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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI KULDIP SINGH & SHRI AMARJIT SINGH
आदेश / O R D E R Per Amarjit Singh (AM): This appeal filed by the assesse is directed against the order passed by the NFAC dated 28.06.2023 for A.Y. 2010-11. The assessee has raised the following grounds before us:
1. That on facts and circumstances of the case and in law, adhoc estimated 12.5% disallowance made at Rs.9,46,165/- by Id AO and upheld by ld. CIT(Appeals), out of the trading purchases of Rs.75,69,320/- made from dealers alleged to be suspicious parties on only basis of information received from DGIT (Inv.), Mumbai that too without bringing any adverse material on record and also without properly appreciating the various supporting documentary evidences, details and also cogent explanations in support of impugned purchases furnished on record being wrong on facts and bad in law therefore may kindly be deleted.
P a g e | Mafatlal Harakchandji Bothra Vs. ITO 19(2)(3)
2. That the impugned disallowance made is also wrong on facts and in law for the reasons that the Id. below authorities have not disputed the complete quantitative and qualitative tally of trading stock of the entire year including the alleged ingenuine trading purchases and corresponding sales made out of that and payments to alleged dealers being made through only normal banking channels and also without providing the information to assessee appellant, relied upon to make the impugned addition or cross examination of the alleged parties in clear violation of principals of the natural justice.
That the appellant craves the leave to amend, alter, substitute and or to raise new or additional grounds of appeal at the time of hearing.”
Fact in brief is that return of income declaring total income of Rs.5,25,019/- was filed on 16.09.2010. The case was reopened u/s 147 of the Act by issuing of notice u/s 148 dated 23.03.2016 on the basis of information received from the Sales Tax Deparmtnet that assessee was involved in taking accommodation of entries of purchases from the following parties:
Sr. No. Name of the party Amount 1. TriveniEtal India 29,534 2. Anand Deep metal 12,93,838 3. Siddhivinayak Steel 17,477 4. Manish Industrial Corporation 7,422 5. Kailash Metal Pvt. Ltd. 16,640 6. Pradeep Enterprises 1,49,631 7. Rajratan Metal Industries 4,08,668 8. Osian Steel Impex 6,95,832 9. Fortune Sales Corporation 9,79,255 10. Om Metal Industries 39,71,023 Total 75,69,320 The assessee was engaged in the business of trading in ferrous and non-ferrous metals. During the course of assessment after considering the submission of the assessee the assessing officer treated 12.5% of total amount of Rs.75,69,320/- which comes to Rs.946,165/- as non- genuine purchases and added to the total income of the assessee.
3. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assesse.
P a g e | Mafatlal Harakchandji Bothra Vs. ITO 19(2)(3) 4. During the course of appellate proceedings before us at the outset the ld. Counsel submitted that similar issue on indentical facts in the case of the assesse for the assessment year 2010-11 has been adjudicated by the ITAT, Mumbai in case of MaftlalHarkchandjiBothra Vs. ITO-19(2)(3) dated 14.06.2023 wherein the ITAT has restricted such addition to the 5% of such purchases. On the other hand, the ld. D.R supported the order of lower authorities.
