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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-1, Nashik, dated 22-08-2016 for the Assessment Year 2009-10.
Grounds raised by the assessee are as under :
“1. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax(Appeals)-1, Nashik, is not justified in confirming validity of notice issued u/s.148 particularly when AO has issued the said notice on the basis of information received from third party and without application of mind. 2. On the basis of facts and in the circumstances of the case and as per law, the appellant order passed u/s.250 of the Act please be quashed as the Commissioner of Income Tax (Appeals)-1, Nashik is not justified in upholding the order passed by the AO u/s.147 of the Act as the AO has not rejected the objections raised against reasons recorded for the notice issued u/s.148 of the Act by way of speaking order.
On the basis of facts and in the circumstances of the case and as per law, the disallowance made by the Commissioner of Income Tax (Appeals)-1, Nashik of the purchases made from some of the parties amounting to Rs.15,20,355/- by treating the same as fictitious particularly when the said purchases are supported by purchase bills, transportation receipts, bank account statements for payments through banking channel, quantity account and more particularly when the CIT(A) is not justified in confirming the disallowances of purchases of Rs.15,20,355/-without considering the evidences. 4. On the basis of facts and in the circumstances of the case and in the interest of the justice the appeal may be set aside to the file of CIT(A) for re-adjudication. 5. The Appellant craves for addition to, deletion, alteration, modification, change of the grounds.”
Briefly stated relevant facts are that assessee is an individual and
is engaged in the business of trading in plastic sheets & works.
Assessee filed the return of income on 22-09-2009 declaring total
income of Rs.7,92,910/- for the assessment year under consideration.
On the basis of information received from the Investigation Section of
Sales Tax Department, AO issued notice u/s.148 of the Act to the
assessee. AO found that assessee made purchases from couple of
suppliers namely, Exact Metal Pvt. Ltd., Shubhlabh Metal and Alloys
Pvt. Ltd. amounting to Rs.15,20,355/-. Eventually, AO came to the
conclusion that the purchases made by the assessee are bogus ones
and therefore added entire sum of those purchases Rs.15,20,355/- to
the total income of the assessee. Thus, the AO determined the income
at Rs.23,13,270/-.
During the First Appellate proceedings, assessee raised an
objection before him stating that the re-assessment proceedings are
required to be quashed as it is a case where the AO summarily rejected
the objections raised against the reasons communicated to the
assessee. Ground No.2 before the CIT(A) is relevant. CIT(A) dismissed
the said submission of the assessee finding no infirmity in the order of
the AO. Further, on merits against the addition of Rs.15,20,355/-,
assessee did not appear before the authorities despite repeated
opportunities granted to him. Contents of Para No.5.5 of the order of
CIT(A) are relevant and the same are extracted here as under :
“5.5 The impugned purchase parties have neither been produced before the Assessing Officer nor before me. The appellant inspite of giving repeated opportunity both by the Assessing Officer and me did not produce quantitative details of the goods purchases, nor co-related purchase and sales, nor produced proof for movement of goods, nor produced proof of payment to impugned purchases parties. In such circumstances, in my considered view the addition made by the Assessing Officer of Rs.15,20,355/- as bogus purchases is in order and is upheld.”
Considering the fact that the assessee did not submit the relevant
details in support of the trail of goods, proof of payments etc., CIT(A)
confirmed the entire addition of Rs.15,20,355/-.
Aggrieved with the order of the CIT(A), the assessee filed the
present appeal before the Tribunal with the grounds extracted above.
Before us, on the legal issue, Ld. Counsel for the assessee
submitted that the reassessment proceedings u/s.147 of the Act is
invalid since the same is invoked without having any incriminating
material. On merits, Ld. Counsel for the assessee submitted that
confirming the entire purchases made by the assessee for the
assessment years under consideration is unsustainable when the books
of accounts are not formally rejected u/s.145(3) of the Act. Ld. Counsel
submitted that when the assessee is in possession of the evidences by
way of copies of bills, transport bills and bank statements, adding the
entire purchases as bogus purposes, is not tenable. Further, Ld.
Counsel submitted that in view of the plethora of decisions of the Pune
Bench of the Tribunal, the addition may be restricted to 10% of the
bogus purchases. The Ld. AR for the assessee has placed reliance on
the ratio laid down by the Pune Bench of Tribunal in bunch of appeals
with lead order in M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT in ITA
No.795/PUN/2014, relating to assessment year 2010-11, order dated
28.04.2017 and pointed out that at best 10% of GP rate may be applied
on alleged bogus purchases.
Ld. DR for the Revenue relied on the orders of AO/CIT(A).
I heard both the sides on the couple of issues under consideration
and perused the orders of the Revenue and the decisions relied on by
the Ld. Counsel for the assessee. Regarding the issue relating to re-
assessment and its validity, I find on similar circumstances, the
Coordinate Bench of the Tribunal dismissed the arguments of the Ld
Counsel for the assessee by relying on the decision of Coordinate Bench
of the Tribunal in the case of Mr. Khan Afzalhussain Mohd. Saie Vs.
DCIT – ITA Nos. 2708 and 2709/PUN/2016, dated 23-03-2018. For the
sake of completeness, I proceed to extract the relevant para of the order
of Tribunal and the same is extracted as under :
“9. The first issue raised by the assessee is against re-assessment proceedings initiated under section 147/148 of the Act. We find that the said issue is squarely covered against the assessee by the ratio laid down by Hon’ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra) and referring to paras 4 and 5 of the appellate order, we uphold the same and dismiss the ground of appeal No.1 raised by the assessee.
Following the same parity of reasoning, the grounds of appeal
No.1 and 2 raised by the assessee on this issue are dismissed.
Regarding the issue of confirming of entire addition of bogus
purchases by the CIT(A), I find that similar issue of bogus purchases
has been decided by the Tribunal in series of decisions. I find the
Coordinate Bench of the Tribunal in the case of Mr. Khan Afzalhussain
Mohd. Saie (supra) has restricted the addition to 10% of such alleged
bogus purchases. I therefore find it to relevant to extract the findings
given by the Tribunal in Para No.11 of order of Tribunal here as under :
“11. Now, coming to the merits of addition. The issue raised in the present appeal is against bogus purchases. We have already adjudicated similar issue in series of decisions with lead order in M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT in ITA No.795/PUN/2014, relating to assessment year 2010-11, order dated 28.04.2017. The assessee in the first year i.e. assessment year 2009-10 has maintained quantitative details. In other words, it has the evidence of purchasing goods and its sales. In such circumstances, at best, higher gross profit rate can be applied. Following our decision in earlier orders, we hold that GP rate of 10% over and above GP declared by the assessee in its books of account, be applied to work out the additional income in the hands of assessee. The ground of appeal No.3 raised by the assessee is thus, partly allowed.”
Considering the same, I direct the Assessing Officer to make
addition in the hands of assessee by adopting GP rate at 10% of bogus
purchases declared by the assessee. Accordingly, Ground No. 3 raised
by the assessee is partly allowed.
In the result, appeal of the assessee is partly allowed.
Order pronounced on this 23rd day of March, 2018.
Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 23rd March, 2018. Satish
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune