HINDUSTAN STEEL INDIA, MUMBAI V. ITO 19 (1)(5), MUMBAI

ITA 3053/MUM/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3366 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 09-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K BHOOPATHI
• Assessee Lawyers: SURENDRA K CHAUHAN
• Keywords: Reopening of assessment; Bogus purchase; Opportunity of being heard; Corroborative evidences; Accommodation entries; Assessment record; Onus to prove; Reason to believe; Reassessment proceedings; Set aside
• Section: 143(3); 142(1); 143(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI RAVISH SOOD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3053/MUM/2019 ASSESSMENT YEAR: 2011-12 M/S. HINDUSTAN STEEL INDIA, SHOP NO.32/32A, MADHAV BHUVAN, 138/152, NANUBHAI DESAI ROAD, 4 TH KHETWADI LANE, MUMBAI-400004. VS. INCOME TAX OFFICER 19(1)(5), MATRU MANDIR, TARDEO, 2 ND FLOOR, MUMBAI-400007. PAN NO. AACFH6648F ASSESSEE BY : SHRI SURENDRA K. CHAUHAN, AR REVENUE BY : SHRI K. BHOOPATHI, DR DATE OF HEARING : 13/11/2019 DATE OF PRONOUNCEMENT : 15/11/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2011-12. THE APPEAL IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, MUMBAI [IN SHORT CIT(A) ] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S 147 OF TH E INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. REASSESSMENT PROCEEDINGS INITIATED IS NOT AS PER LAW AS NO MATERIALS AVAILABLE ON RECORD OF A.O. WHICH HAVE DI RECT NEXUS TO REASON TO BELIEVE RECORDED BY A.O. AS BELIEF MAY BE SUBJEC TIVE BUT REASON HAS TO OBJECTIVE THESE REQUIREMENT OF LAW HAVE NOT BEEN FU LFILLED BY A.O, AND LD. CIT (A) HAS NOT DECIDED THE GROUND IN THIS RESP ECT. APPELLANT RESPONDENT ITA 3053/MUM/2019/A.Y.2011-12 2 HINDUSTAN STEEL INDIA 2. LD. CIT (A) DID NOT DECIDE THE VALIDITY OF NOTIC E ISSUED AFTER LAPSE OF ONE MONTH FROM THE DATE OF RECORDING OF REASONS BY. A.O. APPELLANT SAYS THAT UNDER THE FACTS NOTICE U/S. 148 OF THE ACT DAT ED 02.03.2016 BEING ISSUED AFTER ONE MONTH OF REASON RECORDED ON 02.02. 2016 IS INVALID AS PER THE RATIO LAID BY THE COURT. 3. NO CONCRETE, COGENT AND CORROBORATIVE EVIDENCES, DOCUMENTS, COPIES OF AFFIRMATION OF VENDORS WHICH HAVE DIRECT NEXUS FOR REOPENING OF THE CASE AND FOR MAKING ADDITIONS ARE AVAILABLE ON RECORD AS LD. CIT (A) DID NOT MAKE AVAILABLE, ASSESSMENT RECORDS FOR INSPECTION AND VERIFICATION OF THESE FACTS THOUGH SPECIFIC REQUEST S WERE MADE BY A.R. IN HIS LETTER SUBMITTED AT THE TIME OF HEARING. THEREF ORE, AN ADVERSE INFERENCE MAY BE DRAWN AGAINST BOTH THE AUTHORITIES FOR WITHHOLDING OF THE EVIDENCE AS PER SECTION-114(G) OF THE EVIDENCE ACT AND INFERENCE MAY BE DRAWN IN FAVOUR OF THE APPELLANT AND BOTH TH E ORDERS PASSED BY LOWER AUTHORITIES MAY BE SET ASIDE WITH DELETION OF THE ADDITIONS. 4. AS STATED IN GROUND 3 ABOVE NO MATERIALS FURNISH ED TO THE APPELLANT FOR REBUTTAL BUT THE SAME ARE USED AGAINS T APPELLANT, THEREFORE, THERE IS FRAGRANT VIOLENCE OF RULES OF N ATURAL JUSTICE AND BOTH THE ORDERS MAY BE SET ASIDE ON THIS GROUND ALSO- TH IS GROUND IS ALSO NOT DECIDED BY LD. CIT (A) IN CLEAR TERMS. 5. ADDITIONS ARBITRARILY MADE AS DETAILS ASKED FOR HAVE BEEN SUBMITTED AND HAVE BEEN ACCEPTED AND THE ADDITION A RE MADE BASED ON SUSPICION, SURMISES, CONJECTURES AND BORROWED INFOR MATION AND OPINIONS OF OTHER AUTHORITIES WITHOUT MAKING ANY IN DEPENDENT INQUIRIES AND WITHOUT BRINGING ANY MATERIALS TO SUP PORT THE SAME ON RECORD TO SUPPORT OR TO SUSTAIN THE SAME BY LOWER A UTHORITIES, HENCE, BOTH THE ORDERS ARE LIABLE TO BE SET ASIDE IN TOTO WITH DELETION OF ENTIRE OF ADDITIONS. IN ANY CASE AS BOTH THE AUTHORITIES F AILED TO PROVE THE INFLATED PURCHASES OR PURCHASE PRICE AND WITHOUT RE JECTING THE BOOKS OF ACCOUNTS RESULT THE ADDITION MAY BE DELETED OR REDU CED SUBSTANTIALLY. 6. JUDGMENTS OF HONOURABLE JURISDICTIONAL HIGH COUR T AND MSTT, MUMBAI CITED, REFERRED AND RELIED ON BY THE APPELLA NT ARE BEING IGNORED BY BOTH THE AUTHORITIES, THE SAME MAY BE CO NSIDERED IN THIS APPEAL AS THE SAME ARE BOUND TO BE FOLLOWED BEING L OWER FORUM OF APPEAL AND THE DECISIONS OF THE CO-ORDINATE BENCHES ARE REQUIRED TO BE FOLLOWED AS REQUIRED UNDER ARTICLE 141 AND 144 OF T HE CONSTITUTION OF INDIA. 7. IN ANY CASE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, ORDERS PASSED BY BOTH THE LOWER AUTHORITIES MAY BE SET ASIDE WITH DELETION OF ADDITION AND / OR SUSTAINING THE SAME G IVING SUBSTANTIAL RELIEF IN THE MATTER AND HIGHLY OBLIGE. ITA 3053/MUM/2019/A.Y.2011-12 3 HINDUSTAN STEEL INDIA 8. PENAL INTEREST LEVIED ON ADDITIONAL DEMAND OF TA X DUE TO ADDITION MADE MAY BE DIRECTED NOT TO BE LEVIED. 9. APPELLANT CRAVE THE LIBERTY TO ADD OR TO ALTER O R TO AMEND OR TO CHANGE ANY GROUNDS OF APPEAL ON OR BEFORE OF THE HE ARING OR AT THE TIME OF HEARING OF THE APPEAL. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME OF THE ASSESSMENT YEAR (AY) 2011-1 2 ON 25.09.2009 DECLARING TOTAL INCOME OF RS.2,56,110/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT. THEREAFTER, THE ASSESSING OF FICER (AO) RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION ENTRIES BY AVAILING BOGUS PURCHASE BILLS TO INFLATE PURCHASES, THEREBY REDUCI NG THE TAX LIABILITIES. THE DETAILS, AS FOUND BY THE AO ARE AS UNDER: SR. NO NAME OF THE HAWALA PARTIES HAWALA PAN BILL AMOUNT 1. MELANI METAL (INDIA) AGTPJ6785E 25,87,565 2. SAMCO STEEL & ALLOYS AGQPJ9391R 29,84,664 TOTAL 55,72,229/- ACCORDINGLY, THE AO REOPENED THE ASSESSMENT BY ISSU ING NOTICE U/S. 148 OF THE ACT. DURING THE COURSE OF REASSESSMENT P ROCEEDINGS, THE AO ASKED THE ASSESSEE TO FILE THE DETAILS LIKE (A) NAM E OF THE SELLER WITH CURRENT FULL ADDRESS, (B) PAN (C) BILL AND VOUCHER NO. WITH DATE, (D) DESCRIPTION OF GOODS PURCHASED (E) QUANTITY (F) RAT E, (G) AMOUNT (H) GOODS DISPATCHED FROM (NAME OF THE PLACE) WITH DATE (I) MODE OF TRANSPORTATION, IF BY ROAD VEHICLE NO. AND ALSO PAY MENTS, DETAILED IN THE ANNEXURE-A AND (J) DETAILS OF CORRESPONDING SALES O F GOODS. ITA 3053/MUM/2019/A.Y.2011-12 4 HINDUSTAN STEEL INDIA THE AO NOTED THAT THE ASSESSEE COULD FILE FEW DETA ILS BUT COULD NOT LINK PURCHASES WITH CORRESPONDING SALES AND FURTHER FAILED TO PRODUCE THE BOOKS OF ACCOUNTS FOR VERIFICATION. ON THE BASIS OF THE ABOVE FACTS, THE AO ESTIMATED THE PROFIT @12.5% ON THE DISPUTED PURCHASES OF RS.55,72,229/- WHICH C OMES TO RS.6,96,528/-. