ACIT 19(2), MUMBAI vs. P.B. METAL CORPORATION, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the orders,dtd.6.4.2015 and 25.3.15,of the CIT(A)-30 Mumbai the Assessing Officers(AO.s)have filed the appeals for the above mentioned three AY.s.Assessee-company is engaged in the business of trading of ferrous and non ferrous metals.Details of filing of returns of income returned incomes, assessed incomes, etc, can be summmarised as under :- A.Y. ROI filed on Returned Income Assessment dt. Assessed Income 2009-10 28.11.2011 Rs.21,41,270/- 29.03.2014 Rs.2.06 Crores 2010-11 9.9.2010 Rs.24,52,670/- 22/03/2013 Rs.4.88 crores 2011-12 24.9.2011 Rs.35,78,760/- 29.03.2014 Rs.1.27 crores ITA/4150/M/2015-AY.2009-10: 2.Effective Ground of appeal is about restricting the addition to 7.71 % of purchases from the parties that were not proved to be genuine.During the assessment proceedings,the AO observed that the assessee had debited purchases from various parties whose TIN matched with the information received from Sales Tax Department regarding bogus parties with whom the assessee had made purchases.He called for explanation from the assessee in that regard. After considering the submissions of the assessee,he concluded that the assessee did not purchase any goods from the above parties, that addition in respect of peak amount of investment made out of unaccounted money by the assessee for purchase of material from the

4150/M/15 (09-10);3670/M/15 (10-11) and 4151/M/15 (11-12) M/s. P.B. Metal Corporation party was considered which worked out to Rs.89.13 lakhs.Treating the same as bogus purchases the AO added it to the total income of the assessee.

3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA) and made elaborate submissions.It also relied upon certain case laws contending that the addition made by the AO was not as per law.After considering the submission of the assessee and the assessment order,the FAA held that the AO had made addition with regard to purchases made from three entities,namely M/s. Ratan Deep Impex (RDI), M/s. Harish Metals (HM) and M/s.Valiant Steel Engineering(VSE) by taking the peak balances,that the name of RDI was never in the list of suspected sales tax dealer as per the website of Sales-tax Department,that it had filed the confirmation letter in response to notice u/s.133(6) of the Act issued by the AO,that submission made by assessee with regard to purchases made from RDI had to be accepted,that the genuineness of purchases made by the assessee from RDI could not be doubted. He referred to his order for the AY 2010-11,dt.25.02.15, wherein he had estimated the embedded income at 12.5% of total purchases from HM and VES. In that order,he further observed that the assessee had already offered an average gross profit of 4.79% during the year,that net addition of 7.71% (12.5% - 4.79%) was to be added to the income of the assessee. In his said order,he had referred to the cases of Bholanath Polyfab Pvt. Ltd (355 ITR 290);Sanket Steel Traders (ITA/2801/Ahd./2008 dt.20-5-2011) and Vijay Proteins (58 ITD428).He further observed that facts of the case for the AY.2010-11were similar to the facts of the above mentioned cases,that the AO had proved that suppliers in question were non-existent, that the AO had found that goods were purchased from parties other than the two parties namely HM and VS,that sales of goods were not in doubt,that the assessee was maintaining quantitative details, that genuineness of sales was not in doubt,that addition made by AO in respect of peak of purchases was not justifiable.He finally,upheld the addition of 7.71% of the purchases made for the AY.2010-11.Following the order for the subsequent AY.,he confirmed the addition @7.71% of the purchases.

4.During the course of hearing before us, the Departmental Representative (DR)supported the order of AO and stated that the assessee had not proved genuineness of the purchases,that the notices issued u/s.133(6) of the Act to HM and VE were returned back by the postal authorities,that the assessee had not discharged the onus of proving the genuineness of the purchases. The Authorised Representative (AR) relied upon the order of the FAA and stated 2

4150/M/15 (09-10);3670/M/15 (10-11) and 4151/M/15 (11-12) M/s. P.B. Metal Corporation that the AO had not doubted the sales,that without purchases there could not be any sales,that the name of RDI was not appearing in the list of alleged hawala dealers. He relied upon the cases of Nikunj Exim(ITAppeal No.5604 of 2010); Babulal C. Borana (282 ITR251); Killick Nixon Ltd.(20taxmann.com703).

5.We have heard the rival submissions and perused the materials before us.We find that the AO had reopened the assessment after receiving information from the investigation wing of the department.Sales tax department (Govt. of Maharashtra)had informed the investigation wing about the hawala dealers who were issuing bogus bills.The AO after considering the submission of the assessee made an addition of Rs.89,13,167/- to the total income of the assessee under the head bogus purchases from the hawala dealers.In the appellate proceed - ings,the FAA restricted it to 7.71% of the total purchases. It is a fact that AO had not doubted the sales made by the assessee nor has he doubted the quantitative details maintained by it. Once the sales are accepted as genuine it has to be presumed that goods were purchased. Considering these peculiar facts the FAA had estimated the embedded income at 12.5% of the total purchase from HM and VSE.After considering the gross profit @ 4.79% for the year under consideration, he had restricted the addition.In our opinion the order of the FAA does not suffer from any legal infirmity. Our view is supported by judgment delivered in the case of Nikunj Exim of Hon'ble Bombay High Court.Therefore, confirming the order of the FAA we decide effective Ground of appeal against the AO. ITA.s/3670 & 4151/Mum/2015-A.Y. 2010-11,2011-12: Following our order for the AY.2009-10,we uphold the order of the FAA for both the AY.s.Effective grounds of appeal are decided against the AO for the AY.s.2010-11 and 2011-

12. As a result, appeals filed by AO for all the three AY.s stand dismissed. फलतःिनधा�रती अिधकारी �ारा तीन� िन.वष� के िलए दािखल क� ग� अपील� नामंजूर क� जाती ह# . Order pronounced in the open court on 6th,April, 2017. आदेश क� घोषणा खुले *यायालय म� ,दनांक 6,अ-ैल,2017 को क� गई । Sd/- Sd/- (राम लाल नेगी राम लाल नेगी राम लाल नेगी / Ram Lal Negi) (राजे�� / Rajendra) राम लाल नेगी �याियक सद�य/JUDICIAL MEMBER लेखा लेखा लेखा सद�य लेखा सद�य सद�य/ACCOUNTANT MEMBER सद�य मुंबई Mumbai; �दनांक/Dated :06.04 .2017. Jv.Sr.PS. आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत 1.Appellant /अपीलाथ�

2. Respondent /��यथ� 3

4150/M/15 (09-10);3670/M/15 (10-11) and 4151/M/15 (11-12) M/s. P.B. Metal Corporation