DCIT 15(2)(2), MUMBAI vs. PCI ANALYTICS P.TLD, MUMBAI

आदेश / O R D E R

Per Joginder Singh (Judicial Member) These three appeals are by the Revenue, aggrieved by the impugned orders all dated 21/01/2015 of the Ld. First Appellate Authority, Mumbai. The only common ground raised by the Revenue pertains to directing the Assessing Officer to estimate profit of 15% on the total alleged bogus purchases without appreciating that the seller parties were found to be Hawala Operators/ bogus bill providers.

2.1. On the other hand, the ld. counsel for the assessee, Shri Suresh N. Otwani, defended the order of the Ld. Commissioner of Income Tax (Appeal). The Bench asked the ld. counsel for the assessee whether any appeal has been filed by the assessee challenging the order of the Ld. Commissioner of Income Tax (Appeal). It was claimed by the ld. counsel that the impugned orders have been accepted by the assessee and 3 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 no appeal has been filed against the order of the First Appellate Authority.

2.2. We have considered the rival submissions and perused the material available on record. Before coming to any conclusion, we are reproducing hereunder the relevant finding along with the conclusion drawn in the impugned order for ready reference and analysis:-

“2.3.1 Further during the course of the subsequent hearing, the AR had furnished semi-burntcopy of bill raised in respect of the following concerns: 1. M/s M.R. Corporation 2. V.M.Udyog 3. Snehal Enterprises 4. Mauli Enterprises 5. MeetiTrade lmpex 6. Motion Traders Pvt. Ltd. 2.3.2. I have perused the invoice in respect of M.R. Corporation, which reveal that the LR No., Date & Transport column in the invoice was left blank. Similar is the case with M/s Snehal Enterprises where order no., transporter, LR/RR No, Delivery column in the invoice was left blank. In the case of Meeti .Trade Impex the payment terms and details of transporter etc. were left blank. In the case of Motion Traders Pvt. Ltd. order no transporter, LR/RR No, Delivery column in the invoice were left blank. In the case of Maulik Enterprises, order no., date, payment terms, transport through were all left blank. The perusal of the invoices further reveals that the appellant had purchased SS Tubes of various sizes, SSTEE, Oil free vacuum pump and. MS powder coated gas distribution panel with its accessories. 2.3.3. The scrutiny of the ledger extracts filed in respect of the 18 suppliers indicates following: 1.Sun Enterprises : Ledger extract for theF,Y.2007-08 indicate that there was no transactionduring the year. The ledger extract for the period 01.04.2008 to 31.03.2010 of this party is available in page 66 of the paper book. The perusal indicate that the appellant had 4 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 purchased the material on 13/19.05.2008 for a sum of Rs.1,07,138/- and the entire amount was outstanding as on 31.03.2009. The appellant had cleared the payment in the next financial year on 19.04.2009. The payment was settled 11 months after the purchase.

3. G.R.TradeLink : No transaction during the F.Y.2007-08 and 2009-10. During the year the appellant had purchased goods worth Rs.3,37,740/- in the month of September, 2008 which was found to have been settled on 25.03.2009 after a period of 6 months from the date of purchase.

4. M.R.Corporation : No transaction during the F.Y.2007-08: The appellant had purchased material amounting to Rs.2,94,580/- in May and September, 2008. The payment was found to have been made in the subsequent financial year in the month of April, 2009. The payments were made 7-11 months after the date of purchase in respect of two supplies made.

5. Rekha Trading Co. No transaction during the F.Y.2007-08. Purchases amounting to Rs.1,19,600/- wasmade during the year on 21.03.2009 and the payment was settled on 23.05.2009.

