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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, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-30, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) r.w.s. 147 of the Income Tax Act 1961, (the ‘Act’).
Briefly stated, the facts are that the assessee filed his return of income for the assessment year (AY) 2009-10 on 29.09.2009 declaring total income of Rs.2,42,330/-. On receipt of information from the Sales Shri Haresh Jayantilal Parekh Tax Department, Government of Maharashtra that the assessee had obtained accommodation entries through bogus bills amounting to Rs.78,76,704/-, the Assessing Officer (AO) reopened the assessment by issuing notice u/s 148 dated 19.02.2014. During the course of assessment proceedings, the AO asked the assessee to file (i) name of the seller with current address, PAN, (ii) bill and voucher number with date, (iii) description of goods purchased, (iv) quantity, rate, amount, (v) goods dispatched from the place with date and (vi) mode of transportation, if by road vehicle number and also payments. Similarly, details of corresponding sales of goods were also called for by the AO. However, the AO was not convinced to the details furnished by the assessee and relying on the findings of the Investigation conducted by the Sales Tax Department, estimated the profit @ 12.5% on the alleged bogus purchases of Rs.78,76,704/- by relying on the decision in CIT v. Simit P. Sheth (2013) 356 ITR 451 (Guj). The disallowance made by the AO comes to Rs.9,84,588/-.
In appeal, the Ld. CIT(A) agreed with the reasons given by the AO and confirmed the disallowance of Rs.9,84,588/-.
Before us, the Ld. counsel of the assessee submits that the appellant is engaged in the business of reseller and supplier of iron and steel etc. and he had submitted the details of all purchase, sale, quantitative details, payment evidence as and when called for by the AO.
Shri Haresh Jayantilal Parekh Further, it is stated that the assessee had given full details of goods purchased from the suppliers and sales made to the various parties. Reference is made by him to the books of accounts audited. Thus it is stated that there was no necessity on the part of the AO to estimate the profit @ 12.5% of the so-called disputed purchases of Rs.78,76,704/- which comes to Rs.9,84,588/-.
On the other hand, the Ld. DR submits that the In response to the notices issued u/s 133(6) by the AO to the parties, those notices could not be served on them and were returned by the postal authorities with the remarks ‘not known or left’. It is stated that the AO has rightly relied on the findings of the investigation by the Sales Tax Department, Government of Maharashtra and estimated the embedded profit @ 12.5% of the disputed purchases of Rs.78,76,704/- as these were nothing but accommodation entries. Thus the Ld. DR supports the order passed by the AO and then confirmed by the Ld. CIT(A).
We have heard the rival submissions and perused the relevant materials on record. In the instant case though the notices issued by the AO u/s 133(6) were returned by the postal authorities with the remark “not known or left”,. However, we find that the assessee has filed the details called for by the AO in response to the notice u/s 142(1) dated 19.12.2014 issued. Further we find that the nature of business of the assessee is that of a reseller and supplier of iron and steel. Having considered the nature of business of the assessee and the facts of the case, we direct the AO to restrict the disallowance to 5% of the disputed purchases of Rs.78,76,704/- which comes to Rs.3,93,835/-.
Shri Haresh Jayantilal Parekh