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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Bench: - 1. Aforesaid appeal by assessee for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)-1, Thane [in short referred to as ‘CIT(A)’], dated 20/06/2018 on following grounds of appeal: -
Shri Radheshyam Babulal Vyas Addition u/s. 69C - Rs. 3,26,134/- 1) The learned Commissioner of Income Tax (Appeals) - 1, Thane [(CIT-A)] erred on facts and in law in confirming the order of the Income Tax Officer, Ward 3(3), Kalyan (AO) making an addition of Rs. 3,26,134/- u/s. 69C of the Income-tax Act. 2) The learned CIT(A) further erred in holding that the appellant was capable of harvesting the GP at 14.16% as declared in Assessment Year 2011-12 and the same is liable to be re-estimated by rejecting the accounts considering the facts and defects narrated by him in the order. 3) The learned CIT(A) further erred in computing the disallowance/addition to be made by adopting the highest GP without considering the GP of earlier years and applying the same to the entire turnover of the appellant as against only the purchases from the alleged bogus parties. 4) The learned CIT(A) and AO failed to appreciate that the purchases were duly recorded in the books of accounts and hence, no addition u/s. 69C was called for. 5) The appellant prays that the addition of Rs. 3,26,134/- made by the AO u/s. 69C on account of alleged bogus purchase and as confirmed by the CIT(A) may be deleted.”
We have heard and considered the arguments advanced by both the sides. 2.1 Facts on record would reveal that the assessee being resident individual stated to be engaged in manufacturing of electronic panel under proprietorship concern namely M/s Power Switchgears & Controls was assessed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 on 11/08/2014 wherein the assessee was saddled with additions of Rs.3.26 Lacs on account of alleged bogus purchases. Pursuant to receipt of certain information from Sales Tax Department, Maharashtra, it transpired the assessee made purchases of Rs.3.26 Lacs from 3 suspicious entities, the details of which has already been extracted on page-1 of the quantum assessment order. Accordingly, as per due process of law, the case was reopened vide issuance of notice u/s 148 on 04/10/2013 followed by statutory notices u/s 143(2) & 142(1), wherein the assessee was directed to substantiate the purchases.
Shri Radheshyam Babulal Vyas 2.2 Although the assessee defended the purchases, however, the field inquiries revealed that none of the suppliers existed at the given addresses. The assessee could not produce any of the suppliers to confirm the transactions. The delivery of material could not be established. Consequently, the stated purchases were disallowed and added to the income of the assessee u/s 69C. The learned first appellate authority, after appreciating the trend of Gross / Net Profit rates reflected in other years and relying upon certain judicial pronouncements, sustained full disallowance as made by learned AO. Aggrieved, the assessee is in further appeal before us.
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. The assessee was in possession of primary purchases 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 produce any of the supplier. The delivery of material also could not be established. 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. Therefore, we estimate the addition against these purchases @8% of alleged bogus purchases of Rs.3,26,134/- which comes to Shri Radheshyam Babulal Vyas Rs.26,091/-. The balance addition stands deleted. The learned AO is directed to re-compute the income in terms of our order. 4. In result, the appeal stands partly allowed. 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