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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM
O R D E R
Per Amit Shukla, Judicial Member:
The aforesaid appeal has been filed by the assessee against impugned order dated 23.05.2019, passed by Ld. CIT(A)-30, Mumbai for the quantum of assessment passed u/s 143(3) r.w.s. 147 for AY 2019-20.
M/s Mahalaxmi International 2. In various grounds of appeal, the assessee has challenged the impugned appellate order passed by Ld. CIT(A) for enhancing the addition of purchases by 100% instead of 12.5% made by the AO after applying GP rate on alleged bogus purchases at Rs. 94,22,199/-.
The facts in brief are that, the assessee is a firm, engaged in the business of reseller in Ferrous and non-Ferrous metals. The return of income was filed on 30.09.2011 at Rs. 6,59,860/- which was duly processed u/s 143(1). Thereafter, the case was reopened u/s 147 by issuance of notice u/s 148 on 22.03.2016 on the ground that information was received from DGIT (Inv), Mumbai based on information received from Sales Tax Department, Maharashtra with respect to some of the dealers indulged in providing accommodation entry by issuing bogus sale/purchase bills without supplying any goods. The assessee was also part of the beneficiary of the purchases made from such dealers. The AO also noted that barring ledger account and onward purchases made through cheques, the assessee has failed to file such delivery challans, transportation details, lorry receipts, etc. Thus, he treated M/s Mahalaxmi International the purchases as non-genuine and accordingly, rejected the books of account and held that 12.5% of the purchases amount of Rs. 94,22,199/- should be added which worked out to Rs. 11,77,775/-.
Ld. CIT(A) enhanced the addition and held that the entire purchases aggregating to Rs. 94,22,199/- should be added for the reason that, firstly, notice u/s 133(6) issued by the AO to the parties from whom purchases have been made, returned ‘un- served’; secondly, there was failure to produce the parties from whom purchases were made; and lastly, vital documents like delivery challan, transportation receipts, the goods inward register maintained at the godown were not furnished. Ld. CIT (A) has tried to distinguish the judgment of Hon’ble Bombay High Court in the case of Mohd. Haji Adam and Company in of 2016 order dated 11.02.2019.
After hearing both the parties and on perusal of the findings given in the impugned order as well as material referred before me and on perusal of the record which has been produced in the form of paper book, it is seen that assessee had made purchases from the following parties:-
M/s Mahalaxmi International NAMES AMI 1 NISHA ENTERPRISES 1,358,831.00 2 REAL TRADERS 2,389,017.00 3 DARSHAN SALES CORPORATION 796,728.00 4 KRASNA ENTERPRISES 817,300.00 5 ANSHU MERCANTILE PVT LTD 593,623.00 6 AMAR ENTERPRISES 665,313.00 7 POOJA METAL & ALLOYS 1,110,213.00 8 SIDDHIVINAYAK CORPORATION 1,691,174.00 Total 9,422,199.00 6. During the course of assessment proceedings, assessee had submitted the copy of ledger account and the bank statements and not only that, also produced the copy of ledger account of the corresponding sales which has been duly recorded in the books of accounts and both the purchases and sales forming the part of trading account and duly verified from the books and the transactions have been done through banking channel. The only reason given by the AO was that, firstly, the notice issued u/s 133(6) remained unserved and assessee could not produce the evidence for delivery of goods, transportation receipts, etc. Accordingly, he held that assessee has purchased the goods from M/s Mahalaxmi International these alleged suspicious dealers to deflate the profits and applied GP rate 12.5% by following the certain decisions.
Based on same material, Ld. CIT (A) has enhanced the addition by treating the entire purchases as income of the assessee. Nowhere, Ld. CIT (A) has given any finding that purchases were made outside the books and there are no corresponding sales of the purchased quantity. Once the source of purchases have been shown from the books of accounts and there is corresponding sales of the same purchased quantity, then adding the entire purchases is not justified. Neither there is any material or finding on record that the purchase quantity and sale quantity are mismatched or there sales are outside books or there was huge suppression of gross profit. Once there is no discrepancy between the quantity of purchases shown in the books of account and the corresponding sales declared, the entire purchases cannot be added without distributing the sales. If purchases shown in the books of account and the payment made are reflected in the books of the account it cannot be added as unexplained. Simply because the purchases were not open to verification by the parties from whom purchases M/s Mahalaxmi International were made or assessee could not produce the delivery of such goods, that itself do not lead to conclusion that the entire purchase quantity is bogus or outside the books once the corresponding sales is matching with the purchases. Even if it is presumed the assessee had given the cheques to these parties and whatever received cash back for making the purchases from grey market, this can only be inferred that assessee is trying to suppress the profits. Under this situation, the only way is to calculate the suppressed profit or add GP on such purchases which AO has done @ 12.5% despite assessee has declared GP rate of 6%. The same proposition has been upheld by Hon’ble Bombay High Court in the case of Mohd. Haji Adms & Co. (supra). Accordingly, the addition made by the AO at Rs. 11,27,000/- is confirmed and enhancement of Ld. CIT(A) is deleted.
In the result, the appeal filed by the assessee stands partly allowed.