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2016 (10) TMI 700 - ITAT MUMBAI

2016 (10) TMI 700 - ITAT MUMBAI - TMI - GP addition @ 12.5% of the suspected purchases - Held that:- Sales account is undisturbed, presumption of purchase of goods outside the books and also without bills, procuring the purchase bills from the hawala bill providers etc. Undoubtedly, the assessee is engaged in the construction activity and GP rate 12.5% is not uncommon. In the cited judgment, the addition @ 12.5% of the suspected purchases was confirmed by the Hon’ble High Court in the case of CI .....

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CCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER Assessee by : Shri Dilip Sanghavi Revenue by : Shri Prakash Pathade, DR ORDER Per D. Karunakara Rao, AM There are two appeals under consideration and they are cross appeals involving the assessment year 2009-2010. Since, the issues involved in these appeals are inter-connected, therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Appeal wise adjudication is given in the foll .....

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above ground: 2.1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in confirming arbitrarily the addition to the extent of ₹ 3,16,578/- being 12.5% of purchases of ₹ 25,32,622/- made from two parties holding that some additional gross profit need to be estimated on the purchases made from such six parties. Addition is confirmed arbitrarily ignoring the merits and is bad in law and the same needs to be deleted. 2.2. The Ld CIT (A) failed to apprecia .....

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7; 25,32,622/-. 4. Briefly stated relevant facts of the case are that the assessee filed the return of income declaring the total income of ₹ 18,25,970/-. Regular assessment was duly completed u/s 143(3) of the Act. Assessee is Civil Contractor and was surveyed u/s 133A of the Act on 4.12.2010 relevant to the AY 2011-12. Information was received from the DGIT (Inv) office regarding certain bogus purchases by the assessee from S. S. Enterprises and National Trading Co. As per the assessment .....

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hat the parties are bogus and their names appeared in the list of entities on the official website of the Sales Tax Department ie www.mahavat.gov.in. Eventually, AO made assessment on the said amounts of purchases from both the parties ( ie S. S. Enterprises and National Trading Co) and the assessed income was determined at ₹ 44,00,052/-. Matter travelled to the first appellate authority. 5. During the proceedings before the first appellate authority, after considering the submissions of t .....

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assessee and submitted that Ground no.1 is not pressed. After hearing the Ld DR in this regard, we dismissed the said ground as not pressed. 7. Referring to the Ground no.2, Ld Counsel for the assessee submitted that the addition of additional GP of ₹ 3,16,578/- only increased the unearned GP of the assessee. However, referring to the Gujarat High Court judgment in the case of CIT vs. Simit P Sheth in ITA No.553 of 2012, dated 16.1.2013 (356 ITR 451), Ld Counsel for the assessee submitted .....

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er is relevant). Therefore, the same should be deleted. 8. On the other hand, Ld DR for the Revenue relied heavily on the contents of para 45 of the CIT (A) s order and supported the decision of the CIT (A) in adopting the GP @ 12.5%. 9. We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before us. On hearing both the parties on this issue, we find the sales account is undisturbed in this case by the AO. Therefore, the jurisdi .....

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under:- We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed purchases of steel. It may be that the three suppliers from whom the assessee claimed to have purchased the steel did not own up to such sales. However, vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselv .....

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d the very basis of the purchases. In essence therefore, the Commissioner (Appeals) believed assessee s theory that the purchases were not bogus but were made from the parties other than those mentioned in the books of accounts. That being the position, not the entire purchase price but only profit element embedded in such purchases can be added to the income of the assessee. So much is clear by decision of this Court. In particular, Court has also taken a similar view in case of Commissioner of .....

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sel for the revenue would be justified in arguing that the entire amount of such bogus purchases should be added back to the income of the assessee. Such were the facts in case of ACIT (OSC) Ward 5(3) Nadiad Vs. Pawanraj B Bokadia (supra). This being the position, the only question that survives is what should be the fair profit rate out of the bogus purchases which should be added back to the income of the assessee. The Commissioner adopted ratio of 30% of such total sales. The Tribunal, howeve .....

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ssarily vary with the nature of business and no uniform yardstick can be adopted. 10. From the above, we find, the essential facts are comparable to that of the present case. They are: sales account is undisturbed, presumption of purchase of goods outside the books and also without bills, procuring the purchase bills from the hawala bill providers etc. Undoubtedly, the assessee is engaged in the construction activity and GP rate 12.5% is not uncommon. In the cited judgment, the addition @ 12.5% .....

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