TMI Blog2017 (9) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.03.2014 passed by learned Assessing officer (hereinafter called the AO ) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called the Act ). 2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- l. The learned C.I.T.(A) has erred in sustaining addition/disallowance to the extent of 35% of Purchases of ₹ 29,18,477/- i.e. ₹ 10,21,467/- held as Bogus/Non-genuine Purchases by the Assessing Officer mentioned in Para 3 of the Appeal Order. The C.I.T. has arbitrarily estimated this on the basis of G. P. Ratio of the Appellant. The learned C.I.T. (A) erred in estimating his income at too high a figure and results into unfair, unjust and illogical addition. Because of arbitrary assessment the appellant is put to greater hardship and prays for fair treatment, in these present proceedings. 2. The learned C.I.T. (A) has erred in sustaining addition/disallowance to the extent of ₹ 29,301/- in respect of short booking of Receipts as per 26AS statement ₹ 9,49,336/- vis-a-vis Ledger Account at ₹ 9,20,035/- in case of one of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee as averred in the affidavit. Thus, we admit this appeal and proceed to decide this appeal on merits. We order accordingly. 4. The brief facts of the case are that the assessee is an individual and is proprietor of M/s Hi Tech Tools, engaged in the business of manufacturing of high precision metal parts, sheet metal tools, moulds, dyes and machinery. During the course of assessment proceedings u/s 143(3) r.w.s. 143(2) of the 1961 Act, notices u/s 133(6) of the Act were issued by the A.O. to the following parties to verify the genuineness of purchases made by the assessee from the following parties:- M/s Prarthi Trading Co. M/s Krish Corporation M/s Kantilal Brothers M/s Inspire Traders The notices issued to all the above parties were returned un-served by the postal authorities, except in the case of M/s Kantilal Brothers, however, there was no compliance even from this party to whom the notice u/s 133(6) was served. It was observed by the AO that in some of the cases, where the parties were notified by the sales tax authorities as suspected to have been engaged in issuing bills without delivery of materials, addresses were not provided by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings were delayed owing to the non compliance from the assessee side to the notices issued by Revenue, the details of purchases and sales being submitted only on 18th February, 2014 (which was close to the limitation period for framing of assessment which limitation period was going to expire on 31st March, 2014 ) although the first notice seeking such details were issued by the AO on 14th November, 2013. The A.O. also observed that merely because the bank statements were submitted by the assessee was not in itself sufficient to establish the genuineness of the purchases. The AO also observed that the assessee has also not produced evidences in support of the delivery and transport of material allegedly supplied by these parties. The A.O. observed that the parties from whom the alleged purchases were made by the assessee are all in the notified list of Sales Tax Department as entities who were involved in issuing of bills without actual supply/delivery of material. Thus, the A.O. observed that the assessee has failed to substantiate the genuineness of the purchase transaction in spite of opportunity provided to the assessee to produce the party and substantiate its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. The ld. CIT(A) observed that in such cases the exact source of goods or inflation is only known to the assessee. Thus, in these cases profit embedded in such transactions of purchases and sales will be much higher than normal GP ratio. The learned CIT(A) observed that 100% disallowance cannot be made in this instant case as the AO did not carry out indepth enquiries and investigations which were required to be done by the AO. The learned CIT(A) observed that notice u/s 133(6) of the Act issued by the A.O. were also returned back un-served. The assessee also failed to produce the parties for verification and the assessee could not produce any evidence in support of the delivery and transport of the materials from the bogus suppliers. Thus, the ld. CIT(A) concluded that the assessee had taken bogus bills and the assessee failed to establish that the raw materials were purchased from the party which has issued the bills and hence inflation of purchases is now to be estimated based on facts of the case. The learned CIT(A) concluded that the assessee procured material from some other sources or it was from the suppressed stock of the preceding years. The learned CIT(A) observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) and submitted that the Revenue has not filed any appeal before the Tribunal keeping in view the smallness of amount involved in the appeal since it is covered by low tax effect circular issued by CBDT no. 21/2015 dated 10th December 2015. 10. We have heard rival contentions and also perused the material available on record. We have observed that the assessee is an individual and is proprietor of M/s Hi Tech Tools, engaged in the business of manufacturing of high precision metal parts, sheet metal tools, moulds, dyes and machinery. The assessee s case was selected by Revenue for framing scrutiny assessment u/s 143(2) r.w.s. 143(3). The A.O. in order to verify purchases issued notice u/s 133(6) of the Act to the parties from which the assessee made purchases, wherein notices returned unserved in all cases except one case, while even in this one case where the notice u/s 133(6) was served, there was no compliance to the said notice. The assessee was asked to produce the parties which the assessee failed to produce. The said parties were listed as alleged accommodation entry providers by Maharashtra VAT authorities, wherein these alleged bogus dealers had deposed before MVA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her relief was granted on the grounds that only profit embedded on these alleged bogus purchases can be brought to tax which was assessed at 35% of the alleged purchases without going into details of consumption/utilization of material for manufacture of finished goods manufactured by the assessee and without any evidences brought on record but merely on production of invoices and payments being made through bank. We have observed from the perusal of paper book filed by the assessee before the tribunal which is placed in the file from the Profit and Loss Account for the three financial years namely 2008- 09, 2009-10 and 2010-11 that consumption of material which was around 54.5% (approx) for the financial year ended 31-03-2009 (pb/page30) and 31- 03-2010(pb/41) has suddenly gone up to 66% in the subject assessment year 2011-12(FY 2010-11)(pb/page 3) and in the same period GP ratio also fell from 37%(approx) for FY 2008-09 and 2009-10 to 29% in FY 2010-11, which the assessee did not explained to the authorities below at all nor details of consumption/utilization of these material for manufacture of finished products was brought on record by the assessee. Keeping in view peculiar fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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