THE ITO - 26(2)(1), MUMBAI vs. MR. NASIR ABDUL QUDDUS KHAN, MUMBAI

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

2.1. The only effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in restricting the profit element embedded in the value of bogus purchases to 12.5% as against 100% made by the ld. AO in the facts and circumstances of the instant case.

Sr. No. Particulars Amount 1 Balaji Trading 11,44,026/- 2 V M Udyog 16,03,838/- 3 Somnath International 2,88,106/- 4 Shradhha Trading 4,56,593/- 5 Saj Enterprises 5,51,349/- 6 Sun Enterprises 6,21,024/- TOTAL 46,64,936/- 3.1. This information was admittedly passed on to the ld.AO by the Sales Tax department of Government of Maharashtra through the DGIT (Investigation Wing) of Income Tax department, which triggered the reopening of assessment in the case of the assessee. In the re-assessment, the ld. AO observed that assessee could not prove the genuinity of the purchases made from the six parties as notices issued u/s.133(6) of the Act by the ld. AO were returned unserved. Accordingly, the ld. AO proceeded to disallow the entire value of purchases u/s.69C of the Act in the re- assessment. Before the ld. CIT(A), the assessee filed various evidences which were duly forwarded to the ld.AO vide letter dated 29/09/2016 seeking for a remand report. The assessee pleaded that all the payments were made to the aforesaid suppliers by account payee cheques through regular banking channels and from the purchase bills, input tax credit has been eventually availed by the assessee as per the tax invoice issued by the registered dealers and that all the transactions made from them are genuine and the purchases made from the aforesaid six parties were duly sold and without the purchases there cannot be corresponding sales. The assessee also furnished the GP ratio derived by it from A.Ys. 2008-09 to 2013-14. The assessee also furnished the entire VAT returns filed to the Government authorities together with VAT assessment order. The ld. CIT(A) however, observed that since those parties were classified as tainted dealers and that they had admitted on oath before the sales tax department that they had given accommodation entries without actually supplying the goods and since the assessee had made purchases from those parties, the genuineness of the transactions could not be conclusively proved by the assessee. However, the ld. CIT(A) observed that since the sales made by the assessee are not disputed and that without purchases there cannot be sales, only the profit element thereon, could be brought to tax. This profit element was estimated by the ld. CIT(A) @12.5% and accordingly, partial relief was granted to the assessee. We find that aggrieved by this order, the assessee is not in appeal before us and only Revenue is in appeal before us.

3.2. We find that this Tribunal in series of decisions has been estimating profit @5% for iron and steel industry and since assessee has not preferred any appeal against the order of the ld. CIT(A) before us, we uphold the order of the ld. CIT(A) estimating the profit element @12.5% by stating that the profit estimated by the ld. CIT(A) is already on the higher side and no further profit element is required to be added in the facts and circumstances of the instant case. Accordingly, the grounds raised by the Revenue are dismissed.