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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. The captioned appeals filed by the assessee are directed against the order of the order of the Commissioner of Income Tax (Appeals)-6, Mumbai [in short ‘CIT(A)’] and arise out of the assessment completed u/s 143(3) r.w.s. 147 of the Income Tax Act 1961, (the ‘Act’).
Though the case was fixed for hearing on 13.01.2021 and 03.03.2021, neither the assessee nor its authorized representative appeared before the Bench on the above dates. As there is non-compliance by the assessee, we are & 5166/M/2019 2 M/s Nobel Impex proceeding to dispose off this appeal after examining the materials available on record and after hearing the Ld. Departmental Representative (DR). Facts being identical, we begin with the assessment year (AY) 2010-11.
The grounds of appeal
filed by the assessee read as under:
1. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in upholding the assessment where the Assessing Officer has added 12.5% of the alleged bogus purchases to the income of the appellant.
2. The Ld. CIT(A) failed to appreciate that the appellant was not given any document or statement of the parties investigated by the Sales Tax Department stating the name of the appellant has benefitted from bogus entries.
3. The Ld. CIT(A) failed to appreciate that the G.P. ratio of the appellant becomes unreasonable as compared to the persons engaged in similar business and appellant’s own business for earlier and subsequent years.
3. Briefly stated, the facts of the case are that the assessee filed its return of income for the AY 2010-11 on 12.10.2010 declaring total income of Rs.9,20,520/-. The return was processed u/s 143(1) of the Act. On receipt of information from the Sales Tax Department, Government of Maharashtra that the assessee had obtained accommodation entries from Shree Sundha Steels Pvt. Ltd. of Rs.39,96,252/- and Roopam Impex of Rs.7,40,200/-, the Assessing Officer (AO) re-opened the assessment by issuing notice u/s 148 of the Act. In response to it, the assessee submitted that the return filed on 12.10.2010 be treated as return filed u/s 148 of the Act. During the course of re-assessment proceedings, the AO issued notice u/s 133(6) to the above two parties to verify the genuineness of the purchases. Though the notices were sent by registered post in the address given by the assessee, those were returned back un-served by the postal authorities with the remarks ‘not known’ or ‘no such address’ or & 5166/M/2019 3 M/s Nobel Impex ‘left’ etc. In response to a query raised by the AO, the assessee filed copies of ledger accounts along with purchase invoices of the said parties ; copies of bank statements; details in respect of purchases from the above parties and the corresponding sales. However, the AO was not convinced with the above submission of the assessee inter alia on the ground that the assessee could not file important documents such as delivery challans, transport receipts, octroi receipts, receipts of weighbridge, excise gate pass, goods inward register. Further observing that only the profit embedded in such disputed purchases be brought to tax, the AO relying on the judgment of the Hon’ble Gujarat High Court in the case of CIT v. Simit P. Sheth (2013) 356 ITR 451 (Guj) estimated the profit @ 12.5% of the disputed purchases of Rs.47,36,452/- which comes to Rs.5,92,057/-.
4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that vide order dated 29.05.2019, the Ld. CIT(A) confirmed the disallowance of Rs.5,92,057/- made by the AO by observing that :
“5.3.8 The facts of the present case are exactly similar to the case of CIT vs. Simit P. Sheth (supra). The appellant made purchases from two parties who are said to be hawala operators, who are indulged in providing bogus bills without supply of any material. Under these circumstances, as the appellant could not prove his claim of purchases debited to the profit & loss account, there is no other way to the AO, but to estimate the profit element embedded on such purchases. As stated earlier, the facts of the present case are exactly similar to the cited case and respectfully following the above cited decision, the action of the AO in estimating the addition @12.5% on the total purchases from the two parties is confirmed.”
Before us, the Ld. DR supports the order passed by the Ld. CIT(A). & 5166/M/2019 4 M/s Nobel Impex We have heard the Ld. DR and perused the relevant materials on record. The nature of business of the assessee is trading in ferrous and non-ferrous metals. In the instant case, the notices u/s 133(6) sent by the AO by registered post to the suspected parties in the address given by the assessee were returned un-served by the postal authorities with the remarks ‘not known’ or ‘no such address’ or ‘left’. Further, though the assessee was asked by the AO to produce the said parties for examination, he failed to do so. The assessee also could not produce before the AO evidence like delivery challans, transport receipts, octroi receipts.
The nature of business of the assessee is trading in ferrous and non- ferrous metals. We are of the considered view that in the facts and circumstances of the case, the profit be estimated @ 6% of the disputed purchases. Accordingly, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to estimate the profit @ 6% on the disputed purchases of Rs.47,36,452/-.
Facts being identical, our above decision for AY 2010-11 applies mutatis mutandis to AY 2011-12.
In the result, the appeals are partly allowed.
Order pronounced in the open Court on 05/03/2021.