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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI S. RIFAUR RAHMAN, AM & SHRI RAM LAL NEGI, JM
Shri Jayantkumar Ratilal ITO – 33(2)(1), Mehta, 6th floor, C-12, Prop. M/s Docksan Pratyakshakar Bhavan, बिधम/ Asbestos Packing Inds, C- Bandra Kurla Complex, 126, Bonanza Indl. Estate, Vs. Bandra (East), Ashok Chakravarty Road, Mumbai-400 051 Kandivali (E), Mumbai- 400 101 स्थायीलेखासं./जीआइआरसं./PAN No. AACPM5340D (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant Shri C. S. Sharma, DR : by प्रत्यथीकीओरसे/Respondentby : Shri Debang Shah, AR सुनवाईकीतारीख/ : 23.09.2019 Date of Hearing घोषणाकीतारीख / : 30.09.2019 Date of Pronouncement आदेश / O R D E R
Per S. Rifaur Rahman, Accountant Member:
The present Appeal has been filed by the revenue against the order of Ld. Commissioner of Income Tax (Appeals) - 45 in Shri Jayantkumar Ratilal Mehta, short referred as ‘Ld. CIT(A)’, Mumbai, dated 25.06.18 for Assessment Year (in short AY) 2011-12.
The brief facts of the case are that assessee is the proprietor of M/s Docksan Asbestos Packing Industries and is engaged in the business of manufacturing and trading of Asbestos products like spiral gaskets, etc. Assessee filed its return of income for AY 2011-12 on 21.09.11 declaring the income at Rs. 5,06,870/-. The AO received information from DGIT(Inv.), Mumbai, Sales Tax Department that the assessee had made bogus purchases and billings from various parties during this assessment year amounting to Rs. 16,39,548/-. Accordingly, AO reopened the assessment and issued notice u/s 148 and served upon the assessee. As per the information received from DGiT(Inv.), Mumbai/Sales Tax Department that the assessee had made bogus purchases and billings from the following parties: S. No. Name of the party Amount 1 Rakesh Enterprises 1,44,806 2 Mital Enterprises 1,49,257 3 AG Corporation 3,05,598 Shri Jayantkumar Ratilal Mehta, 4 Kalash Trading Co. 4,54,495 5 Viraj Enterprises 5,85,392 Total 16,39,548
During the assessment proceedings, the AO asked the assessee to furnish the details like copy of ledger account of the purchase party, copy of purchase bills, lorry receipt, toll payment, transport bills, etc and assessee furnished purchase bills, ledger of the parties and bank statement of payments and submitted that the purchases were genuine and the payments were made through bank. AO issued notices u/s 133(6) of the Act on the parties, but some of the notices were returned unserved. Further, the assessee was asked to produce the said party but the assessee could not bring on record. Accordingly, AO opined that purchases remain unverified, therefore AO treated the above purchases as unverified and accordingly disallowed 20% of the above purchases.
Aggrieved with the above order, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A), after considering the submission of the assessee, had concluded that by booking the Shri Jayantkumar Ratilal Mehta, purchases, assessee could have obtained bogus bills in lieu of material purchased legally and assessee could have saved on account of VAT and other incidental charges. Accordingly, he restricted the disallowance to the extent of 12.5% of the purchases. 5. Aggrieved with the above order, revenue has preferred the appeal before us. 6. Considering the rival contentions and material placed on record, we notice that ITAT Mumbai Bench invariably disallowed 12.5% of the purchases, which were not satisfactorily verified by the AO and not substantiated properly by the assessee. Since Ld. CIT(A) has restricted the disallowance to the extent of 12.5%, we are inclined to accept the findings of Ld. CIT(A) and further we come across the decision of the Coordinate Bench of this Tribunal in the case of Sunil B. Vorani (HUF) vrs ITO (ITA No. 1337/Mum/2017), wherein it was held as under:- Be that as it may, after evaluating the entire facts, grounds raised by the assessee, perusal of the records and judgments relied by the parties, we find that Ld. Shri Jayantkumar Ratilal Mehta, CIT(A) has upheld the findings of AO in estimating the profit @ 25% of the total sales. In our considered view, considering the facts of the present case and while relying upon the following judgments:- 1) ClT vs Bholanath Poly Fab Ltd. (2013) 355 ITR 290 (Guj). (HC), 2. CIT v Simit D, Sheth (2013) 356 ITR 451 (Guj)-(HC) and 3. CIT vs. Sanjay Oil Cake Industries (2009) 316 ITR 274 (Guj) (1C) and taking into consideration the facts of the present case, and also considering the order passed by the Coordinate Bench of SMC in assessee’s own case and to account for the profit element embedded in these purchase transactions to factorize profit earned by assessee against purchase of material in the grey market and undue benefit of VAT against bogus purchases, we are of the considered view that upholding the additions @ 25% of the sales by Ld. CIT(A) is unreasonable. The ends of justice would be met in case the additions are restricted @ 12.5 % of purchase amount of Rs. 2,26,39,391/-. Consequently orders passed by Ld. CIT(A) are set aside and hence we direct the AO to restrict the additions to the extent of 12.5% of the bogus purchases of Rs. 2,26,39,391/-. made from the parties. Accordingly these grounds raised by the assessee are partly allowed.
Shri Jayantkumar Ratilal Mehta,
Therefore, respectfully following the aforesaid decision, we are inclined to accept the findings of Ld. CIT(A). Accordingly, grounds raised by the revenue are dismissed.