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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
The captioned appeals filed by the assessee are directed against the order of the Commissioner of Income Tax (Appeals)-53, Mumbai [in short ‘CIT(A)’] and arise out of the assessment completed u/s 143 r.w.s. 147 of the Income Tax Act 1961 (the ‘Act’). As common issues are Shri Jitendra Jugraj 2 4206 & 4209/Mum/2018 involved, we are proceeding to dispose them off through a consolidated order for the sake of convenience. Facts being identical, we begin with the assessment year (AY) 2009-10.
The grounds of appeal
filed by the assessee read as under:
1. On the facts and in the circumstances of the case and in law, the AO erred in re-opening the assessment u/s.147 of the Income Tax Act, 1961 as the prescribed conditions therein are not satisfied. 2. a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition of Rs.10,12,300/- made by the AO to the income of the Appellant on account of possible profit element @ 12.5% embedded in purchases made through alleged non-genuine parties on the basis of information of the Sales Tax Department about suspicious dealers. b) The Id, CIT(A) failed to appreciate that :- i. all the purchases are genuine beyond doubt and supported by sufficient materials; ii. all the goods purchased from these parties have been backed by corresponding sales which are accepted to be genuine; iii. the books of account maintained by the Appellant are correct and complete in accordance with the method of accounting regularly and consistently followed by the Appellant. iv. the gross profit ratio shown by the Appellant is quite reasonable; v. nothing has been brought on record by the AO that money has exchanged the hands in lieu of payment made for these purchases by account payee cheque; and vi. the AO had neither provided copy of materials and statements relied upon by him nor allowed any opportunity to the Appellant to cross examine those parties who have been alleged to have provided the accommodation entries of such purchases.
Shri Jitendra Jugraj 3 4206 & 4209/Mum/2018 c) In reaching to the conclusion and confirming such addition made by the AO, the Id. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. d) Without prejudice, the rate or percentage of profit clement embedded in such purchases as fixed by the AO and confirmed by the CIT(A) is excessive 3. The Ld. AO erred in charging interest u/s 234B and 234C of the Income Tax Act, 1961.
The AO erred in initiating the penalty proceedings u/s 271(1)© of the Income Tax Act, 1961.
5. The ground Nos. 1, 3 and 4 are not raised before the CIT(A) and your appellant prays that the ground be admitted in the fairness of law.
Briefly stated, the facts are that the assessee filed his return of income for the AY 2009-10 on 16.09.2009 declaring total income at Rs.3,15,360/-. The assessee is engaged in the business of trading in ferrous and non-ferrous metals under the name and style of proprietorship concern ‘M/s Steel Fab India’. The Assessing Officer (AO), on receipt of information from the Sales Tax Department, Government of Maharashtra that the assessee had obtained accommodation entries of Rs.80,98,399/- from 20 parties who had issued bogus sales/purchase bills without supplying any goods, reopened the assessment initially done u/s 143(1) by issuing notice u/s 148 of the Act.
During the course of assessment proceedings, the AO issued notice u/s 133(6) to the said parties at the address given by the assessee by registered post. However, the notices were returned by the postal authorities with the remarks ‘not known’ or ‘no such address’ ‘left’ etc.
Shri Jitendra Jugraj 4 4206 & 4209/Mum/2018 The AO relied on the findings of the investigation done by the Sales Tax Department, Government of Maharashtra and estimated the profit @ 12.5% on the disputed purchases of Rs.80,98,399/- which comes to Rs.10,12,300/- by relying on the decision in CIT v. Simit P. Sheth 356 ITR 451 (Guj).
4. In appeal, the Ld. CIT(A) agreed with the reasons given by the AO and confirmed the disallowance of Rs.10,12,300/-.
Before us, the Ld. counsel of the assessee submits that considering the nature of business of the assessee, the rate or percentage of profit element embedded in such purchases as estimated by the AO and confirmed by the CIT(A) is excessive and unreasonable on the facts of the case. On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A).
We have heard the rival submissions and perused the relevant materials on record. In the instant case, the return of income filed by the assessee was processed u/s 143(1). In the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500 (SC), it has been held that intimation u/s 143(1)(a) is not an assessment. Therefore, in the present case, the AO has rightly reopened the assessment u/s 148 on the basis of information from the Sales Tax Department, Government of Maharashtra that the assessee had obtained accommodation entries from bogus bill providers.
Shri Jitendra Jugraj 5 4206 & 4209/Mum/2018 In the instant case, the notices issued by the AO u/s 133(6) of the Act in the address given by the assessee were returned back by the postal authorities with the remark ‘not known’ or ‘no such address’ ‘left’ etc. The AO has relied on the findings of the Sales Tax Department, Government of Maharashtra and estimated the profit @ 12.5% of the disputed purchases of Rs.80,98,399/- However, we find that the nature of business of the assessee is trading in ferrous and non-ferrous metals. Considering the nature of business of the assessee and facts of the case, we direct the AO to restrict the disallowance to 5% of the above purchases of Rs.80,98,399/- and bring to tax the resultant amount only. The charging of interest is consequential. Facts being identical, our decision for the AY 2009-10 applies mutatis mutandis to AYs 2010-11 and 2011-12.