6. Sthapna Trade lmpex Pvt. Ltd. No transaction during the F.Y.2007-08.The ledger extract of this party isavailable in page 80 & 81 of the paper book. During the year appellant had purchased material amounting to Rs.33,45,771/-. Most of the purchases have been made in the month 'of May, 2008 to January, 2009 and some, purchases have also been made in the month of February & March, 2009. The appellant had made payment-of Rs.11,44,282/- leaving a closing balance of Rs.22,01,489/-. In the Subsequent financial year purchases amounting to Rs.9,24,650/- was made. The opening balance as on 01.04.2009 along with purchases, made during the year amounting to Rs.31,26,139/- together was settled during the subsequent Financial year 2009-10. Part of the purchases made during May and June 2008 was found to have been settled in the month of February, 2009 and for the balance i.e.

5 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 material purchased in the month of September, December and January were found to have been settled in the month of June, September and October, 2009. Thus, the payments were made beyond 6 months after the purchase.

7. Siddhivinayak Trading Company.: No transaction during the F.Y.2007-08. Out of the purchases made during the year Rs.3,46,466/- a sum of Rs.71,136/- was paid during the year and the balance Rs.2,75,330/- was outstanding as on 31.03.2009. All the purchases made during the month of May, 2008. During the year only a single payment of Rs.71,136/- was made on 02.02.2009. The balance was paid in the .month of May, 2009 in the subsequent Financial year. Most of the payments have been made almost 1 year after the purchase.

6 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 Rs.1,33,848/- remained as closing balance which was paid on 23.05.2009 in the subsequent financial year. Payments have been made beyond 3 months of purchase.

No 1& 2 are directed •against addition of Rs.93,86,559/- on account of bogus purchases made in respect of 8 parties and bringing to tax 100% of purchase value.

4. The AO had made addition amounting to Rs,93,86,559/-from eight

8 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 alleged hawala operators out of which five parties viz. Motion Traders Private Limited., Mihir Sales Private Limited, K.C. Enterprises, Sthapna Trade Impex Pvt,.;-, Ltd., Saileela Trading Pvt. Ltd. were found to have been supplied during A.Y.2009-10 also which has been discussed in detail in the above paragraphs. The following are the three new suppliers :

1.

2. Mihir Sales Private Limited : The ledger extract is available in page 141 of the paper book. During the financial year 2009-10 relevant to A.Y 2010-11 purchases amounting to Rs.11,61,754/- was made. The appellant had made payment of Rs.12,03,054/- during the year which include the outstanding amount Rs.1,89,800/- belonged to A.Y. 2009-10. The purchases made during August, 2009, Rs.1,48,500/- remained outstanding as on 31.03.2010. This outstanding balance of Rs.1,48,500/- was settled in the subsequent F.Y.2010-11. The payments have been made beyond three months after the. purchases.

3. Everready Marketing Private Limited : During the year assessee purchased material to the tune of Rs.16,47,119/- from this concern out of which Rs.7,27,105/- was paid during the year leaving outstanding balance of Rs.9,20,014/-. The purchases made,, on 12.07.2009 Rs57,684/- was settled on 05.11.2010. The purchases made on 05.12.2009 41,92,722/- was settled on 19.02.2010. The purchases made in the month of July, 2009 was found to have been settled on 31.03.2010. The purchases made in the month of September, 2009 to February, 2010 remained outstanding. The outstanding balances were found to have been settled in the month of May to November, 2010. Therefore, the payment

9 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 pattern shows that bills have been settled beyond three to six months. Copy of invoices filed by the appellant is available in pages 207 to 275 of the paper book. The perusal of the invoices indicates that order no, date and the details of lorry no were left blank. Though the appellant had filed voucher for transport paid which did not indicate the name of the concern. The payment was made by way of cash and it was self- made.

