Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH
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
2 | P a g e Prime Steel CIT(A)], in Appeal No. CIT(A)-38/ITO-26(2)(4)/IT.70/2016-17 order dated 29.06.2018. The Assessment was framed by the Income Tax Officer, Ward-26(2)(4), Mumbai (in short ITO / AO) for the A.Y. 2011-12 vide order dated 28.01.2016, 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 the rate of 12.5% of the bogus purchases. 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 12.5% of the total amount of bogus purchase transaction instead of 100% of the total amount of bogus purchase made by the AO.”
Briefly stated facts are that the assessee engaged in the business of reseller in M.S. Sheet, Angle, Channels etc. 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 ₹833212/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: -
3 | P a g e Prime Steel “Sl Name of party Amount No.
Sahara Traders 102014
Donnies Trading Pvt. Ltd. 562438
Dharam Trades Private Limited 170560 Total 833212
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 of whole amount as unproved purchases at Rs. 833212/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 12.5% of the bogus purchases by observing in para 8.3.2 as under: -
“8.3.2 The Hon’ble High Courts and Judicial Authorities have adopted estimation of varying percentages to arrive at the profit embedded in such transactions depending upon the nature of business as laid down by the Hon’ble High court of Gujarat in the case of Simit P. Seth reported in 356 ITR 451 and in the case of CIT vs. M/s Bholanath Polyfab Pvt. Ltd (2013) reported in 355 ITR 290. As per the details, submitted by the 4 | P a g e Prime Steel appellant it is observed that the average gross profit % for assessment years, 2009-10 & 2010-11 and 2012-13 & 2013- 14 is 7.4% (7.15+7.25+7.51++7.78) & average net profit ratio for the said assessment year is 4.43% (3.64+4.02+5.19+5.16) wherein the issue of bogus purchase is not there as of now/ till date while the gross profit ratio for the instant assessment year is 6.90% and net profit % is 4.54%. Taking into account of the fact that the gross profit declared in the return filed in the instant assessment year is lesser than the aforesaid average GP% of the two preceding and two subsequent assessment years, the inflation in the purchase price accounted in the books of the appellant as per the inflation in the purchase price accounted in the books of the appellant as per the purchase invoices issued by the alleged suppliers/ parties and the benefit of lower price of purchases made from the grey market due to non-levy of sales tax, excise duty, income-tax and considering the entire material on record, I am of the opinion
5 | P a g e Prime Steel that estimating the profit embedded in the alleged purchase at 12.5% of alleged total bogus purchases of Rs. 8,33,212/- is justifiable and rational, the appellant being a trader in M/S sheet, angle, channels etc. In arriving at the above decision, support is taken from the filings laid down by the afore referred Hon’ble Judicial Authorities in the light of the facts and circumstances of the present case. The AO is directed to restrict the addition to total income of the appellant on account of disallowance of bogus purchases to ₹ 1,04,152/-. Accordingly, this ground of appeal is partly allowed.”
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).
6 | P a g e Prime Steel I find that the CIT(A) has rightly applied the profit rate at the rate of 12.5% and I confirm the same. This issue of Revenue’s appeal is dismissed.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 19.12.2019. (महावीर स िंह /MAHAVIR SINGH) (न्याययक दस्य/ JUDICIAL MEMBER) मुिंबई, ददिािंक/ Mumbai, Dated: 19.12.2019 स दीप सरकार, व.यनजी सधिव / Sudip Sarkar, Sr.PS
आदेश की प्रयिसलपप अग्रेपिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A) 4. आयकर आयुक्त / CIT 5. ववभागीय प्रयतयिधर्, आयकर अपीलीय अधर्करण, मुिंबई / DR, ITAT, Mumbai 6. गार्ा फाईल / Guard file. आदेशान सार/ BY ORDER, त्यावपत प्रयत //// उप/सहायक पुंजीकार (Asstt.