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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM (A.Y:2008-09) Rajiv I. Gandhi Income Tax Officer 34 Bajaj Society, Bajaj RD Ward-25(3)(3) Ville Parle (W) Vs. R. No. 608 C-10, Mumbai-400 057 Pratykshkar Bhvan BKC PIN- AADPG3967F Bandra, Mumbai-400 050 Appellant .. Respondent Assessee by .. Shri Rajesh Gupta, AR Revenue by .. Shri Purushottam Kumar, DR Date of hearing .. 25-05-2017 Date of pronouncement .. 09-06-2017 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of CIT(A)-37, Mumbai, in appeal No. CIT(A)-37/IT-906/ITO 25(3)(3)/2015-16 dated 29- 03-2016. The Assessment was framed by ITO ward 25(3)(3), Mumbai for the A.Y. 2008-09 vide order dated 21-03-2016 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) restricting the addition at 12.5% of bogus purchase being cross profit estimated on bogus purchase.
Briefly stated facts are that the assessee is engaged in the business of retail trading of pharmaceuticals. The AO received information from DGIT (investigation) Mumbai, who in turn received information from Sales Tax Department, Maharashtra that assessee is receiving the accommodation entry / bogus purchase / bogus bills of purchase from certain parties, who are indulging in issue of bogus bills without delivery of actual goods. The assessee to prove these purchase as genuine, produces copies of the ledger account of the parities, copies of sales and purchase register, copies of bank statement highlighting the payments made to these purchase parties. The AO noted that the Rajiv I. Gandhi; AY 08-09 assessee has not submitted the stock register, delivery challan, transport receipts mentioning truck no/ lorry no, octoroi receipt etc., to substantiate the claim of purchase as genuine. Finally, the AO held that the purchase made from Applause chemicals at Rs. 4,38,490/- and Ajanta Enterprises at Rs. 15,85,168/- as bogus purchases. Accordingly, he disallowed the same and added to the return of income of the assessee. The total bogus purchase comes to Rs. 25,23,658/-. Aggrieved, assessee preferred the appeal before CIT(A), who considering the issue restricted the disallowance by applying gross profit rate @ 12.5% by observing in Para 6.7 as under: -
“6.7 Considering the totality of the facts before me, as well as the judicial opinion available, I am inclined to agree with the appellant's stand that the addition is excessive. The A.O. has disallowed the amount of Rs.20,23,658/- on account of bogus purchases. The total purchase debited to the trading account from these parties are Rs.20,23,658/-. I am of the view that estimation of profit at 12.5% would meet the ends of justice. Therefore, I direct the AO to estimate profit of 12.5% on the total purchases in question which works out to Rs.2,52,957/- (12.5% of Rs.20,23,658/-). The appellant therefore gets relief of Rs.17,70,701/- (Rs.20,23,658/- minus Rs.2,52,957/-). The grounds raised are partly allowed.”
The CIT(A) restricted the addition at Rs. 2,52,957/-. Aggrieved, now assessee is in second appeal before Tribunal.
I have heard the rival contentions and gone through the facts and circumstances of the case. Now, before me, assessee contended that only profit element applied by CIT(A) is higher as the assessee deals in the business of retail trading of pharmaceuticals. The learned Counsel Page 2 of 3
Rajiv I. Gandhi; AY 08-09 before me, made submissions that whatever GP has been declared and has already been included as GP in books of account on the sales of the bogus purchase is to be reduced. Accordingly, he requested for reduction in profit rate. I have considered the issue and gone through the facts and circumstances of the case, I find reasonable profit rate of 10% will meet the end of justice for the reason that the assessee has already declared profit element on the sale made out of bogus purchases. Accordingly, I direct the AO to re-compute income after applying profit rate @ 10% of the bogus purchase and appeal of the assessee is partly allowed.
In the result, the appeal of assessee is partly allowed. Order pronounced in the open court on 09-06-2017.