4. Abhilasha Sales Private Limited: No transaction during F.Y.2007-08 and 2008-09. During the assessment year •purchases amounting to Rs.29,62,357/- was made from this party. The purchases amounting to Psi 52,854/- made on 07.09.2009, was paid on 31.03.2010 and rest other purchase made from April to January, 2010 amounting to Rs.28,09,503/- remained outstanding which was found to have been settled if the subsequent financial year 2010-11. During F.Y.2010-11 purchases to the tune of Rs.15,32,532/- was made in the month of April and May, 2010 which were found to have been settled in the month of January and March, 2011. The outstanding balance of the earlier financial year was found to have been settled from May, 2010 to December, 2010. The payment pattern indicates that in some instances the purchases have been settled one year after the purchase was made. Copies of the invoice along with delivery chailan and voucher for transport charges filed are available in the paper book. Order no, date and the details of lorry no in the invoice was left blank. Delivery challan also did not indicate the details of lorry no., and the voucher for transport was self made and cash was found to -have been paid. Few of the transport vouchers indicates the name of the transporter but the details such as the tempo no., lorry no., address of the transporter etc. were not mentioned in the voucher.

5. Sthapna Trade Impex Pvt. Ltd.; The ledger extract is available in page 373 of the paper book. The ledger extract for the year indicate that there is an opening balance of Rs.22,01,489/-. During the year purchases amounting to Rs.9,24,650/- was made. The entire sum of Rs.31,26,139/- was settled by January, 2010. The purchase made during the year on 06.07.2009 was paid on 20.12.2009. Therefore, the payment was found to have been made beyond six months. Copies of the invoice, delivery challan along with voucher for transport, filed are available in pages 374 to 434 of the paper book. The perusal indicate that the order no, date and the details of lorry no., transport through were left blank. The delivery challan did not indicate the lorry no. and name of the transporter. The voucher for transportation charges paid did not indicate the name of the transporter and it was self made.

10 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015

11 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 Gas Equipments, Dakshinand United Technologies. Ill. Assessment year: 2011-12: 5. Ground of appeal

No 1& 2 are directed against addition of Rs.68,94,851/- on account of bogus purchases made in respect of 5 parties and bringing to tax 100% of purchase value. 5.1 The original assessment in this case was originally completed u/s 143(3). The assessment was reopened u/s 147 by issue of notice .u/s 148 on 09.03.2013. The reason for reopening is reproduced in para 2 of the assessment order. The AO had made addition of Rs.65,32,410/- towards bogus purchase made in respect of five alleged suppliers. In the absence of any documentary evidence supporting the delivery of the material purchased and its utilization in the business of the appellant, the AO -had come to such conclusion. He had also referred to the investigation carried out by Sales Tax Department, Mumbai and, therefore, findings coupled with the statements of suppliers admitting the issuance of bogus bills. 5.2 The scrutiny of the ledger extracts of the alle9ed bogus suppliers filed before me and the findings are discussed as under:

1. Mahi Sales Pvt. Ltd. During the assessment year the appellant had made purchases amounting to Rs.5,64,751/- on 17 & 24.12.2010 and the entire amount remained outstanding as closing balance. During the F.Y. 2011-12 the payments have been made in the month of May & September, 2011. Therefore, the payments have been made beyond five months to eight months after the purchase.

2. Everready Marketing Private Limited: The perusal of the ledger indicates that the appellant had purchased goods worth Rs.15,88,202/- during the year. The opening balance carried from the previous year was Rs.9,20,014/-. During the year payment to the tune of Rs.18,45,776/- was made leaving a closing balance of Rs.6,62,440/-. Part of the purchases made during the month of April and May, 2010 was paid in September and January, 2011. During the F.y.2011- 12 the balance Rs.6,62,440/- was settled in the months of June to August, 2011 which pertain to part of the purchases made in the month of May, 2010. Therefore, the appellant took more than a year to settle the payment. Invoice and delivery challan pertaining to this assessment year of this party was not furnished by the appellant.

3. Abhilasha Sales Private Limited :- During F.Y.2010-11 purchases to the tune of Rs.15,32,532/- was made in the month of April and May, 2010 which were found to have been settled in the month of January and March, 2011. The outstanding balance of the earlier financial year was found to have been settled from May, 2010 to December, 2010. The payment pattern indicates that 12 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 in some instances the purchases have been settled one year after the purchase was made. No invoice was filed.

