SNEHA ALLOYS PVT. LTD.,MUMBAI vs. ITO 7(2)(4), MUMBAI

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ITA 5090/MUM/2016Status: DisposedITAT Mumbai29 March 2017AY 2006-072 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the 12.50% GP rate approved by the Gujarat High Court in CIT vs. Simit P Sheth is applicable to real estate/civil contract businesses, not to the assessee's iron and steel trading business. The matter was remanded to the AO for fresh consideration.

What were the facts?

The assessee is challenging the CIT(A)'s order which applied a flat rate of 12.50% on suspected bogus purchases. The assessee argued that this rate was not earned even without bogus purchases and that the addition should be restricted to the Gross Profit (GP) plus VAT loss.

What were the issues?

Whether a flat GP rate of 12.50% can be applied to a trading business when the assessee is incurring losses, and if the precedent from a different business sector is applicable.

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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI D. KARUNAKARA RAO

For Appellant: Shri Yash Salavi
Hearing: 23.03.2017Pronounced: 29.03.2017

अऩीराथी की ओय से / Appellant by : Shri Yash Salavi प्रत्मथी की ओय से/ Respondent by : Ms. Beena Santosh, DR सुनवाई की तायीख / Date of Hearing : 23.03.2017 घोषणा की तायीख /Date of Pronouncement : 29.03.2017 आदेश / O R D E R

PER D. KARUNAKARA RAO, AM:

1.

This appeal filed by the assessee on 10.08.2016 is against the order of the CIT (A)-14, Mumbai dated 27.05.2016 for the assessment year 2006-07.

2.

In this appeal, assessee raised four grounds in toto. In the grounds, assessment mentioned that the CIT (A) has applied the flat rate of 12.50% on the suspected bogus purchases amounting to Rs. 21,56,486/-. Mentioning that the assessee is in loss and the said GP rate of 12.50% is never earned by the assessee evening during the time where there were no such bogus purchases. Considering the facts of the case, Ld Counsel for the assessee mentioned that the addition should be restricted to the GP of the assessee plus loss on account of VAT, if any, to the Government Exchequer. 3. After hearing both the parties and on perusal of the orders of the Revenue Authorities as well as the relevant material placed before the Tribunal, I am of the opinion that borrowing 12.50% is approved by the Hon’ble Gujarat High Court vide its judgment in the case of CIT vs. Simit P Sheth [2013] (356 ITR 451) (Guj.) is found to be applicable to the real estate / civil contract business and not to the assessee, who is engaged in the business of trading in iron and steel. It is an

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