ASST CIT PALGHAR CIR PALGHAR, PALGHAR vs. PARVEZ MUSA KHAN, MUMBAI

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ITA 5599/MUM/2015Status: DisposedITAT Mumbai22 September 2016AY 2009-104 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that restricting the addition to 6.6% of the suspected purchases would meet the ends of justice, as confirming the entire addition led to an abnormally high Gross Profit rate. The AO was directed to restrict the addition to 6.6% of the suspected purchases.

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 35,71,228/- on account of suspected bogus purchases from four specific concerns. The CIT(A) deleted a portion of this addition, restricting it to 25% of the suspected purchases, resulting in an addition of Rs. 8,92,810/-.

What were the issues?

Whether the entire addition on account of bogus purchases is to be sustained, or only the profit element embedded in such purchases can be added to the income.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI D. KARUNAKARA RAO & SHRI RAVISH SOOD

For Appellant: Shri Anil Sathe
For Respondent: Smt. R. M. Madhavi, DR
Hearing: 22.09.2016Pronounced: 22.09.2016

सुनवाई की तायीख / Date of Hearing : 22.09.2016 घोषणा की तायीख /Date of Pronouncement : 22.09.2016 आदेश / O R D E R

PER D. KARUNAKARA RAO, AM:

1.

The captioned appeal is filed by the Revenue on 11.12.2015 and Cross Objection No.127/M/2016 is filed by the assessee for the assessment year 2009- 2010. Since, the issues raised in these appeals are inter connected, therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Appeal wise adjudication is given in the following paras of this order.

2.

Firstly, we shall take up the Revenue’s appeal which is filed against the order of the CIT (A)-3, Thane dated 11.9.2015 for the assessment year 2009-2010. In this appeal, Revenue raised the following grounds which read as under:- “1. On the facts and in the circumstances of the case and in law, the Ld CIT (A)- 3, Thane erred in deleting the addition of Rs. 26,78,418/- out of the total addition of Rs. 35,71,228/- made on account of bogus purchases, despite holding that the purchases were not genuine and the assessee failed to prove genuineness of the transactions.

2. On the facts and in the circumstances of the case and in law, Ld CIT (A) erred in deleting the above addition despite the fact that the assessee failed to discharge his onus of proving the purchases.”

3. At the outset, narrating the brief facts of the case, Ld DR for the Revenue submitted that suspecting the genuineness of some of the purchases, AO made addition of Rs. 35,71,228/- in the assessment. The purchases made from four concerns, viz (i) M/s. Sidhivinayak Steels; (ii) M/s. Asian Steel; (iii) M/s. Chanchal Tube Corporation and (iv) Surat Tube corporation, were suspected to be bogus. These parties were listed in their website by the Sales Tax Department as the ones engaged in the business of giving accommodation entries without delivering any goods. AO proceeded to make addition on this account amounting to Rs. 35,71,228/- . Aggrieved, assessee carried the matter in appeal before the first appellate authority.

4. During the proceedings before the first appellate authority, assessee submitted that the Gross Profit (GP) for the period under consideration works out to 6.6%, which is the market GP of the industry of steal traders. Ignoring the fact that the with said addition of Rs. 35,71,228/-, the GP of the assessee went up to a figure, which does not exist in this line of business of steel trade, CIT (A) discussed the above and removed the absurdity by restring the disallowance to 25% of the said suspected steel purchases of Rs. 35,71,228/-. Thus, the effective addition confirmed by the CIT (A) works out to Rs. 8,92,810/-. Aggrieved with the said addition of Rs. 8,92,810/-, assessee is in appeal before the Tribunal. Further, aggrieved with the relief granted by the CIT (A) to the extent of Rs. 26,78,418/- Revenue is in appeal with the above mentioned grounds.

5. During the proceedings before us, in connection with the Revenue’s appeal, Ld DR relied on the order of the AO and prayed for confirming the entire suspected purchases of Rs. 35,71,228/-.

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