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Income Tax Appellate Tribunal, ‘B’ BENCH, KOLKATA
Before: Shri J. Sudhakar Reddy & Shri A.T. Varkey
Per Shri J. Sudhakar Reddy, Accountant Member:- This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-14, Kolkata dated 21.01.2020 passed under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the assessment year 2011-12.
At the outset, there is a delay of 82 days on the part of the assessee in filing this appeal before the Tribunal. In this regard, the partner of the assessee-company has filed an application seeking condonation of the said delay stating that it was not due to any malafide intention or Assessment Year: 2011-2012 Ganga Udyog Limited negligence on the part of the assessee. He also submitted that due to the prevailing Covid-19 Pandemic situation, the offices of the assessee as well as the Government were not functioning, which was the cause of delay. We are satisfied that there was a sufficient cause for the delay on the part of the assessee in filing this appeal before the Tribunal. Even the ld. D.R. has not raised any objection in this regard. We, therefore, condone the said delay and proceed to dispose of the appeal of the assessee on merit.
The assessee is a partnership firm which derives income from business and profession. It filed its return of income on 25.04.2018 disclosing total income of Rs.72,130/-. The case was reopened under section 148 of the Act, thereafter the assessment was completed under section 143(3) read with section 147 of the Act on 11.12.2018 determining the total income of the assessee at Rs.9,27,120/-, inter alia, making addition of Rs.8,54,993/- on account of bogus purchases. The assessee carried the matter in appeal before the ld. CIT(Appeals), wherein the ld. CIT(Appeals) restricted the addition to Rs.1,96,477/- by observing in last para of his impugned order dated 21.01.2020 as under:- “Therefore, after considering the factual matrix of the case, it appears that the AO in the assessment order had treated the entire alleged purchase as bogus but has not rejected the books of account which is essentially means that he has accepted the sales. Under such circumstances, the Hon’ble Courts have taken a view that the entire unverified purchases are not rendered vulnerable for addition, only the element of profit embedded from such purchase should be considered for addition. The appellant had disclosed a GP of 22.98% for the AY 2011-12. Therefore, it would be reasonable to limit undisclosed profit embedded in the bogus purchase to 22.98% at Rs.1,96,477/-. The addition of Rs.8,54,993/- is restricted to Rs.1,96,477/-. This ground of appeal partly succeeds and is therefore partly allowed”.
Assessment Year: 2011-2012 Ganga Udyog Limited Aggrieved by the order of the ld. CIT(Appeals), the assessee is in further appeal before us.
4. The sole submission of the assessee is that the disallowance cannot be made on the basis of the statement recorded from Shri Sanjiv Kumar Singh without confronting the assessee with copy of the same and without providing any opportunity to the assessee to cross examine the witness of the revenue. He relied on the order of the ‘A(SMC)’’ Bench of this Tribunal dated 20.12.2019 in the case of Howrah Shackle Centre –vs.- ITO in for AY 2011-12 & ITA No. 1616/KOL/2019 for AY 2012-13, wherein the addition made on the basis of the statement recorded behind back of the assessee from the same Shri Sanjiv Kumar Singh and without giving any opportunity to cross examine by the Pr. DIT (Inv.), Kolkata, was deleted and prayed that the addition be deleted.
Alternatively it was submitted by the ld. Counsel for the assessee that the percentage adopted by the ld. Pr. CIT was highly excessive and as the assessee’s turnover is less than Rs.40 lakhs and therefore the net profit should be considered at 8%. Even going by the gross profit as declared in the profit & loss account for the year ended 31.03.2011 the net profit is 10.04%.
The ld. D.R. opposed the contention of the ld. Counsel for the assessee and relied on the order of the ld. CIT(Appeals).
After carefully considering the rival submissions and also perusing the relevant material available on record, we accept the alternative contention of the assessee. The ld. CIT(Appeals) in the last para of his order dated 21.01.2020 has directed the Assessing Officer to estimate the gross profit on the alleged bogus purchases @ 22.98%. After considering the facts of the case, we restrict the addition at the rate of 10% of Assessment Year: 2011-2012 Ganga Udyog Limited Rs.8,54,994/-, which comes to Rs.85,499/-. Thus the assessee gets part relief.
In the result, the appeal of the assessee is allowed in part. Order pronounced in the open Court on April 12, 2021.