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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI D.T. GARASIA & SHRI RAJESH KUMAR
Per D.T. GARASIA, Judicial Member:
1. The above titled appeals two by the Revenue and two by the assessee have been preferred against the common order dated 01.03.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2009-10 & 2010-11. for A.Y. 2009-10 (Revenue’s appeal)
The brief facts of the case are that the assessee is proprietor of M/s. Anil Alluminium, which is engaged in the business as a reseller in aluminium extrusion. During the year the Assessing Officer (hereinafter referred to as the AO) found that assessee had made bogus purchases from following parties: Sr. Name of the party Amount of No. Purchase (Rs)
Nageshwar Enterprises 44,42,629 2. Nikhil Enterprise 2,05,000 3. Parsnath Enterprise 16,85,300 4. Saileela Trading Pvt. Ltd. 75,33,330 5. Sharika Incorporation 1,45,000 6. Anmol Industries 12,44,832 7. Universal Trading Co. 98,09,428 8. Kameshwar Trading Pvt. Ltd. 3,44,000 9. Victor Intertrade Pvt. Ltd. 25,192 10. Aaayushi Enterprises 26,24,961 11. Disha Enterprises 44,63,000 12. Poonam Alluminuim 57,80,939 13. Shree Ganesh Trading Co. 1,01,30,267 Total 4,84,33,878
3 & ors Shri Jayprakash D. Barbhaya 3. The assessee was asked to produce the above parties for verification. There was no compliance of notice under section 133(6). Therefore, the AO has made the addition on account of bogus purchases of Rs.4,84,33,878/-.
Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has partly allowed the claim by observing as under: “7.31. As narrated earlier, the Ld. A.O. in this case has held that the parties from whom the purchases were made by the appellant were found to be bogus and that is the reason for which it was not produced during the assessment proceedings. Not having doubted the consumption/sales, the motive behind obtaining bogus bills thus, appears to be inflation of purchase price so as to suppress true profits. As mentioned above, the AU had never disputed or examined the sales. Once sales are accepted, corresponding purchases have to be considered and cannot be disregarded in totality. Looking to the market trend, the appellant may have made purchases from other parties which were not recorded in the books, and took only bills from these parties as accommodation, to explain the purchases. The purchases themselves are not bogus but the purchase parties shown in books are. Therefore, the entire purchase from these parties cannot be added as bogus and what needs to be taxed is the profit element embedded in such transactions. Estimations, ranging from 12.5% to 25% have been upheld by the Hon'ble Gujarat High Court, depending upon the nature of the business. As held in the case of Simit P. Sheth (supra), no uniform yardstick could be applied to estimate the rate of profit and it varies with the nature of business. Taking all facts into consideration as also the findings of the Hon'ble Courts on this issue and the fact that direct one to one relationship between purchases and sales have not been established, I am of the view that estimation of 20% as profit embedded in impugned purchases shown from these tainted parties and adding the same to the total income returned, would meet the ends of justice. Therefore, I direct the AO to estimate profit of 20% in the alleged bogus purchases, which works out to Rs. 96,86,776/- (20% of Rs. 4,84,33,878/-) and restrict the addition to Rs. 96,86,776,!-. The appellant get the relief for the balance Rs.3,87,47,102/-. Grounds of Appeal, are partly allowed to this extent.
8. In result, the appeal is partly allowed.
I have heard the rival contentions of both the parties. Ld. D.R. relied upon the decision of the Tribunal, Ahmedabad Bench in the cases of Shwetambar Steels vs. ITO Ahmedabad and Ganesh Rice
4 & ors Shri Jayprakash D. Barbhaya Mills vs. CIT (294 ITR 316). The facts in the present case show that assessee could not produce the parties from whom goods are stated to have been purchased. The suppliers were found to be engaged in providing bogus bill without actual dealing of goods. In this regard, the assessee has stated that they had submitted quantitative details of stock with respect of the sales with purchases from the parties during the assessment proceedings. The assessee has submitted the detail of corresponding sales in respect of the purchase from the said parties. As mentioned above the AO has never disputed or examined the aspect of sales receipts. Since the sales made by the assessee was not doubted or disputed by the AO and he has accepted the sales receipts of the assessee as it is, therefore, the AO cannot deny that purchases were not made by the assessee and the material was not used for its sales. What is under dispute is the purchases from the parties from whom bills have been taken and cheques have been issued to them. Purchases are not in dispute but the parties from whom purchase are shown to have been made are disputed and suspicious. The AO had made the addition as some of the suppliers were declared hawala dealers by the VAT Department. This may be a good reason for making further investigation but the AO did not make any further investigation and merely completed the assessment on suspicion. Once the assessee has brought on record the details of payments by account payee cheque, it was incumbent on the AO to have verified the payment details from the bank of the assessee and also from the bank of the suppliers to verify whether there was any immediate cash
5 & ors Shri Jayprakash D. Barbhaya withdrawal from their account. No such exercise has been done or findings recorded. There was no detailed investigation made by the AO himself. It is also found that the payments have been made by account payee cheque which are duly reflected in the bank statement of the assessee. There is no evidence to show that the assessee has received cash back from the suppliers. Merely because the suppliers did not appear before the AO or some confirmation letters were not furnished, one cannot conclude that the purchases were not made by the assessee. This view is supported by the decision of Nikunj Eximp Enterprises vs. CIT 216 Taxman 171 (Bom). To this extent, I am of the view that if the assessee has fulfilled its onus of making the payment by cheque and has supplied the addresses of the sellers then it cannot be presumed that supplier were bogus simply because the sellers were not found at the given address. There is a considerable time gap between the period of purchase transaction and period of scrutiny proceedings. The AO has not brought any material on record to show that there is suppression of sales. It is basic rule of accountancy as well as of taxation laws that profit from business cannot be ascertained without deducting cost of purchase from sales. Estimation of profit ranging from 12.5% to 15% has been upheld by the Hon'ble Gujarat High Court in the case of CIT vs Simit P Sheth 356 ITR 451 (Guj.). Respectfully following the decision of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth 38 taxman 385 (Guj), I direct the AO to estimate the GP @ 12.5% of the total purchases which comes to Rs.60,54,235/- for A.Y. 2009-10.
In the result, the departmental appeal is dismissed. for A.Y. 2010-11 (Revenue’s appeal)
In this appeal, during the year, the AO found that assessee had made purchases from following parties: Sr. Name of the party Amount of No. Purchase (Rs) 1. Dhruv Sales Corporation 4,09,003 2. Donear Trading Pvt. Ltd. 5,55,170 3. NB Enterprises 9,55,000 4. Hans Trading Co. 12,63,230 5. Nikhil Enterprise 40,92,188 6. Parsnath Enterprise 6228583 7. Universal Trading Co. 1716647 8. Global Trade Impex 307500 9. PK Trading Co. 316735 10. Jay Traders 517100 11. Shreyas Marketing Agency 209099 12. Shree Ganesh Trading Co. 3742482 13. Rajratan Metal Industries 4334007 24646744
We find that the Revenue has taken the identical grounds in for A.Y. 2009-10 and the same has already been decided as above. Following the same ratio applied in ITA No.3606/M/2016 for A.Y. 2009-10, I decide this appeal also. Accordingly, I direct the AO to estimate the GP @ 12.5% of the total purchases which comes to Rs.30,80,843/- for A.Y. 2010-11.
In the result, the appeal of the Revenue is dismissed. 9.
7 & ors Shri Jayprakash D. Barbhaya ITA No.4485 & 4486/M/2016 (Assessee’s appeals) 10. While disposing of the Revenue’s appeals the order has already been decided in favour of the assessee by directing the AO to estimate the GP @ 12.5% of total purchases in the both the years, as above.
In the result assessee’s appeals are partly allowed and the Revenue’s appeals are dismissed.
Order pronounced in the open court on 24.11.2017.