ASST CIT CIR 2, KALYAN vs. KETANKUMAR JAYANTIBHAI PATEL, AMBERNATH

The only issue in both the appeals of the assessee and Revenue is in respect of partly deleting the addition made towards bogus purchases.

At the outset, Ld. Counsel for the assessee submitted that an identical issue came up before the Tribunal for the immediately preceding Assessment Year i.e. 2009-10 and the Tribunal restricted the addition/disallowance to 2% on the alleged bogus purchases. Copy of the order is placed on record. Ld. Counsel also submitted that the parties are identical, therefore the same may be followed for the year under appeal.

Ld. DR strongly placed reliance on the order of the Assessing Officer.

On a perusal of the order of the Tribunal, we find that an identical issue came up before the Tribunal for the Assessment Year 2009-10 and the party namely M/s. Navratan Metal Impex is common for both the Assessment years i.e. 2009-10 & 2010-11. The other party from whom 3 ITA.No. 5041 & 5237/MUM/2015 (A.Y:2010-11) Shri Ketankumar J. Patel the assessee purchased material during the Assessment Year under appeal is M/s. Shriti Enterprises and it has been stated in the Assessment Order that assessee allegedly made purchases of ₹.30,373/- from this party in the current Assessment Year. We also find that the assessee did not make any purchases from this party during the Assessment Year 2009-10. The Tribunal while disposing of appeal for the Assessment year 2009-10 in respect of the purchases made by the assessee from M/s. Navratan Metal Impex observed as under: “4. The facts in brief are that the assessee is a proprietor of M/s. Unique Chemoplant Equipments, which is engaged in the business of fabrication of various equipments for chemical, pharmaceutical and allied industries. The case was reopened as the parties namely; M/s. Pooja Steel & Alloys, M/s. Aiankar Steels and M/s. Navratan Metal Impex from whom the assessee had made purchases are involved in providing hawala entries. The AO made an addition of Rs.1,46,66,445/- on account of bogus purchases as the assessee failed to discharge its primary onus of producing the respective parties and proving the genuineness of the purchase transaction. The AO added entire purchase in assessee’s income.

Rival contentions have been heard and record perused. From the record, we found that assessee is engaged in the business of fabrication of various equipments for chemical, pharmaceutical and allied industries. On the basis of information from Sales Tax Department, AO reopened the assessment and made addition in respect of suspicion suppliers who were alleged to have issued only bills without actual delivery of goods.

By the impugned order, CIT(A) upheld the addition to the extent of 20% by observing that it is a case where goods were received from the authorities other than the person who had issued the bills of such. It was also observed that payment was made by account payee cheque. The CIT(A) also observed that there was corresponding sales and the payments were made by account payee cheques. We also found that during the year under consideration assessee had 4 ITA.No. 5041 & 5237/MUM/2015 (A.Y:2010-11) Shri Ketankumar J. Patel shown GP of 28.97% as compared to the GP of immediately preceding year at 19.23%. Thus, it is clear that GP shown by the assessee during the year under consideration is not only much better than the GP of earlier years but even on absolute terms, we found that it is a very reasonable GP, looking to the nature of trade assessee is involved. Under these facts and circumstances, making further addition of 20% will be unreasonable. Keeping in view totality of facts and circumstances of the case, we direct the AO to restrict the addition to the extent of 2% of the alleged bogus purchases. We direct accordingly.”

6. As could be seen from the above, Tribunal restricted the disallowance to 2% on the alleged bogus purchases in respect of M/s. Navratan Metal Impex and other parties in the Assessment Year 2009-10. Facts and circumstances being identical, we direct the Assessing Officer to restrict addition/disallowance to 2% in so far as the purchases from M/s. Navratan Metal Impex are concerned. In respect of purchases made from M/s. Shriti Enterprises is concerned the Ld. CIT(A) restricted the disallowance to 20% and for the reasons given by the Ld. CIT(A), we sustain the disallowance/addition in so far as the purchases made from M/s. Shriti Enterprises is concerned. Grounds raised by the assessee are partly allowed.

In the result, both the appeal of the assessee and Revenue are partly allowed.