INCOME TAX OFFICER vs. M/S. MAHARASHTRA INDUSTRIES & RE-ROLLING MILLS, NASHIK

PER D. KARUNAKARA RAO, AM :

There are 2 appeals filed by the Revenue under consideration involving

Assessment Years 2009-10 and 2011-12. They are filed against the common order

of CIT(A)-1, Nashik, dated 06-10-2016.

under consideration in verbatim, except the figures. Therefore, the grounds

raised by the Revenue for A.Y. 2009-10 are reproduced below :

“1.1 Whether on the facts and in circumstances of the case and in law, the CIT(A)-1, Nashik was justified in deleting the addition of Rs.14,63,641/- on account of alleged bogus purchases from Hawala dealers/parties. 1.2 Whether on the facts and in circumstances of the case and in law, the CIT(A)-1, Nashik was justified in deleting the addition even when the assessee has failed to discharge its onus of giving evidence for proving the purchases. 1.3 Whether on the facts and in circumstances of the case and in law, the CIT(A)-1, Nashik was justified in deleting the addition even when he has admitted in Para 4.88 that the assessee has not produced the parties from whom the purchases were made either before the A.O. or CIT(A).

2 ITA Nos.2971 & 2972/PUN/2016 M/s. Maharashtra Industries & Re-Rolling Mills

1.4 Whether on the facts and in circumstances of the case and in law, the CIT(A)-1, Nashik was justified in deleting the addition even when the assessee has not produced the quantitative tally either before the A.O. or CIT(A).

and is engaged in the business of Manufacturing of Steel Rolling Mills. Assessee

filed the return of income on 30-09-2009 declaring total income of Rs.1,23,200/-

for the assessment year under consideration. On the basis of information received

from the Investigation Section of Sales Tax Department, AO issued notice u/s.148

of the Act to the assessee on 26-09-2013 on finding that the assessee made

Hawala purchases to the tune of Rs.14,63,641/-. In response to the same,

assessee filed revised return on 13-03-2015 declaring income of Rs.15,86,840/-.

Assessee has shown net profit at 4.51% on the total turnover of Rs.1,79,67,808/-.

At the end of the assessment proceedings u/s.143(3) r.w.s. 147 of the Act, the AO

made entire addition of Rs.14,63,641/- on account of bogus purchases.

CIT(A). The CIT(A) after elaborately discussing various judgments of Hon’ble

Supreme Court, High Courts and the different Benches of ITAT, restricted the

disallowance to 25% of such bogus purchases which comes to Rs.3,65,910/-.

Thus, the CIT(A) gave relief of Rs.10,97,731/-.

Similarly, for A.Y. 2011-12, the AO made addition of Rs.47,00,720/- on

account of bogus purchases and the CIT(A) restricted the said disallowance to

25% of such bogus purchases which comes to Rs.11,75,180/-.

3 ITA Nos.2971 & 2972/PUN/2016 M/s. Maharashtra Industries & Re-Rolling Mills

Assessee is not in appeal against the order of CIT(A) in confirming the

addition of 25% of the bogus purchases for both the assessment years under

consideration.

before the Tribunal raising the aforesaid grounds.

assessee has not produced the parties before the authorities to demonstrate that

the purchases made by him are genuine. Therefore, Ld. DR for the Revenue

prayed for confirming the entire addition of bogus purchases instead of 25%

adopted by the CIT(A).

decision of the CIT(A) who restricted the disallowance to 25% of purchases.

Otherwise, Ld. Counsel submitted that this is the case where the assessee

maintained the required evidences by way of purchase bills and account extracts

establishing the trail of goods. Further, Ld. Counsel submitted that the Pune

Bench of the Tribunal in a series of decisions on this issue has been restricting the

addition to 10% of the bogus purchases. In support of his case, Ld. Counsel for

the assessee filed the order of Pune Bench of the Tribunal in the case of ACIT Vs.

Shri Nitin Ramchandra Gite and Vice versa in ITA No.1732/PUN/2015 and CO

No.46/PUN/2017, dated 13-10-2017 for the A.Y. 2011-12.

purchases by the CIT(A) and perused the decision relied on by the Ld. Counsel for

the assessee. I find it relevant to reproduce the finding given by the CIT(A) at

Para Nos. 4.88 and 4.89 of his order and the same is extracted as follows :

“4.88 Adverting to the fact in the instant case, the assessee is in the business of manufacturer in steel rolling mills. The parties who are in dispute for purchases, is neither produced before me nor before the AO. In absence of production of

4 ITA Nos.2971 & 2972/PUN/2016 M/s. Maharashtra Industries & Re-Rolling Mills

parties the issue that purchases were indeed from them cannot be verified. The consumption detail is no testimony of the fact that the purchases are not inflated and parties are not bogus.

4.89 Thus in my opinion the facts on record demonstrate that this is not a case of bogus purchase but a case of inflated purchases and at best from bogus parties. Considering the facts and circumstances of the case, to meet the ends of justice, the AO is directed to restrict the disallowance of purchases to 25% of purchases, i.e. Rs.3,65,910/- for A.Y. 2009-10 & Rs.11,75,180/- for A.Y. 2011-12.”

The revenue wants confirming of entire addition of Rs.14,64,641/- and

Rs.47,00,720/- for A.Yrs. 2009-10 and 2011-12 respectively. I find the said

arguments of the Revenue is unsustainable in view of catena of decisions on this

issue. As such, there is no problem with the trail of goods as well as on the

payment to the parties. In such circumstances, we find the order of CIT(A) is fair

and reasonable and does not call for any interference. Accordingly, the grounds

raised by the Revenue for both the assessment years are dismissed.

Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 17th May, 2018. Satish

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The CIT-1, Nashik 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// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune