BALAJI PIPES,MUMBAI vs. ITO, 19(1)(2), MUMBAI

Assessee by Shri Raj Kumar Singh & Shri Harish Sharma (ARs) Revenue by Shri Amit Pratap Singh (DR) Date of Hearing 11/02/2020 Date of Pronouncement 12/02/2020 आदेश / O R D E R PER: R.C. SHARMA, A.M. This is the appeal filed by the assessee against the order of the ld. CIT(A)-07, Mumbai dated 24/12/2018 for the A.Y. 2009-10 in the matter of order passed U/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short, the Act).

M/s Balaji Pipes Vs ITO metals. The A.O. reopened the assessment on getting information from the Sales Tax Department regarding the assessee involved in taking accommodation bill. After making detailed enquiry, the A.O. added 12.5% of alleged bogus purchases in assessee’s income which was confirmed by the ld. CIT(A). Now the assessee is in further appeal before the ITAT.

Furthermore, copy of invoice and deilvery challans issued by the supplier was also produced before the A.O. with respect of alleged bogus purchases alongwith confirmation letter from the supplier. Under these facts and circumstances, it was contended that the A.O. was not justified in making addition of 12.5%.

M/s Balaji Pipes Vs ITO 5. On the other hand, the ld DR has relied on the orders of the authorities below and contended that after making detailed enquiry, the A.O. issued notice U/s 133(6) of the Act and reached to the conclusion that the assessee has not actually purchased the goods but only taken bills. Accordingly, the A.O. was justified in making addition of 12.5%.

(i) Extract of purchase register and sales register of entire year.

(ii) Item wise and bill wise extract of stock register of entire year containing inward and outward movement of trading good dealtwith.

(iii) Copy of invoice and delivery challans issued by alleged hawala dealers for alleged purchases made.

(iv) Confirmation letter of following alleged hawala dealers alongwith copy of their sale tax return and paid VAT challan: a) Shanti Pipes & Tubes b) Pioneer Metals & Alloys c) Heena Metals.

However, no defect was pointed out by the A.O. in the above documents and he just estimated profit @ 12.5% on the alleged bogus purchases.

With respect to issue regarding addition in respect of bogus purchases, the Hon’ble Jurisdictional High Court in the case of Pr.CIT Vs M/s Mohommad Haji Adam & Co. in of 2016 vide its order dated 11/02/2019 have held as under:

M/s Balaji Pipes Vs ITO “8. In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assesses additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd.. (supra) cannot be applied without reference to the facts.

“9. When these facts were confronted to the learned Sr. DR, he requested for application of reasonable profit rate and according to him the profit rate applied by the AO and confirmed by CIT(A) is quite reasonable in view of the decision of Hon’ble Gujarat High court in the case of Smith P.Seth (supra). We have considered the rival contentions and are of the view that Hon'ble Bombay High Court in the case of Mohammad Haji Adam & Co. and Ors. (supra) has considered this issue and respectfully following the same, we direct the AO to restrict the profit rate only to the extent of M/s Balaji Pipes Vs ITO differential percentage as declared on the bogus purchases and as declared on the regular purchases, Hence, we direct the AO accordingly.”

Order pronounced in the open court on 12th February, 2020.