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Income Tax Appellate Tribunal, VIRTUAL COURT
Before: SHRI JUSTICE P P BHATT & SHRI M. BALAGANESH, AM &
आदेश / O R D E R PER M. BALAGANESH (A.M): These appeals in 4998/Mum/2017 for A.Y.2007-08 & 2008-09 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-28, Mumbai in appeal No.CIT(A)-28/IT-635/ ACIT-17(3)/2014-15 to CIT(A)-28/IT-638/ACIT-17(3)/2014-15 dated 03/04/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/03/2014 by the ld. Dy.CIT-Rg.13(1), Mumbai (hereinafter referred to as ld. AO).
1.1. As identical issues are involved in both the appeals, they are taken up together and disposed off by this common order for the sake of convenience.
1.2. None appeared on behalf of the assessee. With the consent of the ld. DR, the appeal of the revenue for A.Y.2007-08 is taken up as the lead case and the decision rendered thereon would apply with equal force for A.Y.2008-09 in view of the identical facts except with variance in figures.
The only effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in restricting the disallowance made on account of unverifiable purchases to the extent of 3% of value thereof as against 10% made by the ld. AO in the assessment.
We have heard the ld. DR. We find that the assessee is a partnership firm engaged in the business of Ship Chandelling and are General Merchants of shipping supplies. The assessee had filed its return of income for the A.Y.2007-08 on 27/10/2007 declaring total income of Rs.41,28,785/- on which no assessment u/s.143(3) of the Act was done. We find that the entire sales are made by the assessee to Shipping Corporation of India in terms of tenders. The ld. CIT(A) had also observed that assessee has been making these sales to Shipping Corporation of India with low margins. The ld. AO observed that assessee had made purchases from the following parties whose names appeared in the website of Sales Tax department, Government of Maharashtra as tainted dealers:-
Sr. No. Name of the party Amount 1 Gaurang Trading Company 45,42,706/- 2 Globex International 15,47,889/- 3 Harsh Enterprises 4,71,375/- 4 Meetali Industries 52,63,510/- 5 Outdoor Marketing Pvt. Ltd., 2,53,752/- 6 Pushp Hari Electricals & Engineering 5,28,754/- Pvt. Ltd., 7 Shyam Corporation 15,51,173/- 8 Carolin Enterprises 23,27,485/- Total 1,64,86,544/- 3.1. This information was passed on by the Sales Tax department to the Income Tax Investigation Wing based on which the assessment of the assessee was sought to be reopened. By issuance of notice u/s.148 of the Act, the assessee filed a reply to the ld. AO that the return already filed may be treated as the return in response to the notice u/s.148 of the Act and sought for reasons recorded for reopening which was duly supplied to the assessee.
3.2. We find that the assessee had furnished the names and address of the aforesaid suppliers, details of products purchased, VAT registration, addresses of suppliers, purchase bills and copies of bank statements, evidencing the payments being made by account payee cheques to those suppliers before the ld. AO. However, the ld. AO observed that assessee was not able to produce any evidence to prove the actual movement of goods from these suppliers in the form of transportation receipts, lorry receipts, gate pass etc., The ld. AO also observed that assessee is not maintaining any stock register. However, considering the fact that assessee had made its entire sales only to Shipping Corporation of India with low margins, he observed that assessee had made purchases in the grey market and had made sales to Shipping Corporation of India. By making purchases in the grey market, assessee would have derived profit in the form of saving in indirect taxes with incidental profits thereon which was estimated at 10% by the ld. AO and accordingly, the ld. AO made the addition of Rs.14,65,479/- on the net purchases (gross purchases less VAT) and completed the assessment. We find that the ld. CIT(A) on due appreciation of the fact that the entire sales were made only to Shipping Corporation of India Ltd., with low margins and also in view of the fact that the ld. AO had not disputed the corresponding sales made out of disputed purchases and by placing reliance on the decision of this Tribunal in the case of Mercury International in to 7588/Mum/2014 for A.Yrs. 2007-08, 2011-12 dated 24/08/2016 by noting that the facts of the assessee and facts before this Tribunal in Mercury International are virtually identical and accordingly, restricted the addition to 3% of the value of disputed purchases. Against this order of the ld. CIT(A), only revenue is in appeal before us and assessee has not preferred any appeal. We find that the ld. CIT(A) had considered the entire modus operandi of the assessee and had accepted the fact that the assessee had indeed made sales out of the disputed purchases and hence, it could be safely presumed that the assessee could have only made purchases from the grey market in order to have some saving in indirect taxes and incidental profits thereon. We find that the ld. CIT(A) had also placed reliance on the Co-ordinate Bench of this Tribunal in the case of Mercury International referred to supra wherein under identical facts and circumstances, this Tribunal had restricted the profit element embedded in the value of disputed purchases at 3%. We find that the ld. DR before us was not able to provide any other contrary decision before us. Hence, we do not find any infirmity in the order of the ld. CIT(A) and accordingly, the grounds raised by the revenue are dismissed.
3.3. At the cost of repetition, the decision rendered for A.Y.2007-08 would apply with equal force for A.Y.2008-09 also except with variance in figures.
In the result, both the appeals of the revenue are dismissed.
Order pronounced on 06/10/2020 by way of proper mentioning in the notice board.