QUARTER THERMAL ENGG. P. LTD.,MUMBAI vs. ASSTT. CIT - 8(1)(2), MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M):

M/s. Quarter Thermal Engg. Pvt. Ltd.,

5.1. We have heard rival submissions and perused the materials available on record. The assessee company is engaged in the business of M/s. Quarter Thermal Engg. Pvt. Ltd., manufacturing industrial furnaces and accessories and had filed its return of income for the A.Y.2011-12 on 30/09/2011 declaring total income of Rs.13,65,212/-. This return was duly processed u/s.143(1) of the Act. Later based on the information gathered by the Income Tax department that assessee had made certain purchases of Rs.8,89,868/- from two entities whose names appear to be tainted dealers in the website of Sales Tax department, Government of Maharashtra and the information also revealed that those entities were engaged in the business of providing accommodation entries and accordingly, the assessee had made bogus purchases which requires to be disallowed in the hands of the assessee. For this purpose, the case of the assessee was reopened by issue of notice u/s,148 of the Act.

5.2. We find that assessee had made purchases of Rs.2,29,995/- from Abhi Sales Agency Pvt. Ltd., and Rs.6,59,873/- from M/s. Ansa Sales Agency Pvt. Ltd., totaling to Rs.8,89,868/-, During the course of re- assessment proceedings, the ld. AO directed the assessee to prove the veracity of purchases made from the aforesaid two parties. In response, the assessee furnished the complete details of the said suppliers together with the name and their address, bank statements evidencing the payments made to them by account payee cheques, invoices issued by the concerned suppliers, quantitative details such as opening stock, purchases, consumption and closing stock of raw materials and production of each of the finished goods, closing stock of finished goods, TIN and PAN of the concerned suppliers, delivery challans relating to transportation and receipt of goods from the concerned suppliers before the ld. AO. The ld. AO however, ignored all the contentions of the assessee and proceeded to make 100% value of purchases as bogus and M/s. Quarter Thermal Engg. Pvt. Ltd., disallowed the same in the assessment. This action was upheld by the ld. CIT(A).

5.3. We find that though the assessee appeared to have made purchases from two tainted dealers as detailed supra, those purchases have been duly recorded in the stock register maintained by the assessee which has been submitted before the lower authorities. These materials have been duly consumed by the assessee in the manufacturing process. Pursuant to the said consumption, the finished product has been produced and sale of those finished goods have also been made by the assessee in the instant case. We find that the ld. AO had absolutely not disputed the quantitative details submitted by the assessee in respect of opening stock purchases, consumption, closing stock of raw materials and production of finished goods, sale of finished goods and closing stock of finished goods while completing the assessment. We also find that the consumption details and sales reported by the assessee have been accepted by the lower authorities. Hence, it would be totally unfair to add 100% value of purchases. However, the assessee could not prove the genuineness of the purchases beyond reasonable doubt by producing those suppliers before the ld. AO. In these type of cases, it would be just and fair that only the profit element embedded in the value of such tainted purchases be brought to tax. But we find from page 43 of the paper book filed by the assessee containing GP chart that assessee had reported the following GP in the past years as under:-

A.Y. GP% 2007-08 18.99% 2008-09 18.21% 2009-10 18.63%

M/s. Quarter Thermal Engg. Pvt. Ltd., 2010-11 15.92% 2011-12 18.06% 5.4. We find that this Tribunal has been consistently holding that profit percentage of 12.5% on the value of disputed purchases would meet the ends of justice. Since in the instant case, the profit declared by the assessee itself is much more than 12.5%, we hold that no further addition is required to be made in the peculiar facts and circumstances of the instant case. Accordingly, we direct the ld. AO to delete the disallowance of Rs.8,89,868/- made on account of bogus purchases. Accordingly, the ground No.3 raised by the assessee is allowed.

Order pronounced on 14/07 /2022 by way of proper mentioning in the notice board.