MOTILAL D. JAIN PROP OF ADARSH METAL CORPORATION,MUMBAI vs. ITO 20(2)(2), MUMBAI

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ITA 3065/MUM/2017Status: DisposedITAT Mumbai14 September 2017AY 2009-103 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the addition should be restricted to the Gross Profit (GP) rate declared by the assessee, not the Net Profit (NP) rate. The CIT(A)'s decision to restrict the addition to the GP rate of 6.68% was upheld.

What were the facts?

The assessee, a dealer in Iron & Steel, purchased goods worth Rs. 1,75,49,847/- from parties identified as 'hawala parties' by the Sales Tax department. The Assessing Officer reopened the assessment and added 12.50% of the purchase value as income.

What were the issues?

Whether the addition for alleged bogus purchases should be made at the Net Profit rate or the Gross Profit rate declared by the assessee.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

Before: Shri B.R. Baskaran (AM)

For Appellant: Shri Jayesh Dadia
For Respondent: Shri S.K. Bepari
Hearing: 14.9.2017Pronounced: 14.9.2017

The appeal filed by the assessee is directed against the order dated 28- 02-2017 passed by Ld CIT(A)-32, Mumbai and it relates to the assessment year 2009-10. The assessee is aggrieved by the decision of Ld CIT(A) in partially confirming the addition relating to alleged bogus purchases.

2.

I heard the parties and perused the record. The assessee is a dealer in Iron & Steel. Consequent to the information received from Sales tax department that certain parties (called hawala parties) are indulging in providing only accommodation bills without actually supplying the materials, the revenue examined those details. It was noticed that the assessee herein have purchased goods during the year under consideration from the parties listed as hawala parties aggregating to Rs.1,75,49,847/-. Hence the AO reopened the assessment of the year under consideration.

2 Motilal D. Jain Prop. of Adarsh Metal Corporation 3. Before AO, the assessee only furnished purchase bills, bank statements, ledger account copies etc. However the AO was not satisfied with them and accordingly assessed 12.50% of the value of purchases as income of the assessee. The Ld CIT(A) noticed that the assessee has declared G.P at the rate of 6.68%. Accordingly he took the view that the addition should be restricted to the G.P rate declared by the assessee. Accordingly he directed the AO restrict the addition to 6.68% of the value of purchases. Still aggrieved, the assessee has filed this appeal.

4.

The Ld A.R submitted that the assessee has declared net profit at the rate of 2.15% and hence the addition should have been restricted to that level. On the contrary, the Ld D.R submitted that the assessee should have made profit on the value of purchases and hence the Ld CIT(A) was justified in adopting the G.P rate for making addition.

5.

Having heard rival submissions, I am of the view that there is no merit in the claim of the assessee. The tax authorities have estimated the profit that would have been made by the assessee on the value of alleged bogus purchases. Hence the addition should be made at Gross profit level only and not at net profit level. Accordingly I do not find any infirmity in the order passed by Ld CIT(A) and hence uphold the same.

6.

In the result, the appeal filed by the assessee is dismissed. Order has been pronounced in the Court on 14.9.2017.

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