GANPAT METAL,MUMBAI vs. ITO, WARD-19(1)(3), MUMBAI

PDF · subscribers
ITA 1000/MUM/2019Status: DisposedITAT Mumbai10 February 2020AY 2010-113 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that when bogus purchases are involved but sales are not disputed, only the profit element should be taxed. Considering the nature of the business, the Tribunal reduced the GP on bogus purchases to 8% over the GP declared by the assessee.

What were the facts?

The assessee's appeal concerns an addition made by the Assessing Officer on account of alleged bogus purchases, estimated at 12.5% GP. The CIT(A) upheld this addition. The assessee argued that the estimated GP rate was too high for their business of trading in metals.

What were the issues?

The primary issue was the correctness of the estimated Gross Profit (GP) rate on alleged bogus purchases. The Tribunal had to determine a fair GP rate to be taxed on the profit element of these purchases.

Which sections of the Income-tax Act were involved?

Section 144,Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI R.C.SHARMA & SHRI VIKAS AWASTHY

For Appellant: Shri Aditya Ramachandran
For Respondent: Shri Amit Pratap Singh
Hearing: 10/02/2020Pronounced: 10/02/2020

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals) – 7, Mumbai ( in short ‘the CIT(A)’ ) dated 18/12/2018 for assessment year 2010-11.

2.

Shri Aditya Ramachandran, appearing on behalf of the assessee submitted that the solitary ground in this appeal is against the addition made on account of alleged bogus purchases. The ld.Authorized Representative of the assessee submitted that in reassessment proceedings, the Assessing Officer observed that assessee had indulged in obtaining bogus purchase bills aggregating to Rs.59,69,054/- from various hawala parties. The Assessing Officer estimated GP @ 12.5% on the alleged bogus purchases and made addition of Rs.7,46,132/-. Aggrieved against the assessment order dated 07/03/2016 passed under section 144 r.w.s. 147 of the Income Tax Act, 1961 ( in short ‘the Act’), the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee and confirmed addition.

3.

The ld. Authorized Representative for the assessee contended that the assessee is engaged in the business of trading in ferrous and non-ferrous metals. The GP @ 12.5% estimated by the authorities below is very much on the higher side. The ld. Authorized Representative for the assessee placed reliance on the decision of Tribunal in the case of Mukesh Samarthmal Jain vs. ITO, in decided on 31/01/2020, wherein GP @ 4% on alleged bogus purchases was determined.

4.

On the other hand, Shri Amit Pratap Singh, representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee.

5.

We have heard rival sides and have perused the orders of authorities below. The addition has been made on account of bogus purchases. It is a well settled legal position now, that where the assessee has indulged in bogus purchases and sales have not been disputed by the Revenue, it is only profit element embedded in the bogus purchases that should be brought to tax. The Assessing Officer estimated GP @12.5% on the alleged bogus purchases. The same has been confirmed by the CIT(A). Taking into consideration the nature of assessee’s business and surrounding circumstances, we are of considered view that ends of justice would be served if GP on bogus purchases is restricted to 8% over and above GP declared by the assessee. Thus, the appeal of assessee is partly allowed in the terms aforesaid.

6.

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

Order pronounced in the open court after the hearing on Monday , the 10th day of February, 2020.

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →