Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-13,
Pune, dated 11-01-2017 for the Assessment Year 2010-11.
Grounds raised by the assessee read as under :
“1. On the facts and circumstances prevailing in the case and as per provisions of law, the Assessing officer made additions u/s. 69C amounting to Rs. 28,54,540/-, u/s. 145(3) amounting to Rs. 2,40,007/- and also granted relief of Rs. 18,17,394/- towards the payment made during the year. The Assessing Officer has created a situated wherein there is change of opinion on one single matter in issue which is dealt in three different manners. 2. On the facts & circumstances prevailing in the case & as per provisions of law, the Ld CIT Appeals has granted relief of Rs. 2,40,007/- and in both the orders (AO & CIT Appeals Order) amount of Rs. 18,17,394 paid to Arihant Traders is not disputed and therefore additions u/s. 69C amounting to Rs. 28,54,540/- if sustained will result in change of opinion while the matter in issue is just of unpaid creditors in books of accounts during the year.
2 ITA No.942/PUN/2017 Shri Firoz Ahmed Moh. Motin Choudhary
On the facts & circumstances prevailing in the case & as per provisions of law, the additions made by assessing Officer have shoot up the Gross Profit Ratios to 45.96% & Net Profit Ratio to 41.96% while the sales are not at all disputed in the Assessment order u/s 143(3) r.w.s. 147. In such a situation additions cannot be sustained at such higher ratios considering the trading activity of the dealer and also when compared to earlier years ratios duly submitted before AO & CIT Appeal. The Appellant be granted just & proper relief in this behalf.
On the facts and circumstances prevailing in the case and as per provisions of law, that the additions made by the Ld. Assessing Officer amounting to Rs. 28,54,540/- is without any investigation, purely on the information of Sales Tax Department and just a matter of unpaid creditors u/s 41(1) as per provisions of Direct Tax Laws. 5. On the facts & circumstances prevailing in the case & as per provisions of law, without prejudice to the above grounds and as per order 143(3) the Assessing Officer at para 12 page 7 has computed the average GP Ratios at 13.41% on undisputed Sales Turnover contradictory to the additions made in Assessment order u/s.143(3) r.w.s.147 which shoots up the GP ratio at 45.96% in case of the dealer. Therefore when two views are possible the view favouring Assessee should be allowed. 6. The appellant prays to be allowed, amend, delete, modify & rectify any grounds of appeal at the time of hearing.”
Briefly stated, relevant facts of the case include that the assessee is an
individual and is engaged in the business of trading in Oil under the name and
style “Star Lubricants”. Assessee filed the return of income on 15-10-2010
declaring total income of Rs.4,27,540/-. Notice u/s.148 of the Act was issued
to the assessee on 06-01-2014. In response to the same, assessee filed a
letter on 24-12-2014 stating that the return filed on 15-10-2010 may be treated
as return in response to notice u/s.148 of the Act. On the basis of information
received from the Investigation Wing of Sales Tax Department, AO found that
assessee made purchases from M/s. Arihant Traders amounting to
Rs.46,71,934/-. Assessee furnished copies of purchase bills, ledger extract of
the concerned party, bank account statement, books of accounts with bills and
vouchers. However, AO held that the onus of proving the genuineness of
transactions of alleged purchases lies on the assessee.
With regard to the purchases made by the assessee from M/s. Arihant
Traders, the AO made addition of Rs.28,54,540/- by holding as under :
3 ITA No.942/PUN/2017 Shri Firoz Ahmed Moh. Motin Choudhary
“9. So far, in respect of purchases made from M/s. Arihant Traders totalling to Rs.46,71,934/-, the assessee could submit proof of payment made of Rs.18,17,394/- only. In respect of balance amount of Rs.28,54,540/- it is claimed that some amount was paid in cash and some amount is outstanding. However, no documentary evidence like valid receipt of payment made, confirmation of the concerned party was submitted. Thus, it is crystal clear that the assessee is not at all in a position to prove the purchases made of Rs.28,54,540/- as genuine. Therefore, the amount of Rs.28,54,540/- is added to the total income of the assessee as unexplained expenditure u/s.69C of the Act.”
Further, the AO also added Rs.2,40,007/- on account of rejection of
books of account/re-computation of Gross Profit by holding as under :
“12. . . . . . . . .No doubt, the profit element involved in such type of transactions is always on higher side. Thus, no comparison can be made with the profit ratios of the assessees in the similar line of business. Considering the total facts, after rejection of the books, to cover up profit @15% on the unproved purchases of Rs.18,17,394/-, I re-compute the gross profit of the assessee @13.41% of total turnover of Rs.87,69,862/- which comes to Rs.11,76,038/-. After deducting the gross profit already shown by the assessee of Rs.9,36,031/-, the balance profit of Rs.2,40,007/- (1176038 – 936031) is hereby added to the total income of the assessee. Thus, total addition of Rs.30,94,547/- is made to the total income of the assessee on this account.....”
Eventually, the AO at the end of the assessment u/s.143(3) r.w.s. 147 of the
Act made addition of Rs.30,94,547.
