ITO 20(2)(4), MUMBAI vs. LIFETCHNIQUES, MUMBAI

This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-32, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-32/IT-185/ITO 17(3)(3)/14-15, dated 28-04-2014. The Assessments were framed by the Income Tax Officer, Ward--17(3)(3), Mumbai (in short ITO or AO) for the assessment year 2009-10 vide order dated Nil under section 143(3) read with section 147 of the Income Tax Act, 1961(hereinafter ‘the Act’).

Liftechniques (AY: 09-10) “1. On the facts and in the circumstances of the case and in law the Ld CIT(A) has erred in granting relief of Rs.48.94.646/- by restricting the addition @ 8.72% (GP declared by the assessee) of total purchases from hawala parties without any actual purchase.'

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the fact that the assessee failed to discharge its burden that A.O. partiers involved were existent and genuine

3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in finding that corresponding sales shown out of material involved in bogus purchases without mentioning how this and with what evidence before him such finding was arrived at. If such evidence was given (as corresponding sales) the same should have been remanded to the A.Q for his examination and comments.”

Liftechniques (AY: 09-10) Corporation 4. Shiv Industries 27680272629V AMIPS8519C 1,16,550 5. Siddhi Enterprises 27860154093V AHUPK6877P 9,74,520 6. Asian Steel 27860346638V AWZPS2908L 14,47,577 7. Gula Trading 27910508261V AMAPM3579N 1,59,390 Company Total 65,44,702 4. It means that the total accommodation entry from these seven parties were taken by the assessee for an amount of ₹ 65,44,702/-. According to AO, the assessee has failed to prove the genuineness of the aforesaid purchases and accordingly, disallowed a sum of ₹ 54,65,344/- by working of the peak of the bogus purchases. The AO himself worked out at ₹ 16,36,176/-. However, the AO added a sum of ₹ 54,65,344/-. Aggrieved, assessee preferred the appeal before CIT(A).

“7.8 In the instant case, the appellant is not in a position to prove the existence of the suppliers. The payment schedule to the alleged suppliers shows that abnormal credit periods have been allowed to the appellant by suppliers whom the appellant admittedly does not know. Another circumstantial evidence is so many suppliers operating out of the same premises and yet being unknown to the appellant. This circumstantial evidence casts a strong doubt on the nature of the transaction. The appellant

Liftechniques (AY: 09-10) himself has admitted before me through written submissions that purchases have been made from parties other than those stated in the books of account. lam of the firm belief that the appellant had made cash purchases from other parties which were not recorded in the books. The appellant took only bills from these 7 parties as accommodation to explain the purchases. Therefore the entire purchase from these 7 parties cannot be added as bogus and what needs to be taxed is the profit element embedded in such transaction. I therefore hold that it would be fair to the appellant that the disallowance on the issue of bogus purchase he restricted to the GP recorded by the appellant in his books for the year which is 8.72%. Therefore, I direct the AO to estimate profit of 8.72% on the total alleged bogus purchase of Rs 65,44,702, which works out to Rs 5,70.698. The amount of Rs 5,70,698 is sustained out of the addition of Rs 54,65.344 made by the AO. The appellant gets a relief of the balance Rs 48.94,646. Grounds I & 2 are partly allowed.”

Aggrieved, Revenue is in appeal before the Tribunal.

Liftechniques (AY: 09-10) that the profit estimated by the CIT(A) at 8.72% a slightly lower and hence, we direct the AO to apply profit rate at the rate of 10% of the bogus purchases and assessed the income accordingly. We direct the AO accordingly.

Order pronounced in the open court on 27-10-2017.