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PER PAWAN SINGH, JUDICIAL MEMBER; 1. These two appeal by assessee are directed against the separate orders of ld. CIT(A)-29, Mumbai dated 11.05.2018 for Assessment Year 2009-10 & Assessment Year 2010-11. In both the appeals, the assessee has raised identical grounds of appeal. Facts for both the Assessment Years are identical, therefore, both the appeals were clubbed, heard together and & 4742 Mum 2018-M/s Classic Metal. are decided by common order. For appreciation of fact, the appeal for Assessment Year 2009-10 was treated as lead case. In appeal for Assessment Year 2009-10, the assessee has raised the following grounds of appeal:
1. (a) On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the action of the A.O and approving the addition calculated by the A.O on alleged bogus purchases without appreciating the facts that the opinion of the A.O is based on merely presumptions and sub conjectures and not on any material evidences corroborating the purchases when it is an accepted fact that material evidences super cedes all presumptions. (b) The CIT (A) erred in confirming the addition without appreciating the understated vital facts that the purchases are duly supported with necessary documentary evidences linking the purchases with sales and there appears no sign of it being bogus. (c) The CIT (A) erred in confirming the addition without appreciating the understated vital facts that the appellant has already paid taxes and the gross profit declared by him in the same year and the industry average for the trader also was not as high as 12.5% G.P. (d) The ld. CIT(A) has erred in holding the impugned purchases to be bogus, in spite of voluminous evidences on record simply on the basis that the current addresses of vendors were not provided and the vendors were not produced before the Respondent. (e) The CIT (A) erred in confirming the addition at 12.5% when on the same facts and submissions in the previous year it was restricted to 8% by an appellate authority which also is too high for a trader who has already paid taxes on the same. (1) The Appellant prays that the addition/ disallowance of entire 391002/- made in respect of alleged purchases be deleted.
2. On the facts and circumstances of the case and in law, the CIT (A) erred in dismissing the ground for the appellant's plea of withdrawal of initiation of penalty proceedings u/s 271(1)(c).
& 4742 Mum 2018-M/s Classic Metal.
Brief facts of the case are that the assessee-firm is engaged in the business of Ferrous and Non-ferrous metals, filed its return of income for Assessment Year 2009-10 declaring total income of Rs. 8,60,946/-.
The return of income was processed under section 143(1). The assessment was re-opened under section 147 on the basis of information received from Sale Tax Department, Government of Maharashtra that certain hawala operators are indulging in providing accommodation bills without actual delivery of goods. The Sale Tax Department, Government of Maharashtra referred the list of such hawala dealers and the beneficiary to the DGIT(Investigation), Mumbai. The name of assessee appeared in the list of beneficiary. The assessee allegedly made the purchases of Rs. 31,28,015/- from such hawala dealers. On the basis of information, the Assessing Officer made a belief that the income of the assessee escaped assessment, therefore, re-opened the assessment under section 147. Notice under section 148 was issued on 28.03.2014 to the assessee. The assessee in response to the notice under section 148 filed its reply dated 28.03.2014 and stated that original return filed under section 139(1) by assessee be treated as return in response to the said notice. The Assessing Officer after serving notice under section 143(2) dated 26.11.2014 proceeded for re-assessment.
During the assessment, the Assessing Officer noted that the assessee has shown purchases from the following parties, which was declared as 3 & 4742 Mum 2018-M/s Classic Metal. hawala dealers by the Sale Tax Department, Government of Maharashtra.
