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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: -
Aforesaid appeal by assessee for Assessment Year [AY] 2010-11 contest the order of Ld. Commissioner of Income-Tax (Appeals)-24, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No.CIT(A)-24/IT-
FGB Manufacturing Co. 4/847/ITO-27(1)(4)/2018-19 dated 12/07/2018 on following grounds of appeal: - “Being aggrieved against the Order of Commissioner of Income Tax (Appeals) 24, this appeal petition is being filed to consider the following grounds of appeals, which are independent of and without prejudice to each other: 1) On the facts and the circumstances of the case and in law, the Commissioner of Income Tax (Appeals) erred in confirming the addition made by A.O. amounting to Rs.3,14,335/- on account of bogus purchases. 2) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition though the appellant provided all the supporting to prove genuineness of the purchases and transactions. 3) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition though the full particulars were filed the assessment proceedings and PAN No. of the said parties are available on record. 4) On the facts and circumstances of the case and in law, the assessing officer ought to have gone through the record of the parties whose Pan numbers were available on record and some of the parties are registered with MCA. 5) On the facts and circumstances of the case and in law, the appellant have already declared Gross Profit of 27.32%, again adding the same percentage, the GP will go up to 54.64% which amounts to double addition and hence the addition is un called for.”
2.1 Facts on record would reveal that the assessee being resident firm stated to be engaged in manufacturing of pressure gauges, was assessed for impugned AY u/s. 143(3) r.w.s. 147 wherein the income of the assessee was determined at Rs.13.65 Lacs after sole addition of alleged bogus purchases for Rs.11.50 Lacs as against returned income of Rs.2.14 Lacs filed by the assessee on 06/07/2010 which was processed u/s.143(1). 2.2 Pursuant to receipt of certain information from investigation wing / Sales tax Department, Govt. of Maharashtra, it transpired that the assessee stood beneficiary of alleged bogus purchases to the tune of Rs.11.50 Lacs from 11 parties, the details of which has already been extracted at para-5.1 of the quantum assessment order. Accordingly, as per due process of law, re-assessment proceedings were initiated against the assessee u/s 147 by FGB Manufacturing Co. issuance of notice u/s 148 on 19/03/2015. The statutory notices u/s 143(2) & 142(1) were issued in due course of assessment proceedings wherein the assessee was directed to substantiate the purchase transactions. 2.3 To confirm the purchases transactions, notices u/s 133(6) were issued to all parties, however the same were returned back unserved by postal authorities with the remarks “left”. The assessee submitted that the purchases were genuine and the material was used in the manufacturing process. The attention was drawn to the fact that the payments were made through banking channels. However, not satisfied, the stated purchases were disallowed and added to the income of the assessee. The learned first appellate authority, inter-alia, relying upon the decision of Hon’ble Gujarat High Court rendered in CIT V/s Simit P. Sheth [356 ITR 451] restricted the addition to 27.32%, being Gross Profit rate reflected by the assessee. Aggrieved, the assessee is in further appeal before us. It appears that the revenue is not in further appeal.
We have heard and considered the arguments of respective representatives.
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. As noted by lower authorities, 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 substantiate the purchases during assessment FGB Manufacturing Co. proceedings and could not produce any of the suppliers to confirm the transactions. 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. However, finding the estimated rate to be on the higher sider, we reduce the same to 12.5% of alleged bogus purchases. The same comes to Rs.1,43,821/-. The balance addition stands deleted. The impugned order stand modified to that extent.
In result, the appeal stands partly allowed.
Order pronounced in the open court on 11th September, 2019. Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांकDated : 11/09/2019 Sr.PS:-Jaisy Varghese आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6.