M/S.ELMEC INDUSTRIES,MUMBAI vs. ITO 19(3)(1), MUMBAI

O R D E R

PER AMARJIT SINGH, JM:

ITA No. 4953/M/2018 A.Y. 2011-12 2) In the facts and circumstances of the case and in law, the Assessing Officer erred in adding Rs 10.77.397/- as alleged Bogus purchases being 12.5% of the total purchases amounting to Rs. 86.19,181/- a) In facts and the circumstances of the case and in law, the learned A.O. erred in adding 10,77,397/- as alleged bogus purchases being 12.5% of the total purchases amounting to Rs. 86,19.181/-, even though the payment for purchases is made from the books by A/C payee cheques and cannot be termed as bogus even though the same has been fully allowed by the jurisdictional Mumbai Tribunal in recent case of Rajeev M Kalathil 6727/M/12, Ganpatraj A Sanghavi [I T.A. No.2826/Muni/2013] and Ramesh Kumar & Co. Appeal No. 2959/Mum/2014, Ramila P Shah and Deepak Popatlal Gala ITA No 5920/M/13]. b) In the facts and the circumstances of the ease and in law, the learned A.O. erred in adding Rs. 10,77,397/- as alleged bogus purchases being 12.5% of the total purchases amounting to Rs. 86,19.181/- only oil basis of the information oil website www.mahavat.gov.in about 2 suspicious dealers whose copy of statement recorded were not furnished to the appellant. c) In the facts and the circumstances of the case and in law, the learned A.O. erred in adding Rs. 10,77,397/- as alleged bogus purchases without issuance of notices u/s 133(6) and/or summons u/s 131. The Assessing Officer has also not afforded the Appellant an opportunity to cross- examine the said parties. d) In the facts and the circumstances of the case and in law, the learned A.O. erred in adding Rs. 10,77,397/- as alleged bogus purchases without appreciating the fact that no addition can be made if the suppliers are not traceable as per the judgment of the Bombay High Court. e) In the facts and circumstances of the case and in law, the learned A.O. erred in disallowing Rs. 10.77,397/- being alleged bogus purchases even though the payments were made by A/C Payee Cheques from the disclosed batik accounts. 3) In the facts and circumstances of the case and in law, the Assessing Officer erred in levying penalty u/s 271(1 )(c) and charging interest u/s 234A, B & C. 4) In the facts and circumstances of the case and in law, the Commissioner of Income Tax(A) erred in confirming the above additions. A.Y. 2011-12 5) In the facts and circumstances of the case and in law, the Commissioner of Income Tax(A) erred in passing the Appellate Order without considering submission of paper books dt. 22/03/2017 and 14/06/2018 respectively. 1 Relief Prayed: The appellant therefore prays follows, To quash the order for reopening the case Ws 143 r.w.s 147. To delete the disallowance of Its. 10,77,3971- being total alleged bogus purchases of the Appellant through alleged bogus suppliers by treating the same as bogus and against several decided cases of Mumbai 1TAT. To quash the order passed by the Commissioner of Income Tax(A) by overlooking the submissions filed twice viz. on 22/03/2017 and 14/06/2018 respectively. To delete penalty levied u/s 271(I )(c) and interest charged Ws 234A, 13 & C& D. D General: - • The appellant reserves rights to add alter or delete any portion of this appeal before its conclusion. • A Detailed paper book along with ease laws will be submitted at the time of hearing. • This appeal has been filed on time and may please be allowed in full.”

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 assessee's 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 coining 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.I. 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. In fact in paragraph 8 of the same judgment the Court held and observed as under “So far the question regarding addition of Rs.3,70,78,125/- as gross profit on sale of Rs.37.08 crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during F.Y. I997-98 is concerned; we are of the view that the assessee be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as result of which profit comes to 5.66%. Therefore, considering 5.66% of Rs.3,70,78,125% which comes to Rs.20,98,621.88 we think if fit to direct the revenue to add Rs.20,98,621.88 as gross profit and made necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue.