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This appeal by the Revenue is preferred against the order of the ld. CIT(A) – 2, New Delhi dated 27.02.2015 pertaining to A.Y 2006-07.
2. The substantive grievances of the Revenue read as under :
“i) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in restricting the addition to Rs. 6,43,466/- out of the total addition of Rs. 71,95,000/- on account of bogus purchases.
ii) On the facts and in the circumstances of the case, the Ld .CIT(A) erred in ignoring the factum of bogus purchases of Rs. 1,45,23,400/- from M/s Rajasthan Metals which was specified in the remand report submitted by the Assessing Officer before the ld. CIT(A).”
3. Briefly stated, the facts of the case are that as per information, a search action was carried out in the case of Shri Navneet Kumar Jain and his son, Shri Vaibhav Jain alongwith Jaguar Group on 26.04.2010 from which it came to the notice of the department that these persons were engaged in providing accommodation entries in the form of bogus sales bills. These entries were provided directed or through agents.
4. It came to the notice of the Assessing Officer that M/s Bansal Strips Pvt. Ltd was found to be dealing with concerns of Shri Navneet Kumar Jain and his son Vaibhav Jain. The Assessing Officer found that the following entries amounting to Rs. 71.95 lakhs were provided by the under mentioned firms from whom the assessee has made purchases:
5. The assessee was asked to explain the transaction to establish the genuineness of the purchases by furnishing copy of accounts of the aforementioned parties with respect to confirmations.
6. In spite of the specific requisition, the assessee did not file the requisite details. The Assessing Officer was of the opinion that the assessee has nothing to say and treated the transaction of purchases of Rs. 71.95 lakhs as bogus and added back the same to the total income of the assessee.
7. The assessee strongly agitated the matter before the ld. CIT(A) and pointed out that the purchases made from Rajasthan Metals were to the tune of Rs. 1.45 crores and the Assessing Officer has doubted only purchases to the extent of Rs. 71 95 lakhs which means that the Assessing Officer has accepted the genuineness of the purchases from the same supplier for the balance amount. It was further contended that during the year under consideration, the assessee has made payment of only Rs. 10 lakhs and balance of Rs. 61.95 lakhs pertained to subsequent years. It was brought to the notice of the ld. CIT(A) that during the year, the assessee has effected sales of Rs. 5.54 crores and without there being any purchases, sales could not have been effected.
8. After considering the facts and submissions and also the remand report called for during the appellate proceedings, the ld. CIT(A) held as under:
“After going through the records and the evidences adduced by the appellant, copies of lave also been placed before me, I am of the opinion that sincee- the AO has not been able to pin point any adversity in the books of account and other details (including details) in respect of sales effected by the appellant which have been accepted by him. As the turnover and the quantitative details thereof have not been controverted by the AO. therefore., I find force in the arguments of the appellant that without purchases there can be no sales The appellant has effected sales which have been accepted in the assessment and the purchases from M/s Rajasthan Metal are nothing but accommodation entries. However, if the total purchases of Rs. 1.45,23,400/- (which amount to app. 26% of turnover of Rs.5,54,49,023/-) are treated as bogus purchases and added to the income of the appellant it will result into an exorbitant Gross profit rate of 29% which is not heard of in the line of trade of the appellant. Therefore in my considered view addition of Rs. 1,45,23,400/- as proposed by the AO in the remand report cannot be made in its entirety since the sales could not be made without making purchases. At the same time, it cannot be denied that there could have been leakages in this process and therefore it would be in the fitness of things to estimate the income of the appellant having regard to the industry’s barometers