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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Aayakr ApIla saM./ (inaQa-arNa baYa- / Assessment Year 2009-10) Big Imports and Gifts The Asst. Commissioner of 5th Floor, ABM House, Near Income Tax, Circle 24(1), Vs. Shoppers Stop, Linking Road, Piramal Chamber, Mumbai- Bandra (W), Mumbai-400 050 400012 .. (p`%yaqaaI- / Respondent) (ApIlaaqaI- / Appellant) स्थायी लेखा िं./PAN No. AAFFB9190D अपीलाथी की ओर े / Appellant by : Shri H.S. Raheja, AR प्रत्यथी की ओर े / Respondent by : Shri S.K. Mitra, DR ुनवाई की तारीख / Date of hearing: 04-09-2018 घोषणा की तारीख / Date of pronouncement : 04-09-2018 AadoSa / O R D E R PER MAHAVIR SINGH, JM:
This appeal filed by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-51, Mumbai [in short CIT(A)], in appeal No. CIT(A)-36/IT-428/ACIT-24(1)/14-15, dated 22.02.2017. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle-24(2), Mumbai (in short ‘ACIT/ AO’) for the A.Y. 2009-10 vide order dated 30.01.2015 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) restricting the disallowance of bogus purchases at the rate of 15% and confirming the disallowance at ₹ 3,42,090/- out of the total bogus purchases of ₹ 22,80,601/-. For this assessee has raised the following ground No. 1:-
1. On the facts and circumstances of the case and in law the CIT(Appeals) was justified in confirming a disallowance of ₹ 3,42,090/- being 15% of the alleged bogus purchases amounting to ₹ 22,80,601/-.
Briefly stated facts are that the assessee is engaged in the business of dealing in gift items. 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. 22,80,601/- for as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - “Sl Name of party Amount No. 1. Pinak Sales Corporation 1,48,500 Metali Industries 3,06,000 2. 3. GM Impex 3,73,500 Prajwal sales corporation 9,22,432 4. 5. Akashila Trade Ltd. 5,30,169 Total 22,80,601 4. 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 all the documentary evidences such as inward register, stock register, payments received against such sales, receipt of material purchases, account payee cheque. the purchase and accordingly, he made addition of 25% of unproved purchase at Rs. 22,80,601/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 15% to Rs. 3,42,090/- of the bogus purchases by observing as under: - “6.2 HELD:
At the outset, it is categorically untrue that AO has not made efforts beyond getting information from Investigation Wing. AO has afforded opportunities to the appellant to produce the parties. The AO issued notices u/s 133(6) of the Act to the parties that did not reveal that claim of the appellant is not genuine. In the appellate proceedings, appellant failed to produce any evidence like weightment slips for transportation of goods. The next aspect to consider is the claim of the appellant that the purchases were made from the alleged supplier. Here, it is relevant to take into account that the enquiries conducted by the Sales Tax Department as well as the Investigation Wing of Income Tax Department/the Assessing Officer have established that the said suppliers are not genuine. The said parties were not produced for examination.
6.3. The two aspects mentioned above lead to the irresistible conclusion that the appellant did make the sale of goods and, therefore, made the corresponding purchases. However, the claim of purchases from alleged suppliers identified by the appellant cannot be accepted due to reasons mentioned above. In other words, while the mentioned by the AO himself. This has its implications in terms of price advantage secured by the appellant, since it would not have indulged in this modality for any other reason. The purchase prices debited and claimed cannot be accepted as being in tandem with the prevailing market rates, given the supplier discrepancy. The appellant has not furnished any evidence to show comparable supported by purchase of similar items from other parties to establish that the transactions were at arm's length. Accordingly, additional gross profit needs to be estimated on the purchases claimed to be made from-the suspected suppliers.
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6.9 Keeping in mind the totality of circumstances as discussed above and the fact that the appellant has not brought on record any evidence to corroborate his arguments during appellate proceedings, in order to meet the ends of justice, the disallowance is restricted to 15 percent of the bogus purchases of Rs.22,80,601/- i.e. 3,42,0901-. Appellant gets relief of Rs.2,28,0601-. The grounds of appeal are partly allowed. This will ensure that only the real income gets subjected to tax and not a notional income or an exaggerated amount determined in an arbitrary manner.”
5. We have considered the issue and gone through the facts and circumstances of the case. We find from the facts of the case and argument of both the sides, that the CIT(A) has applied the profit rate at the rate of 15%, which according to us is on higher side going by the nature of business of the assessee i.e. dealing in gift items. Further, the learned Counsel pointed out that it is showing higher gross profit rate consistently and for this he referred to the comparative chart of GP as under: - Asst Year 2006-07 2007-08 2008-09 2009-10 Sales 56180880 82405890 99790354 99654582 Cost of 46217707 65750601 81991749 80138874 Goods Gross Profit 9963173 16655289 17798605 19515708 GP Ratio 17.73% 20.21% 17.84% 19.58% NP Ratio 5.25% 7.37% 6.41% 6.62% 6. We are in full agreement with the argument of the learned Counsel for the assessee and according to us an additional profit rate of 10% of unproved bogus purchases be further added to income of the assessee which will meet the end of justice in view of the decision of Hon’ble Gujarat High Court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj). Hence, we direct the AO to recompute the profit after applying additional profit rate of 10% on unproved bogus purchases and compute the income accordingly. The appeal of the assessee is partly allowed.
In the result, the appeal of the assessee is partly allowed.