IRTESH MISHRA, MUMBAI V. INCOME TAX OFFICER-13(2)(4), MUMBAI

ITA 2626/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6960 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 27-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Assessee Lawyers: HARI RAHEJA SHRI MANI JAIN
• Keywords: Bogus purchase; Opportunity of being heard; Additional evidence
• Section: 142(1); 133(6); 37(1); 201; 143(2); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 2626 / MUM/20 1 8 ( ASSESSMENT YEAR : 2011 - 12 ) SHRI IRTESH JAWAHARILAL MISHRA C/O. MUMBADEVI BULLION OFFICE NO.301, 3 RD FLOOR, MANJEWAL A MANSION, MAHIM, MUMBAI 400 016 VS. INCOME TAX OFFICER - 13(2)(4) NOW ASSESSED WITH INCOME TAX OFFICER, 17(2)(1), ROOM NO.123B, AAYAKAR BHAVAN MARINE LINES, MUMBAI 400 020 PAN/GIR NO. ASXPM8236D ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI HARI RA HEJA / SHRI MANI JAIN REVENUE BY SHRI H.N. SINGH DATE OF HEARING 18 / 12 /201 8 DATE OF PRONOUNCEMENT 01 / 03 /201 9 / O R D E R PER SANDEEP GOSAIN, JM: THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) - 28, MUMBAI DATED 12/03/2018 FOR THE A.Y.2011 - 12. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - THE FOLLOWING GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN PASSING THE IMPUGNED APPELLATE ORDER WITHOUT PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE APPELLANT AS PER THE GROUNDS STATED IN THE IMPUGNED ORDER OR OTHERWISE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD . COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF ITA NO. 2626/MUM/2018 SHRI IRTESH MISHRA 2 THE ID. A.O, IN PASSING AN EX - PARTE ORDER U/S 144 OF THE ACT, AS PER THE GROUNDS STATED IN THE IMPUGNED ORDER OR OTHERWISE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ARBITRARILY REJECTING THE ADDITIONAL EVIDENCES FILED BY THE APPELLANT VIDE ORDER U/R 46A(2) OF INCOME TAX RULES, 1962 AS PER THE GROUNDS STATED IN THE IMPUGNED ORDER OR OTHERWISE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LD, AO IN DISALLOWING A SUM OF RS. 66,94,97,664/ - ON ACCOUNT OF ALLEGED BOGUS PURCHASES BY INVOKING SECTION 37(1) OF THE INCOME TAX ACT, 1961 AS PER THE GROUNDS STATED IN THE IMPUGNED ORDER OR OTHERWISE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING THE AD - HOC EXPENSES AMOU NTING TO RS. 93,975/ - ON ACCOUNT OF OFFICE EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT AS PER THE GROUNDS STATED IN THE IMPUGNED ORDER OR OTHERWISE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERR ED IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING THE AD - HOC EXPENSES AMOUNTING TO RS. 5,240/ - ON ACCOUNT OF PRINTING AND STATIONERY EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT AS PER THE GROUNDS STATED IN THE IMPUGNED ORDER OR OTHERWISE. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING THE AD - HOC EXPENSES AMOUNTING TO RS. 10,000/ - ON ACCOUNT OF PROFESSIONAL FEES DEBITED TO PROFIT AND LOS S ACCOUNT AS PER THE GROUNDS STATED IN THE IMPUGNED ORDER OR OTHERWISE. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING THE AD - HOC EXPENSES AMOUNTING TO RS. 2,51,300/ - ON ACCOUNT OF SALARY & BONUS DEBITED TO PROFIT AND LOSS ACCOUNT AS PER THE GROUNDS STATED IN THE IMPUGNED ORDER OR OTHERWISE. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING THE AD - HOC EXPENSES AMOUNTING TO RS. 97,845/ - ON ACCOUNT OF WELFARE EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT AS PER THE GROUNDS STATED IN THE IMPUGNED ORDER OR OTHERWISE. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING THE AD - HOC EXPENSES AMOUNTING TO RS. 24,1157 - ON ACCOUNT OF SUNDRY EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT AS PER THE GROUNDS STATED IN THE IMPUGNED ORDER OR OTHERWISE. : 11. THE APPELLANT CRAVE LEAVES TO ADD, AMEND, ALTER, MODIFY AND OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. ITA NO. 2626/MUM/2018 SHRI IRTESH MISHRA 3 THE APPELLANT PRAYS THIS HON'BLE TRIBUNAL TO DEL ETE THE ADDITION/DISALLOWANCES MADE BY THE LD. ASSESSING OFFICER, WHICH IS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. THE FIRST GRIEVANCE OF ASSESSEE RELATES TO DISALLOWANCE OF PURCHASES WHICH WERE ALLEGED TO BE BOGUS. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF WHOLESALE DEALERS IN GOLD AND SILVER BULLION . F OR THE YEAR UNDER CONSIDERATION , A SSESSEE FILED ITS RETURN OF INCOME AT RS.7,54,830/ - ON 30/09/2011, WHI CH WAS PROCESSED U/S.143(1) OF THE IT ACT A T THE RETURN ED INCOME , AND THEREAFTER , THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES WERE ISSUED BY AO U/S.143(2) AND 143(1). IN THE ASSESSMENT ORDER, AO OBSERVED THAT IN RESPONSE TO THE SAID NOTICES, SHRI AJAY P AWAR, ACCOUNTANT ATTENDED ON 10/02/2014, 13/03/2014 AND 19/03/2014 AND FILED PART OF THE DETAILS CALLED FOR. THE AO FURTHER STATED THAT ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM PROPRIETARY BUSINESS IN THE NAME OF M/S. MUMBA DEVI BULLION DEALING IN RESA LE OF GOLD ORNAMENTS AND JEWELLERY. 5. DURING THE COURSE OF SCRUTINY ASSESSMENT , T HE AO OBSERVED THAT THERE IS AN INTIMATION RECEIVED FROM DGIT - INVESTIGATION, MUMBAI IN RESPECT OF BOGUS PURCHASES MADE BY ASSESSEE IN TERMS OF LETTER RECEIVED FROM DGIT - INVE STIGATION HEAD QUARTER TO DGIT INVESTIGATION, MUMBAI VIDE LETTER NO.DGIT/46/SALES TAX/2013 - 14/1381 DATED 21/03/2014. THE AO OBSERVED THAT OUT OF THE TOTAL PURCHASES FROM VARIOUS SUPPLIERS, ITA NO. 2626/MUM/2018 SHRI IRTESH MISHRA 4 INFORMATION WAS CALLED IN RESPECT OF GOODS SUP PLIED BY M/S.MOKSHA I MPEX, SHARE TRADING CO., SHREE JEWELS AND KOTSONS IMPEX P. LTD. THE AO STATED THAT NOTICES U/S.133(6) TO THESE PARTIES WERE RETURNED UNSERVED. FINALLY AO ADDED ALLEGED PURCHASES IN THE INCOME OF ASSESSEE BY DISALLOWING THE SAME U/S.37(1) OF THE IT ACT. THE AO HAS ALSO DISALLOWED 50% OF VARIOUS EXPENDITURE S INCURRED ON OFFICE EXPENSES, PRINTING, STATIONERY, PROFESSIONAL FEES, SALARY AND BONUS, WELFARE EXPENSES AND SUNDRY EXPENSES. THUS, FURTHER DISALLOWANCE OF RS.4,82,475/ - WAS MADE BY THE AO. 6. BY THE IMPU GNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW . WE HAVE ALSO CONSIDERED VARIOUS JUDICIAL PRONOU NCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LD. AR AND DR BEFORE US. FROM THE RECORD WE FOUND THAT AO WAS IN RECEIPT OF INFORMATION FROM THE INVESTIGATION WING WITH REGARD TO THE ALLEGED BOGUS PURCHASES BY THE ASSE SSEE, THEREFORE, ON THE BASIS OF SUCH INFORMATION, THE AO ISSUED NOTICES U/S.133(6) TO FOUR PARTIES, WHICH WERE NOT SERVED ON THE RESPECTIVE PARTIES. IT WAS SUBMITTED THAT TOTAL PURCHASE S SO MADE WAS RS.78.44 CRORES ON WHICH GP WAS WORKED OUT AT 0.28%, IF THIS AMOUNT IS ADDED, THE GP BECOME 87.2% WHICH IS NOT FEASIBLE AT ALL . B EFORE THE CIT(A), ASSESSEE FURNISHED INFORMATION WITH REGARD TO THE STOCK STATEMENT AND THE PAN NUMBER OF ITA NO. 2626/MUM/2018 SHRI IRTESH MISHRA 5 THE SUPPLIER S . THE ASSESSEE HAD ALSO SUBMITTED NECESSARY DETAILS VIDE ITS LET TER DATED 28/02/2018 WHICH HAS BEEN DULY ACCEPTED BY THE AO, HOWEVER, REMAND REPORT WAS PASSED BY THE AO WITHOUT CONSIDERING THE SAME. WE FOUND THAT BEFORE THE LOWER AUTHORITIES, THE ASSESSEE HAD FILED ASSESSMENT ORDERS OF M/S. KBJ BILLION LTD., KBJ EXPORT S LTD., KBJ JEWELLERY PVT. LTD., AND KBJ GOLD ORNAMENTS LTD., TO PROVE THE IDENTITY AND GENUINENESS OF THE SALES PARTIES TO WHOM ALLEGED GOODS WAS SOLD . HOWEVER, THE AO HAS NOT COMMENTED IN THE REMAND REPORT ABOUT SALES PARTIES. AO HAS ONLY COMMENTED ON TH E PURCHASE PARTIES. IN REJOINDER TO THE REMAND REPORT, ASSESSEE HAS GIVEN DETAILS OF PARTIES TO WHOM SALES HAVE BEEN MADE. THE ASSESSEE HAS ALSO FILED ASSESSMENT ORDERS OF THE SALES PARTIES, BUT THE SAME WERE REJECTED BY THE AO. IT WAS CONTENTION OF ASSESS EE THAT FAILURE TO RESPONSE THE NOTICES ISSUED BY THE AO TO THE SUPPLIER CANNOT BE CONSTRUED AS CONCLUSIVE EVIDENCE AGAINST THE ASSESSEE. IN SUPPORT OF THE CONTENTION THAT ENTIRE PURCHASES SO MADE AGAINST WHICH SALES HAS BEEN EFFECTED BY THE ASSESSEE, CAN NOT BE TREATED AS BOGU S , R ELIANCE WAS PLACED ON THE DECISION OF THE CO - ORDINATE BENCH IN CASE OF SHRI JITENDRA M KETAVAT IN ITA NO.7048/MUM/2016 DATED 15/02/2019, ITA NO.7315/7316/7317/MUM/2016 DATED 15/02/2016 IN THE CASE OF VAMA INTERNATIONAL, ITA NO.385 4,3855,3857,3858, 3859 & 3864/MUM/2016 DATED 04/07/2018 IN THE CASE OF SEJAL EX PORT S(INDIA) , ITA NO.3305/MUM/2017 DATED 21/08/2018 IN THE CASE OF SANGHAVI EXPORTS ITA NO. 2626/MUM/2018 SHRI IRTESH MISHRA 6 INTERNATIONAL LTD., AND ITA NO.3531/MUM/2017 DATED 06/12/2017 IN THE CASE OF ASHISH GEMS. 8 . FROM THE RECORD WE FOUND THAT THE ASSESSEE IS AN INDIVIDUAL. RETURN SO FILED WAS SELECTED FOR SCRUTINY, NOTICE U/S 143(2) & 142(1) OF THE ITA WAS ISSUED TO THE ASSESSEE ON 06/02/2012, 08.06.2013, 31.12.2013 & 27.02.2014. IN RESPONSE TO THE SAME, ASSESS FIL ED ITS REPLIES ON 10.02.2014,13.03.2014 & 19.03.2014. THEREAFTER, IN THE FAG END OF THE TIME BARRING PERIOD, AO ISSUED NOTICE U/S 133(6) ON 10.03.2014 TO THE PURCHASE PARTIES TO VERIFY THEM. THE SAID NOTICES RETURNED UNSERVED. SHOWCAUSE NOTICE DATED 18.03. 2014 SERVED ON 19.03.2014 REQUIRING THE ASSESSEE TO PRODUCE THE ALLEGED BOGUS PARTIES BEFORE THE LD.AO. ON 20.03.2014. IT WAS EXPLAINED TO AO THAT IT IS NOT POSSIBLE TO PRODUCE THE PARTIES AT SUCH SHORT NOTICE. IN THE MEANTIME, AO RECEIVED INFORMATION FROM INVESTIGATION WING ON 24.03.2014 REGARDING TWO PURCHASE PARTIES NAMELY KOTSONS IMPEX & MOKSHA IMPEX WHEREIN IT WAS STATED THAT THE SAME ARE NOT GENUINE. SUBSEQUENTLY, AO ISSUED FINAL SHOWCAUSE NOTICE DATED 24.03.2014, REQUIRING THE ASSESSEE TO APPEAR BEFO RE THE LD. AO ON 26.03.2014. HOWEVER, IT WAS IMPOSSIBLE FOR THE ASSESSEE TO FURNISH THE DETAILS DESIRED IN SUCH A SHORT PERIOD OF TIME. IGNORING ALL THE ISSUES RAISED BY THE ASSESSEE. THE A.O PASSED AN EX - PARTE ORDER U/S 144 OF THE ITA ON 29.03.2014 DISALL OWING THE ENTIRE ALLEGED PURCHASES. HE ALSO MADE AD - HOC DISALLOWANCE OF 50% OF OTHER EXPENSES AMOUNTING TO RS.4.82 LAKHS. ITA NO. 2626/MUM/2018 SHRI IRTESH MISHRA 7 9 . AGGRIEVED BY THE SAID ORDER, ASSESSEE FILED AN APPEAL FILED BEFORE CIT(A). DURING THE APPELLATE PROCEEDINGS, EVIDENCE WAS FILED BEF ORE THE CIT(A) WHICH WAS NOTHING BUT THE QUANTITATIVE STOCK STATEMENT, OF THE STOCK SUMMARY WHICH WAS ALREADY PROVIDED IN THE TAX AUDIT REPORT SUBMITTED BEFORE AO. THE SAID EVIDENCE WAS FILED IN ORDER TO SHOW THE FLOW OF GOODS PURCHASED SINCE AO HAD NOT DO UBTED THE SALES. CIT(A) REMANDED THE CASE TO THE LD. AO DIRECTING IT TO VERIFY THE PURCHASES AS WELL AS SALES PARTIES. 1 0 . IN REMAND PROCEEDINGS, THE LD. AO CALLED FOR CERTAIN INFORMATION BY ISSUING NOTICE U/S 133(6) OF THE ITA DATED 30.01.2018. THE ASSESS EE FILED LETTER DATED 07.02.2018 REQUESTING FOR SOME MORE TIME TO FILE THE DETAILS. IT WAS TOLD TO THE ASSESSEE THAT NEW NOTICE FOR HEARING WILL BE ISSUED. ASSSESSE FILED THE REQUISITE DETAILS BEFORE THE LD. AO ON 20.02.2018. HOWEVER, ID. A.O. SENT THE REM AND REPORT TO CIT(A) ON 19.02.2018 , COPY OF WHICH WAS RECEIVED BY THE ASSESSEE ON 22.02.2018. IN RESPONSE TO THE SAID REMAND REPORT, ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT AO HAS FAILED TO CONSIDER THE DETAILS FILED BY THE ASSESSEE THEREAFTER AND HE HA S ALSO FAILED TO COMMENT ON THE ADDITIONAL EVIDENCE. THE ASSESSEE ALSO FILED ASSESSMENT ORDER OF CERTAIN SALES PARTIES TO PROVE THEIR GENUINENESS BEFORE THE CIT(A). 11 . IN THE MEANTIME, AO EVEN AFTER SUBMITTING THE REMAND REPORT ON 19.02.2018, DULY CONSIDE RED THE DETAILS FILED BY THE ASSESSEE AND ISSUED NOTICES U/S 133(6) ON 27.02.2018 TO THE SALES PARTIES TO CONFIRM THE ITA NO. 2626/MUM/2018 SHRI IRTESH MISHRA 8 TRANSACTION. THE SALES PARTIES IN RESPONSE TO THE SAID NOTICES DULY CONFIRMED THE TRANSACTION THROUGH THEIR LETTER FILED ON 05.03.2018, 08 .03.2018 & 12.03.2018. HOWEVER, EVEN AFTER SUBMITTING THE ENTIRE DETAILS, LD. CIT(A) IN HIS ORDER DATED 12.03.2018 FAILED TO APPRECIATE THAT WHEN SALES ARE NOT DOUBTED, HOW CAN ENTIRE PURCHASES BE HELD AS BOGUS. HE ALSO FAILED TO APPRECIATE WHILE REJECTING THE ADDITIONAL EVIDENCE THAT THE STOCK QUANTITATIVE SUMMARY FILED AS AN ADDITIONAL EVIDENCE WAS NOTHING BUT TO SUPPORT THE STOCK SUMMARY AUDITED AND CERTIFIED BY THE AUDITOR IN TAX AUDIT REPORT. 12 . I T IS SETTLED PRINCIPLE THAT WITHOUT PURCHASES, SALES CA NNOT BE DONE. DURING THE ENTIRE ASSESSMENT PROCEEDINGS, NOT A SINGLE DOUBT HAS BEEN RAISED ON THE GENUINENESS OF THE SALES OR GENUINENESS OF THE OTHER PURCHASES. THEREFORE, ONE THING IS ESTABLISHED THAT PURCHASES HAVE BEEN ACTUALLY MADE BY THE ASSESSEE. TH E ONLY QUESTION WHICH MAY ARISE HERE IS THAT THE SAID PURCHASES MIGHT HAVE BEEN PURCHASED FROM GREY MARKET OR THROUGH SOME OTHER PERSON WHICH HAS RESULTED INTO SOME SAVINGS IN THE HANDS OF THE ASSESSEE. FURTHER, AS SETTLED BY THE VARIOUS JUDICIAL PRECEDENT S AS CITED BY LD. AR, THE ONLY ADDITION TO BE MADE IN SUCH CASES IS THE GROSS PROFIT SAVED IN SUCH TRANSACTION. NOW, THE QUESTION ARISES AS TO WHAT GROSS PROFIT CAN BE ADDED IN THE HANDS OF THE ASSESSEE AS ITS POSSIBLE SAVINGS. IN THIS RESPECT, WE REFER TO THE DECISION OF HON'BLE GUJRAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. SIMIT P. ITA NO. 2626/MUM/2018 SHRI IRTESH MISHRA 9 SHETH REPORTED IN 356 ITR 451 WHEREIN THE DECISION OF AHMEDABAD TRIBUNAL WAS CONFIRMED BY THE HON'BLE HIGH COURT . 1 3 . IN THE SAID DECISION OF SIMIT P. SHETH ( TRIBUNAL'S ORDER), THE HON'BLE TRIBUNAL HELD THAT SINCE SALES WERE ALSO NOT DOUBTED, THE GOODS MIGHT HAVE BEEN PURCHASED FROM THE GREY MARKET; THE TRIBUNAL IN ITS DECISION MADE THE ADDITION OF THE PROFIT ELEMENT WHICH THE ASSESS E E COULD HAVE SAVED BY RESOR TING TO THE GREY MARKET AND ACCORDINGLY THE TRIBUNAL MADE THE ADDITION @ 12.5% OF THE ALLEGED BOGUS PURCHASES WHICH WAS SUBSEQUENTLY SUSTAINED BY HON'BLE GUJRAT HIGH COURT. WHILE ARRIVING AT THIS PERCENTAGE, IT HAD CONSIDERED SAVINGS ON ACCOUNT ON ACCOUNT OF VAT PAYABLE WHICH WAS 10% ON THE STEEL PRODUCTS IN WHICH THE ASSESSEE (SIMIT P. SHETH) TRADED IN. FURTHER, TRIBUNAL OBSERVED THAT THE PROFIT MARGIN SAVED FOR THAT PARTICULAR TYPE OF INDUSTRY (I.E. THE STEEL INDUSTRY) IS 2.5%. ACCORDINGLY, TRIBUNAL HELD THAT SAVING WOULD BE OF 12.5% (10% VAT) COMPONENT AND 2.5% GP COMPONENT) AND THE SAME WAS SUSTAINED BY THE GUJARAT HIGH COURT. 