M/S. NEMINATH ELECTRICALS,PUNE vs. INCOME TAX OFFICER,

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.

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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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 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/-.

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.

appeal before the Tribunal with the grounds extracted above.

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.

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.

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