Name of the parties Bill amount (Rs.) 1 Chirag Corporation 85,280/- 2 Adino Trading Company Ltd. 8,21,382/- 2 Shree Mahavir Enterprises 22,21,353/- Total 31,28,015/-
The assessee was asked to substantiate the purchases and to furnish the name of dealers, PAN, Bills, Vouchers, description of goods, quantity, rate and amount. The date of dispatch of goods and the name of place along with mode of transportation by road or other mode, Vehicle Number, and payment details. The assessee was also asked to furnish the corresponding sales of goods. The Assessing Officer noted that the assessee vide reply dated 27.01.2015 stated that to buy-peace. The assessee is agreeable for addition at reasonable lower rate. The Assessing Officer after considering the material before him and contention of assessee disallowed 12.5% of the aggregate of total of non-genuine/alleged hawala purchases in assessment order dated 31.01.2015 passed under section 143(3) r.w.s 147.
On appeal before the ld. CIT(A), the action of Assessing Officer and disallowances made on account of bogus purchases was sustained.
Further, aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us. 4 & 4742 Mum 2018-M/s Classic Metal.
We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. The ld. AR of the assessee submits that the assessee furnished complete details of purchases and the sales made against the alleged bogus purchases. The Assessing Officer has not rejected the books of account. The Assessing Officer made the disallowance of 12.5% of the alleged bogus purchases. The ld. AR of the assessee further submits that assessee has already shown Gross Profit (GP) rate at 5%. The addition sustained on account of alleged bogus purchases is on higher side. The ld. AR of the assessee further submits that the Hon’ble Bombay High Court in a recent decision on similar set of fact in PCIT vs. M Haji Adam & Co. in of 2016 dated 11.02.2019 held that addition in respect of bogus purchases is to be limited to the extent of bringing the GP rate on such purchase at the same rate as on other genuine purchases. The ld. AR of the assessee submits that the disallowance of alleged bogus purchase may be restricted in accordance with the decision of Hon’ble jurisdictional High Court in PCIT vs. M Haji Adam & Co. (supra).
On the other hand, the ld. Departmental Representative (DR) for the revenue supported the order of lower authorities. The ld. DR further submits that Investigation Wing of Income-tax Department has made full-fledged investigation in respect of hawala traders. The hawala 5 ITA No. 4741 & 4742 Mum 2018-M/s Classic Metal. traders were/are engaged in providing bogus bill without actual delivery of goods. The assessee has shown bogus purchases only to inflate the profit. The ld. DR for the revenue submits that the Assessing Officer has given sufficient relief. The Assessing Officer has reasonably estimated the disallowances. The assessee is not entitled for any further relief. 7. We have considered the submissions of both the representatives and perused the record. We have noted, though the assessee has raised ground against the re-opening, however, no submission on the validity/invalidity of re-opening is made by ld. AR for the assessee.
Therefore, the ground related to re-opening is treated as not pressed and dismissed. So far as the ground related to estimated disallowance @ 12.5%, the ld. AR of the assessee has vehemently relied upon the decision of Hon’ble jurisdictional High Court in M Haji Adam & Co.(supra). We have noted that on similar set of fact, the Hon’ble Bombay High Court in PCIT vs. M Haji Adam & Co. (supra) held that addition in respect of bogus purchase be limited to the extent of bringing the GP rate on bogus purchase at the same rate as other genuine purchases. We have further noted that the assessee has shown GP of 5%.
Therefore, respectfully following the order of Hon’ble Bombay High Court, we direct the Assessing Officer to restrict the addition with regard to bogus purchases by brining the GP rate on such purchases at the same rate as that of other genuine purchases. Needles to order that 6 & 4742 Mum 2018-M/s Classic Metal. before making addition, the Assessing Officer shall grant opportunity to the assessee before passing the order in accordance with law.
In the result, appeal of the assessee is partly allowed. A.Y. 2010-11 9. As we have noted above, the assessee has raised the identical grounds of appeal as raised in appeal for Assessment Year 2009-10. The disallowances made by Assessing Officer on account of alleged bogus purchases are also similar except the fact that parties/alleged hawala dealers are different. Considering our order for Assessment Year 2009- 10 on similar ground, the appeal for the year under consideration is also allowed with similar direction.
In the result, appeal of the assessee for both the AY’s are partly allowed.
Order pronounced in the open court on 31/07/2019.