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Income Tax Appellate Tribunal, “SMC” BENCH MUMBAI
Before: SHRI PAVAN KUMAR GADALE
आदेश / ORDER
PER PAVAN KUMAR GADALE - JM:
The appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC)/CIT(A), Delhi passed u/s 250 of the Act. The assessee has raised the following grounds of appeal:
1. That on facts and circumstances of the case and in law, adhoc estimated 12.5% disallowance made at Rs.2,77,932/- by Id.AO and upheld by IdCIT(Appeals), out of the trading purchases of Rs.22,23,456/- made from dealers alleged to be suspicious parties on only basis of information received from DGIT (Inv.), Mafatlal Harkchandji Bothra, Mumbai 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.
2. That the impugned disallowance made is also wrong on facts and in law for the reasons that the Idbelow 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.
2. The brief facts of the case are that, the assessee is engaged in the business as trader and supplier of Industrial Raw Material in Ferrous and Non-Ferrous Metal Items. The assessee has filed the return of income for the A.Y 2011-12 on 29.09.2011 disclosing a total income of Rs. 6,23,698/-. Subsequently, the Assessing Officer (AO) has received information from DGIT (Inv) that as per the sale department, the assessee has obtained accommodation entries of non- genuine purchases from three parties aggregating to Rs.22,23,456/- and is a beneficiary. The AO has reason to believe that the income has escaped assessment and issued notice u/s 143(2) and 142(1) of the Act along with questionnaire. In compliance to notice, the assessee has Mafatlal Harkchandji Bothra, Mumbai filed the details and substantiated the genuineness of the transactions. Whereas the AO has dealt on the facts and information at Para 3.1 to 3.2 of the order. Finally the AO has considered the profit element and has estimated the income@12.5% of non genuine purchases which worked out to Rs.2,77,932/-and assessed the total income of Rs. 9,01,630/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 29.11.2016.
3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the grounds of appeal, submissions of the assessee and findings of the AO but has confirmed the action of the AO and dismissed the assessee appeal. Aggrieved by the order the assessee has filed an appeal before the ITAT.
4. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the action of the AO irrespective of the fact that the assessee has submitted voluminous information before the lower authorities and the books of accounts are maintained and the payments have been made through the banking channel. The Ld.AR substantiated the submissions with the paper book and judicial decisions and prayed for allowing the assessee appeal. Contra, the Ld. DR submitted that the assessee has indulged in alleged bogus purchases and relied on the order of the CIT(A).
Mafatlal Harkchandji Bothra, Mumbai
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 Babulal Punkhraj Sanghvi Vs. 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.
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, Mafatlal Harkchandji Bothra, Mumbai 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.Y2010-11 are partly allowed.
In the result, both the appeals of the assessee are partly allowed. 6. Whereas the facts in the present case, are similar and identical as discussed in the above judicial decision.
Mafatlal Harkchandji Bothra, Mumbai Accordingly, fallow the judicial precedence and set-aside the order of the CIT(A) and direct the Assessing officer to restrict the addition @5% of the non genuine purchases. And the grounds of appeal are partly allowed in favour of the assessee.