SALEM STEEL INDUSTRIES,MUMBAI vs. ITO 19 (3)(2), MUMBAI

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ITA 6230/MUM/2019Status: DisposedITAT Mumbai16 July 2021AY 2010-114 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found the estimation of profit at 12.5% to be on the higher side. It reduced the addition on account of bogus purchases to 7.5% of the unproved purchases, considering the general GP range for such trading.

What were the facts?

The Assessing Officer (AO) made an addition on account of suspicious purchases amounting to Rs. 61,922/-, estimating a profit margin of 12.5%. The assessee failed to prove the authenticity of the dealer and the purchases. The CIT(A) upheld the AO's order.

What were the issues?

Whether the profit estimation on bogus purchases made by the AO and upheld by the CIT(A) was justified, and if not, what should be the appropriate profit margin.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI VIKAS AWASTHY

Hearing: 03/05/2021Pronounced: 16/07/2021

M/s Salem Steel Industries 27/29, Sindhi Lane, Mumbai-400004 PAN: AAOFS8839D ...... अपीलाथ' /Appellant बनाम Vs. ITO-19(3)(2), Matru Mandir, Room No. 224, Tardeo Road, Mumbai-400007. ..... (ितवाद*/Respondent अपीलाथ' +ारा/ Appellant by : None (ितवाद* +ारा/Respondent by : Ms. Smita Verma सुनवाई क, ितिथ/ Date of hearing : 03/05/2021 घोषणा क, ितिथ/ Date of pronouncement : 16/07/2021 आदेश/ ORDER PER VIKAS AWASTHY, J.M: This appeal by assessee is directed against the order of Commissioner of Income Tax (Appeals)-30, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 10.08.2018 for the Assessment Year (AY) 2010-11.

2.

During the course of assessment proceedings, the Assessing Officer (AO) found that the assessee has obtained bogus purchase bills from M/s Siddhivinayak Corporation amounting to Rs. 61,922/-. Since, the assessee

आअसं. 6230/मुं/2019 (िन.व.2010-11) (A.Y.2010-11) failed to discharge its onus in proving authenticity of the dealer and the purchases made from the said dealer, the AO made addition by estimating profit margin at the rate of 12.5% on unproved purchases, the AO made addition of Rs. 77,404/- on account of suspicious purchases. Against the assessment order dated 04.03.2016, the assessee filed appeal before the CIT(A) interalia challenging the addition made on account of suspicious purchases. The CIT(A) upheld the assessment order and dismissed the appeal of assessee in toto. Hence, the present appeal by the assessee.

3.

Ms. Smita Verma representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative (DR) submitted that the assessee could neither produce the dealer nor any confirmation from the said dealer was furnished by the assessee. The name of dealer from whom the assessee had obtained accommodation bills figured in the list of hawala operators declared by the Sales Tax Department, Government of Maharashtra. Further, the assessee failed to furnish copies of lorry receipts, delivery challanes, transport bills, etc. to prove trail of goods. Therefore, the AO held the purchases made from suspicious dealer as bogus and made addition by estimating GP on such unproved purchases. The CIT(A) has upheld the same.

3. Submissions made by ld. DR heard, orders of authorities below examined. The assessee in appeal has challenged re-opening of assessment, in an alternate plea, the assessee has prayed for restricting the addition to the extent of GP declared by assessee i.e. 7.26%. The assessee had assailed re- opening of assessment before the CIT(A). The CIT(A) after examining the आअसं. 6230/मुं/2019 (िन.व.2010-11) (A.Y.2010-11)

submissions of assessee has upheld the validity of re-opening. No contrary material is available before the Tribunal to controvert the findings of CIT(A). Hence, ground no.1 to 3 of appeal are dismissed.

4.

In ground No.4 of appeal, the assessee has raised alternate contention assailing addition on bogus purchases confirmed by the CIT(A). The prayer of the assessee is to restrict GP on alleged unproved purchases to GP already declared by the assessee. Undisputedly, the assessee has failed to discharge its onus in proving genuineness of the dealer and the purchases made from the said dealer. The authorities below have estimated profit margin on unproved purchases at 12.5%. Generally, in trading of ferrous and non-ferrous metals, GP ranges between 5% to 8%. In my considered view, estimation of GP at 12.5% by AO/CIT(A) is on higher side. Taking into consideration entirety of facts, I deem it appropriate to restrict addition in respect of bogus purchases to 7.5%. The impugned order is modified, accordingly and ground no.4 of the appeal is partly allowed.

5.

In the result, appeal of the assessee is partly allowed.

Order pronounced in the open court on Friday, the 16th day of July, 2021.

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