1. 1. M/s R.T. Instruments During the year the appellant had made purchases amounting to Rs.1,33,87,870/-. Opening balance as on 01.04.2010 was Rs.16,10,493/-. The appellant had made payments amounting to Rs.1,36,84,023/- leaving a balance of Rs.13,14,340/-.

2. Dakshin During the year purchases amounting to Rs.80,95,278/- was made from this party. Opening balance of Rs.22,46,67,4/- as on 01.04.2010. A sum of Rs.98,82,207/- was paid during the year leaving a balance of Rs.4,59,945/-.

3. Sunlight Gas Equipment : During the year purchases amounting to Rs.71,19,801/- was made from this party. Opening balance of Rs.33,99,070/- as on 01,04.2010. A sum of Rs.73,82,394/- was paid during the year leaving a balance of Rs.31,36,477/-.

4. United Technologies: During the year purchases amounting. to Rs.85,53,209/- was made from this party. Opening balance of Rs.4,39,105/- as on 01.04.2010. A sum of 13 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 Rs.74,14,174/- was paid during the year leaving a balance of Rs.11,82,945/-.

6. Thus with regard to the regular suppliers, the appellant availed the credit limit of less than 90 days for payment, whereas in the case of alleged bogus suppliers there was an abnormal extension of credit period noticed, which in some cases had extended upto one year. Going by the market practices credit limit of 3. months is considered as normal. More over no prudent businessman would extend the credit limit beyond 6 months to 1 year in a tight market conditions. Therefore, going by this circumstantial evidence one can come to a reasonable conclusion that suppliers are bogus. The payment pattern itself indicates the bogus nature of the transaction. Applying the human probability and the circumstantial evidence, it can be concluded that the supplies by th6above parties are bogus. 6.1 I find the AO did not make any independent investigation/enquiry by issue of notice u/s. 133(6) except in the case of Mihir Sales Pvt. Ltd. or summon u/s 131 to ascertain the true nature of the transaction and the existence of the suppliers. He has simply concluded the assessment by treating the suppliers as hawala .0ealers purely based on the information received from the Investigation wing which in turn retied on the surveys conducted by Sales tax Department and the statement recorded by interrogating the alleged bogus suppliers. As a proof of delivery of the material at the appellant's premise the appellant could furnish copies of few purchase bills and copies of few delivery challan. It also failed to file the weighbridge receipts, transport receipt etc to prove that really the materials purchased were delivered to it. As discussed above.. LR/RR number and date in the invoice was left blank indicating the doubtful delivery of the material. The mode of delivery and the evidence towards transport of the material in the form of LRs or transport bill also could not be filed for this supply. The mere payment by way of account payee cheques alone could not establish the genuine nature of the transaction. 6.3. The appellant had admitted sales and job work receipts amounting to.Rs.9,22,60,771/-, Rs.11,27,52,136/- and Rs.15,16,83,843/- respectively for A.Y.2009-10, 2010-11 & 2011-12. In my view without purchasing the materials, it would not have been possible for the appellant to complete projects/ jobwork of this magnitude. The purchases made cannot be treated as bogus particularly when the appellant had completed the contract or the material purchased was in turn sold, the fact of which has been entered into the books of account. As far as the sale was concerned the appellant had fully disclosed the entire sales and the AO had not disputed this. However, because of the information received from Sales tax Dept. and from the Investigation wing of the department, the AO had strongly presumed that the 14 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 purchases were bogus. Therefore it is possible that appellant might have purchased these materials by way of cash in the open market and subsequently obtained bills from these hawala parties, hence, in my view the entire purchases cannot be added as income of the appellant. What needs to be taxed is only the profit element embedded in these purchases. 6.4 Identical issue came up before the Hon'ble High Court of Gujarat in the case of Commissioner of Income-tax v. Bholanath Poly Fab. Pvt. Ltd. reported in 355 ITR 200 (Guj). The assessee was engaged in the business of trading in finished fabrics. The AO disallowed, purchase amounting to Rs.40,69,540/- as bogus/unexplained. The CIT(A) confirmed the action of the AO. The issue was carried in appeal before the Hon'ble tribunal which concurred with the finding of the revenue authorities below that such purchase was made from bogus parties. After adverting to the facts and data placed before it, the Hon'ble Tribunal noted that the entire 1,02,514 metres of cloth was sold during the year and 'therefore accepted the assessee's contention that finished goods purchased by the appellant may not be from the parties shown in the accounts but from other parties. In view of this the Hon'ble ITAT was of the view tfit only profit margin embedded in such purchases would be subjected to tax. The Hon'ble Tribunal relied Op earlier decision in the case of M/s. Saket Steel Traders Vs. ITO (ITA No.2801/Ahd/2008 dt. 20/5/2008) and also made reference to the decision in the case of Vijaya Protein Vs. GIT 56 ITD 425 (Ahd.). On appeal by the Department, the Hon'ble HC of Gujarat dismissed the appeal. The head note is as under: Income from undisclosed sources- -Assessment(--Assessee trading in finished fabrics—Whether purchases themselves bogus--Whether parties from whom such purchases were made bogus--Questions of fact—Tribunal finding assessee did purchase cloth and sell finished fabrics--Not entire purchase price but profit element embedded in purchases liable to tax--Income-tax Act, 1061. The assessee, for the assessment year 2005-06, was engaged in the business of trading in finished fabrics. The Assessing Officer, hold that purchases worth Rs. 40,69,546 were unexplained and disallowed the expenditure claimed by the assessee and computed the total income of Rs. 41, 10, 187 In so for as the question of bogus purchases was concerned, the Tribunal concurred with the Revenue's views that such purchases were made from bogus parties. The tribunal noted that the Assessing Officer had issued notices to all the parties from whom such purchases were allegedly made. Such notices were returned unserved by the postal authorities with the remark that the addresses were incomplete. The inspector deputed by the Income-tax Department also could not find any of the parties available at the given addresses. The assessee was unable to produce any confirmation from any of the parties. Though the assessee had claimed to have made payment by account payee cheques, upon verification, it was found that the cheques were encashed by some other parties and not by the supposed sellers. However, the Tribunal was of the opinion that though the purchases might

