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Income Tax Appellate Tribunal, “SMC” BENCH,
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 29.05.2018 passed by the Commissioner of Income Tax (Appeals) -30, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2011- 12.
The assessee has raised the following grounds: - “
1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal) erred in (a) arriving at the conclusion that purchases made of Its. 93,30,700/- from parties mentioned in assessment order are not genuine and not made from them but from other sources. A.Y.2014-15 (b) Confirming estimation of profit element @ 12.5% on alleged non genuine purchases of Rs. 93,30,700/- which is over and above the gross profit declared @7.01% in books of accounts. (b) Confirming addition of Rs. 11,66,339/- made by the Assessing Officer to the total income of the appellant. The CIT (A) failed to appreciate that the AO did not carry out any independent enquiry himself and did not point out any defect in the evidence furnished by the Appellant. Therefore, the addition is liable to be deleted. The CIT(A) failed to appreciate that the AO had not provided the Appellant any material on which he placed his reliance in making the impugned addition thereby violating the principles of natural justice. The CIT (A) ought to have provided such material to the Appellant before adjudicating on the impugned addition. Therefore, the addition is not justified. The appellant crave leave to add, amend, alter and / or vary any of the grounds of appeal before or at the time of hearing.”
3. The brief facts of the case are that the assessee filed its return of income on 16.09.2011 declaring total income to the tune of Rs.2,98,780/- for the A.Y. 2011-12. The return was processed u/s 143(1) of the I.T. Act, 1961. The case of the assessee was reopened on the basis of the information received from the DGIT (Inv.) Wing, Mumbai in which it was conveyed that the assessee has taken the accommodation entries of bogus purchase in sum of Rs.93,30,700/- from the following five parties.
Name of the Party Amount Nisha Enterprise 2620737 Mahavir Corporation 3366636 P.M. Steel Alloys 2311127 Bhagyalaxmi Steel Industries 403000 Vijay Trading Company 629200 Total 9330700 A.Y.2014-15 4. After the reply of the assessee, the AO raised the addition to the extent of 12.5% of the bogus purchase of Rs.93,30,700/- i.e 11,66,339/- The total income of the assessee was assessed to the tune of Rs.14,65,120/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who confirmed the addition to the extent of 12.5%, therefore, the assessee has filed the present appeal before us.
We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The assessee failed to produce the sufficient evidence before the AO to prove the purchase as genuineness. The assessee also failed to produce the suppliers before the AO. In the instant case, sale is not doubted. It is settled law that when the sales are not doubted then the 100% disallowance addition cannot be made and in this regard we also find support in law settled by the Hon’ble Jurisdictional High Court in the case of Nikunj Eximp Enterprises (in writ petition no.2860 dated 18.06.2014). In the present case the facts of the case are that the assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax of and others at the expenses of the exchequer. In view of the said circumstances, no harms seem if the restriction of the bogus purchase be confirmed to the extent of 12.5% of the bogus purchase. The Ld. Representative of the assessee has argued that when only the profit earned by assessee on these bogus transactions is to be taxed then the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase.