TMI Blog2017 (12) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee as the case may be, as otherwise it will lead to double deduction. See Nikhil Kishore Gandhi case [2017 (12) TMI 1278 - ITAT MUMBAI]. The assessee gets part relief. - I.T.A. No. 6881/Mum/2016 - - - Dated:- 21-12-2017 - SHRI C . N . PRASAD JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Ms . Ruchi M . Rathod For The Revenue : Shri . Purushottam Kumar ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 6881/Mum/2016 for assessment year 2009-10, is directed against the appellate order dated 12.09.2016 passed by learned Commissioner of Income-tax (Appeals)-44, Mumbai (hereinafter called the CIT(A) ) for assessment year 2009-10, appellate proceedings had arisen before learned CIT(A) from the assessment order dated 27.03.2015 passed by learned Assessing Officer (hereinafter called the AO ) u/s 143(3) r.w.s 147 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:- 1 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G CO 7,064,083 / - 27500537441 V SKAND INDUSTRIES 6,414,236 /- 27410583032V TARA ENTERPRISES 8,544,724 / - 27600666493V TORAL ENTERPRISES 7,254,040 / - 27440688212V TULSIANI RADING PRIVATE LIMITED 5,420,266 /- 27860613194V V3 ENTERPRISES 3,934,715 / - Total 8,45,53,960 / - The assessment was reopened within the meaning of Section 147 and as a consequence thereof notice u/s. 148 dated 03.06.2013 was issued by the AO after recording reason for reopening of the assessment, which notice u/s 148 was duly served on the assessee. The assessee did not challenged reopening of the assessment u/s 147 of the 1961 Act by Revenue. These twelve parties from whom the assessee allegedly purchased material have admitted in the statement recorded on oath before sales tax authorities that they have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was duly submitted before the authorities below. It was also submitted that these twelve dealers have in-fact not paid VAT to the sales tax department which led to action by Sales Tax Department against these dealers. It was submitted that in fact the assessee was compelled by Maharashtra VAT/Sales Tax Department to make payment for the said VAT which was not paid by the said twelve dealers to the Government of Maharashtra. It was submitted that these twelve parties could not be located and hence could not be produced before the authorities below. It was also submitted that notices u/s 133(6) issued by the AO to these twelve parties which were returned un-served by postal authorities. The Ld. Counsel for the assessee brought on record notice of demand dated 31-03-2013 u/s 32 of Maharashtra Value Added Tax Act, 2002 along with order of assessment dated 31-03-2013 passed by ACST(Mum-INV-D-004), Mumbai wherein total amount due of ₹ 49,66,208/- was computed as payable by the assessee by Maharashtra VAT authorities towards sales tax, interest and penalty for the financial year 2008-09 on account of the default of these dealers. These documents are placed in file. The assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27020680974V ROHIT ENTERPRISES 8,404,274 / - 27660660931 V SHREE SAl TRADING CO 7,064,083 / - 27500537441 V SKAND INDUSTRIES 6,414,236 /- 27410583032V TARA ENTERPRISES 8,544,724 / - 27600666493V TORAL ENTERPRISES 7,254,040 / - 27440688212V TULSIANI RADING PRIVATE LIMITED 5,420,266 /- 27860613194V V3 ENTERPRISES 3,934,715 / - Total 8,45,53,960 / - The said parties in their statement recorded before the Maharashtra Sales Tax Authorities have confirmed that they only issued bogus bills without supplying any material. Notices were issued by the AO u/s. 133(6) to aforesaid 12 parties which returned un-served by postal authorities. The assessee was asked by the AO to produce the above parties which assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be paid, and paid challans for ₹ 28.04 lacs for period of financial year 2008-09. It is claimed that the liability of VAT which was additionally paid by the assessee to the tune of ₹ 16.31 lacs and also interest was an additional liability owing to failure of these twelve dealers which has reduced the profits to that extent which the assessee could have earned by obtaining the material from grey market and this should be taken into account while estimating profit under the Act. The assessee has submitted reconciliation statement of the stock and it is claimed that G.P of 2.64% was declared by the assessee. The assessee also relied upon the decision of the ITAT, Mumbai in Nikhil Kishore Gandhi v. ACIT in ITA no. 315/Mum/2016 vide orders dated 04.08.2017 wherein the assessee claimed that under similar circumstances, the tribunal has upheld the addition by applying profit ratio of 5% of the bogus purchases because the said selling dealers have not deposited the VAT with the sales tax authorities. The said order of the tribunal is reproduced as under:- This appeal by the assessee is arising out of the order of CIT ( A )- 44, Mumbai, in appeal No . CIT ( A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 . The AO issued noticed under section 133 ( 6 ) to the parties which returned back with the remark as left and assessee failed to produce these parties . During the course of assessment proceedings and during appellate proceedings, the assessee submitted all the documentary evidences such as inward register, stock register, payment received against such sales, receipt of material purchases, account payee cheque . It was also argued that the AO has not doubted the sales and it is not possible to effect sales without purchase but the CIT ( A ) confirmed the action of the AO after considering the various case laws including the decision of the Hon ‟ ble Rajasthan High court in the case of CIT vs . Mangilal Choudhary 229 Taxman 378 ( Raj ) ( 2015 ) and he confirmed the addition by observing in Para 6 . 1 as under : - 6 . 1 It is seen from record that the A . O . has not mechanically disallowed the entire purchases amounting to Rs . 2,37,08,218 /-. Further he has pointed out the apparent deficiencies in the books of the assessee and had thereafter rejected the books of the appellant by invoking th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% of the bogus purchase and appeal of the assessee is partly allowed. 7. In the result, the appeal of assessee is partly allowed. We have observed that the factual matrix in ITA no. 315/Mum/2016 are almost similar as in the instant appeal and Respectfully following the said order of the ITAT we uphold addition in the instant case by directing the AO to re-compute income after applying profit rate @ 5% of the bogus purchases to the tune of ₹ 8.45 crores and appeal of the assessee is partly allowed. We would like to clarify that the claim of the assessee for payment of additional VAT and interest on these alleged bogus hawala purchases from twelve dealers shall be verified by the AO as the said claim is set up for the first time before the tribunal and also since we have factored the additional VAT and interest etc. paid by the assessee on such alleged hawala purchases while estimating income on the said alleged hawala purchases by applying profit rate @5% of the alleged bogus purchases of ₹ 8.45 crores for the impugned assessment year, the deduction on account of additional VAT, interest etc paid by the assessee on these alleged bogus purchases cannot be availed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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