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2019 (7) TMI 659

ECH PVT. LTD. VERSUS ASSTT. CIT [2019 (4) TMI 1722 - ITAT DELHI], we directed the Assessing Officer to restrict the disallowance to the tune of 5% of the impugned purchases wherein the same party M/s Meet Enterprises was involved. . Respectfully following the aforesaid precedents, we direct the Assessing Officer to restrict the disallowance to 5% of the impugned purchase - decided in favour of assessee - ITA NO. 787/DEL/2016 - 9-7-2019 - Shri H.S. Sidhu, Judicial Member And Shri B.R.R. Kumar, Accountant Member For the Assessee : Sh. Nippen Mittal, CA For the Revenue : Sh. S.S. Rana, CIT(DR) ORDER PER H.S. SIDHU, JM Assessee has filed this appeal against the impugned order dated 22.12.2015 passed by Ld. CIT(A), Ghaziabad on the following grounds:- 1. On the facts and circumstances of the case and in law, the CIT(A) has erred in confirming the addition of ₹ 3714973/- made by the AO on account of alleged unexplained purchases. 2. On the facts and circumstances of the case and in law, the addition of ₹ 3714973/- made by the AO is beyond the scope / jurisdiction of provisions of section 153A of the Income Tax Act, 1961 and the CIT(A) has erred in not holding so. That the app .....

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rut Road, Surju Chungi, Muzcffarnagar. From local enquiries it was revealed that he is of no means and his statement was also recorded wherein he stated that he is a driver and that earlier he used to be a driver of one Pushkar Tyagi, Rio Shalimar Garden, Sahibabad in district of Ghaziabad and who had his business address at Nand Gram, Ghaziabad. It was stated by him that on being asked by Pushkar Tyagi, he opened an account in the name of Meet Enterprises and signed blank cheque book at the behest of Tyagi. Apart from this he has no knowledge of Meet Enterprises/its transactions all what transactions were made through the bank. The trade tax registration No. given at the time of opening of bank account at PNB, Ghaziabad was also got verified from Trade Tax Department, Muzaffarnagar and it was found that the registration number, mentioned in the registration certificate submitted to the bank at the time of opening account, is related to Mis Kumar Traders, Meerut Road, Near Suzru Chungl, Muzoffamagar. Dy. Commissioner Varijyakar, Khand - 4, Muzzafarnagar has also mentioned that M/s Meet Enterprises is non-existent firm as per their records. Further enquiries of these cheques reveale .....

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ent of receipt of material received note no. by project manger of contractor MIs V.K. Agarwal & Co. after weighing the same though public way bridge,' Sabji Mandi, Niranjanpur, Derhadum. In the said weighing truck no. alongwith time of receipt of material with quantity is mentioned (details furnished). 4. The material has been used for construction at Dehradun project. 5. It might be, the Meet Enterprises purchased the said steel from M/s RA Steels whose' address is Shop No.3, Rampur, Saharanpur Road, . Roorkee (Phone 9810560969 and TIN 05004093813) and Tehri Steels Ltd, Vi/age Dhaliwala, Muni Ki Reti Post Box No. 21, Rishikesb Distt. Tehri Garwal (Phone 0135-2431083, TIN No. 05003639950] 6. The payment has been paid form our bank account vide cheques of Indian Overseas Bank, total payment amounting to ₹ 3714973/- (details enclosed). Further, we would like to state that the material was ordered by our staff Mr. Gupta who is no more working with us neither we have no connection with M/s Meet Enterprise because last dealing with company was upto September, 2008. We have purchased the material which is utilized for our construction site at Dehradun and the payment ha .....

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n submission and stated that assessee has asked to show why purchase from M/s Meet Enterprises should not be treated as bogus in view of the statement of Sunil Kumar, Vikas Kumar and other information gathered from the trade tax department. He further stated the case of CIT vs. Kabul Chawla (Supra) is not applicable in the present case, hence, the same may not be accepted. He further submitted that the appeal of the assessee be dismissed by not directing the AO to restrict the disallowance of the impugned purchases. He relied upon the following case laws:- i) N.K. Proteins Ltd. vs. CIT (2017-TIOL-23-SC-1T) ii) N.K. Industries Ltd. Vs. DCIT 292 CTR 354 (Guj) iii) CIT vs. Arun Malhotra 363 ITR 195 (Del) iv) CIT vs. La Medica 250 ITR 575 (Del) v) Vijay Proteins Ltd. vs. ACIT 58 taxmann.com 44 (Gu}) vi) Sri Ganesh Rice Mills vs. CIT (2007) 294 ITR 316 (Allahabad). vi) Sanjay Oilcake Industries vs. CIT 316 ITR 274 (Gu}) 5. We have heard both the parties and perused the records especially the orders passed by the revenue authorities alongwith the arguments advanced by both the parties and the case laws cited before us as well as the ITAT, Delhi E Bench decision passed in ITA No. 7022/Del .....

