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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, VP & SHRI S. RIFAUR RAHMAN, AM
O R D E R भहावीय स िंह, उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP: These appeals of the Revenue are arising out of orders of the Commissioner of Income Tax (Appeals)]-12, Mumbai [in short CIT(A)], in Appeal Nos. CIT(A)-12/DCIT-6(3)(1)/367/16-17 & CIT(A)- 12/DCIT-6(3)(1)/B2-393/16-17 vide dated 17.07.2019 & 27.08.2019. The Assessments were framed by the Dy. Commissioner of Income
2. The only issue in these appeals of Revenue is as regards to the order of CIT(A) in restricting the disallowance of bogus purchases to the extent of profit rate of 12.5% rather than confirming the action of the Assessing Officer in assessing the whole of such purchases as income amounting to Rs.6,13,408. Facts and circumstances are exactly identical in both appeals for AYs 2009-10 and 2011-12. For the sake of convenience, we will take the facts from Assessment Year 09-10 and deal with the matter. For this, Revenue has raised the various argumentative grounds.
We have heard the learned Sr. DR and gone through the facts and circumstances of the case. We noted that the assessee is engaged in manufacturing of billets, hot rolls/ Bars, wire rods and also manufacturing the same on job work basis for others. The Assessing Officer received information from Investigation Wing and Sales Tax Department of Maharashtra that the assessee has obtained accommodation bills in respect of purchases made from hawala concerns amounting to Rs.6,13,408/- during the year under consideration from the following parties:-
Sr. Name of Hawala Concerns Amount No 1. Mahavir Traders 6,13,408/-
5. The CIT(A) after considering the submissions of the assessee and considering the documentary evidences like copy of purchase, invoices, ledger account of parties, stock register and also the bank statement showing each and every payment for the purchases, treated that this purchases may be bogus but Revenue could not prove that sales are not affected out of these purchases. Whereas, assessee has produced sale bills also. The CIT(A) observed that simply on account of information, the Assessing Officer cannot made 100% of addition on non genuineness purchases. Accordingly, he estimated the profit rate at 12.5% considering the case laws of Hon’ble Guwahati High Court in the case of CIT vs. Smith P Seth 356 ITR 451 by observing in Para 3.2 to 3.4 as under:-
“3.2 I have considered the assessment orders and the submissions of the appellant including the case laws cited. The Assessing Officer held in the assessment order that the appellant produced the details with regard to purchase made. Assessee also filed copies of purchase invoices, ledger account of parties, stock register and also the bank statement showing each and every payment for purchases. It is noticed that on account of non-production of suppliers and brokers, transportation bills etc. the Assessing Officer added 100% as non genuine purchases. It is seen that
Salim Ebrahim Petiwala v/s. ITO 17(3)(2) ITA No. 4772/Mum/2017
Tubes India V/s. Asst. CIT circle 19(3) to 2232/Mum/2016.
3. the ACIT 19(2) V/s. M/s. Nocil Steels Ita No. 4505/Mum/2015
Satish R. Rathod V/s. ITO 15(3)(1) ITA No. 567/Mum/2016
vinod H. Sanghvi V/s. DCIT 15(2) (Old) to 127/Mum/2016.
M/s. Pentagon System and Services P. Ltd. V/s. DCIT (S) Cir 2(3) ITA No.4804/Mum/2015.
Montex Glass Fibre V/s. DCIT 2(2) ITA No. 1520/mum/2017
R.A. Industrial Metals V/s. ITO 14(1)(1) ITA No. 1850/Mum/2015
Mehul K. Mehta V/s. ITO 15(1)(3) ITA No. 3227/mum/2015.
Nangalia Fabrics P. Ltd. 40 taxmann.com 206 (Guj)
PCIT vs. Tejua Rohitkumar Kapadia SLP NO. 12670/2018 (SC)
Further, this is also not case in which the signed blank cheque books are found with the buyer to hold that the purchases of material were not at all made but entered in the stock to inflate the raw material. Therefore, the decision of the Supreme Court in the case of NK Proteins Ltd. 250 taxman 0022(SC) would not apply to the case. Therefore, the saving on account of VAT and other incidential charges made by the appellant on the said bogus purchases can be brought to tax as additional profit. In the case of CIT vs. Simit P. Sheth, 356 ITR 451, Hon’ble Gujarat High Court has upheld estimation@12.5% of alleged bogus purchases by holding as High Court has If the payments to be abovementioned parties are made thorough cheque and the subsequent sales made have been accepted in total by the assessing officer, then it can be concluded that purchases have been made form persons in the open market. That being the position, not the entire purchase price but only profit element embedded in such purchases can be added to the income of the assessee.
3.4 Keeping in view the totality of facts and circumstances of the case, the disallowance made by the Assessing Officer is restricted to 12.5% of such purchases. Therefore, the Assessing Officer is directed add 12.5% of Rs.6,13,408 working out to Rs.76,676 and modify the addition accordingly. Appellant gets part relief. This ground is partly allowed.”
Aggrieved, now Revenue is in appeal before Tribunal.
6. We have considered the submissions of learned CIT DR and gone through the assessment order and the order of the CIT(A). Before us, the learned CIT DR could not point out any infirmity in the order of CIT(A), particularly assessee has filed copies of invoices, ledger account of parties, stock register and bank statement showing each and every payment of purchases. Once, these documents are not controverted, the CIT(A) has rightly estimated the profit rate at the rate of 12.5% on such purchase. We find no infirmity in the order