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Income Tax Appellate Tribunal, “SMC” BENCH,
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 27.09.2018 passed by the Commissioner of Income Tax (Appeals) -29, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009- 10.
The assessee has raised the following grounds: - “1.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of AO in reopening the case, without considering the provision of law and as such the order passed u/s 143(3) r.w.s. 147 was void-ab-initio, bad in law & would be quashed.
ITA No. 7393/M/2018 A.Y.2009-10 1.2. The appellant prays that said reopening be held as void-ab-initio and/or otherwise bad in law. 2.1 On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming an addition of profit of Rs.12,44,533/- on the alleged ground that the purchases were not genuine without appreciating the fact that the rejection of books of accounts would be a pre-requisite to hold purchases as non- genuine. 2.2 The appellant prays that the action of the AO/CIT(A) be held as void and /or otherwise bad in law. The Appellant pays that the actun of the AOCIT(A) be held as sod and otherwise had in law. Without Prejudice to Ground 1, 2: 3.1 On the facts and circumstances of the CISC and in law, the learned CIT(A) erred in confirming a disallowance of Rs.12,44,533/- on the alleged ground that purchases wen: not genuine though relevant documents were duly submitted to justify the genuineness of purchases. The Appellant prays that it be held that the said purchases were genuine and as such the said addition be deleted. Without Prejudice to ground 1, II & III 4.1. On the facts and in circumstances of the ease and in law. the CIT(A) erred in confirming the addition by applying a rate of 12.50% on the alleged ground that such quantum of profit element will meet the end of justice without recognizing the fact that the gross profit ration of the Appellant had never been mom than 5%. 4.2 The Appellant prays that the said addition he restricted to as crape grass profit of 4.6 1%.
5. General The appellant craves leave to, add to, alter, amend or delete all or any of the grounds of appeal
at the time of hearing.”
3. The brief facts of the case are that the assessee filed its return of income on 24.09.2009 declaring total income to the tune of Rs.3,10,710/- for the A.Y. 2009-10. The return was processed u/s 143(1) of the I. T. Act A.Y.2009-10 1961 accepting the returned income. Thereafter, an information was received from the DGIT(Inv.) Wing, Mumbai in which it was conveyed that the assessee has made the bogus purchase entries of Rs.9,956,258/- from the following parties.
Name of the Party F.Y. Amount Total Dhruv Sales Corporation 2008-09 164,320 Om Corporation 584,220 2008-09 Nageshwar Enterprises 67,106 2008-09 Parshva & CO 233,194 2008-09 Nikhil Enterprise 86,450 2008-09 Naman Enterpirses 567,658 2008-09 Tara Enterprises 883,480 2008-09 Impex Trading Co 72,800 2008-09 Bharat Industrial Corporation 354,276 2008-09 Daksha Enterprises 711,334 2008-09 R. K. Enterprise 747,110 2008-09 Crystal Commerce Co. 784,290 2008-09 Namrata Trading Co 990,106 2008-09 KK Enterprises 694,720 2008-09 Navdeep Trading Cor. 174,200 2008-09 Grifton India Riddhi Enterprise 1,653,366 2008-09 Retake Impex & Tech Chem 96,200, 2008-09 Shriji Enterprises 179,660 2008-09 Mahavir Interprises 911,768 9,956,258 2008-09 4. Thereafter, notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee and the AO restricted the addition to the extent of 12.5% of the bogus purchase in sum of Rs.9,956,258/- i.e. Rs.12,44,533/-. The total income of the assessee was assessed to the tune of Rs.15,55,240/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who A.Y.2009-10 confirmed the addition raised by the AO, therefore, the assessee has filed the present appeal before us.
We have heard the argument advanced by the Ld. Representative of the Department and has gone through the case carefully. Upon careful consideration we find that assessee has provided the documentary evidence for the purchase. Adverse inference has been drawn due to the inability of the assessee to produce the suppliers. We find that in this case the sales have not been doubted. It is settled law that when sales are not doubted then hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from Hon’ble jurisdictional High Court decision in the case of Nikunj eximp enterprises (in writ petition no 2860, order dt 18.6.2014. In the present case the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation we are of the considered opinion on the facts and circumstances of the case that the 12.5% disallowance out of the bogus purchases meets the end of justice. However, in this regard learned counsel of the assessee has prayed that when only the profits earned by the assessee on these bogus purchase transaction is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase.
Up on careful consideration, we find considerable cogency in the submission of the learned counsel of the assessee, as otherwise it will be double jeopardy to the assessee. Accordingly, we modify the order of A.Y.2009-10 learned CIT-A and direct that the disallowance in this case be restricted to 12.5% of the bogus purchases as reduced by the gross profit @ 4.61% already declared by the assessee on these transactions. Accordingly, we allowed the claim of the assessee.