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Income Tax Appellate Tribunal, “SMC”, BENCH
Before: SHRI R.C.SHARMA, AM & SHRI VIKAS AWASTHY, JM
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC”, BENCH MUMBAI
BEFORE SHRI R.C.SHARMA, AM & SHRI VIKAS AWASTHY, JM
ITA No. 1116/Mum/2019 (Assessment Year: 2009-10) M/s Balaji Pipes, Vs. I.T.O.-19(1)(2) 2nd C/o- D.C. Bothra & Co. LLP Floor, Matru (CA) (formerly known as D.C. Mandir, Tardev Road, Bothra & Co.), 297, Tardeo Mumbai-400021. 1st Road, Wille Mansion, Floor, Opp Bank of India, nana Chowk, Mumbai-400007. PAN/GIR No.AAIFB 0628 D (Appellant) .. (Respondent)
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).
In this appeal, the assessee is basically aggrieved for upholding
addition of 12.5% on account of bogus purchases.
Rival contentions have been heard and record perused. Facts in
brief are that the assessee is a dealer of ferrous and non-ferrous
2 ITA No. 1116/Mum/2019 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.
The ld AR appearing on behalf of the assessee has contended that
the issue is covered by the decision of Hon’ble Jurisdictional High Court
in the case of Pr.CIT Vs M/s Mohommad Haji Adam & Co. in ITA No.
1004 of 2016 vide its order dated 11/02/2019, according to which
addition can be made only to the extent of difference between the G.P.
declared on regular purchases vis a vis bogus purchases. He has further
contended that no where the A.O. or the ld. CIT(A) has disputed the
corresponding sales and the assessee has filed quantitative details of all
the purchases and extract of purchase register and sales register of
entire year containing inward and outward movement of trading goods.
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%.
3 ITA No. 1116/Mum/2019 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%.
We have considered the rival contentions and carefully gone
through the orders of the authorities below and found that before the
A.O., the assessee has filed following documents:
(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 ITA No. 1004 of 2016 vide its order
dated 11/02/2019 have held as under:
4 ITA No. 1116/Mum/2019 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.
The Coordinate Bench of the ITAT, Mumbai in the case of Shri
Rameshkumar Daulatraj Vs ITO in ITA No. 4192/Mum/2018 order dated
07/05/2019 after following the above decision of Hon’ble Bombay High
Court held as under:
“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 ITA No. 4192/Mum/2018 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
5 ITA No. 1116/Mum/2019 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.”
It is clear from the above decisions that in case of bogus
purchases where sales are accepted and assessee has filed quantitative
details of purchases and also stock register reflecting goods received,
the addition is required to be made only to the extent of difference
between the GP declared by the assessee on normal purchases vis a vis
bogus purchases. Respectfully following the order of the Hon’ble
Jurisdictional High Court and the Coordinate Bench of the ITAT, Mumbai,
we restore the matter back to the file of the A.O. to restrict the addition
to the extent of lower GP declared by the assessee in respect of bogus
purchases as compared to GP on normal purchases. The assessee is also
directed to give full details to the A.O. with regard to GP earned on
normal purchases and also GP earned on alleged bogus purchases. We
direct accordingly.
In the result, the appeal of the assessee is allowed in part for
statistical purposes only.
Order pronounced in the open court on 12th February, 2020.
Sd/- Sd/- (VIKAS AWASTHY) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 12/02/2020 *Ranjan Copy of the Order forwarded to : 1. The Appellant
6 ITA No. 1116/Mum/2019 M/s Balaji Pipes Vs ITO 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. स�या�पत ��त //True Copy// BY ORDER,
(Asstt. Registrar) ITAT, Mumbai