MURTUZA ABDUL GAFFAR KHAN,MUMBAI vs. NATIONAL FACELESS APPEAL CENTRE (NFAC), DELHI
Facts
The assessee, a proprietor of an engineer tube trading business, filed his return for AY 2011-12. The Assessing Officer made a 100% addition for non-genuine purchases amounting to ₹1,15,86,557/- from two identified parties, treating them as bogus. This addition was confirmed by the CIT(A).
Held
The Tribunal held that while the purchases might be from alleged bogus suppliers, the sales were not disputed and correlated with the purchases. The Tribunal referred to the Bombay High Court's decision in PCIT vs. Mohd. Haji Adam & Company, which suggests restricting additions to the extent of gross profit at the same rate as other genuine purchases. The Tribunal noted that the gross profit on these transactions was 5.096%, only slightly lower than the assessee's regular gross profit ratio of 5.407%, making the difference minuscule.
Key Issues
Whether the addition of non-genuine purchases amounting to ₹1,15,86,557/- was justified, or if it should be restricted to the difference in gross profit margin compared to genuine sales.
Sections Cited
143(3), 147, 148, 142(1), 133(6), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI RAHUL CHAUDHARY, JM Shri Vimal Punmiya, CA
PER PRASHANT MAHARISHI, AM:
ITA No. 2698/Mum/2023 is filed by Murtuza Abdul Gaffar Khan, [assessee / appellant], for A.Y. 2011-12, against the appellate order passed by National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 6th July, 2023, wherein the appeal filed by the assessee against the assessment order under Section 143(3) read with section 147 of the Income-tax Act, 1961 (the Act) dated 19th December, 2018, passed by the Income Tax Officer, Ward 26(2)(3), Mumbai, (the learned Assessing Officer), was dismissed. Therefore, the assessee is aggrieved and has preferred this appeal before us.
“1. The learned CIT erred in confirming an addition of ₹1,15,86,557/- treating the same as Non-genuine purchase under Section 68 of the act income tax act 1961. 2. The appellant craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing.” 03. The brief facts of the case shows that assessee is an individual proprietor of engineer tube traders carrying on the business as resellers in MS Pipes, Tubes and allied products. He filed his return of income on 28th September, 2011, at ₹6,72,951/-. The return was processed under Section 143(1) of the Act. The notice under Section 148 of the Act was issued on 30th 04. March, 2018, after recording the reasons. The assessee responded by reiterating the original return filed as return in response to notice under Section 148 of the Act. He further asked for the reasons recorded which were provided and thereafter, notice under Section 142(1) of the Act was issued.
In assessment proceedings and reasons recorded for reopening, It was found that assessee has purchased
The assessee aggrieved with that has preferred this appeal. Before us, the assessee has
i. Submitted stock register of material purchased, he further shown the details of purchases from Siddhi Vinayak Steel and Chanchal Steel Corporation and corresponding sales made to other parties.
ii. produced stock tally of kilograms and submitted that on the goods purchases of ₹1,15,86,557/-, same were sold for ₹1,22,08,684/-, resulting into gross profit of ₹6,22,127/-, showing gross profit of 5.09%.
iii. Relied on the decision of the Hon'ble Bombay High Court in case of PCIT vs. Mohd. Haji Adam and Co. date 11 February 2019.
iv. Submitted, gross profit chart to show that in the regular business of the assessee, the assessee has earned gross profit ratio of 5.41% and therefore, gross profit is shown by the assessee similar even if alleged bogus
v. Submitted plethora of judicial precedents to support his case.
The learned Departmental Representative supported the orders of the lower authorities.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact clearly shows that assessee is a trader in MST tubes and pipes. Based on sales tax department enquiry and consequent report of DGIT, assessee was found to have indulged into purchases from tainted parties as per Sales Tax Department. Two parties are identified and total of such purchases was ₹1,15,86,557/-. The learned Assessing Officer made an addition to the extent of 100% of the same, which was confirmed by the learned Commissioner of Income tax (Appeals). Before us, the assessee has given a quantitative chart along with the value to show that alleged bogus purchases are amounting to ₹ 1,15,86,557/- for 1,89,475 kgs, which were sold for ₹1,22,08,684/- of identical kgs. Bills of purchases and bills of sales were also correlated. The assessee has also submitted the stock register before us. Assessee has also produced before the lower authorities the details such as invoices, payment through banking channel, confirmation of accounts and other details for purchase of goods. Undeniably, the parties who notices under section 133 (6) of the act were returned, assessee also did not produce
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 15.03.2024.
Sd/- Sd/- (RAHUL CHAUDHARY) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 15.03.2024 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai
