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The ITO-14 (1) (3) , Mumbai Versus Shri Takhtmal Bhuralal Pichholiya, Mumbai

2016 (9) TMI 384 - ITAT MUMBAI

Addition on account of purchases made from suspicious dealers - dealers which are allegedly involved in issuing bills and purchases made from the parties in dispute are not genuine - CIT(A) restricted the addition to 5% of the alleged purchases and deleted 95% of the purchases made treating them as genuine purchases - Held that:- It is not in doubt that the assessee has made purchases and also made sales and they are duly accounted for in the books of account and offered to tax therefore entire .....

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wed. - I.TA Nos. 4526 to 4528/Mum/2014, C.O. Nos. 212 to 214/Mum/2015 - Dated:- 27-7-2016 - SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER For The Revenue : Shri Kailash Gaikwad For The Assessee : Shri Vimal Punamiya ORDER PER C.N. PRASAD, JM: These appeals are filed by the Revenue and the Cross objections are filed by the assessee against the order of the Ld. CIT(A)-25, Mumbai dated 14.4.2014 pertaining to assessment years 2009-10 to 2011-12. In all these appeals, the is .....

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business of trading of ferrous and non-ferrous metals. The assessments of the assessee for these three assessment years i.e. 2009-10 to 2011-12 are re-opened 147 of the Act on the basis of information received from investigation wing who in turn got the information from Sales tax authorities that some dealers are not depositing sales tax and they are providing accommodation entries for bogus purchases. Based on these information and enquiries, the Assessing Officer reopened the assessment of the .....

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s and sold the same and the transactions are genuine, the purchases are not bogus. There is one to one corelation to the purchase and sales therefore purchases are genuine. However, the Ld. CIT(A) has granted relief of 95% and confirmed the 5% of purchases holding that purchases can be in grey market against which order both revenue as well as the assessee filed appeals/cross objections before us. 5. The Ld. Departmental Representative vehemently supported the orders of the Assessing Officer in .....

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CIT(A) in holding that the purchases made by the assessee are genuine. He submits that the Ld. CIT(A) having held that there is one to one match of purchases and sales, quantitative details of stocks are tallied, even 5% which was sustained by the Ld. CIT(A) is not proper and Ld. CIT(A) should have allowed the entire purchases as genuine. He further submits that when the sales are accepted as genuine, the corresponding purchases cannot be bogus just because the parties were not produced before t .....

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as only suspicious dealers and not confirmed as hawala dealers. Therefore, the list merely highlights a possibility which is tentative in nature. Therefore, the Ld. Counsel for the assessee submits that on mere suspicion and without making any enquiry addition was made which is not sustainable in law. He further submits that however strong suspicious may be, that suspicion cannot be an evidence for making the addition. Reliance was placed on the decision of the Co-ordinate Bench in the case of D .....

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t enquiry and satisfaction by the Assessing Officer. He strongly places reliance on the order of the Ld. CIT(A) in holding that the purchases made by the assessee are genuine. 7. We have heard the rival contentions and perused the orders of the authorities below. On a reading from the assessment order, we find that the Assessing Officer treated certain purchases from various parties as bogus purchases for the reason that assessee has not produced the dealers, suppliers did not exist etc., and th .....

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stricted the addition to 5% of the alleged purchases and deleted 95% of the purchases made treating them as genuine purchases. It is not in doubt that the assessee has made purchases and also made sales and they are duly accounted for in the books of account and offered to tax therefore entire purchase made cannot be treated as unexplained expenditure. While coming to such conclusion, the Ld. CIT(A) observed and held as follows: 5.3 I have perused the assessment order, submissions of appellant, .....

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y had actually sold goods to the appellant or not, and thereafter to confront the appellant with any adverse finding from such enquiry, and also to provide opportunity of cross examination of these parties to the appellant. In a recent decision pronounced by Hon'ble ITAT, Mumbai on 1st October, 2013, in the case of Parmit Textiles vs. ITO (ITA Nos. 4012 to 4015 and 4020 to 4021/Mum/2012, the Hon'ble ITAT, Mumbai observed that there was no material on record to say that the purchases made .....

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e through banking channel. Though the AO has alleged that the payments to these parties were made after substantial lapse of time, however there is no evidence to prove that the cash has flown back to the appellant. In the case of CIT vs. M.K. Brothers [1987] 163 ITR 249 (Guj), the assessee made certain purchases from some parties and made payment through cheques, and the ITO found that parties were not available to cross examine and that payments were shown to have been made after substantial l .....

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mption as a manufacturer. It is pertinent to note that unlike manufacturer of goods, a trader is able to establish one to one co-relation between the goods purchased and sold. The AO has not found any such fault in the present case. The purchases made are followed by sales. The AO has agreed that "the assessee has shown the quantitative details and sale has been effected against the alleged purchases". There cannot be any sale without purchases. Once sale is accepted, there is no reaso .....

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e 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 GP/NP ratio. In the present case of appellant, in fact the AO himself has not ruled out the possibility that the assessee must have purchased these goods from the grey market by investing unaccounted cash which is not recorded in the books of accounts. However, there seems no objective statement in the assessment orde .....

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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. In present circumstances, I find it appropriate to confirm addition to the extent of 5% of the alleged purchases i.e. .....

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