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2016 (9) TMI 384 - ITAT MUMBAI

2016 (9) TMI 384 - ITAT MUMBAI - TMI - 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 accou .....

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jections filed by the assessee are allowed. - 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 t .....

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M/s. Metal Agencies and conducting the 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 .....

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hat the assessee has purchased the goods 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 .....

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emently supports the orders of the Ld. 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 .....

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s that website has termed such dealers 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 .....

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ition without there being an independent 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 dealer .....

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sing Officer in the assessment order restricted 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 asses .....

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uire with the parties as to whether they 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 o .....

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es etc., and the payments have been made 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 show .....

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ed were used in sales, and not in consumption 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. O .....

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axed 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 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 obj .....

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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. In present circumstances, I find it appropriate to confirm addition to the ext .....

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