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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI JOGINDER SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the Revenue against the order dated 10.02.2014 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.
The only issue raised by the Revenue in various grounds of appeal is against the restriction of addition by the Ld. CIT(A) to Rs.44,92,600/- as against Rs.2,99,50,670/- as made by the AO under section 69C of the Act towards the bogus purchases.
2 Shri Nipun I. Thakkar 3. The assessee also filed application under rule 27 of Income Tax Appellate Tribunal Rules, 1963 dated 15.02.17 raising the following grounds: “1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the additions on account of purchases made by the appellant (assessee) to the extent of 15%, i.e., Rs. 44,92,600/- u/s 69C of the Act.
2. That on the facts and circumstances of the case and in law, the Ld CIT(A) erred in ignoring the submission of the appellant, as was held by Hon'ble Punjab & Haryana High Court in the case of CIT vs. Leaders Valves (P.) Ltd [(2007) 295 ITR 273], that where consumption is not doubted addition on account of purchases cannot be made.
3. That on the facts and circumstances of the case and in law, the Ld CIT(A) erred in confirming the addition u/s 69C of the Act in ignoring the law laid down by the jurisdictional High Court in the case of CIT vs. Nikunj Eximp Enterprises (P.) Ltd [(2013) 216 taxman 171 (Bom)], that purchases cannot be disallowed merely because the appellant failed to produce the parties before the assessing officer.
4. The appellant craves leave to add to, alter, to delete from or substantiate the above ground of appeal.”
We will first decide the admission of the said application and issue raised therein.
The Ld. A.R. submitted that assessee is within its right to move the application under rule 27 of the ITAT Rules, 1963 before the Tribunal to support the order appealed against on any ground which is decided against him and the same may be admitted and the assessee may be allowed to agitate the issue raised in the said application. The Ld. A.R. submitted that the issue raised in the application under rule 27 is arising out of the order of Ld. CIT(A) which is against the assessee.
The Ld. D.R., on the other hand, strongly opposed the 3 Shri Nipun I. Thakkar admission of application under rule 27 by submitting that the Revenue cannot be put in a worst position than what it was before the Ld. CIT(A). The Ld. D.R. argued that the power of Tribunal is confined to section 254 of the Act on the subject matter of the issue placed before it and the Tribunal cannot go beyond it or pass order or give direction which would not fall within the subject matter of the appeal.
Having heard both the parties and perusing the relevant materials placed before us, we find that the respondent may support an order on the ground decided against him even though he has not appealed an order of CIT(A) deciding the ground partially against the assessee. The Hon’ble Supreme Court in the case of CIT vs. Manick Sons [1969] 74 ITR 1 (SC) has interpreted the provision of section 254 of the Act wherein the respondent has been allowed to support the order appealed against on any other ground decided against him even though he may not have appealed against the said order. It was explained by the Hon’ble Supreme Court that power conferred by section 33(4) of the Indian Income-tax Act, 1922, is wide, but it is still a judicial power which must be exercised in respect of matters that arise in the appeal and according to law. The Tribunal in deciding an appeal before it must deal with questions of law and fact which arise out of the order of assessment made by the Income-tax Officer and the order of the Appellate Assistant Commissioner. It cannot assume powers which are inconsistent with the express provisions of the Act or its scheme. In this case, the appeal of the assessee was partly allowed by Ld. CIT(A) by 4 Shri Nipun I. Thakkar sustaining the addition in respect of bogus purchases at 15% and the assessee without filing the appeal against the order of the Ld. CIT(A) supported the order of the Ld. CIT(A) in an appeal filed by the Revenue. In view of the above, issue raised by the assessee under rule 27 deserved to admitted and is admitted and adjudicated as under:
The undisputed facts of the case are that the assessee has made purchases to the tune of 2,99,50,670/- from various parties which were declared as hawala dealers by the VAT Department, Government of Maharashtra and the notice sent by the AO to the assessee was returned back and even the report of the inspector of Income Tax confirmed that no such person existed on the addresses given by the assessee. The Ld. CIT(A), after considering the various decisions relied upon by the assessee viz. in the case of CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. and also the decision of Apex Court in the case of Saraswathi Oil Traders vs. CIT (2002) 254 ITR 259 (SC), reached to a very reasoned finding that entire purchases cannot be brought to tax and it is only the gross profit which the assessee has made on such bogus purchases which is to be brought to tax and accordingly partly sustained the addition to the extent of 15% which worked out to Rs.44,92,600/-. However, we find that the percentage of addition applied by the Ld. CIT(A) is on the higher side whereas the co-ordinate benches of the Tribunal have been taking a consistent view in the matter of bogus purchases applying GP of 2% to 12.5% of the amount involved. In our opinion, it would be reasonable in the facts and circumstances
5 Shri Nipun I. Thakkar of the case to apply a GP of 10% to bring the income on such purchases to tax and we direct the AO accordingly. The order of Ld. CIT(A) stands modified to this extent. Accordingly, the issue raised by the assessee under rule 27 is partly allowed. In view of our decision partly allowing application filed under rule 27 of the ITAT Rules, the appeal of the revenue is dismissed.
In the result, Revenue’s appeal is dismissed and issue raised by the assessee is partly allowed.
Order pronounced in the open court on 16.04.2018.