1 4 . FROM THE RECORD WE FOUND THAT IN THE ASSESSEE'S CASE, VAT RATE IN CASE OF GOLD JEWELLERY IS 1%. IN THIS REGARD, ASSESSEE HAS PLACED THE SAMPLE PURCHASE & SALE BILL ISSUED BY THE PARTIES TO THE ASSESSEE ALONG WITH THE RATE SCHEDULE UNDER THE MAHARASHTRA VALUE ADDED TAX (MVAT) ACT - 2002 WHICH SPECIFIES THE RATE OF TAX @ 1% IN CASE OF GOLD, BULLION FOR THE PERIOD UNDER CONSIDERATIO N. FURTHER, WITH REGARDS GROSS PROFIT MARGIN, THE GP MARGIN RANGES FROM 0.2% TO 0.3% WHICH IS EVIDENT FROM THE ITA NO. 2626/MUM/2018 SHRI IRTESH MISHRA 10 FINANCIALS OF OTHER ASSESSEES IN SIMILAR BUSINESS. THUS, THE AVERAGE PROFIT MARGIN CAN BE REASONABLY TAKEN @ 0.25% . 1 5 . IN ABOVE FACTUAL SITUATIO N , APPLYING THE RATIO OF AFOREMENTIONED DECISION OF GUJARAT HIGH COURT IN ASSESSEE'S CASE, THE MAXIMUM ESTIMATION OF GROSS PROFIT THAT CAN BE SUSTAINED ON ACCOUNT OF PURCHASES SHOULD BE 1.25% OF THE ALLEGED BOGUS PURCHASE. FROM THE RECORD WE FOUND THAT THE ASSESSEE HAS ALREADY OFFERED A GP OF 0.28% IN THE CURRENT YEAR I.E. AY 2011 - 12 ON THE SALE OUT OF SUCH PURCHASES. THEREFORE, THE CREDIT OF THE SAME IS TO BE ALLOWED WHILE MAKING THE PERCENTAGE ADDITION. IN THIS RESPECT, RELIANCE IS PLACED ON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF MADHU BANWARILAL AGARWAL BEARING ITA NO.2936/MUM/2017 WHEREIN CREDIT OF PROFIT OFFERED BY THE ASSESSEE HAS BEEN ALLOWED . ACCORDINGLY , THE ADDITION IN THE ASSESSEE CASE SHOULD BE RESTRIC TED TO 0.97% (1.25% - 0.28%) OF THE A LLEGED BOGUS PURCHASES. WE DIRECT ACCORDINGLY. 1 6 . THE AO ALSO MADE ADHOC DISALLOWANCE OF 5 0% IN RESPECT OF VARIOUS EXPENDITURE INCURRED UNDER THE HEAD OFFICE EXPENSES, PRINTING AND STATIONERY, PROFESSIONAL FEES, SALARY AND BONUS, STAFF WERLFARE EXPENSES AND SUNDRY EXPENSES. HOWEVER, NOTHING WAS PLACED BEFORE US BY THE LD. AR SO AS TO PERSUADE US TO DEVIATE FROM THE FINDINGS RECORDED BY THE LOWER AUTHORITIES FOR DISALLOWING 50% OF THE ALLEGED EXPENSES. ACCORDINGLY, WE CONFIRM THE ACTION OF THE AO FOR DISA LLOWING EXPENDITURE OF RS.4,82,475/ - . ITA NO. 2626/MUM/2018 SHRI IRTESH MISHRA 11 1 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01/03/ 201 9 . SD/ - (R.C.SHARMA) SD/ - (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DAT ED 01 / 03 /201 9 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY O RDER, ( 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//