding an issue, the Tribunal can consider probabilities properly arising from the facts alleged or proved and by doing so the Tribunal does not indulge in conjectures, surmises or suspicions. The Apex Court expressed a similar view in the case of Sumati Dayal v. CIT (1995) 214 ITR 801/80 Taxman 89 (SC) and held that the decision of an adjudicating body based on surrounding circumstances and human probabilities is not bad in law and 16 A.Y.2009-10 deserves to be upheld. In the case of McDowell & Co. Ltd. v. CTO (19851154 ITR 148/22 Taxman /I, the Apex Court held that colourable devices are not part of legitimate tax planning. Going by the ratio of these decisions, we are of the view that the assessee- firm cannot be dissociated from the scheme of declaration of gold under the amnesty scheme in the names of the family members of the partners of the assessee-firm, as different individuals could not have hit upon the same idea of acquiring gold in the year of account relevant for the assessment year 1978-79 and declaring such gold under the amnesty scheme and getting the gold valued by the same valuer on the same day and filing their returns under the amnesty scheme on the same day, i.e., 30-3-1987, and subsequently getting the gold converted into ornaments through Karigars on more or less the same day and subsequently selling the ornaments to the assessee-firm in the same year of account without the planning, controlling and coordination of a central agency and that agency in the surrounding circumstances appears to be only the assessee firm. The Apex Court has held in the case of Jamnaprasad Kanhaiyalal (supra) that there is no double taxation in taxing the person to whom the income actually belonged with the persons who falsely declared them in their returns filed under the Voluntary Disclosure Scheme. That is a risk which an assessee resorting to unfair tax saving devices has necessarily to run and an assessee who has resorted to such devices has to thank himself for it."

6.2.18. As regards the issue of cross-examination, in T Devasahaya Nadar v. CIT (1964) 51 ITR 20 (Mad.); it Was held:

17 A.Y.2009-10 "It cannot be laid down as a general proposition of law that the Income-tax Department cannot rely upon any evidence which has not been subjected to cross-examination.

An ITO occupies the position of a quasi-judicial Tribunal and is not bound by the rules of the Evidence Act, but he must act in consonance with MI urn! justice, and one such rule is that he should not use any material against an assessee without giving the assessee an opportunity to meet it. He is not bound to divulge the source of his information. There is no denial of natural justice if the ITO refuses to produce an informant for cross- examination though if a witness is examined in the presence of the assessee, the assessee must be allowed to cross-examine him. The range of natural justice is wide and whether or not there has been violation of natural justice would depend on the facts and circumstances of the case."

6.2.19. The Supreme Court had also an occasion to consider the applicability of the principles of natural justice in R.S. Dass v. Union of India AIR 1961 SC 593. Referring to the same, the Supreme Court in Chairman, Board of Mining Examination v. Ramjee AIR 1977 SC 965, inter alia, held as follows:

Natural justice is no unruly horse, no lurking land mine, nor a judicial cure all. If fairness is shown by the decision maker to the man proceeded against, the form features and the fundamentals of such essential processual propriety being conditional by the facts and circumstances justice can be complained of natural justice are but the means to achieve the end of justice. They cannot be perverted to achieve from opposite end.

18 A.Y.2009-10 6.2.20. In GTC Industries Ltd. v. Assistant Commissioner of Income-tax 119981 65 ITD 380 (BOM), it was held as under :

"105. In our opinion right to cross-examine the witness who made adverse report, is not an invariable attribute of the requirement of the dictum, taudi alter= parkin'. The principles of natural justice do not require formal cross-exams nation. Formal cross- examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of Court. It is part of legal and statutory justice, and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination.

However, if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination.

Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collateral Nature."

6.2.21. To sum up, I Would like to quote the landmark case of State Bank of India v. S.K. Sharma AIR 1996 SC 364 where the Hon'ble Apex Court observed :

Justice means justice between the parties. The interest of justice equally demand that the guilty should be punished and that technicalities and irregularities which do not occasion failure of 19 A.Y.2009-10 Justice are not allowed to defeat the ends of justice. Principles of natural justice are but the means to achieve from opposite end.

