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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH
आयकर अपीलीय अधिकरण “SMC” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य BEFORE SRI MAHAVIR SINGH, JUDICIAL MEMBER आयकर अपील सुं./ (यिर्ाारण वर्ा / Assessment Year 2011-12) The Income Tax Officer Power Hydraulic & Equipments Ward 26(2)(4), Room No. Gala No.16, Cresent Indl. Co- बनाम/ 511, 5th Floor,, C-11, Bandra premises Ltd. R.C. Layalika Kurla Complex, Bandra Street, Kherani road, Vs. (East), Mumbai-400 051 Sakinaka,Mumbai-400 072 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./PAN No. AALFP8380M अपीलार्थी की ओर े / Appellant by : Shri Akhtar H. Ansari, DR प्रत्यर्थी की ओर े / Respondent by : None ुिवाई की तारीख / Date of hearing: 19.12.2019 घोर्णा की तारीख / Date of pronouncement : 19.12.2019 आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
This appeal of the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)]-38, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-38/ITO-26(2)(4)/IT-236/2016-17 order dated 28.06.2018. The Assessment was framed by the Income Tax Officer, Ward-26(2)(4), Mumbai (in short ITO / AO)
2 | P a g e Power Hydraulic & Equipment for the A.Y. 2011-12 vide order dated 26.11.2016, under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of Revenue is against the order of CIT(A) restricting the addition made of the AO by applying the profit rate at 16% of the bogus purchase. For this Revenue has raised following ground: -
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance to 16% of the total amount of bogus purchases transaction instead of 25% of the total amount of bogus purchased made by the AO.”
Briefly stated facts are that the assessee engaged in the business of manufacturing of Hydraulic Equipments & parts. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed in hawala dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to ₹4,164,623/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: -
“Sl Name of party Amount No. 1. Vardhman Traders 1,175,720 2. Radhika Enterprises 39,203 3. Banjara Enterprises 563,638 4. Royal Steel Corporation 571,387 5. A.K. Traders 743,912 6. Vihol Enterprises 1,070,763
3 | P a g e Power Hydraulic & Equipment Total 4,164,623 4. During the course of assessment proceedings and during appellate proceedings, the assessee submitted all the documentary evidences such as inward register, stock register, payment received against such sales, receipt of material purchases, account payee cheque. According to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition as unproved purchases at 25% to Rs. 10,41,156/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 16% of the bogus purchases by observing in para 8.3.6 as under: -
“8.3.6 ……………..
It is observed from the financial statements that GP at 11.86% is declared in the return flied in the instant assessment year. Taking the GP factor alone into consideration, the disallowance made by the AO at 25% of the total alleged bogus purchase is viewed to be on the higher side. Considering the aforesaid GP percentage declared in the return filed in the instant year, the inflation by way of higher price accounted. In the books of the appellant and the cost saving benefits availed in procuring the goods/ materials from the grey market and considering the fact and circumstances of the instant case
4 | P a g e Power Hydraulic & Equipment in totality, and respectfully, following the decision of the Hon'ble Judicial Authorities cited above, entries in the book of the appellant to that effect are rejected and adopting 16% of the total bogus purchases of Rs. 41,64,623/-is considered fair and reasonable. Going by the above profit percentage, 16% of the total alleged bogus purchases, works out to Rs.6,66,340/-. Tre Assessing Officer is directed to restrict the disallowance of expenses on account of bogus purchase and addition to total income to ₹6,66,340/-. Accordingly, this ground of appeal is partly allowed.”
5. I have considered the issue and gone through the facts and circumstances of the case. I noted the facts from the assessment order and also from CIT(A)’s that the assessee submitted the ledger accounts of the above parties and bank statements extracts evidencing the payments through bank cheque. I noted that facts of this case are similar to the case of Hon'ble High Court of Gujarat in the case of Simit P Seth V CIT (2013) 356 ITR 451(Guj) wherein it had on occasion to deliver its judgment by confirming the decision of the ITAT which has estimated the disallowance at 12.5% of the disputed bogus purchases to meet the end of Justice. Even now before me also revenue could not dislodge the factual aspects noted by CIT(A). I find that the CIT(A) has rightly applied the profit rate at the 5 | P a g e Power Hydraulic & Equipment rate of 16 % and I confirm the same. This issue of Revenue’s appeal is dismissed. 6. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 19.12.2019.