Heard both the sides and perused the material on record. The assessing officer has received information from the DGIT (Investigation) that as per the Sales Tax Department the assessee has obtained accommodation entries of non-genuine purchases from the aforesaid 10 parties aggregating to Rs.75,69,320/-. The assessing officer has considered the profit element and estimated the income @ 12.5% of such genuine purchases. The ld. Counsel has brought to our notice that similar addition on identical facts in the case of the assessee has been adjudicated by the ITAT vide above referred order wherein the addition was restricted to 5% of non-genuine purchases. With the assistance of the ld. Representative we have perused the decision of ITAT in the case of the assessee itself pertaining to assessment year 2011-12 as referred above. The relevant operating part of the decision is reproduced as under:
“5. Heard the rival submissions and perused the material on record. Prima- facie the Ld. AR contentions are that the CIT(A) has erred in sustaining the addition @ 12.5% of the alleged bogus purchases irrespective of the fact that the assessee has submitted the details. The Ld. AR emphasized that the assessee has maintained books of accounts and referred to page No.44 of the paper book where Form.no. 3CD was enclosed and at page 52 of the paper book referred to the the quantitative details of stock of material was placed and the GP ratio @ 6.86%. Further, the Ld.AR submitted that the purchase transactions are duly supported with the details and estimating income on the said purchases is on the higher side. The Ld.AR relied on the decision of the coordinate bench of Honble Tribunal on the identical issue in the case of P a g e | Mafatlal Harakchandji Bothra Vs. ITO 19(2)(3) BabulalPunkhrajSanghviVs. ITO, in & 2557/Mum/2022 dated 19.12.2022 at Para 4 to 7 of the order read as under: 04. The only identical issue involved in both these appeals is challenging the profit estimation made on account of ingenuine purchases 05. We have heard the rival contentions and perused the materials available on recordThe assessee is an individual and proprietor of Nandishwar Steel, engaged in the trading in ferrous and non-ferrous metals. It is not in dispute that assessee during the year had made certain purchases from certain parties, who were treated as tainted parties by the Sales Tax Department, Government of Maharashtra. In the opinion of the learned Assessing Officer, though assessee had furnished the relevant documents in the form of purchase invoices, bank statements evidencing payments by account payee cheques, stock registers,address of the suppliers, sales made out of purchases made from tainted parties, still the assessee could not produce the proof of delivery of goods made by those tainted suppliers to the assessee the learned Assessing Officer also proceeded to make independent enquiries by issuing notice under Section 133(6) of the Act on this suppliers which returned unserved with remarks by the postal authorities stating either left, not traceable, not known, etc. Accordingly, assessee was confronted with these developments and thereafter, directed to produce parties for personal examination by the learned Assessing Officer, which was not complied with by the assessee. Since, the sales made by the assessee was not disputed by the learned Assessing Officer, the learned Assessing Officer thought it fit to bring to tax only the profit element embedded in the value of disputed purchases. This profit percentage was estimated by the learned Assessing Officer for A.Y2009-10 at 15% and for A. Y2010-11 at 12.5% On first appeal, the learned CIT (A) directed the learned Assessing Officer to estimate the profit percentage at 12.5% for both the years. Since, in the instant case sales made out of disputed purchases were not doubted by the Revenue, the only logical conclusion could be that assessee had made purchases in the grey market in order to have savings in indirect taxes and instantly, profit element thereon. Hence, it would be just and fair to bring to tax only the profit element embedded in the value of such disputed purchases. We find that this Tribunal has been consistently passing orders by estimating the profit percentage for assessee's engaged in iron and steel industry at 5% When this was put to learned Authorized Representative, he also fairly agree for estimation of profit at 5%. Accordingly, we estimate the profit element at the rate of 5% of disputed purchases, which in our considered opinion, would meet the ends of justice. Accordingly, the ground no. 2 raised for A. Y. 2009- 10 and ground no. 1 raised for A.Y. 2010-11 are partly allowed.
In the result, both the appeals of the assessee are partly allowed.
Whereas the facts in the present case, are similar and identical as discussed in the above judicial decision.Accordingly, fallow the judicial precedence and set-aside the order of the CIT(A) and direct the Assessing
P a g e | Mafatlal Harakchandji Bothra Vs. ITO 19(2)(3) officer to restrict the addition @5% of the non genuine purchases. And the grounds of appeal are partly allowed in favour of the assessee.”
Following the decision of coordinate bench as referred supra on identical facs and similar issue we direct the AO to restrict the disallowance to the extent of 5% of the purchases of Rs.75,64,320/-. Accordingly, the appeal of the assessee is partly allowed. 6. In the result, the appeal of the assesse is partly allowed. Order pronounced in the open court on 23.10.2023