What did the Tribunal hold?

The Tribunal, following its own order for the immediately succeeding assessment year, directed the Assessing Officer to restrict the disallowance to 8% of the purchases.

The assessee appealed against the disallowance of 12.5% of bogus purchases. The assessee argued that for a prior assessment year, the Tribunal had estimated the profit element on bogus purchases at 8%.

What were the issues?

Whether the profit element on bogus purchases should be estimated at 8% based on a prior year's order.

Rajasthan Metal Syndicate vs ITO | ITAT Mumbai 2020

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

Before: SHRI C.N. PRASAD, HONBLE & SHRI RAJESH KUMAR, HONBLE

For Appellant: Shri N.K. Bhuta

For Respondent: Shri R. Bhoopathi

Hearing: 10.02.2020Pronounced: 29.09.2020

O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals) – 41, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 31.12.2018 for the Assessment Year 2010-11.

(A.Y: 2010-11) M/s. Rajasthan Metal Syndicate 2. The only issue in the appeal of the assessee is that the Ld.CIT(A) erred in sustaining the disallowance made by the Assessing Officer in respect of bogus purchases to the extent of 12.5%.

At the time of hearing, Learned Counsel for the assessee submitted that the Tribunal in ITA.No. 2004/Mum/2018 dated 15.11.2018 for the A.Y. 2011-12 estimated the profit element from alleged purchases at 8%. Ld. Counsel for the assessee requested that same percentage may be applied for this year also.

Ld. DR vehemently supported the orders of the authorities below.

We have heard the rival submissions, perused the orders of the authorities below. The Tribunal for the immediately succeeding assessment year i.e. A.Y. 2011-12, estimated the profit element on bogus purchases at 8% observing as under: - “5. I have considered the issue and gone through the facts and circumstances of the case. I find from the facts of the case and argument of both the sides that the CIT(A) has confirmed the profit rate at the rate of 12.5%, which according to me is on higher side going by the nature of business of the assessee i.e. Ferrous and Non- Ferrous Metal. I am in full agreement with the contentions raised by the assessee before CIT(A) and according to me a profit rate of 12.5% is on higher side as assessee has also paid the VAT element on these bogus purchases, a further deduction in estimation of profit to the extent of 4.5% can be allowed. Hence, I direct the AO to recompute the income after applying profit rate at the rate of 8% and compute the income accordingly. The appeal of the assessee is partly allowed.”

(A.Y: 2010-11) M/s. Rajasthan Metal Syndicate 6. Following the said order, we direct the Assessing Officer to restrict the disallowance to 8% of the purchases.

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

Before parting, we noticed that this appeal was heard on 10.02.2020 and the pronouncement is delayed due to lockdown in view of COVID-19 pandemic. The pronouncement is as per Rule 34(5) of Income Tax Appellate Tribunal Rules, 1963 and Hon'ble Bombay High Court decision vide orders dated 15.04.2020 and 15.06.2020 extending the time bound periods specified by Hon'ble High Court by removing the period under lockdown. This aspect was also dealt with in detail by the Mumbai Bench of the Tribunal in case of DCIT v. JSW Steel Vide order dated 14.05.2020 in ITA.No. 6264/Mum/2018.

Order pronounced on 29.2020 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.

RAJASTHAN METAL SYNDICATE,MUMBAI vs. INCOME TAX OFFICER 30(3)(1), MUMBAI

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