Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI N.K. PRADHAN, HONBLE
O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-16, Mumbai Dated 24.10.2016 for the Assessment Year 2011-12. The only grievance of the Revenue in its appeal is that Ld.CIT(A) erred in estimating the profit at 12.5% of the purchases disallowed by the Assessing Officer.
(A.Y: 2011-12) M/s. Evergreen Engineering Co.P.Ltd.
Briefly stated the facts are that the assessment was completed u/s. 143(3) r.w.s. 147 on 23.03.2015 treating purchases of ₹.37,24,969/- as bogus purchases for the reason that as per the information received from Sales Tax Department, assessee company made certain purchases from Mayur Enterprises. Mayur Enterprises was shown in the list of dealers who had issued bogus purchases without actual delivery of goods. Therefore, Assessing Officer concluded that assessee obtained only accommodation bills from the said dealer without any actual delivery of goods. Assessing Officer required the assessee to prove the genuineness of purchases. He also issued notice u/s.133(6) to the dealer. However, the notice returned unserved. The assessee could not produce the complete details as requested by the Assessing Officer and therefore Assessing Officer treated the entire purchases from the said dealer as non-genuine and brought to tax.
On appeal the Ld.CIT(A) restricted the addition to 12.5% on the said purchases by relying on the decisions of the Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd., [355 ITR 290] and CIT vs. Simit P. Seth [38 Taxman.com 385].
The Ld. DR vehemently supported the orders of the Assessing Officer and submitted that since the assessee could not prove the genuine purchases by filing requisite details as called for by the Assessing Officer,
(A.Y: 2011-12) M/s. Evergreen Engineering Co.P.Ltd. the Assessing Officer is justified in treating the entire purchases from the said dealer as bogus purchases.
On the other hand, the Learned Counsel for the assessee strongly supported the orders of the Ld.CIT(A) and submitted that when the sales are accepted the entire purchases cannot be treated as bogus. He also submitted that the information said to have been received from the Sales Tax Department is not given to the assessee for its rebuttal. It is not known what kind of information they have received and no opportunity to cross examine the parties is provided. Therefore, there is no justification in treating the purchases as non-genuine purchases.
We have heard the rival submissions, perused the orders of the authorities below. The Ld.CIT(A) considering the submissions and the decision of Hon'ble Gujarat High Court estimated the profit from such purchases at 12.5% observing as under: -
“6.1.29 Similarly, in yet another decision of Hon'ble Gujarat High Court in the case of CIT vs. Simit Sheth (2013) 38 Taxmann.com 385 (Guj), Hon'ble Court was seized with a similar issue where the A.O. had found that some of the alleged suppliers of steel to the assessee had not supplied any goods but had only provided sale bills and hence purchases from the said parties were held to be bogus. The A.O. in that case added the entire amount of purchases to gross profit of the assessee. Ld. CIT(A) having found that the assessee had indeed purchased though not from named parties but other parties from grey market, partially sustained the addition as probable profit of the assessee. The Tribunal
(A.Y: 2011-12) M/s. Evergreen Engineering Co.P.Ltd. however, partly sustained the addition. Taking into account the above facts, the Hon'ble Gujarat High Court held that since the purchases were not bogus, but were made from parties other than those mentioned in books of accounts, only the profit element embedded in such purchases could be added to the assessee's income and as such no question of law arose in such estimation. While arriving at the above conclusion, the Hon'ble Court also relied on the decision in the case of Vijay M. Mistry Construction Ltd. 355 ITR 498 (Guj) and further approved the decision of Ahmedabad Bench, ITAT in the case of Vijay Proteins 58 lTD 428. 6.1.30 In the case of Vijay Proteins (supra), the Hon'ble ITAT was seized with a case of bogus suppliers of oil cakes where 33 parties were found to be bogus by the departmental authorities even though payments were made to the said parties by cross cheques and in fact the A.O. in that case had brought adequate material on record to prove that the cross cheques had not been given to parties from whom supplies were allegedly procured but these were encashed from a bank account in the name of another entity, possibly hawala dealer. Subsequently, the money deposited in that account was withdrawn in cash almost on the same day. The Tribunal however, held that if the purchases were made from open market without insisting for genuine bills, the suppliers may be willing to sell the product at a much less rate as compared to a rate which they may charge in which the dealer has to give genuine sale invoice in respect of that sale. Keeping all such factors in mind, the Tribunal estimated an element of profit percentage of the overall purchase price accounted for in the books of accounts through fictitious invoices. 6.1.31 As narrated earlier, the Ld. A.O. in this case has held that the parties from which the purchases were made by the appellant were found to be bogus and that is the reason for which it was not produced during the assessment proceedings. Not having doubted the consumption/ sales, the motive behind obtaining bogus bills thus, appears to be inflation of purchase price so as to suppress true profits. Considering the facts of the case as well as the various case laws cited (supra), I estimate the suppressed profit to the extent of 12.5% of the purchases made from the bogus entities, as the suppressed profit element embedded in such (A.Y: 2011-12) M/s. Evergreen Engineering Co.P.Ltd. purchases. This estimation is in addition to the GP shown by the appellant. Accordingly, this ground of appeal is partly allowed.
7. On a careful consideration of the observations of the Ld.CIT(A) we do not find any infirmity in estimating the profit from such purchases in view of the decisions of the Hon'ble Gujarat High Court relied on by him. Thus we sustain the order of the Ld.CIT(A) and reject the grounds of the Revenue.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on the 20th September, 2017.