SIDDHARTH STRUCTURALS,MUMBAI vs. ITO 29(3)(4), MUMBAI

आदेश / O R D E R PER R.C.SHARMA (A.M):

1. In the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings initiated u/s 147 by the learned Assessing Officer without independent application of mind on the information received from DGIT(Investigation).

2. In facts and in the circumstances of the case and in law, the learned CIT(A)-40 has erred in confirming the action of the Assessing Officer of completing the assessment u/s 143(3) without providing any opportunity of cross examination of the witnesses relied upon by the Assessing Officer and thus violating the law laid down by Honorable Supreme Court in the case of Kishanchand Chellaram v. CIT (1980) 125 ITR 713 and Andaman M/s. Siddharth Structurals Timber Industries v. Commissioner of Central Excise (Civil Appeal No. 4228 of 2006.) 3. In facts and in the circumstances of the case and in law, the learned CIT(A)-40, Mumbai has erred in upholding the ad hoc addition of Rs. 29,21,470 / - being 12,5% of alleged bogus purchases of Rs. 2,33,71,789/-, merely on surmises and conjectures.

5.24. “”the Ld. A.O. in this case has held that the parties from whom the purchases were made by the assessee were found to be bogus and that is the reason for which it was not produced during the assessment proceedings. 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. As mentioned above, the AO had never disputed the sales. Once sales are accepted, corresponding purchases have to be considered and cannot be disregarded in totality. Looking to the market trend, the assessee may have made purchases from other parties which were not recorded in the books, and took only bills from these parties as accommodation, to explain the purchases. The purchases themselves are not bogus but the purchase parties shown in books are. Therefore, the entire purchase from these parties cannot be added as bogus and what needs to be taxed is the profit element embedded in such transactions. Estimations ranging from 12.5% to 25% have been upheld by the Hon'ble Gujarat High Court, depending the nature of the business. It has been held in the case of Simit P. Sheth that no uniform yardwtick could be applied to estimate the rate of profit and it varies with the nature of business.

M/s. Siddharth Structurals In the facts and circumstances of the case, I am of the considered opinion that estimation of 12.5% as profit embedded in impugned purchases shown from the said parties and adding the same to the total income returned, would meet the ends of justice. Therefore, the addition made by the Ld. AO of Rs.29,21,470/- being 12.5% of the alleged bogus purchases of Rs. 2,33,71,789/- is justified.