DCIT 15(3)(2), MUMBAI vs. STERLING ELECTRO ENTERPARISES P.LTD, MUMBAI

सुनवाई की तायीख / Date of Hearing : 18.04.2017 घोषणा की तायीख /Date of Pronouncement : 21.04.2017 आदेश / O R D E R PER D. KARUNAKARA RAO, AM: There are two appeals under consideration. The captioned appeal is filed by the Revenue and assessee filed the Cross Objection (CO) No. 175/M/2016 for the assessment year 2009-2010. Since, the issues raised in these appeals are inter-connected, therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Appeal wise adjudication is given in the following paras of this order.

Grounds raised by the Revenue in its appeal read as under:-

1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in directing the AO not to treat the bogus purchases as unexplained expenditure u/s 69C of the Act. The Ld CIT (A) has further erred in not appreciating the fact that the said seller parties were found to be Hawala operators / bogus billers.

2. Without prejudice to the above, the Ld CIT (A) ought to have made further enquiries himself or directed the AO to make further enquiries and furnish a report in view of the provisions of section 250 of the Act if he was not satisfied regarding the enquiry made by the AO.

3. Further, without prejudice to the above, in para 2.5.17 the Ld CIT (A) has observed that the appellant might have purchases materials by way of cash in the open market. In this situation the CIT (A) ought to have applied the provisions of section 40A(3) of the Act. Cross Objections raised by the assessee read as under:-

1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) has erred in retaining addition at the rate of 15% of the alleged purchases merely on surmises & conjectures without appreciating the fact that the utilisation of goods has been proved by the appellant and has also been accepted by the CIT (A) and therefor disallowance cannot be sustained as per the decision of the Hon‟ble Bombay High Court in the case of Babulal C Borana Vs. Third ITO (2006) 282 ITR 251 (Bom.) and CIT vs. Nikunj Eximp Enterprises (P) Ltd (2013) 216 Taxman 171 (Bom.).

2. Without prejudice to ground no.1, on the facts and in the circumstances of the case and in law, the Ld CIT (A) has erred in arbitrarily estimating the profit at the rate of 15% of the alleged bogus purchases by wrongly relying on the decision of the Gujarat High Court in the case of Sanjay Oilcake Industries vs. CIT (316 ITR 274) disregarding the fact that there were withdrawals by bearer cheque from the accounts of the creditors whereas there is no such finding in the assessee‟s case.”

2. The only issue raised in the main appeal of the Revenue (ITA No.1506/M/2015) relates to the „bogus purchases‟ and „correctness of addition of 100% of such purchases‟. While AO made addition of 100% of such purchases (Rs. 65,80,515/-), the CIT (A) restricted the addition to 15%. Aggrieved with the said relief granted by the CIT (A), the Revenue is in appeal before the Tribunal. On the other hand, assessee filed the CO supporting the order of the CIT (A) and also for complete deletion of entire addition.

by the Revenue and the Cross Objection of the assessee are decided protanto.

5. In the result, appeal of the Revenue and the CO of the assessee are decided protanto. Order pronounced in the open court on 21st April, 2017.