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ng the year 2007-08 (Assessment year 2008-09) (pages 121- 126 of Paper Book); v) That books of accounts so maintained by the appellant company have not been rejected by the learned Assessing Officer by invoking section 145(3) of the Act and, profit declared stands accepted as such; vi) That entire purchase and sales duly accepted and verified in sales tax order for the instant assessment year (pages 30-32 of Paper Book); viii) That the consideration was duly discharged through banking channels as would be evident from the following evidence: a) Copy of cheque issued by the appellant company to M/s Meet Enterprises (pages 111-113 of Paper Book) 4.2 It was further contended that in case of purchases, assessee is under a burden to establish delivery of goods and payment of consideration for such delivery. It was submitted that in the instant case, both the facts are not in dispute as the delivery of goods is duly recorded in the stock register and the fact of supply is also accepted in the sales tax order for the instant assessment year. Furthermore, as regards payment of consideration, it was also stated that such payments have been made through banking channels and there is no alleg .....

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f sales tax for the instant assessment year, copy of which is placed at pages 32 to 34 of Paper Book. The issue, therefore, arises is that once the supplies have been received by the assessee which are duly recorded in the books of account accepted as such and also accepted in the sales tax order, would it be justified to hold that such supplies against which payments have already been made are not genuine purchases for the reason that there is another proprietorship concern by the same name i.e. Meet Enterprises at Ghaziabad. It is no doubt true that cheques issued by the assessee in the name of MIs. Meet Enterprises had been deposited in the account of MIs. Meet Enterprises, Ghaziabad instead of Meet Enterprises, Haridwar. But the sales made by the assessee have not been doubted by the Assessing Officer. It is impossible to make sales without corresponding purchases. In the stock register corresponding to the sales, purchases have been duly recorded. In the circumstances of no irregularity observed In the inventory record, entire purchases of ₹ 32,76,741/- cannot be disallowed. 4.5 In the above facts and circumstances, we are of the considered opinion that it would be inapp .....

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in the grey market through cash payment and some entries were obtained from certain suppliers who had not sold such goods. 6. The present case, thus, being one oj only purchase but not from disclosed sources, it would be only profit element embodied in such purchase which could be added in the income oj the assessee and thus, rightly so done by the Commissioner (Appeals) and the Tribunal. 7. If this be our conclusion, only question arises whether such profit element should be estimated at the rate of 30% or 12 ½%. Whenever such a question arises, some reasonable estimation is always permissible. Hardly any question of law on such aspect would arise. Merely it is pointed out that the assessee was a trader and that the Tribunal retained 12% of the purchase towards its possible profit, we do not find any reason to entertain the appeal. In the result, Tax Appeal is dismissed." 4.8 Similar view has also been expressed in the case of CIT vs. Simit P. Sheth 356 ITR 451 wherein it has been held as under: "6. In the present case, the Commissioner of Income-tax (Appeals) believed that when as a trader in steel the assessee sold certain quantity of steel; he would have purcha .....

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ed the same quantity from some source. When the total sale is accepted by the Assessing Officer, he could not have questioned the very basis of the purchases. In essence, therefore, the Commissioner (Appeals) believed the assessee's theory that the purchases were not bogus but were made from the parties other than those mentioned in the books of account 7. That being the position, not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. So much is clear by the decision of this court. In particular, the court has also taken a similar view in the case of CIT v. Vijay M. Mistry Construction Ltd. [2013] 355 ITR 498 (Guj) and in the case of CIT v. Bholanath Poly Fab (P.) Ltd. [2013} 355 ITR 290 (Guj). The view taken by the Tribunal in the case of Vijay Proteins Ltd. v. Asstt CIT [1996} 58 ITD 428 (Ahd.) came to be approved. " 4.9 In the instant case, the assessee is engaged in dealing in MS Bar (Ironj Steel Product) and has shown gross profit rate of 5.22%. We find that in the case of Sh. Sanjay H. Shah, Mumbai Vs. Income Tax Officer in ITA No.5063 to 5065/Mum/2017 for assessment year 2009-10 to 2011-12, wh .....

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