In the First Appellate proceedings, the CIT(A) upheld the action of the
AO in making addition of Rs.28,54,540/- as purchases made from unaccounted
source of income. Contents of Para No.2.1.9 of the order of CIT(A) are
relevant and therefore, the same is extracted as under :
“2.1.9 The Appellant has argued that the learned AO has accepted his turnover, therefore, he could not have disallowed the purchases. I do not agree with the Appellant. The learned AO has not disallowed the purchases on the ground that they were not genuine, but has made the addition because the Appellant could not furnish the evidence of having made the payment for the purchases out of his accounted sources of income. Therefore, the fact of the purchase and corresponding sales are accepted. The learned AO has accepted the Appellant’s contention that his purchases are genuine. Accordingly, I do not find any error in the learned AO’s decision to add Rs.28,54,540/- on account of the purchases made from the unaccounted source of income.”
4 ITA No.942/PUN/2017 Shri Firoz Ahmed Moh. Motin Choudhary
With regard to the addition of Rs.2,40,007/-, the CIT(A) deleted the
same by observing as under :
“2.2.3 I have considered the arguments of the learned AO and of the Appellant. I consider that this addition should be considered to have been subsumed in the addition made by the learned AO of Rs.28,54,540/- on account of the purchases made from his unaccounted sources. No separate addition needs to be made as the Appellant would have used the additional income generated from his additional gross profit towards making the unaccounted purchased. In other words, the Appellant needs to be granted telescoping for this addition. Accordingly, I delete the addition of Rs.2,40,007/- made by the learned AO.”
Aggrieved with the order of CIT(A) confirming the addition of
Rs.28,54,540/- on account of unaccounted source of income, the assessee filed
the present appeal with the grounds extracted above.
Before us, Ld. Counsel for the assessee submitted that the AO made
addition of Rs.30,94,547/- which includes addition of Rs.28,54,540/- and
another sum of Rs.2,40,007/-. Mentioning about the absence of any dispute
with regard to Rs.2,40,007/- in view of the relief granted by the CIT(A), Ld.
Counsel for the assessee submitted that the assessee is in appeal against the
addition of Rs.28,54,540/- only. From the order of CIT(A), it is evident that
proof of payment and filing of confirmation letter from the seller are the twin
reasons for concluding the assessee’s failure to prove the genuineness of the
purchases to the extent of Rs.28,54,540/-. Ld. Counsel for the assessee
submitted that the AO suspected the above purchases from M/s. Arihant
Traders qua the allegation of accommodation entries/bills on the basis of the
information supplied by the Sales Tax Department (Para No.4 of the AO.).
Ld. DR for the Revenue relied on the orders of AO/CIT(A).
I heard both the sides on the solitary issue of confirming of addition of
Rs.28,54,540/- by the CIT(A) on the ground that they constitute bogus
5 ITA No.942/PUN/2017 Shri Firoz Ahmed Moh. Motin Choudhary
purchases as the payment is still pending payable to M/s. Arihant Traders.
Otherwise, the AO allowed the purchases to the extent the payment was made.
In my view, such an approach in matters relating to bogus purchases involving
the information received from Sales Tax Department, is not sustainable. I find
making entire addition of Rs.28,54,540/- is not appropriate as these purchases
are infact linked to the allegation of accommodation entries/listing of hawala
suppliers by the Sales Tax Department. The CIT(A) did not deal with the likely
GP rate of such suspected purchases and also the applicability of the catena of
decisions on this issue.
I find that similar issue of bogus purchases has been decided by the
Tribunal in series of decisions. Further, it is not the case of the Revenue that
something is wrong with the invoices, payments, trail of goods purchased etc.
I find the Coordinate Bench of the Tribunal in the case of Mr. Khan Afzalhussain
Mohd. Saie Vs. DCIT – ITA Nos. 2708 and 2709/PUN/2016, dated 23-03-2018
confirming the addition to only 10% of such alleged bogus purchases apply to
the facts of this case. I therefore find it to relevant to extract the findings given
by the Tribunal in Para No.11 of order of Tribunal here as under :
“11. Now, coming to the merits of addition. The issue raised in the present appeal is against bogus purchases. We have already adjudicated similar issue in series of decisions with lead order in M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT in ITA No.795/PUN/2014, relating to assessment year 2010-11, order dated 28.04.2017. The assessee in the first year i.e. assessment year 2009-10 has maintained quantitative details. In other words, it has the evidence of purchasing goods and its sales. In such circumstances, at best, higher gross profit rate can be applied. Following our decision in earlier orders, we hold that GP rate of 10% over and above GP declared by the assessee in its books of account, be applied to work out the additional income in the hands of assessee. The ground of appeal No.3 raised by the assessee is thus, partly allowed.”
Considering the same, I direct the Assessing Officer to make addition in
the hands of assessee by adopting GP rate at 10% of bogus purchases of
6 ITA No.942/PUN/2017 Shri Firoz Ahmed Moh. Motin Choudhary
Rs.28,54,540/-. Accordingly, the grounds raised by the assessee are partly
allowed.
In the result, appeal of the assessee is partly allowed.
Order pronounced on this 25th day of May, 2018.
Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 25th May, 2018. Satish
आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-13, Pune 3. आयकर आयु� / The CIT-13, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune