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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: Shri Shamim Yahya (AM) & Shri Pawan Singh (JM) Shri Virmabhai A Patel vs
O R D E R
PER PAWAN SINGH, JM :
This appeal filed by the assessee is directed against the order of the CIT(A)-30, Mumbai dated 17-08-2018.
The brief facts of the case are that the assessee, an individual engaged in the business of trading in ferrous and non ferrous metals, filed his return of income for the assessment year 2010-11 on 28- 09-2010 declaring total income at Rs.3,19,660/-. The return was processed u/s 143(1) of the Income-tax Act, 1961. The assessment was re-opened under section 147 on the basis of information received from Sale Tax Department, Government of Maharashtra that certain hawala operators are indulging in providing accommodation bills without actual delivery of goods. The Sale Tax Department, Government of Maharashtra referred the list of such 2 ITA 5955/Mum/2018 Virmabhai A Patel hawala dealers and the beneficiary to the DGIT (Investigation), Mumbai. The name of assessee appeared in the list of beneficiaries.
The assessee allegedly made the purchases of Rs.1,14,97,076/- from such hawala dealers. On the basis of information, the Assessing Officer made a belief that the income of the assessee escaped assessment, therefore, re-opened the assessment under section 147.
Notice under section 148 dated 14-07-2015 was issued to the assessee. The reasons recorded for re-opening the assessment was also supplied to the assessee. Subsequently, The Assessing Officer issued a notices u/s 143(2) and 142(1) along with a questionnaire and served upon the assessee. During the assessment, the Assessing Officer noted that the assessee has shown purchases from the following parties, which was declared as hawala dealers by the Sale Tax Department, Government of Maharashtra:
Name of the parties Bill amount (Rs.) 1 Konika Tube Industries 3,09,443 2 Mahadev Metal Industries 4,85,801 3 Global Enterprises 16,99,317 4 Raj Impex 10,04,536 5 Raghupati Trading Pvt Ltd 6,61,640 6 Sunrise Enterprises 4,64,907 7 Ratandeep Impex 10,21,711 8 Manish Industrial Corporation 7,38,148 9 Suraj Enterprises 5,79,638 10 Dhanera Metal Corporation 4,46,973 11 Sandoz Steel 14,82,731 12 Vijay Laxmi Trading Co 9,16,992 13 Shree Rajaram Steel & Engg. Co 16,85,239
3 ITA 5955/Mum/2018 Virmabhai A Patel Total 11,14,97,076 3. In order to verify the transactions of purchases, the assessing officer issued notices u/133(6) to the above parties, however, all the notices returned unserved by the postal authorities with the remark, “left”. This fact was brought to the notice of the assessee by the assessing officer. In response to the notices issued by the assessing officer, the representative of the assessee attended the assessment proceedings before assessing officer and furnished various details such as, copies of purchase invoices of the specified parties; copies of bank statements evidencing payments made through banking channels; chart showing the details of purchases of the alleged parties; and details in respect of purchases from the parties and the corresponding sales made out of it.
The assessing officer, however, did not impress with the evidences filed by the assessee; he observed that the intention of indulging in such activity is to suppress the true profits and to reduce the tax liability.
Therefore, relying upon the judgement of Hon’ble Gujarat High Court in the case of CIT vs Simit P Sheth (2013) 356 ITR 451 (Guj) and also giving credence to the fact that assessee has recorded such purchases in the books of account, the assessing officer held that it would be fair and just to bring the profit element embedded in such purchases to tax. He, therefore, made addition of Rs.14,37,135/- being 12.5% of the amount
4 ITA 5955/Mum/2018 Virmabhai A Patel of alleged bogus purchases to the total income element embedded in such purchases.
On appeal, the ld. CIT(A) upheld the action of the assessing officer.
Further aggrieved, the assessee filed the present appeal before us.
The revenue has raised the following ground of appeal:-
On the facts and circumstances of the case and in law, the learned CIT (A) erred in making disallowance of non genuine purchase claims of Rs. 14,37,1357- on the basis of G.P Ratio @12.5% on purchase (Total Alleged Purchase Rs. 1,14,97,0767-) under the Income Tax Act 1961, without considering the facts of the case.” 6. None appeared on behalf of the assessee before us. The notice of hearing was sent by RPAD for two occasions. Therefore, we are left with no alternative but to hear the Ld. DR for the revenue and dispose of the appeal on the basis of material available on record. The ld. DR for the revenue supported the order of the lower authorities. The ld. DR submits that the investigation wing of department made full-fledged investigation and came to the conclusion that the hawala operators were indulging in providing mere entry without delivery of actual goods. The ld. DR further submits that the assessee is already granted sufficient relief by the lower authorities and the appeals of the assessee may be dismissed.
7. We have considered the submissions of the Ld. DR for the revenue and perused the material available on record. The assessing officer made
5 ITA 5955/Mum/2018 Virmabhai A Patel additions @ 12.5% of the alleged purchases shown from the hawala dealers by following the decision of the Hon’ble Gujarat High Court in CIT vs Simit P Sheth (356 ITR 451 Guj) . We have noted that the lower authorities have not doubted the sales of the assessee. The lower authorities have not examined the gross profit (GP) declared by the assessee during the previous or subsequent assessment years. We are of the considered opinion that under Income Tax Act only real income can be taxed by the Revenue. We may further conclude that even if the transaction is not verifiable, the only taxable is the taxable income component and not the entire transaction. And after considering the facts of the case and the rival contentions of the parties we are of the opinion that in order to fulfil the gap of revenue leakage the disallowance of reasonable percentage of such purchases would meet the end of justice.
Considering the facts the assessee is dealing in trading of metals, wherein the margin of profit is not very much, therefore, considering the business activities of the assessee, we direct the assessing officer to restrict the additions / disallowance on account of the alleged bogus purchase @12.5 % minus GP declared by the assessee. In the result the appeal of the assessee is partly allowed. No other contrary fact or decision has been brought to our notice by the Ld. DR for the revenue.
In the result, appeal of the assessee is partly allowed.