15 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 have been made from bogus parties, the purchases themselves were not bogus. The Tribunal adverted to the facts and data on record and came to the conclusion that the entire quantity of opening stock, purchases and the quantity manufactured during the year 2005-06 were sold by the assessee. Therefore, ho purchases of the entire 1,02,514 metres of cloth were sold during the year 2005-06. The Tribunal, therefore, accepted the assessee's contention that the finished goods were purchased by the assessee, though not from the parties shown in the accounts, but from other sources. The Tribunal was of the opinion that not the entire amount, but the profit margin embedded in such amount would be subjected to tax. On appeal: Held, dismiss/rig the appeal, that whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished fabrics. Therefore, as a natural corollary, not the entire amount covered under such purchases, but the profit element embedded therein would be subject to tax". 6.5 In the case of MIs Sanjay Oilcake Industries v. Commissioner of Income-tax reported in 316 ITR 274(Guj), the Hon'ble court had upheld the action of the CIT(A) and ITAT in determining estimated addition of 25% of the purchases in cases involving bogus purchases. The head note is as under- Assessment—Income from undisclosed sources--Additions on account of inflated purchase price--Estimate--Not a question of law--No material produced by assessee to disprove inflated purchases—Tribunal's order in accordance with law—Income-tax Act. 1961. Whether an estimate should be at a particular sum or at a different sum, can never be a question of law. For the assessment years 1984-85 and 1985-86, the Assessing Officer made additions to the income of the assessee on account of inflated purchase price of oilcakes. The Commissioner (Appeals) held that 25 per cent. of the value of the purchase price was not genuine and the addition made by the Assessing Officer was accordingly restricted to 25 per cent, of the amount paid to the parties from whom the Assessing Officer had disallowed the entire purchases. On cross-appeals by the assessee and the Revenue, the Tribunal confirmed the order of the Commissioner (Appeals). The assessee sought modification of the order on the ground that the Tribunal had failed to consider various pieces of evidence enumerated by it in the application. The Tribunal rejected the application holding that there was no apparent error on record which would permit the Tribunal to undertake review of its own order. On a reference to the High Court: Held, that the finding of the Assessing Officer had been accepted by the Commissioner (Appeals) and the Tribunal that (lie apparent sellers who had issued sale bills were not traceable. The goods were received from the parties other than the persons who had issued bill's for such goods. Though (lie

