SUNSERVICES FORKLIFTS PARTS P.LTD,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,, PUNE

आयकर अपीलीय अिधकरण “ए” �यायपीठ पुणे म� । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE �ी डी. क�णाकरा राव, लेखा सद�य एवं �ी िवकास अव�थी, �याियक सद�य के सम� BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM आयकर अपील सं. / ITA No.748/PUN/2017 िनधा�रण वष� / Assessment Year : 2010-11 Sunservices Forklifts Parts P. Ltd., S-50, S-Block, MIDC, Bhosari, Pune-411026. .......अपीलाथ� / Appellant PAN : AALCS8518H बनाम / V/s. DCIT, Circle-10, ……��यथ� / Respondent Pune. Assessee by : Shri Subhash Chhajed Revenue by : Shri S. P. Walimbe सुनवाई क� तारीख / Date of Hearing : 19.11.2019 घोषणा क� तारीख / Date of Pronouncement : 21.11.2019 आदेश / ORDER PER D. KARUNAKARA RAO, AM: This appeal is filed by the assessee against the order of CIT(A)-9, Pune dated 30.12.2016 for the Assessment Year 2010-11. 2. The grounds raised by the assessee are as under :- “1. On the facts and in the circumstances of the case and in law, the re- opening proceedings initiated by issuance of notice u/s 148 of the act invalid and bad in law. 2. On the facts and in the circumstances of the case and in law, the assessment order passed u/s 143(3) r.w.s. 147 of the act is invalid and bad in law. 3. On the facts and in the circumstances of the case and in law, the learned C.I.T.(A) erred in dismissing the appeal. 4. On the facts and in the circumstances of the case and in law, the learned C.I.T.(A) erred in upholding the action of the learned A.O. in making an addition of Rs.26,28,592/- as ‘Addition on account of bogus purchases’.

2 ITA No.748/PUN/2017 5. On the facts and in the circumstances of the case and in law, the learned C.I.T.(A) erred in dismissing the ground of appeal pertaining to the charging of interest u/s 234B and 234C of the act. The Appellant craves leave to add, alter, amend or delete any or all of the grounds of appeal at any time.” 3. Before us, at the outset, ld. Counsel for the assessee demonstrated that this is a case of bogus purchases where the trail of goods were demonstrated. Further, bringing our attention to the orders of the Assessing Officer and the CIT(A), ld. Counsel for the assessee submitted that both the officers i.e. Assessing Officer and CIT(A) resorted to make the addition of Rs.26,28,592/- i.e. entire such purchases for the assessment year 2010-11. 4. In this background, ld. Counsel mentioned that in this case the decision of the Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. and others Vs. DCIT in ITA No.795/PUN/2014, relating to assessment year 2010-11, decided on 28-04-2017 should apply and the disallowance should be restricted only @ 10% of the bogus purchases. 5. The ld. DR for the Revenue, on the other hand, relied heavily on the orders of the Assessing Officer and the CIT(A). 6. On hearing both the parties, we find this is a case of bogus purchases reassessed by reopening the completed assessment. The assessee raised the issue of violation to the principle of natural justice raised in the grounds on the basis of “change of opinion”. Deviating from the above legal issue, referring to the merits of addition, the assessee relied heavily on the order of the Co-ordinate Bench of the Tribunal in

3 ITA No.748/PUN/2017 the case of M/s. Chhabi Electricals Pvt. Ltd. and others (supra). The assessee pleaded for restricting the disallowance @ 10% of the bogus purchases. Meanwhile, we find the Jurisdictional High Court has decided similar issue in the case of Pr.CIT vs. M/s. Mohommad Haji Adam & Co. vide Income Tax Appeal No.1004 of 2016 dated 11.02.2019. In para 8 of this judgement (supra), we find the Hon’ble Jurisdictional High Court dismissed the appeals filed by the Revenue with the following observations :- “8. In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. I (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- “ So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66 %. Therefore, considering 5.66 % of Rs.3,70,78,125/- which comes to Rs.20,98,621.88 we think it fit to direct the revenue to add Rs.20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue.”

4 ITA No.748/PUN/2017

5 ITA No.748/PUN/2017 the issue under consideration should also be remanded to the file of the Assessing Officer with similar direction as given in para 4 of the order of the Tribunal (supra). The Assessing Officer is also directed to examine the arguments relating to the change of opinion while passing a speaking order on technical ground after granting reasonable opportunity of being heard to the assessee. Accordingly, the issues raised by the assessee on legal as well as on merits are allowed for statistical purposes. 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 21st day of November, 2019. Sd/- Sd/- (िवकास अव�थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 21st November, 2019. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A)-9, Pune. 4. The Pr. CIT-5, Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.