ACIT - 17 (1), MUMBAI vs. BHARAT TRADING CO., MUMBAI

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ITA 5048/MUM/2018Status: DisposedITAT Mumbai16 September 2019AY 2009-104 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that while the assessee had primary purchase documents and made payments through banking channels, they failed to prove delivery of material. Therefore, additions to account for the profit element in these purchases were justified.

What were the facts?

The assessee firm was assessed for AY 2009-10 with additions for suppressed profit due to inflated purchases. The AO made additions at 12.5% as suppliers could not be verified, but the CIT(A) reduced it to 8%.

What were the issues?

The primary issue was the disallowance on account of bogus purchases and the extent to which it should be sustained when the assessee failed to prove the delivery of goods.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: HON’BLE SHRI MAHAVIR SINGH, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

For Appellant: Shri Haresh P.Shah-Ld. AR
For Respondent: Shri Akhtar H. Ansari-Ld. DR, Shri Haresh P.Shah-Ld. AR

आदेश / O R D E R

Per Bench: -

1.

Aforesaid appeal by revenue for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)-55,

M/s Bharat Trading Co. Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-55/ACIT- 17(1)/IT-410/17-18 dated 14/06/2018 on following grounds of appeal: -

1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in reducing the disallowance at 8% as against 12.50% adopted by the A.O. in respect of bogus purchases.”

2.1 Facts on record would reveal that the assessee being resident firm stated to be engaged in the business of iron & steel was assessed u/s 143(3) r.w.s 147 of Income Tax Act, 1961 on 16/03/2015 wherein the assessee was saddled with estimated additions of Rs.1.14 Lacs on account of suppression of profit in lieu of inflated purchases. Pursuant to receipt of certain information from DGIT (Investigation), it transpired the assessee made purchases of Rs.9.13 Lacs from 2 entities, the details of which has already been extracted in the quantum assessment order. Accordingly, as per due process of law, the case was reopened vide issuance of notice u/s 148 on 27/03/2014 followed by statutory notices u/s 143(2) & 142(1), wherein the assessee was directed to substantiate the purchases. 2.2 Although the assessee defended the purchases, however, notices issued u/s 133(6) to both the entities remained un-served / un-responded to and the assessee also failed to produce any of the supplier to confirm the transactions. Resultantly, the assessee was saddled with estimated additions of 12.5% against these purchases. The learned first appellate authority reduced the estimate to 8%, against which the revenue is under appeal before us. We have heard and considered the rival submissions.

M/s Bharat Trading Co.

3.

We are of the considered opinion there could be no sale without actual purchase of material keeping in view the assessee’s nature of business. It transpires that the assessee was in possession of primary purchase documents and the payments to suppliers were through banking channels. The sales turnover reflected by the assessee has not been disturbed / disputed by Ld. AO. However, at the same time, the assessee miserably failed to prove the delivery of material. Notices issued u/s 133(6) remained un-responded to. Under such circumstances, the additions which could be sustained, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which Ld. first appellate authority has rightly done. It is noted that the assessee is engaged in price sensitive commodity like iron & steel and therefore, concurring with the approach of learned first appellate authority in restricting the additions to 8%, we dismiss the appeal.

4.

In result, the appeal stands dismissed.

Order pronounced in the open court on 16th September, 2019. Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांकDated : 16/09/2019 Sr.PS:-Jaisy Varghese आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1.

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