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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH
Aayakr ApIlaIya AiQakrNa “SMC” nyaayapIz maMuba[- mao. IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य के मक्ष । BEFORE SRI MAHAVIR SINGH, JUDICIAL MEMBER Aayakr ApIla saM./ (inaQa-arNa baYa- / Assessment Year 2011-12) Shri Suresh Amarlal Mehta The Income Tax Officer, M/s Nelco Steel India 29, 2 nd ward 19(3)(4) Floor, habib Bldg, 2 nd Matru mandir, Mumbai Vs. Panjrapole lane, C.P. Tank Mumbai-400 004 .. (ApIlaaqaI- / Appellant) (p`%yaqaaI- / Respondent) स्थायी लेखा िं./PAN No. ADBPM7463M अपीलाथी की ओर े / Appellant by : None प्रत्यथी की ओर े / Respondent by : Shri SK Bepari, DR ुनवाई की तारीख / Date of hearing: 22.10.2018 घोषणा की तारीख / Date of pronouncement : 22.10.2018 AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-53, Mumbai [in short CIT(A)], in appeal No. CIT(A)-53/IT-226/ITO-19(3)(4)/2017-18 vide order dated 22.12.2017. The Assessment was framed by the Income Tax Officer, Ward-19(3)(4), Mumbai (in short ‘ITO’/ AO’) for the A.Y. 2011-12 vide order dated 09/02/2016 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal 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 following ground: -
“Being aggrieved by the order passed by the Learned Assessing Officer (A.O.) u/s 143(3) r.w.s. 147 of the Income Tax Act ('the Act') and as partially confirmed by the CIT (A), your appellant prefers an appeal on the following grounds, which it is prayed, may be considered without prejudice to one another
(a) On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the action of the A.O and approving the addition calculated by the A.O on alleged bogus purchases without appreciating the facts that the opinion of the A.O is based on merely presumptions and sub conjectures and not on any material evidences corroborating the purchases when it is an accepted fact that material evidences super cedes all presumptions.
(b) The CIT (A) erred in confirming the addition without appreciating the understated vital facts that the purchases are duly supported with necessary documentary evidences including quantitative tally of purchases and sales and there appears no sign of it being bogus and the learned officer accepted the books of accounts.
(c) The Id. CIT(A) has erred in holding the impugned purchases to be bogus, in spite of voluminous evidences on record simply on the basis that the current addresses of vendors were not provided and the vendors were not produced before the Respondent.
(d) The Appellant prays that the addition/ disallowance of entire 8,33,810/- made in respect of Alleged purchases be deleted.”
Briefly stated facts are that the assessee engaged in the business of trading in ferrous and non-ferrous metals and runs the company under the name of Nelco Steel India for past many years. 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. 66,70,471/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: -
“Sl. Name of party Amount No. 1. Akshay Metal 26,03,413 2. Konica Steel India 4,99,036 3. Veer Corporation 35,68,022 Total 66,70,471
The AO issued noticed under section 133(6) to the parties which returned back with the remark as “left” 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 ₹ 8,33,809/- 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 6.7 by following the decision of Hon’ble Gujarat High court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj) by observing as under: -
“6.7 Even if materials have been purchased, they are not purchased form these parties and may be in cash from un-disclosed parties. By purchasing from the grey market, the appellant would have benefitted by the savings of taxes. Therefore, in fact and circumstances of the case, in this particular case, it is considered most appropriate to adopt 12.5% profit which can take care of the rotation of capital utilised for such transaction. Hence in the light of finding of the Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth, 12.5% profit is found to be appropriate for ascertainment of taxable income related to such transaction. This is exactly what the assessing officer has done in this case. In the result, Ground of Appeal Nos. 4 is dismissed.”
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 learned Sr. Dr, that the CIT(A) has confirmed the profit rate at the rate of 12.5%, which according to me is on higher side going by the nature of business of the assessee i.e. iron and steel. I am in full agreement with the contentions raised by the assessee before CIT(A) and according to me a profit rate of 12.5% is on higher side as assessee has also paid the VAT element on these bogus purchases, a further deduction in estimation of profit to the extent of 7.5% can be allowed. Hence, I direct the AO to recompute the income after applying profit rate at the rate of 5% and computer the income accordingly. The appeal of the assessee is partly allowed.
In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 22-10-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 22-10-2018kao kI ga[- .