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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 2008-09) Mr. Vipul Ashok Tibrewala The Commissioner of Income 6, Tibrewala House, J.B. Tax-53, Aayakar Bhavan, M.K. बनाम/ Nagar, Andheri (E), Road, Mumbai-400 020 Vs. Mumbai-400 059 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./PAN No. AACPT3400B अपीलार्थी की ओर े / Appellant by : Shri Rajesh Modi, AR प्रत्यर्थी की ओर े / Respondent by : Shri Akhtar H. Ansari, DR ुिवाई की तारीख / Date of hearing: 18.12.2019 घोर्णा की तारीख / Date of pronouncement : 18.12.2019 आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
This appeal of the assessee is arising out of the order of Commissioner of Income Tax (Appeals)]-53, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-53/IT-247/ITO-25(1)(4)/2018-19 order dated 12.09.2018. The Assessment was framed by the Income Tax Officer, Ward-25(1)(4), Mumbai (in short ITO / AO)
2 | P a g e Mr. Vipul Ashok Tibrewala for the A.Y. 2008-09 vide order dated 13.11.2015, under section 143(3) read with section 147 of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The only issue in these appeal of assessee is against the order of CIT(A) confirming the addition made by the AO by applying the profit rate at the rate of 25% of the bogus purchase.
Briefly stated facts are that the assessee engaged in the business of issuing accommodation bills. 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 ₹43,60,404/- as admitted by these hawala dealers in their deposition before the authorities.
The AO issued noticed under section 133(6) to the parties which returned unserved and assessee failed to produce these parties. 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 unproved purchase at 25% of ₹10,90,101/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the action made by the AO by observing as under: -
3 | P a g e Mr. Vipul Ashok Tibrewala “4.7. Even if materials have been purchased, they are not purchased form these parties and may be in cash from un- disclosed parties. By purchasing from the grey market, the appellant would have benefitted by the savings of taxes. The assessing officer has considered such profit element to be 25%. The appellant has shown net profit of only 2.53% of turnover. The impugned purchases at Rs.43,60,404/- is 28% of total purchases of Rs 153,67,309/- The disallowance made by assessing officer is not unreasonable. The same is upheld. Thus this Ground of appeal is dismissed on merits.”
5. I have considered the issue and gone through the facts and circumstances of the case. I find from the facts of the case and argument of both the sides. The CIT(A) has confirmed the profit rate at the rate of 12.5%, which according to me is on higher side going by the nature of business. of the assessee i.e. engaged in the business of issuing accommodation bills. I am in full agreement with the contentions raised by the assessee before CIT(A) and according to me a profit rate of 12.5% is on higher side because the profit rate cannot be at 12.5%. Even the assessee has also paid the VAT element on these bogus purchases. Hence, I direct the AO to recompute the income after applying profit rate at the rate of 5% and compute the