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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
These two appeals filed by the assessee are arising out of the orders of Commissioner of Income Tax (Appeals)-32, Mumbai [in short CIT(A)], in appeal No. CIT(A)-32/IT-85 & 172/ITO-17(3)(3) & 20(2)(4)/14- 15 & 15-16, dated 03.03.2017. The Assessments were framed by the ITAs No. 4516 & 4518/Mum/2017 Income Tax Officer, Ward 20(2)(4) & 17(3)(3), Mumbai (in short ITO/AO) for the A.Ys. 2009-10 & 2011-12 vide order dated 17.03.2015, 29.03.2014 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
In both the appeals, the issue is same as regards to application of profit rate on bogus purchases and the facts and circumstances are identical except the quantum. Hence, we will take the facts from AY 2009-10 and decide the issue.
The only issue in these appeals of assessee is against the orders of CIT(A) confirming the addition of profit @ 4% on the bogus purchase. For this assessee has raised the following grounds: - “I. Learned CFI(Appeal) erred in confirming the levy of Ld. Assessing officer ignoring the material facts brought on record
2. Learned CIT(Appeal) erred in confirming the additions of 4% of profit amounting to Its. 5014383/- as determined by the AO ignoring the material facts brought on record.
3. Learned CIT(Appeal) erred in ignoring the facts that the transactions of purchases and sales are genuine and appellant has already offered GP."
Briefly stated facts are that the assessee is engaged in metal scraps. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed in hawala ITAs No. 4516 & 4518/Mum/2017 dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to Rs. 12,53,59,585/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under.
Name of party Amount Shah Trading Co. 4,42,30,575 Vimal Sales corpn. 3,50,22,247 Siddhi Vinayak Traders 1,94,06,750 Samiksha Metal India 2,67,00,286 Total 12,53,59,585 5. The AO issued noticed under section 133(6) of the Act to the above mentioned parties and no reply was filed from the concerned parties. During the course of assessment proceedings and during appellate proceedings, the assessee submitted documentary evidences such as payment received against such sales, receipt of material purchases, account payee cheque. According to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition of unproved purchase at 4% of ₹ 50,14,383/- to the returned income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the addition made by the AO by following the decision of Hon’ble Gujarat High court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj).
We have considered the issue and gone through the facts and circumstances of the case. Before us, the assessee has filed copy of Tribunal order in assessee’s own case in for AY 2010-11 vide order dated 30.04.2019, wherein Tribunal has accepted the restriction of 2% net profit on the alleged bogus purchase and for this Tribunal observed in Para 7 as under: - ITAs No. 4516 & 4518/Mum/2017 “7. I have considered rival submissions and perused material on record. No doubt, the assessee has failed to conclusively prove the genuineness of purchases made from the declared source. However, the sales effected by the assessee have not been doubted. Therefore, the Assessing Officer has restricted the addition to the profit element embedded in the non–genuine purchases. The dispute in the present appeal is only with regard to the reasonable profit rate at which the addition can be made. Learned Commissioner (Appeals) has estimated the profit @ 5%. As could be seen, the assessee is a dealer in ferrous and non–ferrous metals where the profit margin is very low. Further, from the chart submitted before me, it is noticed that the gross profit rate shown by the assessee in the preceding as well as subsequent assessment years varies between 2% and 6%. Whereas, the net profit rate is around 1%. Considering the above, I am of the view that addition @ 2% of the non–genuine purchases would suffice. Accordingly, I direct the Assessing Officer to restrict the addition to 2% of the non–genuine purchases. It is made clear, the aforesaid decision is purely on the basis of facts involved in the present appeal, hence, will not apply to any other case. Grounds are partly allowed.”