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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The above titled two appeals have been preferred by the assessee against the order dated 09.03.2018 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12 & 2010-11.
The only issue raised in the grounds of appeal in both the years is against the confirmation of addition of Rs.3,99,957/- in A.Y. 2010-11 and Rs.11,68,248/- A.Y. 2011-12 by Ld. CIT(A) as made by the AO towards bogus purchases.
2 & ITA No.3773/M/2018 Shri Kirti Murlidhar Muni 3. The facts in brief are that the assessment was framed in the case of the assessee under section 143(3) on 28.12.2012 accepting the returned income. Thereafter, the AO received information from the DGIT (Inv.) Mumbai that assessee is beneficiary of bogus purchase transactions to the tune of Rs.31,99,653/- from six parties as stated in para 3 of the assessment order. Thereafter, the case of the assessee was reopened under section 147 of the Act by issuing notice under section 148 of the Act dated 15.03.2016. During the course of assessment proceedings, the AO asked the assessee to prove the genuineness of the purchase by filing bills, vouchers, payment details and other evidences. The AO also issued notices under section 133(6) of the Act to the bogus suppliers which were returned unserved with the remark ‘not known’. Finally, the AO came to the conclusion that purchases from the said six parties were bogus and non genuine as the assessee failed to file the delivery challan, transport receipts, receipt of weigh bridge and stock register etc. and addition to the tune of Rs.3,99,957/- by applying the rate of 12.5% of the bogus purchases was made to the income of the assessee.
In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by upholding the order of AO on the ground that the onus lies on the assessee to prove the genuineness of the purchases. The Ld. CIT(A) justified the order of the AO on the ground that the assessee has failed to discharge the onus cast upon it by the statute and therefore assessment order is rightly passed by the AO.
3 & ITA No.3773/M/2018 Shri Kirti Murlidhar Muni 5. We have heard the rival submissions of both the parties and perused the material on record. The undisputed facts are that the assessee is a traders of iron, steel and general items. During the year, the assessee was found to be beneficiaries of bogus purchase entries to the tune of Rs. 31,99,653 /-. The case of the assessee was reopened after the AO received information from the DGIT (Inv.) to this effect. We observe from the facts before us that the AO has accepted the sale of the assessee and made addition on account of GP on the alleged bogus purchases to bring to tax the profit element embedded in such purchases therein @ 12.50%. In the assessee’s case we note that the applicable VAT rate is 4% and find merit in the contentions of the Ld. A.R. that 12.5% GP on the steel item is unreasonable and excessive and if confirmed, would lead to absurd and unrealistic GP rate of the assessee which is not practicable in the steel trading. The Ld. D.R., on the other hand, relied heavily on the order of Ld. CIT(A) by submitting that the first appellate authority has taken a very balanced view by upholding the order of AO wherein addition was made only @ 12.5% and therefore prayed before the Bench that the appeal of the assessee may be dismissed. However, we can not ignore the fact that in the assessee’s case the GP margin is very meager and thus we are not in agreement with the conclusion drawn by the lower authorities on the rate of G.P. to be applied. In the case of the assessee, the VAT rate is only 4% and margin is also very thin. We have also examined the decisions of the co- ordinate benches of the Tribunal with similar facts wherein GP rate ranging from 3% to 5% have been held to be reasonable.
ITA No.3772/M/2018 6. The issue raised in this appeal is identical to the one as stated above in for A.Y. 2010-11. Therefore, our finding in No.3773/M/2018 for A.Y. 2010-11 would, mutatis mutandis, apply to this appeal as well. Accordingly the appeal of the assessee is partly allowed.
In the result, both the appeals of the assessee are partly allowed.
Order pronounced in the open court on 22.03.2019.