M/S JUPITER METAL,MUMBAI vs. CIT (A)-30, MUMBAI

Jupiter Metal Page | 2 2. The only issue in this appeal of assessee is as regards to the order of CIT(A) estimating the gross profit as estimated by Assessing Officer at 12.5% as against the gross profit declared by the assessee at 4.17% and assessee has also raised the issue that the profit rate declared is included in the turnover which is subjected to double taxation. For this, assessee has raised the following ground No. 1 and 2: -

The learned CIT(A) erred in law and on facts in estimating GP at 12.5% as against normal gross profit ratio shown by the assessee at 4.17% as declared by the assessee in his return filed with the audit report. The GP Margin in this industry as such is very low.”

Brief facts are that the assessee is engaged in the business trading of ferrous and non-ferrous metals and runs a partnership concern under the name and style of M/s Jupiter Metal. The Assessing Officer completed the assessment under section 143(3) read with section 147 of the Act vide his order dated 20.03.2015 and made assessment by taking gross profit at the rate of 12.5% of the alleged bogus purchases. The details of bogus purchases as per information received from the office of DGIT vide letter no. F.N. DGIT(Inv.)/Corr.field/2013-14) date 26.12.2013. The following are the details: - Jupiter Metal Page | 3 SL No. Name of parties Amount 1) Tripati Metals 45,62,551 2) Antriksh Metals 58,31,065 3) Padmavati Steel & Alloys 6,37,324 4) BPT Tube Corporation 37.755 5) Rishabh Steel Industries 3,99,999 6) Minaxi Metal & Alloys 4,00,020 7) Rajlaxmi Metal & Alloys 5,64,805 8) Henil Salesagency 5,97,480 9) Kalash Metals Pvt. Ltd. 17,41,480 10) Anupam Metal 20,12,613 11) National Steels 62,38,939 Total 2,30,24,009 4. From the above, the Assessing Officer noted as per the information received from Sale Tax Department, the assessee has shown purchases of ` 2,30,24,009/- during the financial year but the Sales Tax Department found that the above stated concerns were not doing genuine business of purchases and sales but merely providing accommodation bills to various parties including assessee. The Assessing Officer taking into consideration, the information received from Sales Tax Department noted that the assessee has not provided the evidences in respect to transportation of goods and also the parties are not genuine. The Assessing Officer noted that these are bogus purchases. Further, the assessee contended that complete details i.e. ledger accounts, payment by cheque and the goods are entered into stock of the assessee and provided stock statement and entries of the said purchases in the stock register. But the Assessing Officer was of the view that once the assessee could not produce documents like lorry receipts, transport details that means that the movement of goods has not taken place and hence, he observed that no doubt once the goods are entered into stock register, inevitable conclusion is Jupiter Metal Page | 4 that the assessee might have purchased the material from grey market or open market from some other parties and saved VAT etc. According to Assessing Officer, the goods purchased from grey market is comparatively cheaper and therefore, relying on the Gujarat High Court decision in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj) computed the profit rate at the rate of 12.5% of the bogus purchase of ` 2,30,24,009/-. Thereby, the Assessing Officer added the profit from the above bogus purchases for an amount of `28,78,001/-. Aggrieved, assessee preferred the matter before CIT(A).

The CIT(A) noted that the Assessing Officer has doubted the genuineness of purchases but not disturbed the sales. He also noted that once lorry receipt and transport details are not available with the assessee, he relying on the decision of Hon’ble Gujarat High Court in the case of Smith P. Seth (supra) confirmed the action of the Assessing Officer in making addition of profit rate at the rate of 12.5% of the bogus purchases. He dismissed the appeal of the assessee vide Para 6.9 and 6.10 as under: - “6.9 Hon’ble Gujarat High court in the case of CIT vs. Simit Sheth 356 ITR 451 (Guj) found that some of the alleged suppliers of steel to the assessee had not supplied any goods but had only provided sale bills and hence, purchase from the said parties were held to be bogus. The Assessing Officer in that case added the Jupiter Metal Page | 5 entire amount of purchase to gross profit of the assessee. Ld CIT(A) having found that the assessee had indeed purchased though not from named parties but other parties from grey market, partially sustained the addition as probably profit of the assessee. The Tribunal however, sustained the addition to the extent of 12.5%. Taking into account the above facts, the Hon’ble Gujarat High Court held that since the purchases were not bogus, but were made from parties other than those mentioned in books of accounts, only the profit element embedded in such purchase could be added to the assessee’s income and as such no question of law arose in such estimation.”

This appeal was fixed for hearing first time on 14.01.2020 on which date none was present from assessee’s side. Now, during this Covid time this appeal was again fixed for hearing through the Website of https://itat.webex.com/webappng/sites/ itat/dashboard by putting a notice at ITAT’s Website Notice Board but none was present from the assessee’s side. Hence, I am of the view that this being a very small matter which can be disposed off without the representation of the assessee. Hence, qua assessee I am deciding this appeal ex-parte.