JAYSHREE METAL,MUMBAI vs. ITO - 19(2)(1), MUMBAI

The brief facts of the case as emanating from the records are: The assessee is engaged in the business of trading in ferrous and non-ferrous metals. On the basis of information received from DGIT (Investigation), Mumbai the assessment for assessment year 2011-12 was reopened on the ground that the assessee has obtained accommodation entries from declared hawala dealers. The Assessing Officer in reassessment proceedings found that the assessee has obtained accommodation entries to the tune of Rs.1,45,80,351/- from various hawala operators. The Assessing Officer estimated GP at 12.5% on non-genuine purchases and thus, made addition of Rs.18,22,544/-. Aggrieved against the assessment order dated 05/12/2016 passed under section 143(3) r.w.s 147 of the Income Tax act, 1961 (in short ‘the Act’), the assessee filed appeal before the CIT(A). The first appellate authority dismissed the appeal of assessee and confirmed the addition. Hence, the present appeal by the assessee.

Notice of hearing of the appeal was sent to assessee on the address mentioned in form No.36. The first notice was sent on 26/08/2019 for hearing fixed on 18/09/2019. None appeared to represent the assessee on the said date. Thereafter, notices were sent to the assessee through RPAD for the respective dates of hearing. However, the notices sent were returned back unserved by the Postal Authorities with the remark ‘Left’. The assessee has not taken pains to inform the Registry regarding change of address or the current address. It seems that the assessee is not keen to pursue its appeal. Under such circumstances, the appeal is taken up for hearing with the assistance of ld. DR and the material available on record.

Ms. R. Kavitha, representing the Department vehemently supported the impugned order. The ld.Departmental Representative submitted that the Assessing Officer has estimated GP on bogus purchases in line with the judgement of the Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Sheth, 356 ITR 451(Guj). The ld. DR contended that the order of Assessing Officer and the CIT(A) are justified and reasonable. On merits the ld. DR submitted that the assessee has failed to substantiate genuineness of the purchases and suppliers. The assessee could neither produce the dealers from whom alleged goods were purchased, nor the assessee could produce vital documents such as delivery challans, transport receipts, octroi receipts, inward register, etc. to prove trail of goods. The ld. DR submitted that the CIT (A) was justified in upholding the addition.

We have heard the submissions made by ld. Departmental Representative and have examined the material available before us. The addition has been made in reassessment proceedings in respect of bogus purchases aggregating to Rs.1,45,80,351/-. The Assessing Officer has estimated GP @ 12.5% i.e. Rs.18,22,544/- on the alleged bogus purchases. The CIT (A) has confirmed the same. It is a well settled law that in case of bogus purchases only the profit embedded in non-genuine purchases should be brought to tax. In our considered opinion, estimation of GP @12.5% is on the higher side keeping in view assessee’s nature of business. Taking into consideration entirety of facts, the ends of justice would meet if GP on bogus purchases is estimated at 5% over and above the GP declared by the assessee. The ground No.1 of the assessee is partly allowed in the terms aforesaid.

In ground No.2 of the appeal the assessee has assailed initiation of penalty under section 271(1)(c) of the Act. This ground of appeal is premature at this stage, hence, the same is dismissed, as such.

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

This appeal was heard on 20/02/2020. As per Rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963, (ITAT Rules, 1963), the order was required to be “ordinarily” pronounced within a period of 90 days from the date of conclusion of the hearing of appeal. The instant appeal was heard prior to the lockdown declared by the Hon’ble Prime Minister on 24-03-2020 in view of COVID-19 pandemic. The lockdown was forced due to extra ordinary circumstances caused by world wide spread of COVID-19. Thereafter, the lockdown was extended from time to time. Therefore, the pronouncement of order beyond the period of 90 days from the date of hearing is not under “ordinary” circumstances. The Co-ordinate Bench of the Tribunal in the case of DCIT vs. JSW Ltd., for A.Y 2013-14 decided on 14/05/2020, under identical circumstances, after considering the provisions of Rule 34(5) of the ITAT Rules, 1963, judgements rendered By Hon’ble Apex Court and the Hon’ble Bombay High Court on the issue time limit for pronouncement of orders by the Tribunal and the circumstances leading to lockdown held:- 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only inconsonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon’ble Bombay High Court did not approve an order

The appeal of the assessee is partly allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board.