SHREENOX SYNTHETICS,BHIWANDI vs. CIT-II, THANE
What did the Tribunal hold?
The Tribunal found no basis for the CIT(A)'s 25% addition and directed the AO to restrict the addition by applying a GP rate of 3.50% considering the increase in turnover and previous year's GP rates.
What were the facts?
The assessee appealed against an addition sustained by the CIT(A) regarding bogus purchases. The AO had made an addition of Rs. 31,36,444/- based on sales tax department information. The CIT(A) upheld 25% of this addition.
What were the issues?
The primary issue was the validity of the addition sustained by the CIT(A) on account of bogus purchases, and whether the tribunal could re-quantify the addition based on GP rates.
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC”, BENCH MUMBAI
Before: SHRI R.C.SHARMA
O R D E R This is an appeal filed by the assessee against the order of CIT(A)- Mumbai, for the assessment year 2011-2012.
In this appeal the assessee is aggrieved for addition sustained by CIT(A) with respect to the bogus purchases.
I have considered rival contentions and found that on the basis of information from the sales tax department the AO made an addition of Rs.31,36,444/- on account of bogus purchases.
By the impugned order the CIT(A) upheld the addition of inflated purchases to the extent of 25% by observing that the AO has accepted the trading results as disclosed in the audited profit and loss account, wherein total sales of Rs.21.83crores have been accepted. Once the sales are accepted, as per CIT(A), purchases cannot be doubted. However, against the order of CIT(A) upholding the disallowance of 25%, 2 assessee is in appeal before us. Revenue is not in appeal against order of CIT(A) deleting addition to the extent of 75% of such purchases.
For the addition so sustained the assessee is in further appeal before us.
From the record I found that CIT(A) had not given any basis for upholding the addition of 25% of the purchase amount treated as bogus by the AO. However, trading results of the assessee have not been disturbed nor books of accounts have been rejected. The GP rate disclosed by the assessee in the assessment year 2009-2010 was 4.73%, wherein assessment year 2010-11 was 3.72. However, there is increase of 33% in the sales amount during the year under consideration. The sales has increased from 16.62 crores to 21.83 crores during the year. Increase in sales reduces the net profit margins slightly , therefore, keeping in view the GP rate of 3.72% in earlier year as well as increase in turn over during the year under consideration, we direct the AO to restrict the addition by applying the GP rate of 3.50% in place of 3.44% shown by the assessee. We direct accordingly.
In the result, appeal of the assessee is allowed in part. Order pronounced in the open court on this 14/07/2016. Sd/- (R.C.SHARMA) ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 14/07/2016 प्र.कु.मभ/pkm, नन.स/ PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3.
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