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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
This appeal of Revenue is arising out of the order of CIT(A)-35, Mumbai, in appeal No. CIT(A)-35/ITO.25(3) (1)/ITA.296/10-11 dated 25-01-2012. The assessment was framed by ITO 24(3)(1), Mumbai for the A.Y. 2008-09 vide his order dated 20.12.2010 u/s 143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’).
The only issue arising out of the order of Commissioner of Income-tax (Appeals) directing the AO to delete the addition need by AO being estimating profit percentage at the rate of 5 % on bogus purchases.
For this, Revenue has raised following grounds :-
“1. On the facts and in the circumstances of the case, and in law, the Ld. Commissioner of Income-tax (Appeals)erred in directing to delete the addition of Rs.63,78,735/- being 5% of purchases made from M/s. Metal Impex (India) Rs.5,03,73,842/-, M/s. Pradeep Metal Corporation-
AY 08-09 Shri Mukesh S. Malhotra Rs.12,75,74,697/- without appreciating the fact that addition is based on enquiry and non-availability of purchase parties and also as the assessee could not explain the same at the time of assessment proceedings.”
Briefly stated facts are that the assessee is engaged in the business of trading of Iron and other metals. The assessee has declared total turnover at Rs.29.98 crores and declared Gross Profit at Rs.26.59 lacks. The Assessing Officer during the course of assessment proceedings noticed that the assessee has made purchases from the following parties:-
Sr. NO Name of the Party Purchase during the year Jyoti Steel Impex 5,18,32,584 1. 2. Pradeep Metal Syndicate 1,22,56,686 3. Metal Impex (India) 5,03,73,842 Pradeep Metal Corporation 1,31,11,585 4. Total 12,75,74,697
The Assessing Officer required the assessee to prove these purchases and assessee was unable to produce the parties. The AO issued notices under section 133(6) to all these parties but there was no response or parties were not available at the given address. The Assessing Officer issued showcase notice vide order sheet entry dated 08/12/2010 that as to why profit at the rate of 5 % on the above one unverified purchases be note made. As the assessee could not explain or could not produce these parties or could not prove these purchases, the Assessing Officer estimated profit at the rate of 5 % on the above purchases and added sum of Rs.63,78,735/-. Aggrieved, assessee preferred appeal before Commissioner of Income-tax (Appeals). The CIT(A) confirmed the action of the AO by observing as under: -
“6 I have carefully gone through the assessment order and also through the submissions made before me. On appraising the facts of the appellant’s case and also the submissions made I find there is force in the contentions put forward by the appellant which are summarized as below:-
AY 08-09 Shri Mukesh S. Malhotra
6.1 The impugned purchases of Rs.12,75,74,697/- have been made on paying account payee cheques and the appellant’s books of accounts are subjected to the statutory tax audit under section 44 AB of the Act. 6.2 In view of the fact of payments made through account payee cheques, the contention that the assessing officer could have cross- verified the genuineness of the payments made by summoning the appellant’s bankers is found to be correct. It would have been possible to the assessing officer to know whether on encashing the cheques, amounts have been withdrawn in cash. This exercise would have helped the assessing officer one step further to establish that the purchases from these four parties are spurious. The assessing officer has not done this ground work. 6.3 The bills issued by the suppliers of the appellant bear CST & VAT – which indicates that the suppliers are regularly dealing the goods dealt in by the appellant. The assessing officer has not proved that the said CST/VAT are also bogus on making enquires with the respective government authorities. Aggrieved, now Revenue is in second appeal before Tribunal.
At the time of hearing assessee was not present despite notices sent to him through RPAD. Hence, we are proceeded to decide the appeal ex partee as this is very old appeal and assessee does not seem to be interested in prosecuting this appeal. After hearing ld. Sr. DR and going through to case records, it is noticed that the assessee could not produce anything before the Assessing Officer that is i.e. the Sales Bill, Purchase Bill or could not produce the parties and even when the notice under section 133(6) of the Act was issued the same was unserved with the remarks not known by the Postal Authorities. We have gone through the appellate order of the Commissioner of Income-tax (Appeals) and find that the assessee for the first time has produced the bank details of assessee’s proprietary concern that the payments are made by account payee cheque by these parties. Before Commissioner of Income-tax (Appeals) it was claimed that these parties are registered with VAT and CST Authorities. The assessee before Commissioner of Income-tax (Appeals) also contested the application of Gross Profit rate at the rate of 5 % and stated that this is very high. From the appellate order, it is not clear whether the assessee has produced documents before Commissioner of Income-tax (Appeals) or not merely written
AY 08-09 Shri Mukesh S. Malhotra submissions are available. Under the such circumstances we are of the view that let this issue be restored back to the file of Assessing Officer for fresh adjudication and for allowing one more opportunity to produce requisite details before the Assessing Officer, that is Purchase and Sale Bills of these parties, payment details complete name and address of the parties in case Assessing Officer wants to verify the same. The Assessing Officer will also verify the related sales and accordingly estimate the profit of the assessee. Hence, we are set aside the order of Commissioner of Income- tax (Appeals) and restored the matter back to the file of Assessing Officer.
In the result, the appeal of the Revenue is allowed for statistical purposes. Order pronounced in the open court on 17-02-2017