It is observed that the A.O. has made addition of the entire purchases amount to Rs. 1.13 crores by making additions of Rs. 1,31,88,227/- being peak credit payable during the year for purchases to these parties which included balance of Rs.18,43,451/- for purchases made in the earlier year, while the AO has , however , not doubted the sales made by the assessee against these purchases. The assessee has reconciled the quantitative details of the stock reflected in these purchases with quantitative details of stock as per sale invoices.
The A.O. has doubted the purchases from these four alleged accommodation entry providers being hawala dealers as concluded by Sales Tax Department of Government of Maharashtra to be bogus purchases, that these four parties only provided accommodation bills and the goods were never supplied by these parties and the assessee allegedly made purchases from some other parties for which payments were made through undisclosed income.
Thus, the A.O. observed that the assessee has purchased the material from someone else while bogus bills were organized by these hawala dealers, hence, section 69C of the Act was invoked by the AO and additions were made by the AO.
The conclusion of the ld. CIT(A) that the assessee has purchased material from some other dealers but quantitative reconciliation of the stock was duly done by the assessee of the sale and purchase and hence the profit element in this accommodation entries are to be added to the income cannot be faulted .
The ld. CIT(A) restricted the addition by estimating GP ratio of 12.5% of Rs. 1,13,44,778/- being purchases from these alleged four accommodation entry providers. We do not find any infirmity in the well reasoned order of the ld. CIT(A) whereby net profit was estimated which was a reasonable estimation made by learned CIT(A) and we sustain1affirm the order of learned CIT(A).
Relevant Extract of the Judgment
4. The Brief facts of the case are that the assessee is an individual running a proprietorship firm namely M1s The Shoe Box INC Retail Store of footwear, bags, belts, wallets and leather goods, boutique etc. having shops at Pune, Ahmedabad, Jalandhar and office at Mumbai. It was observed by the A.O. that the assessee had incurred expenditure in terms of purchases of Rs. 4,89,88,555.31 , out of which it was alleged by the AO that purchases of Rs. 1,13,44,77/- was made from the allegedly bogus parties as per information received from Sales Tax Department, Government of Maharashtra , who as per Government of Maharashtra web-site are suspicious parties providing accommodation entries and are thus bogus bill giving entities without doing any business , as detailed hereunder:
