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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./ ITA No. 6894/Mum/2018 (यिर्ाारण वर्ा / Assessment Year 2010-11) आयकर अपील सुं./ ITA No. 6895/Mum/2018 (यिर्ाारण वर्ा / Assessment Year 2011-12) Jinpal and Company The Income Tax Officer, 4, Vasant Kunj, Bapubhai Ward 25(2)(4), Vashhi Road, Vile Parle Room No. 503, 5th Floor, C- बनाम/ (West), Mumbai-400 056 10, Pratykshar Bhavan, Vs. Bandra Kurla Complex, Mumbai-400 051 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./PAN No. AAAFJ4733F अपीलार्थी की ओर े / Appellant by : Shri Dhipam Koyadia, AR प्रत्यर्थी की ओर े / Respondent by : Shri Akhtar H. Ansari, DR ुिवाई की तारीख / Date of hearing: 17.12.2019 घोर्णा की तारीख / Date of pronouncement : 17.12.2019 आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
These appeals of the assessee are arising out of the orders of Commissioner of Income Tax (Appeals)]-53, Mumbai [in short
2 | P a g e ITA Nos. 6894 & 6895/Mum/2018 Jinpal and company CIT(A)], in Appeal No. CIT(A)-53/IT-125,126/ITO- 25(2)(4)/2018-19 even dated 07.09.2018. The Assessments were framed by the Income Tax Officer, ward-25(2)(4), Mumbai (in short ITO / AO) for the A.Ys. 2010-11, 2011-12 dated 16.03.2016, 28.07.2016 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 12.5% of the bogus purchase. The facts and circumstances are exactly identical in both the assessment years i.e. AYs 2010-11 and 2011-12 except quantum, hence, we will take the facts from AY 2011-12 in ITA No. 6895/Mum/2018 and decide the issue.
Briefly stated facts are that the assessee engaged in the business of trading in Alloy, Steel, Iron 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 ₹11,68,613/- for AY 2011-12 and ₹9,47,831 for AY 2010-11 as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: -
In AY 2010-11
“Sl Name of party Amount No.
3 | P a g e ITA Nos. 6894 & 6895/Mum/2018 Jinpal and company 1. Riddhi Enterprises 3,04,025 2. Anshu Mercantile Pvt. Ltd. 3,07,435 3. Dhiren Mercantile Pvt. Ltd. 3,36,371/- Total 9,47,831 In AY 2011-12
“Sl Name of party Amount No. 1. Supreme Enterprise 11,68,613 Total 11,68,613 4. 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 i.e. 12.5% of ₹1,18,479/- for AY 2010-11 and ₹1,46,077/- for AY 2011-12 to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the addition made by the AO by observing in para 4.7 as under: -
“4.7 Even if materials have been purchased, they are not purchased form these parties and may be in cash from un- disclose parties. By purchasing from the grey market, the appellant would have benefitted by the savings of taxes.
4 | P a g e ITA Nos. 6894 & 6895/Mum/2018 Jinpal and company Therefore, in fact and circumstances of the case, in this particular case, it is considered most appropriate to adopt 12.5% profit which can take care of the rotation of capital utilized for such transaction. Hence, in the light of finding of the Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth, 12.5% is found to be appropriate for ascertainment of taxable income related to such transaction. This is exactly what the assessing officer has done. Thus, the ground of appeal is dismissed.”
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. Trading in iron and steel. 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. The normal profit in the Iron and Steel cannot be @ 12.5% rather it remains between 5 to 6% on the given facts of the case. Even in this case, 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% on these
5 | P a g e ITA Nos. 6894 & 6895/Mum/2018 Jinpal and company bogus purchases and compute the income accordingly. The appeal of the assessee is partly allowed. 6. As the issue is same in AY 2010-11, hence, taking a consistent view, I confirm the order of CIT(A) in this year also. 7. In the result, both the appeals of the assessee are partly allowed. Order pronounced in the open court on 17.12.2019.
Sd/- (महावीर स िंह /MAHAVIR SINGH) (न्याययक दस्य/ JUDICIAL MEMBER) मुिंबई, ददिािंक/ Mumbai, Dated: 17.12.2019 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 //True Copy// उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुिंबई / ITAT, Mumbai