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Income Tax Appellate Tribunal, SMC BENCH, PUNE
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-2, Thane, dated 27-06-2016 for the Assessment Year 2009-10.
Grounds raised by the assessee read as under :
“1. The Ld. CIT(A) erred on facts and in law in upholding the decision of the AO for reopening the assessment u/s.148 of the Act without any proper reasons and/or without having additional cogent evidence on records. 2. The Ld.CIT(A) erred on facts and in law in upholding addition of Rs.13,51,065/- on account of alleged bogus purchases by the assessee. The Ld.CIT(A) failed to appreciate the facts and evidences submitted before the Ld. AO as well as Ld.CIT(A). The Ld.CIT(A) further erred in upholding rejection of books of accounts and treated genuine transactions as hawala transactions. 3. The Ld.CIT(A) erred on facts and in law in upholding addition of Rs.13,51,065/- calculated by considering the Gross Profit ratio of next assessment year as against estimated gross profit thereon for the current assessment year.”
Condonation of Delay of 6 days : At the outset, Ld. Counsel for the
assessee referred to the Affidavit dated 04-10-2016 filed by the assessee
and submitted that there is delay of 6 days in filing of this appeal. The
delay is attributed to the resignation of the persons working in accounts
department and the things beyond the control of the assessee. Therefore,
Ld. Counsel prayed for admitting the appeal for adjudication by condoning
the delay.
After hearing both the sides and considering the contents in the
affidavit filed by the assessee, we are of the opinion that the delay of 6 days
in filing of the appeal is required to be condoned and admit the appeal for
adjudication.
Regarding adjudication of the core grounds, we find the assessee is in
appeal against a couple of issues, namely, (1) the re-opening of assessment
u/s.148 of the Act and against (2) the addition made on account of alleged
bogus purchases of Rs.13,51,065/-.
Briefly stated relevant facts of the case are that the assessee is an
individual and is engaged in the business of training in Iron and Steel
under the name and style of “M/s. Rajlaxmi Enterprises”. Assessee filed
the return of income on 22-09-2009 declaring total income of
Rs.4,79,280/-. During the course of assessment proceedings, AO noticed
that the assessee made purchases from M/s. K.R.C. Trading Company
whose name is listed in the list of bogus dealers by the Sales Tax
Department of Maharashtra Government. Eventually, the AO made the
addition of entire bogus purchases amounting to Rs.17,18,132/-. CIT(A)
confirmed the same after considering the submissions made by the
assessee. The submissions of the assessee are extracted in Para 5 of the
order of CIT(A). CIT(A) also relied on various decisions and dismissed the
assessee’s request for confirming the Gross Profit portion of the said
purchases. Further, CIT(A) did some calculations comparing the Gross
Profit rates of the assessee for various years and found that the 6.14%
Gross Profit rate for the year under consideration is far less than the 11%
Gross Profit declared by the assessee for the subsequent assessment year.
Accordingly, he worked out the suppression of Gross Profit to the extent of
Rs.13,51,065/-. He attributed the said suppressed profit to the bogus
purchases of Rs.17,18,132/-. Eventually, the CIT(A) restricted the addition
to Rs.13,51,065/-.
Aggrieved with the same, the assessee is in appeal before us against
the confirmed addition of Rs.13,51,065/-.
Regarding the issue of validity of reassessment proceedings raised in
Ground No.1, Ld. Counsel for the assessee argued that the issue of notice
u/s.147 of the Act is bad in law as AO does not have any tangible material
on his hand.
Regarding merits of addition, Ld. Counsel for the assessee submitted
that adopting 11% Gross Profit rate for the year under consideration is not
based on facts and the same is unsustainable when the books of accounts
are not formally rejected u/s.145(3) of the Act. Further, he submitted for
restricting the addition to 10% of the alleged bogus purchases. For this
proposition, he relied on the decision of Pune Bench of the Tribunal in the
case of M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT and others in ITA
No.795/PUN/2014 and connected appeals , dated 28-04-2017 for the A.Y.
2010-11.
Ld. DR for the Revenue relied on the order of CIT(A) dutifully and
submitted for confirming the entire addition. Ld. DR relied on various
decisions in this regard.
We heard both the sides on the limited issues under consideration
and perused the orders of the Revenue and the decision of the Pune Bench
of the Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. (supra)
relied on by the Ld. Counsel for the assessee.
A. Regarding the issue relating to re-assessment and its validity, we 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, we 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
raised by the assessee on this issue is dismissed.
B. Regarding the issue of confirming of entire addition of bogus
purchases by the CIT(A), we find that similar issue of bogus purchases has
been decided by the Tribunal in series of decisions. we 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.
We 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, we 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 Nos. 2 and 3
raised by the assessee are partly allowed.
In the result, appeal of the assessee is partly allowed.
Order pronounced on this 27th day of March, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 27th March, 2018. Satish
आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-2, Thane 3. आयकर आयु� / The CIT-2, Thane 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “एक सद�य 5. एक सद�य एक सद�य” / एक सद�य DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
//True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune