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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: Shri Joginder Singh,
सुनवाई क" तार"ख / Date of Hearing 30/08/2016 01/09/2016 आदेश क" तार"ख /Date of Order: आदेश / O R D E R The assessee is aggrieved by the impugned order dated 09/02/2016 of the Ld. First Appellate Authority, Mumbai.
2 Allied Engineers and Elastomers
Grounds no.1.1 to 1.3, raised by the assessee are with respect to upholding the validity of reopening of assessment u/s 147 of the Income Tax Act, 1961 (hereinafter the Act). During hearing, the ld. counsel for the assessee did not press this ground, therefore, dismissed as not pressed.
The only ground agitated by the assessee is with respect to adding additional net profit at the rate of 12.5% on the disputed purchases. The crux of argument advanced on behalf of the assessee is that assessee showed the gross profit at 9.4% of the gross purchases and the Assessing Officer took the pick credit, whereas, the Ld. Commissioner of Income Tax (Appeal) added 12.5% of the gross profit on the purchases. The ld. counsel contended that the gross profit margin is 6.69% (as per profit & loss account) and 9.40% in the cases of Hawala parties and identically 6.4% in normal such cases. However, the ld. DR, defended the addition made by the Ld. Commissioner of Income Tax (Appeal).
3.1. I have considered the rival submissions and perused the material available on record. The facts, in brief, are that the Assessing Officer received information from DGIT(Investigation) that Sales Tax Department has exercised due diligence, revealing that the assessee is involved in taking accommodation entries of bogus purchases from certain parties. It was also informed that the main person, who is providing accommodation entries has 3 Allied Engineers and Elastomers admitted before the Sales Tax Department that they are not carrying out actual trading activities and merely providing bogus bills/accommodation entries. On the basis of this information, the case of the assessee was reopened. Before the ld. Assessing Officer, furnished submissions and relied upon various decision like Income Tax Officer vs Parmanand 107 TTJ 395 (Jodh), Jagdamba Trading Company vs Income Tax Officer, 16 SOT 6 (Jodh), Indian & Eastern News paper society vs CIT 119 ITR 996 (SC), Coca-cola Export Corporation vs Income Tax Officer 231 ITR 200 (SC), CIT vs Kelvinator of India Ltd. 320 ITR 561 (SC), CIT vs Sfil stock broking Ltd. 325 ITR 285 (Del.) and GMR Holding Pvt. Ltd. vs DCIT 134 ITD 668 (Bang.).
3.2. It is noted that the assessee made purchases to the tune of Rs.40,00,166/- from the alleged Hawala dealers and the ld. Assessing Officer after considering the factual matrix, added back the pick credit amounting to Rs.9,35,988/- to the income of the assessee. Before the Ld. Commissioner of Income Tax (Appeal), the submissions of the assessee, and summary of sales gross margin and net margin in the preceding two years and also during the year under consideration were provided, which has been summarized in para 5.2 (page-6 of the impugned order), which is reproduced hereunder for ready reference:-
Assessment year 2009-10 2008-09 2007-08 Sales 590.30 727.42 791.62 Cost of Goods Sold 550.82 680.36 735.62 Gross Profit 39.48 47.06 56.00 GP(%) 6.69% 6.47% 7.07% 4 Allied Engineers and Elastomers Profit before partners 15.75 13.58 21.82 Appropriation and taxes Profit (%) 2.67% 1.87% 2.76% Net profit after Tax 3.79 2.88 7.80 NP(%) 0.64% 0.40% 0.98% The assessee relied upon following judicial pronouncements:- i. Shri Hiralal Chunilal Jain V/s ITO (ITA NO 4547/Mum/2014 dt 01.01.2016) ii. ITO v/s Shri Paresh Arvind Gandhi (ITA NO 5706/Mum/2013 dt 13.05,2015 , iii. ACIT, V/s Shri Ramila Pravin Shah (ITA NO 5246/ Mum/2013 dt 05.03.2015 , iv. ACIT V/s M/s G. V. Sons (ITA NOS 2238/2239/2240/ Mum/20l2 dt 05.12.2014, v. Babulal C.Borana V/s ITO 282 ITR 251 (Bom) vi. CIT V/s M.K. Brothers 163 ITR 249 (Guj) vii. C1T V/s Nikunj Eximp Enterprises (P.) Ltd. 216 Taxman 171 (Mag)(Bom) viii. ITO V/s Eagle Impex (ITA no. 5697/Mum./2010) ix. J.H. Metals V/s ITO 77ITD 71 (ASR)(TM) x. G.G. DIAMOND INTERNATIONAL v/s DCIT 104 TT) 809 (Mum) xi. ITO v/s Surana Traders 921TD 212 (Mum) xii. M/s Vijay Protiens Ltd. V/s ACIT 58 ITD 428 (ITAT) Sanjay Oil Cake Industries vis CIT 3161TR 274 (Guj) xiii. CIT V/s Bholanath Poly Fab. Pvt Ltd. 3551TR 290 xiv. CIT V/s G.A,nandarajan 2281TR 664 (Kerala)
5 Allied Engineers and Elastomers The Ld. Commissioner of Income Tax (Appeal), considering the aforesaid judicial pronoucements held that the estimation, varies with the nature of business and no uniform yardstick can be adopted, therefore, he estimated the gross profit on the alleged bogus purchases at the rate of 12.5%. Considering the totality of facts, the ld. Assessing Officer adopted/estimated the gross profit at 9.04% which was enhanced by the Ld. Commissioner of Income Tax (Appeal) in addition to the estimation made by the Assessing Officer, which comes to practically 22%, in my view, is improper. Considering the cases cited by the assessee and the material facts available on record, it will meet the ends of justice if the gross profit on bogus purchases is estimated at 12.5% in place of 9.4% adopted by the ld. Assessing Officer. It is made clear that this adoption of gross profit on the gross purchases was agreed by the ld. counsel for the assessee. Thus, the appeal of the assessee is partly allowed.
Finally, the appeal of the assessee is partly allowed.