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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकर अपील सं./ (िनधा"रण वष" / Assessment Year: 2008-09) & आयकर अपील सं./ (िनधा"रण वष" / Assessment Year: 2010-11) & आयकर अपील सं./ I.T.A. No.2604/Mum/2016 (िनधा"रण वष" / Assessment Year: 2011-12) Navin Jaichand Doshi DCIT-23(3), बनाम/ D-705, Kalp Nagri C-10, Pratyakshkar Bhavan B.R. Road, Mulund West BKC, Bandra East Vs. Mumbai-400 080. Mumbai-400 051. "थायीलेखासं./जीआइआरसं./PAN/GIR No. ADDPD-0288-P (अपीलाथ"/Appellant) (""थ" / Respondent) : Assessee by : Shri Vimal Punmiya -Ld. AR Revenue by : Ms. Kavita P. Kaushik – Ld. DR सुनवाई की तारीख/ : 25/11/2019 Date of Hearing घोषणा की तारीख / : 07/01/2020 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1.1 Aforesaid appeals are recalled matter since the appeals were initially disposed-off ex-parte qua the assessee vide common order dated 26/07/2018. However, upon assessee’s miscellaneous ITA Nos.2604-06/Mum/2016 Navin Jaichand Doshi applications, the said order has been recalled vide MA Nos.343- 345/Mum/2019 common order dated 20/08/2019. Accordingly, the appeals have come up for fresh hearing before this bench. 1.2 As evident from grounds of appeal raised before us, the grievance of the assessee in all the three years is common i.e. estimated additions on account of alleged bogus purchases. Although the assessee has also challenged the reassessment proceedings on legal grounds, however, these grounds have not been pressed before us by learned Authorized Representative for assessee and accordingly, the same stands dismissed. 1.3 We have carefully heard the arguments advanced by both the representatives and perused relevant material in record including judicial pronouncements cited before us in support of the arguments. 2.1 Facts for AY 2008-09 are that assessee being resident individual stated to be engaged as wholesale dealer of iron and steel under proprietorship concern namely M/s Citizen Steel Corporation was assessed for year under consideration u/s 143(3) r.w.s. 147 on 27/03/2014 wherein the income of the assessee was determined at Rs.221.20 Lacs after sole addition of alleged bogus purchases of Rs.218.12 Lacs as against returned income of Rs.3.07 Lacs filed by the assessee on 24/09/2008 which was processed u/s 143(1). 2.2 Pursuant to receipt of certain information from DGIT (investigation), Mumbai, the assessee was subjected to survey action resulting into impounding of some incriminating documents indicating purchases by assessee from bogus parties. Accordingly, the case was reopened vide ITA Nos.2604-06/Mum/2016 Navin Jaichand Doshi issuance of notice u/s 148 on 12/03/2013 which was followed by notice u/s 142(1) directing assessee to file the requisite information / evidences. 2.3 Upon perusal of information / documents, it transpired that the assessee obtained accommodation purchase bills aggregating to Rs.218.12 Lacs from 14 entities, the details of which have already been extracted at para 5.1 of the quantum assessment order. On the basis of statement recorded during survey proceedings, it was concluded that the assessee was engaged in obtaining bogus purchase bills without actually purchasing the material. 2.4 Although the assessee defended the purchases but failed to produce any of the suppliers to confirm the transactions. The field inquiries established that none of the parties was existing at the given addresses. Finally, not satisfied with assessee’s submissions / explanations, the stated purchases were disallowed and added back to the income of the assessee.
The learned first appellate authority after examining the factual matrix in the light of various judicial pronouncements rendered by higher authorities, came to a conclusion that when the sales were accepted, entire purchases could not be disallowed but what needed to be taxed was the profit element embedded in such transactions. The same was estimated @12.5% of alleged bogus purchases. Still aggrieved, the assessee is under further appeal before us.
After careful consideration, we are of the considered opinion there could be no sale without actual purchase of material keeping in view the assessee’s nature of business. Undisputedly the assessee was in possession of primary purchase documents and the payments to the Navin Jaichand Doshi suppliers were through banking channels. The sales turnover achieved by the assessee has not been disputed by the revenue. The books of accounts were subject to audit. However, at the same time, the assessee miserably failed to substantiate the purchases and could not produce any of the suppliers to confirm the transactions and field inquiries indicated that none of the suppliers was existing at the given addresses. Therefore, the onus casted upon assessee, in this regard, remained undischarged. Hence, on the given facts and circumstances, the additions which could be sustained, would be to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which learned CIT(A) has rightly done. However, keeping in view the fact that the assessee was dealing in thin margin item like iron & steel and the assessee reflected Gross Profit Rate of 3.27%, we estimate the additions @2% of alleged bogus purchases of Rs.2,18,12,572/- which comes to Rs.4,36,251/-. The impugned order stand modified to that extent. Resultantly, the appeal stands partly allowed.
Facts are pari-materia the same in AYs 2010-11 & 2011-12 wherein the assessee was saddled with additions of Rs.313.73 Lacs & Rs.254.61 Lacs respectively. The additions were restricted by first appellate authority to 12.5% of alleged bogus purchases, against which the assessee is in further appeal before us with similar grounds of appeal
. Keeping in line with estimation made by us for AY 2008-09, we restrict the additions to 2% of alleged bogus purchases which comes to ITA Nos.2604-06/Mum/2016 Navin Jaichand Doshi Rs.6,27,465/- for AY 2010-11 and Rs.5,09,235/- for AY 2011-12. Both these appeal stands partly allowed.
6. In the result, all the three appeals stand partly allowed to the extent indicated in the order.