SHREYANS METAL (INDIA),MUMBAI vs. ITO RG 19(3)(3), MUMBAI

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ITA 5517/MUM/2016Status: DisposedITAT Mumbai01 November 2017AY 2009-104 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the purchases were not fully substantiated, the addition should account for the profit element. Considering the sales turnover was not disputed and payments were through banking channels, the addition was reduced.

What were the facts?

The assessee, engaged in the business of stainless steel raw material, was subjected to reassessment proceedings due to information about bogus purchase bills. Notices to suppliers were returned unserved, and the assessee could not provide confirmations for the purchases.

What were the issues?

The primary issue was the addition made by the revenue on account of alleged bogus purchases and the extent to which such additions should be sustained.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 133(6),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI D.T. GARASIA, JM & SHRI MANOJ KUMAR AGGARWAL, AM

Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by assessee for Assessment Year [AY] 2009-10 assails the order of the Ld. Commissioner of Income-Tax (Appeals)-30 [CIT(A)], Mumbai, Appeal No. CIT(A)- 30/19(3)(3)/243/2015-16 dated 16/08/2016. The assessment for impugned AY was framed by Ld. Income Tax Officer Range 19(3)(3), ITA.No.5517/Mum/2016 Shreyans Metal(India) Assessment Year-2009-10 Mumbai [AO] u/s 143(3) read with Section 147 of the Income Tax Act,1961 on 13/03/2015. The solitary issue involved in the appeal is addition on account of certain bogus purchases. 2.1 Facts leading to the same are that the assessee being resident firm engaged in the business of stainless steel raw material was subjected to an assessment u/s 143(3) read with Section 147 for impugned AY on 13/03/2015 at Rs.60,24,160/- after addition of certain bogus purchases for Rs.52,84,346/-. The original return was filed on 23/09/2009 at Rs.7,39,811/- which was processed u/s 143(1). As already stated, the solitary issue involved in the appeal is addition against bogus purchases. 2.2 The reassessment proceedings were initiated upon receipt of certain information from Sales Tax Department, Maharashtra regarding dealers indulging in bogus purchase bills and it was noted that the assessee stood beneficiary of such bogus purchase bills to the tune of Rs.2,11,37,383/- from fifteen such entities. Consequently, notice u/s 148 dated 10/02/2014 was issued to the assessee which was followed by statutory notices u/s 143(2) and 142(1). 2.3 To confirm the impugned transactions, notices u/s 133(6) was issued to the suppliers at the addresses provided by the assessee. However, the same could not be served and returned back un-served with remarks like left, not known etc. The assessee, in turn, furnished sale/purchase invoices, stock register, bank statement etc. However, Ld. AO finding discrepancies in the same, treated the purchases as non- genuine and placing reliance on several judicial pronouncement, estimated addition @ 25% against the alleged bogus purchases which came to Rs.52,84,346/-.

1.

ITA.No.5517/Mum/2016 Shreyans Metal(India) Assessment Year-2009-10 3. Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 16/08/2016 where the Ld. CIT(A), after considering various contentions & submissions, restricted the impugned additions to 12.5%. Aggrieved, the assessee is in further appeal before us.

4.

The Ld. counsel for Assessee [AR] opposed the estimated additions on the ground that confirmation with respect to few parties was available on the record and Gross profit rates in the impugned AY was in line with earlier years and further quantitative details were available on record. Per Contra, Ld. DR contended that adequate relief has already been granted by Ld. CIT(A) and the same was quite fair and reasonable.

5.

We have carefully heard the rival contentions and perused relevant material on record. We are of the considered opinion that there could be no sale without purchase /consumption of material since the assessee was engaged in trading activities. The sales turnover achieved by the assessee has not been disputed / disturbed by the revenue and the payments were through banking channels. The purchases were backed by invoices. At the same time, the assessee could not produce any confirmation from the any of the fifteen suppliers and all notices issued u/s 133(6) were returned back, which cast serious doubt on assessee’s claim. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which Ld. CIT(A) has rightly done. The Ld. AR has contended that the assessee made VAT payment with ITA.No.5517/Mum/2016 Shreyans Metal(India) Assessment Year-2009-10 respect to five parties. The assessee deserves the benefit of the same. Hence, on overall facts and circumstances and keeping in view assessee’s nature of business, we reduce the estimated addition to 10% of alleged bogus purchases of Rs.2,11,37,383/- which comes to Rs.21,13,738/-. The order of Ld. CIT(A) stands modified to that extent.

6.

Resultantly, the assessee’s appeal stands partly allowed. Order pronounced in the open court on 01st November, 2017.

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