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Income Tax Appellate Tribunal, “C”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD, JM
आदेश / O R D E R PER R.C.SHARMA (A.M): These are the cross appeals filed by assessee and revenue against the order of CIT(A)-5, Mumbai for A.Y. 2009-10 dated 08/08/2015 in the matter of order passed u/s.143(3) r.w.s. 147 of the IT Act. 2. The following grounds have been taken by the assessee:-
5318/Mum/2015 Pentagon System and Services Pvt. Ltd., GROUND NO. 1 In the facts and circumstances of the case and in law, the Id. CIT(A) has erred in not holding that the reopening u/s 147 is unjustified, unwarranted, illegitimate and hence, bad in law. GROUND NO. 2 The Id. CIT(A) has erred in making and confirming the addition of Rs. 39,78,000 thereby holding the same to be the peak credit. The Id. CIT(A) has failed to consider that:
1. 1. There are no bogus purchases.
2. The assessee has provided and furnished all the documents necessary for the purpose of proving that its purchases are genuine.
3. The onus is on the Revenue to prove that the purchases are bogus.
4. The fact that the purchases are bogus must be proved by way of corroborative evidence.
5. Assumptions and presumptions cannot take the place of evidence. GROUND NO.3 The assessee craves leave to add, alter or amend the existing grounds of appeal on or before the date of hearing.
3. The following grounds have been taken by the revenue:-
1. The order of the CIT(A) is opposed to law and facts of the case.
2. On the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the addition on account of bogus purchases to the element of profit embedded in the purchase, when the whole of the transaction was bogus and the AO had taxed the same by taking the peak credit of such purchases.
4. Rival contentions have been heard and record perused.
Facts in brief are that the assessee is engaged in the business of trading of Computer hardware, software and services. Based on the Information received from the Sales Tax Department regarding bogus supplies, the AO issued 148 Notice dt. 15/02/2013.
5318/Mum/2015 Pentagon System and Services Pvt. Ltd., 6. During the reassessment proceedings, the Assessee had filed a letter dt.06/03/2014 and submitted Ledger Account, Tax Invoice, Bank Statements and utilisation of goods supplied. However, the AO did not satisfy with the assessee’s contention and added the amount of peak credit in respect of alleged bogus purchases in assessee’s income.
By the impugned order CIT(A) restricted the addition to the extent of 12.5% against which both assessee and revenue are in further appeal before us. 8.We have considered rival contentions and carefully gone through the orders of the authorities below.
It was argued by learned AR that original assessment proceedings was completed u/s.143(3) wherein all the details of purchases as called by the AO was furnished and AO was satisfied with the genuineness of purchases. Therefore, reopening was not justified. On merits of the addition he relied on the order of the Co-ordinate Bench in case of Steel Line (India) order dated 29/08/2017 in 1322/Mum/2016 and 1323/Mum/2016 wherein Tribunal has observed as under:- “We have considered rival contentions and carefully gone through the orders of the authorities below and also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. From the record, we found that AO has made addition in respect of purchases found to be bogus as per the information from sales tax department. In the appellate proceedings, the CIT(A) recorded a finding to the fact that AO has not disputed the quantitative details and also day to day stock register maintained by the assessee. Assessee company being a trader of goods, AO not 5318/Mum/2015 Pentagon System and Services Pvt. Ltd., having doubted the genuineness of sales, could not have gone ahead and made addition in respect of peak balance on such purchases. Accordingly, CIT(A) concluded that issue boil down to find out the element of profit embedded in bogus purchases which the assessee would have made. When the corresponding sales have not been doubted and the quantitative details of purchases and sales vis-a-vis stock was available, we deem it appropriate considering the entirety of facts and circumstances of the case to restrict the addition to the extent of 2% of such bogus purchase. Accordingly, the order of both the lower authorities are modified and AO is directed to restrict the addition to the extent of 2% on such purchases.”
We have carefully gone through the orders of the authorities below and found that AO has made addition of peak credit in respect of purchases made through suppliers as per information of Sales Tax Department. The AO has accepted the corresponding sales made by the assessee. Books of Accounts were not rejected. However, he has added the peak credit in respect of such purchases in assessee’s income. By observing that only profit element embedded in bogus purchase which the assessee would have made, should be added in the assessee’s income, the CIT(A) has restricted the addition to 12.5% of such purchases. So far as reopening is concerned, we found that sufficient reasons were recorded by AO and he was justified in reopening the assessment.
11.From the record, we found that during the year under consideration the assessee had offered higher GP. GP of last two years of the assessee was at 8.39% and 8.36%. During the year under consideration GP shown by the assessee was 8.83%. Thus, the GP ratio of assessee is not only consistent as compared to the earlier years but even higher. We also found that during the course of assessment proceedings, the assessee
5318/Mum/2015 Pentagon System and Services Pvt. Ltd., had submitted the ledger account, tax invoice, bank statements and utilization of goods supplied. Statement of reconciliation of purchases and sales was also filed before the lower authorities. Keeping in view the nature of trade assessee was carrying on vis-à-vis higher G.P. declared during the year and also totality of facts and circumstances of the case, we modify the order of both the lower authorities and upheld the addition to the extent of 2% of the bogus purchases. We direct accordingly.
In the result, appeal of the Revenue is dismissed where as appeal of assessee is allowed in part.