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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 2010-11) Aayakr ApIla saM./ (inaQa-arNa baYa- / Assessment Year 2011-12) Mr. Nareshkumar Ramaji Income Tax Officer, Ward Choudhary 19(2)(4), Piramal Chamber, Room No.8, Ground Floor, 58, lal Bag, Mumbai-400 012 Vs. Ragwala Building, Islampura Street, Nanubhai Desai Road, Mumba-400 004 .. (p`%yaqaaI- / Respondent) (ApIlaaqaI- / Appellant) स्थायी लेखा िं./PAN No. ADNPC6328D अपीलाथी की ओर े / Appellant by : None प्रत्यथी की ओर े / Respondent by : Shri SK Bepari, DR ुनवाई की तारीख / Date of hearing: 25.10.2018 घोषणा की तारीख / Date of pronouncement : 25.10.2018 AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
These appeals by the assessee are arising out of the orders of Commissioner of Income Tax (Appeals)-53, Mumbai [in short CIT(A)], in appeal No. CIT(A)-53/IT-267& 268/ITO 19(2)(4)/2017-18 vide even date 22.12.2017. The Assessments were framed by the Income Tax Officer,
ITAs no.1987 & 1988/Mum/2018 Ward 19(2)(4), Mumbai (in short ‘ITO/ AO’) for the A.Ys. 2010-11 & 2011- 12 vide dated 17.03.2016 & 18.03.2016 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 identically worded grounds in both the years except the quantum. The facts and circumstances are exactly identical in both the years and hence, we will take the facts from AY 2010-11 and will decide the issue.
Briefly stated facts are that the assessee engaged in the business of dealer in ferrous and non-ferrous metals. 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. 31,31,367/- for AY 2010-11 & ₹ 54,69,817 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 Shakti Trading Co. 1,75,679 Arihant Traders 40,292 Hiten Enterprises 3,13,175 Suryadev metal (India) 4,30,988 Valiant Steel Engineering Co. 3,83,986 Shree Traders 1,77,188 PM Trading Company 4,48,736 Pakshal Steel & Engineering Co 11,61,323 31,31,367 2011-12
ITAs no.1987 & 1988/Mum/2018
Name of party Amount NB Enterprises 10,85,585 LEO Impex 2,50,001 Real Traders 7,20,895 Global Trade Impex 8,74,999 Liberty Trading Corporation 14,53,717 Rajkamal Steel 5,20,001 Sahara Traders 4,680 PM Trading Company 2,65,423 Pakshal Steel & Engineering Co 2,94,516 54,69,817 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 ₹ 3,91,421/- for AY 2010-11 & ₹ 6,83,727/- 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 4.7 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: -
“4.7 Even if materials have been purchases, they are not purchased 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 rotation of capital utilized for such transaction. Hence, in the light of finding of the Hon’ble Gujarat High Court in the case of CIT vs.
ITAs no.1987 & 1988/Mum/2018
Smit P. Sheth, 12.5% profit found to be appropriate for ascertainment of taxable income related to such transaction. This is exactly what the assessing officer has done. Thus the Grounds of appeal Nos.1 to 5 are 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 both the sides 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. ferrous and Non-ferrous. 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 4.5% can be allowed. 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.
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.
In the result, both, the appeals of assessee are partly allowed.
Order pronounced in the open court on 25-10-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 25-10-2018kao kI ga[- .