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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Navin Hiranandani Karmiani Income Tax Officer Prop Neotech Computers Ward 24(3)(1) Flat No.402, B/24 Victoria Mumbai Lokhandwala Vs. Circle Shastri Nagar, Andheri (W)Mumbai-400053 PAN No. AKTPK1754G Appellant .. Respondent Assessee by .. Shri Anil Sathe, AR Revenue by .. Shri Purushottam Kumar, DR Date of hearing .. 24-05-2017 Date of pronouncement .. 07-06-2017 O R D E R PER MAHAVIR SINGH, JM:
These two appeals by the assessee are arising out of the common order of CIT(A)-36, Mumbai, in appeal No. CIT(A)-36/IT-445&446/ITO-24(3)(1)/15-16 dated 28-12-2016. The Assessments were framed by ITO Ward-24(3)(1), Mumbai for the A.Ys. 2010-11, 2011-12 vide orders dated 08-01-2016 under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
At the outset, the learned counsel for the assessee has not pressed the first issue regarding non issue of notice under section 143(2) of the Act. Hence, the first ground in both the appeals of the assessee is dismissed.
The only issue in both the appeals of assessee is regards to the order of CIT(A) confirming the action of the AO in disallowing 12.5% of bogus purchases. This issue is in both the years but I will take facts from AY 2010-11 and decide the issue. & 1658/Mum/2017 Navin Hiranandani Karmiani (A.Ys:10-11, 11-12)
Brief facts are that the assessee has filed return of income on 25.09.2010 by declaring total income Rs.6,94,403/-. The AO received information from the DGIT (Inv.), Mumbai, wherein it is stated that the information was received from Sales Tax Department, Govt. of Maharashtra regarding cases involving bogus purchases/ hawala transactions wherein list of beneficiaries who have taken bogus purchase. The data contains details of transactions of each beneficiary with bogus bill, their TIN and PAN details, amount of such purchases with F.Y. and the PAN of beneficiary. On verification of said data, it was noticed that the assessee has acquired bogus Purchase bills from the parties as under: - TIN Name of the Par PAN of the Party Amount (Rs.) 27310721312V GLOBE AGKPJG6G6M 5,33,985 IMPEX(INDIA) Rs.5,33,935/- In response to the queries, the assessee furnished various explanations in support of assessee's contention. The assessee runs a proprietary concern under the name and style M/s Neotech Computers which is engaged in the business of trading in computer, spare parts. The assessee has shown purchases from the aforementioned party M/s Globe lmpex India of Rs.5,33,985/-, whose name is reflected in the information provided by the Sales Tax Department about bogus hawala dealers. In response to the opportunity provided to the assessee, the assessee vide letter dated 20-12-2015 submitted that the purchases made from these parties are genuine and in support of this contention, assessee furnished copies of ledger accounts of these parties and also placed emphasis on the facts that the payments to this party in lieu of the purchases have been made by account payee cheque. But the AO did not accept the submission of the assessee. The AO noted that since the assessee has made payment through Account Payee Cheques, the only inevitable conclusion to be drawn is that the assessee must have made these purchases from open markets from some parties best known to it. The AO rejected the books of accounts u/s 145(3) of the Act on the reason that the assessee has purchased goods from other suppliers from the grey market and assessee has been benefitted by providing margin of grey market. After & 1658/Mum/2017 Navin Hiranandani Karmiani (A.Ys:10-11, 11-12)
rejecting the books, AO estimated the total income of the assessee taking into consideration the facts of the case in totality, as explanation offered by the assessee having regards to facts of the case. Accordingly, he applied the G.P. percentage of the assessee in respect of such purchases and estimated at 12.5% of such purchases as against GP of 3.10% declared by the assessee. In view of the foregoing discussion, the AO made addition of Rs. 66,748/- being 12.5% of Rs.5,33,985/-. Aggrieved, assessee preferred appeal before CIT (A), who also confirmed the action of the AO. Aggrieved, assessee preferred second appeal before Tribunal.
Now, before us, assessee contended that only profit element is higher as the assessee is engaged in the business of trading in computer, spare parts and assessee’s disclosed profit is at 3.10%. The learned Counsel before me, made submissions that this 3.10% has already been included in books of account on the sales of the bogus purchase. 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 09% will meet the end of justice for the reason that the assessee has already declared profit @ 3.10% on the sale made out of bogus purchases. Accordingly, I direct the AO to re-compute income after applying profit rate @ 09% of the bogus purchase and appeal of the assessee is partly allowed.
Similar are the facts in AY 2011-12 and hence, taking a consistent view I also direct the AO accordingly.
In the result, both the appeals of assessee are partly allowed. Order pronounced in the open court on 07-06-2017.