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Shri Vinod S. Deora Versus DCIT, 24 (2) , Mumbai

2016 (10) TMI 494 - ITAT MUMBAI

GP determination - low in the G.P. rates - estimation of purchases - Held that:- It is seen that the learned CIT(A) noticed that in respect of these transactions, i.e. purchases of ₹ 70,60,756/- the assessee had shown G.P. of 0.68% on sale of items purchased from M/s. Crystal Enterprises and G.P. of 1.19% on sale of items purchased from M/s. Induja Traders Pvt. Ltd. Stating that, inter alia, the assessee had not given his overall G.P. ratio, the learned CIT(A) proceeded to hold, on estimat .....

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aid purchases at ₹ 17,65,189/- (i.e. 25% of ₹ 70,60,756/-) and neither has the learned CIT(A) rendered any cogent reasons for coming to the said finding. In our view, the learned CIT(A)’s estimation that 25% of the alleged purchases of ₹ 70,60,756/- is profit therefrom, be taxed as income of the assessee, is unsustainable and therefore delete the same. Consequently, ground of assessee’s appeal is allowed. - ITA No. 7723/Mum/2014, ITA No. 7251/Mum/2014 - Dated:- 5-10-2016 - Shri .....

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g salary from M/s. Guruashish Exim Pvt. Ltd., filed his return of income for A.Y. 2010-11 on 30.09.2010 declaring total income of ₹ 22,87,440/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. In the course of assessment proceedings, the Assessing Officer (AO) records that information was received from Sales Tax authorities (Government of Maharashtra) that the assessee is a beneficia .....

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rchase bills, sale bills, bank statements indicating payments made and copies of ledger accounts of these two parties as appearing in its books. The assessee contended before the AO that there is no case of bogus purchases and that the aforesaid documentary evidence established that the said purchases amounting to ₹ 70,60,756/- from these two parties was genuine. The explanation put forth by the assessee did not find favour with the AO who was of the view that the inability of the assessee .....

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affidavit; which the AO felt was ample evidence to disprove the claim of genuine purchases made by the assessee, the AO disallowed the said purchases amounting to ₹ 70,60,756/- under section 40A(3) of the Act. Apart from this, the AO also made disallowance of personal expenses - ₹ 56,638/- and ₹ 6,908/- under section 14A of the Act. The assessment was accordingly completed under section 143(3) of the Act vide order dated 14.03.2013. 2.2 Aggrieved by the order of assessment dat .....

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e assessee, being aggrieved by the order of the CIT(A)-34, Mumbai dated 27.09.2014 for A.Y. 2010-11 to the extent the same is against them, have preferred appeals raising the following grounds: - 3.1 Grounds raised by Revenue 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 70,60,756/- made under section 40A(3) of the Act on account of non-genuine purchases from M/s. Crystal Enterprises and M/s. Induja Traders Pvt. Ltd. and .....

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owance at 25% of alleged purchases of ₹ 70,60,756/- ignoring the fact that the Sales Tax Commissioner has recorded the statement of Shri Sanjay Ramchandra Kore by way of affidavit that these dealers are engaged in the business of issue of bills without physical delivery of materials. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 70,60,756/- made under section 40A(3) of the Act on account of non-genuine purchases fr .....

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ecting the disallowance at 25% of alleged purchases of ₹ 70,60,756/- ignoring the fact that the onus lies on assessee to produce the concerned parties which assessee failed to do. 5. On the facts and in the circumstances of the case, the Ld. C.I.T.(A) erred in deleting the additions relying on the Hon'ble Bombay High Court's decision in the case of CIT vs. Nikunj Eximp Enterprisers P. Ltd.(2013) 216 Taxman 171 without appreciating the fact that the assessee's case is entirely d .....

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ming disallowance of 25% of alleged purchases of ₹ 70,60,756/- i.e. ₹ 17,65,189/- [Order Page No. 8 - para (iv)] instead of allowing/ deleting entire addition of ₹ 70,60,756 as explained in written submission & paper book. 2. Without Prejudice to the above, the AO inferred in his order that Purchases of ₹ 70,60,756 is in cash (inspite of cogent evidence of payment by A/C. Payee cheques) & disallowed U/S. 40A(3) which was corrected by Ld. CIT(A) to Section 69C as U .....

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ind that in many such cases, the additions are made based on the G.P./N.P. ratio. In the present case, the appellant has shown G.P. of 0.68% & 1.19% on subsequent sale out of purchases from two suspicious dealers, i.e. M/s. Crystal License, & M/S. Induja License respectively. The appellant has not shown any comparison of G.P. ratio in respect of purchase/sale from other parties, and also his overall G.P. ratio. Ignoring the fact that the above details was given in written submission dt. .....

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nds of Appeal. 4. Grounds 2 to 4 of assessee s appeal At the outset, the learned A.R. for the assessee submitted that assessee is not pressing grounds raised at S.Nos. 2 to 4 in its appeal. Since the grounds at S. Nos. 2 to 4 of the assessee appeal (supra) are not being pressed, the same are rendered infructuous and are accordingly dismissed. 5. Grounds 1 to 5 of Revenue s appeal Ground No. 1 of assessee s appeal 5.1 The only issue for consideration and adjudication before us is with respect to .....

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7; 70,60,756/- on account of purchases and erred in confirming the same to the extent of ₹ 17,05,189/-, i.e. 25% of the value of the said purchases. 5.2 The learned D.R. for Revenue was heard and he placed strong reliance on the findings rendered by the AO in the order of assessment on his issue. 5.3.1 The learned A.R. for the assessee submitted that in the impugned order at para 3.3 thereof, the learned CIT(A) has observed that the addition made by the AO was made on the basis of informat .....

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s 26 to 47 of paper book), bank statements evidencing payments made through banking channels, ledger copies of these two parties in its books of accounts which evidenced the genuineness of the purchases. It was further contended that there is no evidence with the AO to prove that cash has flown back to the assessee in these transactions or that the bills given to the assessee by those two parties were bogus. It was submitted that once the purchases and sales are not disputed by the authorities b .....

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assessee further submitted that the additions made by the AO in the cases of some other assessee s on identical reasons; i.e. on the basis of statements given by third parties before the Sales Tax Department without carrying out any other separate inquiry to establish the allegation of bogus purchases, were held to be unjustified by various Coordinate Benches of this Tribunal and deleted. In this regard, the learned A.R. placed reliance on, inter alia, the following judicial pronouncements of t .....

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al on record; including the judicial pronouncements cited. The assessee, Prop. S.R. International, is engaged in the business of trading in licences. The AO observed that the Sales Tax Department of the Government of Maharashtra has listed out names of certain dealers, who were allegedly providing accommodation entries to various parties without doing actual business. The AO noticed that the assessee had made purchases from two such parties, whose names found place in the list given by the Sales .....

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in the assessee s books of account to show that the said purchases were genuine. The AO was of the view that the inability of the assessee to produce these two parties before him, coupled with the reliance on the statement of a third party before the Sales Tax Department, even though the assessee was not named therein; rendered the purchases bogus and therefore relying on the said statement of the third party held the said purchases amounting to ₹ 70,60,756/- as bogus. 5.4.2 On appeal we .....

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CIT(A) also acknowledged that the assessee in its attempt to prove the said purchases as genuine had filed copies of purchase bills, bank statements evidencing payment thereof, ledger accounts of these parties in the assessee s books of account. We also find that no fault had apparently been found by the learned CIT(A) with these purchases as there was no evidence on record to prove that cash in respect of the said transaction had flown back to the assessee or that the vouchers/purchase bills gi .....

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es before the Sale Tax Department without conducting any further investigation to establish with corroborative evidence that the said purchases were bogus. The Coordinate Bench in the case of Ramila Pravin Shah (supra) in this regard at para 6 and 7 thereof has held as under: - 6. On the other hand, the Id. AR submitted that the additions made in the case of some other assesses on identical reasons have been deleted by the Co-ordinate Benches of the Tribunal in the following cases a) Ramesh Kuma .....

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other investigation. In the instant case also, the assessing officer has made the impugned addition on the basis of statements given by the parties before the Sales tax department. We notice that the ld.CIT(A) has properly analysed the facts prevailing in the instant case and for the sake of convenience, we extract the same below:- "5.3.11. I have also gone though the judicial pronouncements relied upon by the Ld AR and find that the facts of the above referred judicial pronouncements are s .....

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nj Eximp Enterprises, the Hon'ble Bombay High Court in its latest judgment has held that once the Sales are accepted, the Purchases cannot be treated as ingenuine in those cases where the appellant had submitted all details of purchases and payments were made by cheques, merely because the sellers/suppliers could not be produced before the A.O. by the assessee. Further, I have also gone through the judgment in case Balaji Textile Industries (P) Ltd. Vs Income Tax Officer by Hon. ITAT, Mumbai .....

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ssessee's books of account and the books of account of '5' in which the entries of sale and adjustment were made, could not be discarded merely by saying that they were not genuine entries though neither the Assessing Officer nor the Commissioner (Appeals) opined anything in respect of those entries. Further, the purchase of the goods in the month of March 1985 did not make any difference. The assessee might not have carried on any business activities prior to March 1985, but that di .....

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assessee purchased the textile goods, sold them and adjusted the same towards the loan taken by it. Therefore, the assessee was entitled to get the entire deduction. I have also taken into consideration, the G.P Ratio/G.P. Margin of the appellant in the previous A.Y. as well as subsequent Assessment Year. If the addition made by the A.O. is accepted, then G.P. Ratio of the appellant during the present A.Y.will become abnormally high and therefore that is not acceptable because it onus of the A. .....

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iv) No cross examination has been offered by AO to the appellant to cross examine the relevant parties (who are deemed to be witness or approver being used by AO against the appellant) whose name appear in the website www.mahavat.gov.in and (v) Failure to produce parties cannot be treated adversely against appellant. In view of the facts discussed above as well as binding judicial pronouncements of the jurisdictional ITAT Mumbai Bench as well as Hon'ble Mumbai High Court and other legal prec .....

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