QUARTER THERMAL ENGG. P. LTD., MUMBAI V. ASSTT. CIT - 8(1)(2), MUMBAI

ITA 1825/MUM/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7381 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-10-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBRAMANIAN
• Keywords: Bogus purchase
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘SMC‘ BENCH MUMBAI BEFORE: SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA No.1825/Mum/2020 (Assessment Year :2011-12) M/s. Quarter Thermal Engg. Pvt. Ltd, Room No.2, Sion Vijayanand CHS Ltd., Road No.31 Sion (E) Mumbai – 400 022 Vs. Asst. Commissioner of Income Tax – 8(1)(2) Aayakar Bhavan M.K.Road, New Marine Lines, Mumbai – 400 020 PAN/GIR No.AAACQ0125B (Appellant) .. (Respondent) Assessee by Shri Subramanian Revenue by Shri Rajendra Chandekar Date of Hearing 11/07/2022 Date of Pronouncement 14/07/2022 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No.1825/Mum/2020 for A.Y.2011-12 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-15, Mumbai in appeal No.CIT(A)-15, Mumbai/10451/2019-20 dated 21/02/2020 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/11/2016 by the ld. Asst. Commissioner of Income Tax-8(1)(2), Mumbai (hereinafter referred to as ld. AO). ITA No. 1825/Mum/2020 M/s. Quarter Thermal Engg. Pvt. Ltd., 2 2. At the outset, we find that the appeal is time barred by 163 days for which the defect notice has been issued by the Registry to the assessee. The same has been duly responded by the assessee and we find that the said delay is attributed due to Covid-19 pandemic as lockdown was imposed from 24/03/2020 and by placing reliance on the Government of India of notification No.218979 dated 31/03/2020 in Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020 (No.2 of 2020) dated 31/3/2020 as per Clause 3(1)(b) extending the time limit specified in Income Tax Act which falls during the period from 20 th day of March 2020 to 29 th June 2020 for the purpose of filing appeal, till 30/06/2020 or such other date as the Central Government by notification specify in this behalf. Subsequently, the Government vide Notification No.35/2020 dated 24/06/2020, has extended the said time limit up to 31/03/2021. In view of the same, we are inclined to condone the delay of 163 days in filing the appeal of the assessee and admit the appeal for adjudication. 3. The ground No.1 raised by the assessee is general in nature and does not require any specific adjudication. 4. The ground No.2 raised by the assessee is challenging the validity of re-assessment which was stated to be not pressed by the ld. AR at the time of hearing. Hence, the ground No.2 is hereby dismissed as not pressed. 5. The only surviving issue to be decided is with regard to the addition made on account of bogus purchases. 5.1. We have heard rival submissions and perused the materials available on record. The assessee company is engaged in the business of ITA No. 1825/Mum/2020 M/s. Quarter Thermal Engg. Pvt. Ltd., 3 manufacturing industrial furnaces and accessories and had filed its return of income for the A.Y.2011-12 on 30/09/2011 declaring total income of Rs.13,65,212/-. This return was duly processed u/s.143(1) of the Act. Later based on the information gathered by the Income Tax department that assessee had made certain purchases of Rs.8,89,868/- from two entities whose names appear to be tainted dealers in the website of Sales Tax department, Government of Maharashtra and the information also revealed that those entities were engaged in the business of providing accommodation entries and accordingly, the assessee had made bogus purchases which requires to be disallowed in the hands of the assessee. For this purpose, the case of the assessee was reopened by issue of notice u/s,148 of the Act. 5.2. We find that assessee had made purchases of Rs.2,29,995/- from Abhi Sales Agency Pvt. Ltd., and Rs.6,59,873/- from M/s. Ansa Sales Agency Pvt. Ltd., totaling to Rs.8,89,868/-, During the course of re- assessment proceedings, the ld. AO directed the assessee to prove the veracity of purchases made from the aforesaid two parties. In response, the assessee furnished the complete details of the said suppliers together with the name and their address, bank statements evidencing the payments made to them by account payee cheques, invoices issued by the concerned suppliers, quantitative details such as opening stock, purchases, consumption and closing stock of raw materials and production of each of the finished goods, closing stock of finished goods, TIN and PAN of the concerned suppliers, delivery challans relating to transportation and receipt of goods from the concerned suppliers before the ld. AO. The ld. AO however, ignored all the contentions of the assessee and proceeded to make 100% value of purchases as bogus and ITA No. 1825/Mum/2020 M/s. Quarter Thermal Engg. Pvt. Ltd., 4 disallowed the same in the assessment. This action was upheld by the ld. CIT(A). 5.3. We find that though the assessee appeared to have made purchases from two tainted dealers as detailed supra, those purchases have been duly recorded in the stock register maintained by the assessee which has been submitted before the lower authorities. These materials have been duly consumed by the assessee in the manufacturing process. Pursuant to the said consumption, the finished product has been produced and sale of those finished goods have also been made by the assessee in the instant case. We find that the ld. AO had absolutely not disputed the quantitative details submitted by the assessee in respect of opening stock purchases, consumption, closing stock of raw materials and production of finished goods, sale of finished goods and closing stock of finished goods while completing the assessment. We also find that the consumption details and sales reported by the assessee have been accepted by the lower authorities. Hence, it would be totally unfair to add 100% value of purchases. However, the assessee could not prove the genuineness of the purchases beyond reasonable doubt by producing those suppliers before the ld. AO. In these type of cases, it would be just and fair that only the profit element embedded in the value of such tainted purchases be brought to tax. But we find from page 43 of the paper book filed by the assessee containing GP chart that assessee had reported the following GP in the past years as under:- A.Y. GP% 2007-08 18.99% 2008-09 18.21% 2009-10 18.63% ITA No. 1825/Mum/2020 M/s. Quarter Thermal Engg. Pvt. Ltd., 5 2010-11 15.92% 2011-12 18.06% 5.4. We find that this Tribunal has been consistently holding that profit percentage of 12.5% on the value of disputed purchases would meet the ends of justice. Since in the instant case, the profit declared by the assessee itself is much more than 12.5%, we hold that no further addition is required to be made in the peculiar facts and circumstances of the instant case. Accordingly, we direct the ld. AO to delete the disallowance of Rs.8,89,868/- made on account of bogus purchases. Accordingly, the ground No.3 raised by the assessee is allowed. 6. The ground No.4 raised by the assessee is general in nature and does not require any specific adjudication. 7. In the result, appeal of the assessee is partly allowed. Order pronounced on 14/07 /2022 by way of proper mentioning in the notice board. Sd/- (VIKAS AWASTHY) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 14/07/2022 KARUNA, sr.ps ITA No. 1825/Mum/2020 M/s. Quarter Thermal Engg. Pvt. Ltd., 6 Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary / Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//