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 14.02.2019, THE LD. CIT(A) HAS DISMISSED THE APPEAL FILED BY THE ASSESS EE BY OBSERVING THAT: I HAVE CONSIDERED THE FACTS OF THE CASE, AOS CONTE NTIONS AND APPELLANTS SUBMISSION AND ALSO THE CASE LAWS RELIE D UPON BY THE APPELLANT. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF FERROUS AND NON-FERROUS METALS. THE ASSESSEE HAS SHOWN PURCHASES OF RS.55,72,229/- FROM VARIOUS NON-GENUINE PARTIES AS PER THE INFORMATION RECEIVED FROM THE INVESTIGATION WING. SALES TAX DEPARTMENT HAS FOUND THAT THE SAID CONCERNS WERE NOT DOING GENUINE BUSINESS OF PURCHAS ES AND SALES AND MERELY INDULGING PROVIDING ACCOMMODATION BILLS. AO HAS DENIED THE EXPLANATION OFFERED BY THE ASSESSEE AS IT IS SEEN F ROM THE DETAILS ON RECORD THAT BARRING THE LEDGER ACCOUNT AND CHEQUE P AYMENT, NO OTHER DOCUMENTS SUCH AS LORRY RECEIPTS, TRANSPORTATION DE TAILS ARE PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. MOREOV ER, THE FACT REMAINS THAT THESE PARTIES HAVE ADMITTED IN FRONT O F THE SALES TAX DEPARTMENT THEY HAVE NOT MADE ANY SALE OR PURCHASE TRANSACTION. THIS PROVES THAT THE PURCHASES SHOWN TO HAVE BEEN MADE B Y THE ASSESSEE FROM THESE FIRMS ARE NON-GENUINE. ITA 3053/MUM/2019/A.Y.2011-12 5 HINDUSTAN STEEL INDIA THE AO AFTER CONSIDERING THE SUBMISSION AND ALSO GI VING DUE CONSIDERATION TO THE FACT THAT THE ASSESSEE HAS REC ORDED SUCH PURCHASES IN THE BOOKS OF ACCOUNT THAT 12.5% OF TOTAL AMOUNT OF THE SAID PURCHASES, WHICH COMES TO RS.6,96,528/- (TOTAL UNPR OVED PURCHASES BEING RS.55,72,229/-) IS TAKEN AS UNPROVED/NON-GENU INE PURCHASES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THUS , ADDITION OF THE AO IS CONFIRMED AND GROUNDS OF APPEAL NOS. 2 TO 6 ARE DISMISSED. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITS THAT THE ASSESSEE-FIRM IS A TRADER IN VARIOUS ITEMS OF FERRO US AND NON-FERROUS METALS DURING THE YEAR UNDER CONSIDERATION. IT IS S TATED THAT THE RE- ASSESSMENT PROCEEDINGS ARE NOT PROPERLY AND LEGALLY INITIATED BY THE AO AS REQUIRED AS PER TERMS LAID DOWN IN THE ACT. IN T HIS RESPECT, IT IS ARGUED BY HIM THAT THE AO HAS ISSUED NOTICE U/S. 147/148 A FTER ONE MONTH OF RECORDING OF REASONS FOR REOPENING OF ASSESSMENT. F URTHER, IT IS STATED THAT THE AO HAS NOT PROVIDED TO THE ASSESSEE, THE I NFORMATION/REPORTS OF THE SALES TAX DEPARTMENT IN SPITE OF THE REQUEST MA DE IN THIS REGARD. THE LD. COUNSEL SUBMITS THAT THE ASSESSEE HAS DISCHARGE D ITS BURDEN TO PROVE THE CLAIM AND THEREFORE THE ADDITION OF RS.6,96,628 /- MADE BY THE AO BE DELETED. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE (DR) SUBMITS THAT THERE IS NO IRREGULARITY ON THE PART O F THE AO IN ISSUING NOTICE U/S.148 IN THE PRESENT CASE. IT IS FURTHER A RGUED THAT AS RECORDED BY THE AO, THE ASSESSEE FAILED TO FILE FULL DETAILS CA LLED FOR VIDE NOTICE U/S.142(1) OF THE ACT. IT ALSO STATED BY HIM THAT T HE ASSESSEE FAILED TO PRODUCE TO BOOKS OF ACCOUNTS BEFORE THE AO FOR VERI FICATION. THUS, THE LD. ITA 3053/MUM/2019/A.Y.2011-12 6 HINDUSTAN STEEL INDIA DR SUBMITS THAT THE ESTIMATION @12.5% ON THE DISPUT ED PURCHASES MADE BY THE AO AND THEN CONFIRMED BY THE LD. CIT(A) BE A FFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. FIRSTLY, WE DEAL WIT H THE NOTICE ISSUED U/S.148 OF THE ACT. AS MENTIONED EARLIER, THE AO HA S REOPENED THE ASSESSMENT WHICH WAS PROCESSED U/S. 143(1) OF THE A CT. THE HONBLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS P. LTD. (2007) 291 ITR 500 (SC) ANALYZED THE DISTINCTION BE TWEEN THE ACCEPTANCE OF A RETURN U/S 143(1) AND AN ASSESSMENT WHICH IS FRAMED U/S 143(3) OF THE ACT. IN THE FORMER CASE, THE AO WOULD HAVE MUCH WIDER LATITUDE TO REOPEN THE ASSESSMENT. IN THE CASE OF AVIRAT STAR HOMES VENTURE P. LTD. V. ITO (2019) 411 ITR 321 (BOM), THE HONBLE BOMBAY HIGH COURT REFERRING TO THE ABOVE DECISION HAS HELD : THAT THE RETURN HAD BEEN ACCEPTED WITHOUT SCRUTINY . THE INCOME-TAX INVESTIGATION HAD SUBSEQUENTLY PROVIDED INFORMATION ABOUT CERTAIN COMPANIES HAVING BANK ACCOUNTS WITH A BANK IN KOLKATA AND WHO WERE INVOLVED IN GIVING ACCOMMODATION ENTRIES OF VARIOUS NATURE TO SEVERAL BENEFICIARIES INCLUDING THE ASSESSEE. THE INFORMATION SUPPLIED BY THE INVESTIGA TION WING TO THE ASSESSING OFFICER FORMED A PRIMA FACIE BASIS TO ENABLE THE ASSESSING OFFICER TO FORM A BELIEF OF INCOME CHARGEABLE TO TAX HAVING ESCAPED A SSESSMENT. THE ASSESSING OFFICER PERUSED THE INFORMATION SUPPLIED BY THE INV ESTIGATION WING AND HAVING FORMED THE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, COULD NOT BE STATED TO HAVE ACTED MECHANICALLY. FURTHER, THE MERE FACT THAT THE ASSESSEE HAD ASKED FOR CERTAIN INFORMATION FROM THE ASSESSING OFFICER, WHICH AT THIS STAGE WAS NOT SUPPLIED, WOULD NOT INVALIDAT E THE REASONS RECORDED BY THE ASSESSING OFFICER IN ISSUING THE NOTICE. THE NO TICE WAS VALID. ITA 3053/MUM/2019/A.Y.2011-12 7 HINDUSTAN STEEL INDIA THUS IN THE INSTANT CASE, THE AO HAS RIGHTLY ISSUE D NOTICE U/S 148 FOR REOPENING THE RETURN OF INCOME PROCESSED U/S 14 3(1) OF THE ACT. NO IRREGULARITY HAS BEEN COMMITTED BY THE AO IN RECORD ING THE REASONS AND THEN ISSUING THE NOTICE U/S.148 OF THE ACT. 7.1 AS MENTION EARLIER, THE AO HAD ISSUED NOTICE U/ S. 142(1) CALLING FOR DETAILS TO BE FILED BY THE ASSESSEE AND ALSO THE BO OKS OF ACCOUNTS TO BE REPRODUCED. IN RESPONSE TO IT, THE ASSESSEE FAILED TO FILE THE COMPLETE DETAILS. ALSO THE ASSESSEE FAILED TO PRODUCE BEFORE THE AO THE BOOKS OF ACCOUNTS FOR VERIFICATION IN VIEW OF THE ABOVE FACT S, WE ARE OF THE CONSIDERED VIEW THAT THE DECISION OF THE HONBLE BO MBAY HIGH COURT IN THE CASE OF PR. CIT V. M/S MOHOMMAD HAJI ADAM & CO. (ITA NO. 1004 OF 2016) HAS RELEVANCE TO THE PRESENT CASE. IN THAT CA SE, DURING THE COURSE OF SURVEY OPERATIONS IN THE CASE OF ENTITIES FROM WHOM THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES, THE DEPARTMENT COLL ECTED INFORMATION SUGGESTING THAT SUCH PURCHASES WERE NOT GENUINE. TH E AO NOTICED THAT THE ASSESSEE HAD SHOWN PURCHASES OF FABRICS WORTH R S.29.41 LAKHS FROM THREE GROUP CONCERNS, NAMELY M/S MANOJ MILLS, M/S A STHA SILK INDUSTRIES AND M/S SHRI RAM SALES AND SYNTHETICS. ON THE BASIS OF STATEMENT RECORDED DURING SUCH SURVEY OPERATIONS, THE AO CONC LUDED THAT THE SELLING PARTIES WERE ENGAGED ONLY IN SUPPLYING THE BOGUS BILLS, THAT THE GOODS IN QUESTION WERE NEVER SUPPLIED TO THE ASSESS EE, AND THEREFORE, THE PURCHASES WERE BOGUS. HE, THEREFORE, ADDED THE ENTI RE SUM IN THE HANDS OF THE ASSESSEE AS ITS ADDITIONAL INCOME. THE ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), WHO ACCEPTED THE FACTU M OF PURCHASES BEING BOGUS. HOWEVER, HE COMPARED THE PURCHASES AND SALES STATEMENTS OF THE ASSESSEE AND OBSERVED THAT THE DEPARTMENT HAD ACCEP TED THE SALE, AND ITA 3053/MUM/2019/A.Y.2011-12 8 HINDUSTAN STEEL INDIA THEREFORE, THERE WAS NO REASON TO REJECT THE PURCHA SES, BECAUSE WITHOUT PURCHASES THERE CANNOT BE SALES. HE, THEREFORE, HEL D THAT UNDER THESE CIRCUMSTANCES THE AO WAS NOT CORRECT IN ADDING THE ENTIRE AMOUNT OF PURCHASES AS THE ASSESSEES INCOME. HE, THEREFORE, DELETED THE ADDITION REFRESHING IT TO 10% OF THE PURCHASE AMOUNT. HE ALS O DIRECTED THE AO TO MAKE ADDITION TO THE EXTENT OF DIFFERENCE BETWEEN T HE GROSS PROFIT RATE AS PER THE BOOKS OF ACCOUNTS ON UNDISPUTED PURCHASES A ND GROSS PROFIT ON SALES RELATING TO THE PURCHASES MADE FROM THE SAID THREE PARTIES. THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL. TH E REVENUE ALSO CARRIED THE ISSUE BEFORE THE TRIBUNAL. THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE PARTLY AND DISMISSED THAT OF THE REVEN UE. THE TRIBUNAL NOTED THAT THE CIT(A) HAD NOT GIVEN ANY REASONS FOR RETAINING 10% OF THE PURCHASES BY WAY OF AD-HOC ADDITIONS. THE TRIBUNAL, THEREFORE, DELETED SUCH ADDITIONS, BUT RETAINED THE PORTION OF THE ORD ER OF THE CIT(A) TO THAT EXTENT HE PERMITTED THE AO TO TAX THE ASSESSEE ON T HE BASIS OF DIFFERENCE IN THE GP RATES. IN FURTHER APPEAL BEFORE THE HONB LE BOMBAY HIGH COURT, THE REVENUE REFERRED TO THE DECISION OF THE DIVISIO N BENCH OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF N.K. INDUSTRIES L TD. V. DCIT IN TAX APPEAL NO. 240 OF 2003 AND CONNECTED APPEALS DECIDE D ON 20.06.2016 AND ALSO POINTED OUT THAT THE SLP AGAINST SUCH DECI SION WAS DISMISSED BY THE HONBLE SUPREME COURT. THE HONBLE BOMBAY HIGH COURT HELD : 8. IN THE PRESENT CASE, AS NOTED ABOVE, THE ASSESS EE WAS A TRADER OF FABRICS. THE A.O. FOUND THREE ENTITIES WHO WERE INDULGING IN BOGUS BILLING ACTIVITIES. A.O. FOUND THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE ENTITIES WERE BOGUS. THIS BEING A FINDING OF FACT, WE HAVE PROCEE DED ON SUCH BASIS. DESPITE THIS, THE QUESTION ARISES WHETHER THE REVENUE IS CO RRECT IN CONTENDING THAT THE ITA 3053/MUM/2019/A.Y.2011-12 9 HINDUSTAN STEEL INDIA ENTIRE PURCHASE AMOUNT SHOULD BE ADDED BY WAY OF AS SESSEE'S ADDITIONAL INCOME OR THE ASSESSEE IS CORRECT IN CONTENDING THA T SUCH LOGIC CANNOT BE APPLIED. THE FINDING OF THE CIT(A) AND THE TRIBUNAL WOULD SUGGEST THAT THE DEPARTMENT HAD NOT DISPUTED THE ASSESSEE'S SALES. T HERE WAS NO DISCREPANCY BETWEEN THE PURCHASES SHOWN BY THE ASSESSEE AND THE SALES DECLARED. THAT BEING THE POSITION, THE TRIBUNAL WAS CORRECT IN COM ING TO THE CONCLUSION THAT THE PURCHASES CANNOT BE REJECTED WITHOUT DISTURBING THE SALES IN CASE OF A TRADER. THE TRIBUNAL, THEREFORE, CORRECTLY RESTRICT ED THE ADDITIONS LIMITED TO THE EXTENT OF BRINGING THE G.P. RATE ON PURCHASES AT TH E SAME RATE OF OTHER GENUINE PURCHASES. THE DECISION OF THE GUJARAT HIGH COURT I N THE CASE OF N.K. INDUSTRIES (SUPRA) CANNOT BE APPLIED WITHOUT REFERENCE TO THE FACTS. IN FACT IN PARAGRAPH 8 OF THE SAME JUDGMENT THE COURT HELD AND OBSERVED AS UNDER- SO FAR AS THE QUESTION REGARDING ADDITION OF RS.3 ,70,78,125/- AS GROSS PROFIT ON SALES OF RS.37.08 CRORES MADE BY THE ASSE SSING OFFICER DESPITE THE FACT THAT THE SAID SALES HAD ADMITTEDLY BEEN RE CORDED IN THE REGULAR BOOKS DURING FINANCIAL YEAR 1997-98 IS CONCERNED, W E ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE PUNISHED SINCE SALE PRI CE IS ACCEPTED BY THE REVENUE. THEREFORE, EVEN IF 6 % GROSS PROFIT IS TAK EN INTO ACCOUNT, THE CORRESPONDING COST PRICE IS REQUIRED TO BE DEDUCTED AND TAX CANNOT BE LEVIED ON THE SAME PRICE. WE HAVE TO REDUCE THE SEL LING PRICE ACCORDINGLY AS A RESULT OF WHICH PROFIT COMES TO 5. 66 %. THEREFORE, CONSIDERING 5.66 % OF RS.3,70,78,125/- WHICH COMES TO RS.20,98,621.88 WE THINK IT FIT TO DIRECT THE REVENUE TO ADD RS.20, 98,621.88 AS GROSS PROFIT AND MAKE NECESSARY DEDUCTIONS ACCORDINGLY. A CCORDINGLY, THE SAID QUESTION IS ANSWERED PARTIALLY IN FAVOUR OF TH E ASSESSEE AND PARTIALLY IN FAVOUR OF THE REVENUE. WE FIND THAT THE FACTS IN THE INSTANT CASE ARE SIMI LAR TO THE ABOVE DECISION. FOLLOWING THE SAME, WE SET ASIDE THE ORDE R OF THE LD. CIT(A) AND DIRECT THE AO TO RESTRICT THE ADDITIONS LIMITED TO THE EXTENT OF BRINGING THE ITA 3053/MUM/2019/A.Y.2011-12 10 HINDUSTAN STEEL INDIA G.P. RATE ON DISPUTED PURCHASES AT THE SAME RATE OF OTHER GENUINE PURCHASES. WE DIRECT THE ASSESSEE TO FILE THE RELEV ANT DOCUMENTS/EVIDENCE BEFORE THE AO. NEEDLESS TO SAY, THE AO WOULD GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE BEFORE FINALIZING THE ORDER. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.11.2019 SD/- SD/- (RAVISH SOOD) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI; DATED: 15.11.2019 SUBHANKAR, PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY. /ASSISTANT REGISTRAR) ITAT, MUMBAI