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Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Bench 1. These are cross-appeals for Assessment Years [AY] 2009-10 & 2011-12 which contest common order of Ld. Commissioner of Income Tax (Appeals)-2, Thane [CIT(A)], & 254/13-14 dated 28/10/2015 qua certain addition on account of alleged bogus purchases. Since common issues are involved, we dispose-off the same by way of this common order for the sake of convenience and brevity. 2.1 Facts as emanating from Assessment Order for AY 2009-10 dated 31/01/2014, as passed by Ld. Income Tax Officer, Ward-3(3), Thane u/s 143(3) read with Section 147, are that the assessee being resident firm engaged in the business of trading of Iron & Steel Scrap has been assessed at Rs.74.52 Lacs, inter-alia, after certain additions on account of alleged bogus purchases of Rs.65.87 Lacs as against returned income of Rs.7.35 Lacs e-filed by the assessee on 30/09/2009. The original return filed by the assessee was processed u/s 143(1). The reassessment proceedings were initiated by issuance of notice u/s 148 dated 18/09/2013 which was followed by statutory notices u/s 143(2) & 142(1). 2.2 The reassessment proceedings were initiated upon receipt of certain information from Sales Tax Department, Maharashtra regarding dealers indulging in bogus purchase bills and it was noted that the assessee stood beneficiary of such bogus purchase bills to the tune of Rs.65,87,051/- from seven such parties, the details of which have been extracted at Page number-2 of the quantum assessment order. The -201,253- 254/Mum/2016 S.S.Metal & Alloys Assessment Years: 2009-10 & 2011-12 assessee defended the purchases made by him but notices issued u/s 133(6) to the aforesaid suppliers to confirm the transactions elicited no response. Finally not convinced with assessee’s submissions and explanations, Ld. AO disallowed the same and added the same to the income of the assessee u/s 69C.
Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 28/10/2015 where Ld. CIT(A), after considering the factual matrix and relying upon certain judicial pronouncements restricted the impugned additions to Rs.9,58,390/- by applying the Gross Profit Rate of 16.10% reflected by the assessee in AY 2012-13 to the turnover of impugned AY and deleted the balance addition. The disallowance, in effect, as sustained by Ld. CIT(A) came to 14.55% of alleged bogus purchases of Rs.65,87,051/. Aggrieved, the assessee as well as the department is in further appeal before us.
The Ld. Departmental Representative [DR] submitted that the assessee could not substantiate the actual delivery of material and payment through banking channel alone was not sufficient to prove the genuineness of the purchases. Per Contra, Ld. Authorised Representative for assessee [AR] drew attention to the fact that the assessee was a trader and could not the achieve the turnover without actual purchase of material and therefore, the addition as sustained by Ld. CIT(A) was on the higher side. Our attention has been drawn to the supporting documents placed in the paper-book.
We have carefully heard the rival contentions and perused relevant material on record. We are of the considered opinion that there could be ITA Nos.200-201,253- 254/Mum/2016 S.S.Metal & Alloys Assessment Years: 2009-10 & 2011-12 no sale without purchase of actual material since the assessee was engaged in trading activity. The sales turnover achieved by the assessee has not been disputed by the revenue. The assessee was in possession of primary purchase documents and the payment to the suppliers was through banking channels. The assessee was maintaining adequate stock records. At the same time, the assessee could not produce any party for confirmation of the account and notices sent u/s 133(6) elicited no response. All these factors cast serious doubt on assessee’s claim. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which Ld. CIT(A) has rightly done so. However, keeping in view the factual matrix and assessee’s nature of business, we find the estimated effective rate of 14.55% to be on the higher side and therefore we reduce the same to 8% of alleged bogus purchases, which comes to Rs.5,26,964/-. The order of Ld. CIT(A) stand modified to that extent. Resultantly, the revenue’s appeal stands dismissed whereas the appeal filed by the assessee stand partly allowed.
The assessee, in AY 2011-12, has been saddled with similar additions of Rs.1,68,15,478/- on account of alleged bogus purchases. The Ld. CIT(A) has estimated the impugned additions at 16.62% of alleged bogus purchases . We find that the impugned order is common order for AY 2009-10 as well as for AY 2011-12. Therefore, factual matrix being similar, taking the same stand, we restrict the impugned 254/Mum/2016 S.S.Metal & Alloys Assessment Years: 2009-10 & 2011-12 additions to 8% of alleged bogus purchases which comes to Rs.13,45,238/-. Resultantly, the revenue’s appeal stands dismissed whereas the appeal filed by the assessee stand partly allowed.
In nutshell, ITA Nos. 253-254/Mum/2016 stands dismissed whereas ITA Nos. 200-201/Mum/2016 stands partly allowed. Order pronounced in the open court on 11th April, 2018 Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 11 . 04.2018 Sr.PS:- Thirumalesh आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त(अपील) / The CIT(A) 4. आयकर आयु�त / CIT – concerned 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard File