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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI D.T. GARASIA
Per D.T. Garasia, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 09.12.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.
The short facts of the case are that the return of income was e-filed by the assessee on 07.07.2009, declaring total income of Rs.1,04,790/-. The same was processed u/s 143(1) of the Act. The case of the assessee was reopened u/s 148 of the Act on 05.03.2014 and the assessment order u/s 143(3) r.w.s. 147 of the Act was passed on 05.03.2015, determining total income at Rs.21,95,860/-. In this case an intimation was received from the office of the Director General of Income Tax (Inv.) Mumbai, wherein, it was stated that as per information received from Sale Tax Department, Govt. of Maharashtra, the assessee was 2 M/s. D & D Metalloys Corporation found to have acquired bogus purchase bills amounting to Rs.1,67,28,620/- from the parties mentioned below:- Sr. Name F.Y. Amount (Rs.) No.
Shakti Trading Company 2008-09 1,35,000/- 2. Paras Steel India 2008-09 7,40,484/- 3. Manav Impex 2008-09 67,68,162/- 4. Naman Enterprises 2008-09 4,83,972/- 5. Daksh Enterprises 2008-09 19,36,034/- 6. Manshi Traders 2008-09 17,80,749/- 7. Jinkushal Metal Corp. 2008-09 6,07,620/- 8. Slree Manibhaclra Metal 2008-09 6,28,503 9. Great International 2008-09 36,48,096/- Total 1,67,28,620/-
Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has allowed the appeal by observing as under:
“5.3.8 On perusal of copy of the ledger account filed by the appellant, it is found that the details of purchases are from the NINE Hawala panties. It is to reiterate that the case was reopened by issuing notice u/s 148 of the Act. In order to verify the genuineness of the purchase, notices u/s 133(6) of the Act were issued by AO to the above said parties. However, the notices have been returned unserved by the ‘Postal Authorities'. The appellant was asked to produce the parties. But the appellant has not produced any of the parties. Further, the appellant was asked to produce Octroi receipts and Delivery Challans of the relevant purchase goods. The appellant has admitted that all purchase and deliveries were made by the purchasing parties but appellant has not produced any transport receipts in respect of relevant purchased goods. The appellant has failed to produce the parties, thereby has not discharged the onus cast upon. Keeping in mind the totality of circumstances as discussed above, it would be adequate to meet the ends of justice, if the addition is made on the profit element of the bogus purchases. It is found that the AO has rightly made disallowance in this case @ 12.5 percent of the bogus purchases of Rs.1,67,28,620/- which amounts to Rs.20,91,076/- which are found to be reasonable and ensures that only the real income gets subjected to tax and not a notional income or an exaggerated amount determined in any arbitrary manner. Hence, the grounds of appeal raised are dismissed.”
4. None appeared on behalf of the assessee. I have heard the Ld. D.R. and the Ld. D.R. relied upon the decision of the Tribunal, Ahmedabad Bench in the cases of Shwetambar Steels vs. ITO Ahmedabad and Ganesh Rice Mills vs. CIT (294 ITR 316). The facts in the present case show that assessee could not 3 M/s. D & D Metalloys Corporation produce the parties from whom goods are stated to have been purchased. The suppliers were found to be engaged in providing bogus bill without actual dealing of goods. In this regard, the assessee has stated that they had submitted quantitative details of stock with respect of the sales with purchases from the parties during the assessment proceedings. The assessee has submitted the detail of corresponding sales in respect of the purchase from the said parties. As mentioned above the AO has never disputed or examined the aspect of sales receipts. Since the sales made by the assessee was not doubted or disputed by the AO and he has accepted the sales receipts of the assessee as it is, therefore, the AO cannot deny that purchases were not made by the assessee and the material was not used for its sales. What is under dispute is the purchases from the parties from whom bills have been taken and cheques have been issued to them. Purchases are not in dispute but the parties from whom purchase are shown to have been made are disputed and suspicious. The AO had made the addition as some of the suppliers were declared hawala dealers by the VAT Department. This may be a good reason for making further investigation but the AO did not make any further investigation and merely completed the assessment on suspicion. Once the assessee has brought on record the details of payments by account payee cheque, it was incumbent on the AO to have verified the payment details from the bank of the assessee and also from the bank of the suppliers to verify whether there was any immediate cash withdrawal from their account. No such exercise has been done or findings recorded, There was no detailed investigation made by the AO himself. It is also found that the payments have been made by account payee cheque which are duly reflected in the bank statement of the assessee. There is no evidence to show that the assessee has received cash book from the suppliers. Merely because the suppliers did not appear before the AO or some confirmation letters were not furnished, one cannot conclude that the purchases were not made by the assessee. This view is supported by the decision of Nikunj Eximp Enterprises vs. CIT 216 Taxman 171 (Bom). To this extent, I am of the view
4 M/s. D & D Metalloys Corporation that if the assessee has fulfilled its onus of making the payment by cheque and has supplied the addresses of the sellers then it cannot be presumed that supplier were bogus simply because the sellers were not found at the given address. There is a considerable time gap between the period of purchase transaction and period of scrutiny proceedings. The AO has not brought any material on record to show that there is suppression of sales. It is basic rule of accountancy as well as of taxation laws that profit from business cannot be ascertained without deducting cost of purchase from sales. Estimation of profit ranging from 12.5% to 15% has been upheld by the Hon'ble Gujarat High Court in the case of CIT vs Simit P Sheth 356 ITR 451 (Guj.). Respectfully following the decision of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth 38 taxman 385 (Guj), I do not have any reason to interfere in the order of the Ld. CIT(A).
In the result, assessee’s appeal is dismissed.
Order pronounced in the open court on 29.08.2017.