KANAK STEEL INDIA,MUMBAI vs. INCOME TAX OFFICER - WARD 18(2)(1), MUMBAI

Grounds no.1 to 4 are not pressed, hence, dismissed.

In ground no.5, the assessee has challenged addition of ` 1,15,990 on account of bogus purchases.

Brief facts are, the assessee, a partnership firm, is a dealer in ferrous and non–ferrous metals. For the assessment year under 2 Kanak Steel India dispute, the assessee filed its return of income on 3rd September 2011, declaring total income of ` 6,01,684. The return of income filed by the assessee was processed under section 143(1) of the Income Tax Act, 1961 (for short “the Act”). Subsequently, on the basis of information received from the DGIT (Inv.), Mumbai, that purchases made of ` 9,27,923 from M/s. Vinayak Steel (Impex), is not genuine, the Assessing Officer re–opened the assessment under section 147 of the Act. During the assessment proceedings, the Assessing Officer found that as reported by the DGIT (Inv.), Mumbai, the Sales Tax Department, Maharashtra Government, has found that M/s. Vinayak Steel (Impex), is a hawala operator providing accommodation bills and the assessee is a beneficiary of such accommodation bill provided by the said party. He, therefore, called upon the assessee to prove the genuineness of purchases made from the said party. Though, the assessee claimed the purchases to be genuine by producing the purchase invoice, ledger account copy and bank statement, however, the Assessing Officer was not convinced with the submission of the assessee. Accordingly, he treated the purchases made by the assessee from M/s. Vinayak Steel (Impex) as non–genuine. However, considering the fact that assessee has reflected the purchases in the books of account and without such purchases sales could not have been effected, the Assessing Officer restricted the addition to 12.5%

Though, the assessee challenged the aforesaid addition before the first appellate authority, however, the assessee was unsuccessful.

I have considered rival submissions and perused materials on record. The only submission made by the learned A.R. is that the assessee has paid VAT of ` 37,117, on the alleged bogus purchases of ` 9,27,922. Therefore, even if the profit element on the alleged bogus purchases is estimated at 12.5% but the VAT amount paid by the assessee should be reduced from such profit.

The learned Departmental Representative relied upon the decision of the learned Commissioner (Appeals).

Having considered rival submissions, I am of the view that the assessee should get the benefit of VAT paid on the purchases held to be non–genuine by the Assessing Officer. Accordingly, I direct the Assessing Officer to verify the payment of VAT by the assessee and reduce it from the addition made of ` 1,15,990 and sustain addition to the extent of the balance amount. This ground is partly allowed.

In ground no.6, the assessee has challenged levy of interest under various provisions of the Act.

Ground no.7, being pre–mature at this stage and ground no.8 being general in nature is dismissed.

In the result, assessee’s appeal is partly allowed. Order pronounced in the open Court on 19.09.2018