16 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 purchases were shown to have been made by making payment therefore by account payee cheques, and the cheques had been deposited in bank accounts ostensibly in the name of the apparent sellers, thereafter the entire amounts had been withdrawn by bearer cheques and there was no trace or identity 01 the person withdrawing the amount from the bank accounts. Both the Commissioner (Appeals) and the Tribunal had come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated could not be ruled out and there was no material to dislodge such finding. The assessee had, by evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee had been actually received by the apparent sellers. Hence, the estimate made by the appellate authorities did not warrant interference. 6.6 Very recently in the case of Commissioner of Income-tax v. Simit P. Sheth 356 ITR 451 (Gui), the Hon'ble court has given a finding that estimation of rate of profit return must necessarily vary with the nature of business and no uniform yardstick could be adopted and finally confirmed the action of the ITAT determining 12.5% of the bogus purchases as the profit em4dded in such transaction. The head note is as under: Income from undisclosed sources--Assessee trading in steel–Finding that some purchases recorded by it were not bogus but from other parties not recorded in books- Estimation of profit element embedded in purchases–Tribunal justified in estimation on the basis of facts-Income-tax Act, 1961. ' The assessee was engaged in the business of trading in steel on wholesale basis. During the course of the reassessment proceedings for the year 2006-07, the Assessing Officer noticed that some of the suppliers of steel to the assessee had made their statements on oath to the effect that they had not supplied the steel to the assessee but had only provided sale bills. In turn, they were receiving a small commission. The Assessing Officer concluded that the total purchase of Rs. 41,04,903 cumulatively made from the three parties were bogus. He thus treated such purchases as bogus purchases and added the entire amount of Rs.41,04,903 to the gross profit of the assessee. He also rejected the books of account and estimated the assessee's business profits at Rs. 5 lakhs. The Commissioner (Appeals) held that the assessee had made purchases from other parties in the open market. Therefore, he retained 30 per cent. of the purchases cost as The probable profit of the assessee. He reduced the additions from Rs.41,04,903 to Rs. 12,31,471 and deleted the balance of Rs. 26,73,432. While doing so, he deleted the addition of Rs. 5 lakhs as made by the Assessing Officer on the ground that the addition on account of bogus purchases had already been made. The Tribunal was of the opinion that twelve and half percent. of the disputed purchases should be retained in the hands of the assessee as business profits. On appeal to the High Court.

