SHRI BHARATKUMAR T. JAIN,MUMBAI vs. INCOME TAX OFFICER-19(1)(2), MUMBAI

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ITA 2048/MUM/2018Status: DisposedITAT Mumbai01 November 2018AY 2010-114 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the profit rate of 12.5% confirmed by the CIT(A) on bogus purchases was on the higher side. The AO was directed to recompute the income by applying a profit rate of 8% on the bogus purchases.

What were the facts?

The assessee, engaged in trading ferrous and non-ferrous metals, was found to have made purchases from hawala parties based on information from the Sales Tax Department. The Assessing Officer (AO) received information that these parties provided bogus purchase bills.

What were the issues?

The primary issue was the estimation of profit on bogus purchases made by the assessee. The Tribunal had to determine a fair profit rate to be applied to these unverified purchases.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SRI MAHAVIR SINGH

For Respondent: Shri BS Bist, DR
Hearing: 01.11.2018Pronounced: 01.11.2018

Heard together (2 matters)

ITA No. 2048/Mum/2018
ITA No. 2049/Mum/2018

Read from the judgment's own cause title. This page is filed under one of them.

ुनवाई की तारीख / Date of hearing: 01.11.2018 घोषणा की तारीख / Date of pronouncement : 01.11.2018 AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:

These two appeals by the assessee are arising out of the orders of Commissioner of Income Tax (Appeals)-54, Pune [in short CIT(A)], in appeals no. CIT(A)-30/IT-2178 & 2175/ITO-19(1)(2)/2015-16 of even date 22.01.2018. The Assessments were framed by the Income Tax Officer, Ward 19(1)(2), Mumbai in short ‘ITO/ AO’) for the A.Ys. 2010-11 & 2011- 12 vide orders of even date 30.01.2016 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).

2.

The only common issue in these appeals of assessee is against the order of CIT(A) confirming the addition made by AO applying the profit rate at 12.5% of the bogus purchase. For this assessee has raised identically worded grounds in both the years except the quantum. The facts and circumstances are exactly identical in both the years and hence, I will take the facts from AY 2010-11 in and will decide the issue.

3.

Briefly stated facts are that the assessee engaged in the business of trading in Ferrous and non-ferrous metal. 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 dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to Rs. 84,22,926/- for AY 2010-11 & ₹ 1,23,50,183/- for AY 2011-12 as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - 2010-11

Name of party Amount Mahavir Metal Corporation 558661 Jineshawhar Trading Company 646760 Vinayak Sales Corporation 108593 Kanak Metal Corporation 281160 Bhagyalaxmi Steel Industries 361616 Kushal Steel Corporation 686930 Vidhi Metal Company 1769808 Shree Keshar Impex Mehta Pvt. Ltd. 4009398 Total 84,22,926 2011-12

Name of party Amount Mahavir Metal Corporation 1437278 Jineshawhar Trading Company 358841 Vinayak Sales Corporation 565354 Kanak Metal Corporation 667777 Bhagyalaxmi Steel Industries 1562983 Kushal Steel Corporation 1687354 Vijay Trading Company 2757425 Shree Keshar Impex Mehta Pvt. Ltd. 3313170 Total 1,23,50,183 4. The AO issued noticed under section 133(6) to the parties which returned back and assessee failed to produce these 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 12.5% of ₹ 10,52,866/- for AY 2010-11 & 12.5% of ₹ 15,43,773/- for AY 2011-12 to the returned income of the assessee.. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the addition made by the AO by observing in para 5.5 as under: -

“5.5 The AO has estimated this profit at 12.5%. As the purchases could not be established as genuine, the estimation made by the AO of 12.5% of the alleged bogus purchases is confirmed. However, the AO is directed to allow the GP already declared by the assessee on these alleged bogus purchases. These grounds of appeal are partly allowed.”

5. I have considered the issue and gone through the facts and circumstances of the case. I find from the facts of the case and argument of both the sides that the CIT(A) has confirmed the profit rate at 12.5% of ₹ 10,52,866/- for AY 2010-11 & 12.5% of ₹ 15,43,773/- for AY 2011-12 to the return income of the assessee, which according to me is on higher side going by the nature of business of the assessee i.e. trading in Ferrous and non-ferrous metal. Hence, I direct the AO to recompute the income after applying profit rate at the rate of 8% and compute the income accordingly. The appeal of the assessee is partly allowed.

6.

Similar are the facts in AY 2011-12 and hence, I direct the AO to apply profit rate at the rate of 8% on the bogus purchases.

7.

In the result, both, the appeals of assessee are partly allowed.

Order pronounced in the open court on 01-11-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 01-11-2018kao kI ga[- .

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