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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)-5,
Pune, dated 28-09-2016 for the Assessment Year 2009-10.
Grounds raised by the assessee are as under :
The following grounds are taken without prejudice to each other – On facts and in law, 1. The learned CIT (A) erred in confirming the additions of Rs. 26,07,413/- on account of non genuine purchases on the ground that payments made to parties did not match with reference to the bank statement, the purchases made against the payments to two parties namely Saicin Mercantile (Private) Limited and Accure Impex (Private) Limited have not been proved and also demand draft payment are not reflected in the bank statement. The sale price being lower than the purchase price and the purchase rates being high is against the normal business practice. The other purchases are held as closing stock till a respectable profit could be earned on their sale disregarding the submissions and evidences given by the appellant.
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The learned CIT (A) erred in confirming the additions as non genuine purchases only on presumption and surmises without examining the gravity of such allegations and without satisfying the basic ingredients and requirements of such transactions.
The learned CIT (A) while confirming the addition failed to appreciate the following important facts that:
a. The purchases were supported by proper invoice.
b. The payments were made by a/c. payee cheques,
c. All the parties from whom the purchases were made are duly registered under the state and Central Sales Tax Act at the time when purchases were effected.
d. The appellant is also a registered dealer under the MVAT Act 2002 and CST Act and their registration were valid when the appellant had entered into the transaction.
e. The appellant has maintained all the quantitative details of purchases and sales and the same matches with the books of accounts.
f. The books of accounts of the appellant were audited under Income Tax Act, 1961 and also under Maharashtra Value Added Tax Act, 2002.
g. The sales effected by the appellant out of these purchases have been accepted.
h. The reconciliation of sales and purchase with quantitative tally had been furnished by the appellant.
The Id CIT(A) further erred in drawing conclusion that the appellant had sold the material out of these purchases at less than cost price and incurred loss in the transaction.
The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.
Briefly stated relevant facts are that assessee is a Firm and is engaged in
the business of trading in Electrical goods. Assessee filed the return of income
on 25-09-2009 declaring total income of Rs.6,04,946/- for the assessment year
under consideration. On the basis of information received from the
Investigation Wing of Sales Tax Department, AO issued notice u/s.148 of the
Act to the assessee. AO found that assessee made purchases from six suppliers
namely, (1) Padmavati Trading Company (2) Mani Bhadra Sales Pvt. Ltd. (3)
Varah Laxmi Sales Agency (4) Saican Mervantile Pvt. Ltd., (5) Accure Impex
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Pvt. Ltd., (6) Pawan Enterprises totalling to Rs.26,07,413/-. AO held that either
the amount did not match or was not reflected in the bank account as and
when the payments were made and therefore, proof of payment could not be
established. Eventually, AO came to the conclusion that the purchases made by
the assessee are unproved and made addition of entire sum of Rs.26,07,413/-
as income from undisclosed sources. Thus, the AO determined the assessed
income at Rs.32,12,360/-.
During the First Appellate proceedings, assessee made elaborate
submissions relying on various decisions/judgments which were incorporated in
Para No.6.2 of the order of CIT(A). However, the CIT(A) sustained the
addition made by the AO considering the fact that the assessee did not furnish
any evidence of the delivery of the goods by way of transport receipt, delivery
challan, octroi receipts, stock register showing movement of goods and proof of
payment made to the parties mentioned above. Contents of Para No.6.3 of the
order of CIT(A) are relevant.
Aggrieved with such order of the CIT(A), assessee filed the present
appeal before the Tribunal with the grounds extracted above.
At the outset, Ld. Counsel for the assessee submitted that confirming the
entire purchases made by the assessee for the assessment years under
consideration is unsustainable when the books of accounts are not formally
rejected u/s.145(3) of the Act. Ld. Counsel submitted that when the assessee
is in possession of the evidences by way of invoices, payments by account
payee cheques, quantitative details of purchases, registration of the
assessee/parties under State and Central Sales Tax Act etc., adding the entire
purchases as bogus purposes, is not tenable. Further, Ld. Counsel submitted
that in view of the plethora of decisions of the Pune Bench of the Tribunal, the
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addition may be restricted to 10% of the bogus purchases. Ld. Counsel for the
assessee has placed reliance on the ratio laid down by the Pune Bench of
Tribunal in bunch of appeals 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 and pointed out that at best 10% of GP rate may be applied
on alleged bogus purchases.
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 entire
addition of bogus purchases by the CIT(A) and perused the orders of the
Revenue and the decisions relied on by the Ld. Counsel for the assessee. 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.”
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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 declared
by the assessee. Accordingly, the grounds raised by the assessee are partly
allowed.
In the result, appeal of the assessee is partly allowed.
Order pronounced on this 17th day of May, 2018.
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)-5, Pune 3. आयकर आयु� / The CIT-5, 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// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune