NELCO STEEL (PROP NEMICHAND KALUCHANJI SHAH),MUMBAI vs. CIT, APPEAL-52, MUMBAI

आदेश / O R D E R भहावीय स िंह, उऩाध्मक्ष / PER MAHAVIR SINGH, VP: This appeal of assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-52, Mumbai, [in short CIT(A)], in ITA No/Nos. CIT(A)-52/IT-228/ITO-19(2)(4)/17-18 dated 31.10.2018. The assessment was framed by the Income Nelco Steel Page | 2 Tax Officer, Ward 19(2)(4) (in short ACIT/ITO/ AO) for the A.Y. 2010-11 vide order dated 29.01.2016 under section 143(3) read with Sec. 147 of the Income-tax Act, 1961 (hereinafter ‘the Act’).

(c) The CIT(A) erred in partly confirming the addition without any evidence found which shows any cash activity undergone by the appellant.

(d) the Ld. CIT(A) has erred in holding the impugned purchases to be bogus, in spite of voluminous evidences on record simply on the basis that the current addresses of vendors were not provided and the vendors were not produced before the Respondent.

(e) The appellant prays that the addition/ disallowance made in respect of Alleged purchases be deleted.”

Nelco Steel Page | 5 The assessee also submitted the details of purchases made from the above parties and corresponding sales but the Assessing Officer required the assessee to file delivery challans, transport receipts, octroi receipt for payment of octroi duty, receipt of weighbridge for weighing of goods, excise gate pass, goods inward register maintained at godown but the assessee could not file any of the above mentioned documents and hence, the assessee was unable to file evidences to prove that the purchases are genuine. Accordingly, the Assessing Officer treated these purchases as bogus but noted that since the corresponding sales are made and the goods are recorded in stock register. He noted that only the assessee obtained the bills from the above parties but purchased materials from grey market on a lower price. Therefore, applying the ratio of Hon’ble Gujarat High court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj) applied the profit rate at the rate of 12.5% of the total non-genuine purchases amounting to `81,11,218/-. Thereby, the Assessing Officer estimated the profit and made addition on non-genuine purchases at `10,13,902/-. Aggrieved, assessee preferred the appeal before CIT(A), who only allowed one relief by directing the Assessing Officer to reduce already declared GP i.e. 3.15% from the profit rate applied by Assessing Officer at 12.5%. For this, the CIT(A) decided the issue in Para 6.7 as under: - “6.7 From the aforesaid cited decision of Gujarat High Court in the case of Simit P.

Nelco Steel Page | 6 Sheth (Supra), it can be observed that the appropriate GP percentage for computing the unaccounted profits from the purchases from the alleged hawala/ bogus suppliers should factor the savings of taxes etc due to the unaccounted sales and the GP already shown in the regular books. It is observed that the rato of the decision of the Gujarat High Court in the case of Simit P. Sheth (Supra) cannot be squarely applied to the facts of the case of our assessee since the sales tax rate prevalent in Gujarat was 10% as against only 4% applicable in Maharashtra for the relevant period. However, the facts of the case of the assessee ar some what similar to that of Ratnagiri Steels (supra). In the case of Ratnagiri Steels (supra), the Hon’ble ITAT after considering the healthy GP shown of 5.45%, directed to Assessing Officer to allow set off of the book GP against the said rate of 12.5% while computing the additional profits from the purchases from the alleged hawala/ bogus suppliers. In the instant case, it is observed that the assessee has shown a GP of 3.15%. Therefore, as was done by Nelco Steel Page | 7 the Hon’ble ITAT, Mumbai in the case of Ratnagiri Steel (spra), it will be appropriate if rate of 12.5% is applied for computing the unaccounted profits related to purchase from the hawala/ bogus suppliers and against this set off of the GP shown in the regular books in respect of the purchases from the hawala / bogus suppliers is allowed. Accordingly. The Assessing Officer is directed to the additional profits in respect of the purchases from the alleged hawala/ bogus suppliers by adopting rate of 12.5%. However, the Assessing Officer will allow a set off of the GP already shown by the assessee in regular books in respect of the purchases from the said alleged hawala/ bogus suppliers. Accordingly, Ground Nos.3 to 6 of the appeal are partly allowed.” Aggrieved, assessee came in appeal before Tribunal.