17 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 Held, dismissing the appeal, that the Commissioner (Appeals) believed that the purchases were not bogus but were made from the parties other than those mentioned in the books of account. That being the position, not the entire purchase price but only the profit element embedded in such purchases could be added to the income of the assessee. In essence, the Tribunal only estimated the possible profit out of purchases made through non-genuine parties. 'The estimation of rate of profit return must necessarily vary with the nature of business and no uniform yardstick could be adopted. 6.7 The facts in the present case indicate that the appellant was not in a position to prove the existence of the suppliers. The suppliers were found to have been engaged in providing bogus bills without actual delivery of goods. Moreover few of the suppliers are not regular parties and they were found to have supplied only during the year and there were no supply either in the earlier year or in the subsequent year. As discussed above this circumstantial -evidence prove the bogus nature of the transaction. On careful analysis of the finding of Hon'ble High Court of Gujarat in the above mentioned cases, I am of the firm view that without purchase of materials it was not possible for the appellant to either sell the items or complete the contract. As mentioned above the AO had never disputed or examined the aspect of sales. Hence I am of the firm belief that the appellant had made cash purchases from other parties which were not recorded in the books. The appellant took only bills from these 9 parties as accommodation to explain the purchases. Therefore the entire purchase from these 9 parties cannot be added as bogus and what needs to be taxed is the profit element embedded in such transaction. Profit estimates ranging from 12.5% to 25% has been upheld by the Hon'ble Gujarat High Court depending upon the nature of the business. As held in the case of Simit P. Sheth (supra) no uniform yardsticks could be applied to 'estimate the rate of profit and it vary with, the nature of business. Taking all the facts into consideration and the findings of the Hon'ble Courts on this issue, I am of the view that estimation of 15% of profit would meet the ends of justice. Therefore, I estimate profit @ 15% of the total alleged bogus purchase as income of the appellant which is worked out as under:- Sr. No. A.Y. Total Bogus Estimated profit @ 15% of Balance Relief Purchases the purchases 1 2009-10 1,56,47,527 23,47,129 1,33,00398 2 2010-11 93,86,559 14,07,984 79,78,575 3 2011-12 68,94,851 10,34,228 58,60,623 Ground No. 1 & 2 raised in all the three years are, therefore, partly allowed.”

18 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, it is noted that the information was received from the investigation wing of the Sales Tax Department that they have recorded the statement of certain hawala operators, who have confirmed to have given bogus bills to certain parties including the present assessee. The details of such bogus bills were also claimed to be accepted by the assessee. In order to verify the genuineness of the transactions, notice u/s 133(6) of the Act were issued to the parties calling for the following information.

“• Purchase orders, invoices, lorry receipts, check post entries, gate entries, goods received notes, issue of material, production record of consumption, delivery challans, octroi charges in relation to the goods supplied to the assessee from AY. 2006-07 to till date. • Copies of Income Tax Returns, computation of income, Balance Sheet and Profit & Loss account-with Annexures and Schedules thereto for the AY. 2011-12. • Extract of Bank Statement(s) reflecting the relevant entries in relation to transactions with the assessee company till date . • Copy of ledger account in relation to the assessee company from AY. 2006-07 to till date. • Any other information that may be parted with, in connection with the transactions with the assessee during the year.” 2.4. During assessment proceedings, the AR of the assessee was informed that notices issued to the parties have returned un-served. In the absence of genuineness of 19 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015 transaction, the additions were made as details in the respective appeal as bogus purchases and added to the total income. On appeal before the Ld. Commissioner of Income Tax (Appeal), the factual matrix was considered and the Ld. Commissioner of Income Tax (Appeal) directed the assessee to estimate the profit at the rate of 15% (as discussed in preceding para of this order). The Revenue is aggrieved and is in appeal before this Tribunal.

2.5. Under the facts narrated hereinabove and also available on record, even it is presumed that the purchases are bogus and the assessee was not in a position to prove the existence of the suppliers admittedly, without purchases of the material, there cannot be any sale. Even otherwise, the Assessing Officer has not examined the aspect of sale. Even as per the provision of section 44AD of the Act, which is a special provision for computing profit & gains on business on presumptive basis, the profit is to be computed equal to 8% of the total turnover or gross receipt of the assessee. In the present appeal, the Ld. Commissioner of Income Tax (Appeal) has directed to adopt the profit at 15% of the alleged bogus purchases and no appeal has been filed by the assessee by accepting the order of the Ld. Commissioner of Income Tax (Appeal), therefore, in our view, the First Appellate Authority is quite justified to safeguard the interest of the Revenue, consequently, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), his stand is affirmed, resulting into dismissal of appeals of the Revenue.

20 M/s. PCI Analytics Pvt. Ltd. to 1915/Mum/2015

Finally, the appeals of the Revenue are dismissed.

This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 23/11/2016.

Sd/- Sd/- (N.K. Pradhan) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 02/12/2016 f{x~{tÜ? P.S /�नजी स�चव आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.