6.2.22. Similarly, in yet another decision of Hon'ble Gujarat High Court in the case of C1T vs. Sung Sheth (2013) 38 Taxmann.com 385 (Guj), I-Hon’ble Court was satisfied with a similar issue where the A.O. 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 said parties were held to be bogus. The A.O. in that case added the entire amount of purchases to gross profit of the assessee. Ld. CIT(A) having found that the assessee had indeed purchased though not from named parties but other parties from grey market, partially sustained the addition as probable profit of the assessee. The Tribunal however, partly sustained the addition. Taking into account the above facts, the Hon’ble Gujarat High Court held that since the purchases were not bogus, but were made from parties other than those mentioned in books of accounts, only the profit element embedded in such purchases could be added to the assessee's income and as such no question of law arose in such estimation. While arriving at the above conclusion, the Hon’ble Court also relied on the decision in the case of Vijay M. Mistry Construction Ltd. 355 ITR 498 (Guj) and further approved the decision of Ahmedabad Bench, ITAT in the case of Vijay Proteins 58 ITD 428. 6.2.23. In the case of Vijay Proteins (supra), the Hon’ble ITAT was seized with a case of bogus suppliers of oil cakes where 33 parties were found to be bogus by the departmental authorities even 20 A.Y.2009-10 though payments were made to the said parties by cross cheques and in fact the A.O. in that case had brought adequate material on record-to prove that the cross cheques had not been given- to parties from whom supplies were allegedly procured but these were encashed from a bank account in the name of another entity, possibly hawala dealer. Subsequently, the money deposited in that account was withdrawn in cash almost on the same day: The Tribunal however, held that if the purchases were made from open market without insisting g to sell the product at a much less rate for genuine bills, as compared to a in which the dealer has to give genuine sale invoice in respect of that sale. Keeping all such factors in mind, the Tribunal estimated an element of profit percentage of the overall purchase price accounted for in the books of account through fictitious invoices.

6.2.24. Recently in the case of ACIT vs. Steel Line (India) (ITAT Mumbai) [880/881/882/MUM/2016, wherein the issue has been decided as under:

Assessee company being a trader of goods, AO not having doubted the genuineness of soles, could not have gone ahead and made addition in respect of peak balance on such purchases, Accordingly, OT(A) concluded that issue boil down find out the element of profit embedded in bogus purchases which the assessee would have made. When the corresponding sales have not been doubted and the quantitative details of purchases and sales vis-a- vis stock was available, we deem it appropriate considering the entirety of facts and circumstances of the case to restrict the addition to the extent of 2% of such bogus purchase. Accordingly, 21 A.Y.2009-10 the order' Of both the lower authorities are modified and AO is directed to restrict the addition to the extent of 2% on such purchases.

, 6.2.25. Further, also in the Innovators Facade Systems Private Limited the Jurisdictional ITAT has restricted the addition on account of bogus purchase to the extent of 2% of the alleged bogus purchase.

6.2.26. In view of above discussion and as narrated earlier, the Ld. A.O. in this case has held that the parties from which the purchases were made by the appellant were found to be bogus. Not having doubted the consumption/sales, the motive behind obtaining bogus bills thus, appears to be inflation of purchase price so as to suppress_ true profits. Considering the facts of the case as well as the various case laws cited (supra), the suppressed profit as estimated by the, AO at 12.5% being on the higher side and following above citied Jurisdictional 1TAT decisions, I am of the considered opinion that fixing the GP at 3% of bogus purchase will be fair and meet the ends of the justice which works out to Rs. 25,92,590/- (3% of Rs.8,64,19,368/-). The Assessing Officer is directed to restrict the addition to Rs 25,92,590/- being 3% of total purchases. In result the appeal of the assessee on this ground is partly allowed.”