HBD PUMPS CONTRACTS CORPN,MUMBAI vs. ACIT 14(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI N.K. PRADHAN, AM (A.Y:2010-11) HBD Pumps Constract Corpn. Addl. Commissioner of Income Tax G1/G2 Fort Chamber, Ambalal 14(1),Earnest House, Nariman Doshi Marg, HOmi Mody Cross Vs. Point, Mumbai-400021 Street No.2, Fort, Mumbai-400023 PAN No.AAAFH2229N Appellant .. Respondent Assessee by .. Ms. Arti Sathe, AR & Shri. Kalpesh Tusalkar, AR Revenue by .. Shri CS. Sharma, DR Date of hearing .. 22-12-2016 Date of pronouncement .. 22-12-2016 O R D E R PER MAHAVIR SINGH, JM:

This appeal by the assessee is arising out of the order of CIT(A)-25, Mumbai, in appeal No. CIT(A)-25/IT-169/AC 14(1)/12-13 dated 18-07-2014. The Assessment was framed by ACIT Circle-14(1), Mumbai for the A.Y. 2010-11 vide order dated 28-02-2013 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

3. We have heard the rival contentions and gone through the facts of the case. We find from the facts of the case are that admittedly there is bogus purchases. In view of the fact that the assessee has obtained accommodation entry / bogus bills from the parties who provide entries and this matter was investigated by Maharashtra Sales Tax Authorities. This fact is admitted by assessee Counsel before us. We find from the facts of the case that the entire bogus purchases/ books entry obtained are to the tune of Rs.83,2,079/-. The AO added the entire bogus purchase to the return income of the assessee. Aggrieved assessee preferred appeal before CIT(A), who restricted the addition of bogus purchase transaction

2009-10 and 2010-11 to the extent of 40.50% and thereby partly confirmed the addition at Rs.33,62,341/- by observing as under: -

Looking at the aforesaid facts and circumstances of the case as a whole and still giving some benefit of doubt to the appellant being an old matter; even then, it would be unjustified to give full relief to the appellant. IN the meantime, it is to be noted that the AO in appellant’s own case on the same and identical issue, i.e. bogus purchase for the AYs 2009-10 and 2011-12, has considered this issue afresh and added the peak transaction. The peak transactions for the two AYs are around 40.43% and 40.87% of the alleged purchase. The appellant also furnished the said assessment order copies and submitted a letter dated 14-02-2014 stating that the appellant has no objection and agreed, if the peak purchase of 40.50% of the total alleged purchases are disallowed. In view of the above mentioned facts and circumstance of the case, I disallow 40.50% on agreed basis of the alleged purchases of Rs.83,02,079/- i.e. Rs.33,62,341/-. The appellant gets partial relief of Rs. 49,39,738/- accordingly.

Aggrieved, now assessee is in second appeal before the Tribunal.

“(iv) Under Income Tax Act, 1961 what can be taxed is the real income. Even though the transaction is not verifiable, what is taxable is the income component, and not the entire transaction amount. I find that in many such cases, the additions are made based on the G.P./ N.P. ratio. In the present case of appellant, in fact the AO himself has not ruled out the liability that the assessee must have made these purchases from grey markets from some other parties by investing unaccounted cash. In such a situation, even assuming that the appellant would have purchased the goods by investing the unaccounted cash, still it is undisputed that the sale proceeds of said goods have been duly accounted for in the books and offered to tax. Hence. the addition of entire purchase amount cannot be made in the present case. Rather, the cause of justice would be met by making addition of a reasonable percentage of such purchases in order to fulfill the gap of any revenue leakage in aforesaid circumstances. Following the decisions of CIT vs Simit P. Sheth, 356 ITR•451 and Bholanath Poly Fab P Ltd. Vs A.O., 355 ITR 2907 the Assessing Officer has accepted @ 12.5% of the bogus purchases. It is also seen that the department itself has accepted @12.5% of the alleged purchases in the case of M/s. Sadahav Offshore Engineering Co. PAN AAOFS 1381A for the assessment year 2009- 10, the Income Tax Officer- 13(2(1) Mumbai, passed order u/s 143(3) r. w. s 147 of the Act. I have gone through the said order and found that the issues involved are similar and identical with the appellant's case. The appellant also requested for disallowance of the same rate 12.5% in the present case. In view of this, I think is reasonable to restrict the disallowance made by the AO the rate of 12.5%. It is observed that the Page 2 of 3

G.P. ratio has increased in current assessment year to 14.69% compared to previous year's G.P. of 11.81%, however the appellant has not produced t1e stock register to the satisfaction of the AO. In these circumstances, I Confirm addition to the extent of 12.5% of the gross purchases of Rs.22,85,400/- from the four impugned parties i.e. at Rs.2,85,675/-. The AO has made addition appellant gets balance relief of Rs.9,23,945 Hence, the appellant gets balance relief of Rs. .9,23,945 -2,85,675 = 6,38,270/-. Therefore, the grounds of appeal are partly allowed.”

5. Now, before us the learned Counsel for the assessee made only one submission that taking a consistent view, as done in earlier years by CIT(A), the profit rate at the rate of 12.5% of the bogus purchase be estimated on the total bogus purchases of Rs. 83,02,079/-. We find force in the plea of the assessee that consistency should be maintained and taking consistent view, we direct the AO to compute the profit rate at the rate of 12.5% as was done by Revenue in earlier years. The AO is directed accordingly. The appeal of the assessee is partly allowed.