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Income Tax Appellate Tribunal, VIRTUAL COURT
आदेश / O R D E R PER M. BALAGANESH (A.M):
These cross appeals in for A.Y.2011-12 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-25, Mumbai in appeal No.CIT(A)- 25/IT-363/14-15 dated 13/02/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/03/2014 by the ld. Jt. Commissioner of Income Tax, Range 22(2), Mumbai (hereinafter referred to as ld. AO).
The only effective issue to be decided in this appeal is with regard to disallowance made on account of bogus purchases.
We have heard rival submissions and perused the materials available on record. We find that assessee is a partnership firm engaged in civil contracting business. The return of income for the A.Y.2011-12 was filed on 29/09/2011 declaring total income of Rs.1,11,74,693/-. It is not in dispute that assessee had made purchases from four parties listed in page 2 of the assessment order whose names appear to be tainted dealers as per the website of Sales Tax department of Government of Maharashtra. The total purchases made by the assessee from those four parties amounted to Rs.62,81,676/-. The ld. AO based on the information gathered from Sales Tax department and which was eventually passed on to him through the office of DGIT Investigation, Mumbai, rejected all the 7215/Mum/2018 M/s. Poonam Enterprises contentions raised on behalf of the assessee and proceeded to disallow the entire purchases of Rs.62,81,676/- u/s.37(1) of the Act. The ld. AO however, did not dispute the sales made out of such tainted purchases. The main reason for the disallowance was that though the assessee had produced all the relevant documents before him, the ld. AO observed that assessee could not produce the above parties physically before him for examination. The ld. CIT(A) however, observed that assessee produced the ledger extracts of all the parties thereby stating that all the payments to these parties were made through account payee cheques. The ld. CIT(A) also observed that relevant bills were also filed by the assessee. The ld. CIT(A) observed that the entire disallowance was made merely based on the information received from sales tax authorities without carrying on further independent investigation. He held that the entire purchases cannot be held to be bogus in the instant case. Since, the sales made out of corresponding purchases has not been disputed by the ld. AO by placing reliance on the decision of the Gujarat High Court in the case of Simit P Sheth reported in 356 ITR 451, he resorted to estimate the profit element embedded in such purchases @25% and gave partial relief to the assessee.
Aggrieved by this order, the assessee is in appeal before us for deletion of 25% addition confirmed by the ld. CIT(A) and the Revenue is in appeal for deletion of 75% of the addition by the ld. CIT(A).
At the outset, we find that there is a delay of 609 days in filing of appeal by the assessee. On going though the affidavit filed by the partner of the assessee firm and on hearing the ld. Counsel for the assessee as well as the assessee partner who was also present at the time of hearing, we are not convinced with the reasoning given in the affidavit by the 7215/Mum/2018 M/s. Poonam Enterprises partner of the firm. The affidavit is reproduced for the sake of convenience.
7215/Mum/2018 M/s. Poonam Enterprises 5.1. From the reading of the aforesaid affidavit, we find that admittedly the assessee had reposed faith on Mr Bhalekar , erstwhile consultant of assessee, who had advised assessee not to prefer further appeal. But in that scenario, an affidavit from Mr Bhalekar should have been brought on 7215/Mum/2018 M/s. Poonam Enterprises record. When this was put to assessee’s counsel and the partner of the firm, they expressed their inability to furnish the same. In these circumstances and for the reasons stated in the affidavit, we are not inclined to condone the delay of 609 days in filing of appeal of the assessee and accordingly, we hold that appeal of the assessee is dismissed as unadmitted and not maintainable.
The only issue involved in revenue appeal is relief granted by the ld. CIT(A) to the extent of 75% to the value of total purchases. We find that the sales is not disputed by the ld. AO. The break-up of sales is given in page 7 of the paper book. We find that the gross profit declared by the assessee is 13.98%. The workings of which are enclosed in page 13 of the paper book. Hence, we find that assessee had made purchases from the grey market in order to have saving in indirect taxes and incidental profit element thereon together with cash discounts. The ld. CIT(A) had estimated the said profit element to be at 25%. Since assessee appeal has already been dismissed as not maintainable, though we find that profit percentage estimated by the ld. CIT(A) at 25% to be excessive, we are not inclined to interfere in the said order. Accordingly, the grounds raised by the Revenue are dismissed.
7215/Mum/2018 M/s. Poonam Enterprises
In the result, appeal of the assessee is dismissed and appeal of the Revenue is dismissed.
Order pronounced on 24/03/2021 by way of proper mentioning in the notice board.