ITO WD 3(1), KALYAN V. BHARAT R VALIA, DOMBIVALI

ITA 5357/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9099 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 17-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Bogus purchase; Question of law; Cost of acquisition
• Section: 133(6); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/ SHRI D.T. GARASIA (JM) & B.R. BASKARAN (AM) I.T.A. NO. 5357 /MUM/20 15 (ASSESSMENT YEAR 20 09 - 10 ) I.T.A. NO. 5358/MUM/2015 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 5359/MUM/2015 (ASSESSMENT YE AR 2011 - 12) ITO WARD - 3(1) 2 ND FLOOR, RANI MANSION KALYAN - MURBAD ROAD NEAR SBI, KALYAN (W) PIN : 421301. VS. SHRI BHARAT R. VALIA PROP. M/S. RELIANCE SWITCHGEARS, B - 10 SHREE GURUDATT TOWERS PANDURANGWADI MANPADA ROAD DOMBIVALI (E) - 421201. PAN : ADMPV81 08K ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY S HRI V. VIDHYADHAR DATE OF HEARING 0 9 . 10 . 201 7 DATE OF PRONOUNCEMENT 0 9 . 10 . 201 7 O R D E R PER B ENCH : - THESE THREE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST A COMMON ORDER DATED 27.8.2015 PASSED BY THE LEARNED CIT(A) - THANE AND THEY RELATE TO A.YS. 2009 - 10 TO 2011 - 12. 2. ALL THESE APPEALS WERE HEARD TOGETHER SINCE THE ISSUES URGED IN THESE APPEALS ARE IDENTICAL IN NATURE. ACCORDINGLY, THESE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE AND HENCE WE PROCEED TO DISPOSE OF THESE APPEALS EX - PARTE, WITHOUT PRESENCE OF THE ASSESSEE. 4. WE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORD. THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN NOT FULLY SHRI BHARAT R. VALIA 2 SUSTAINING ADDITION RELATING TO BOGUS PURCHASES AND SALES PROMOTION EXPENSES MADE BY THE ASSESSING OFFICER IN ALL THE YEARS UNDER CONSIDERATION. 5. THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF TRADING IN ELECTRIC AND HARDWARE MATERIALS. UPON RECEIVING INFORMATION FROM THE SALES TAX DE PARTMENT THAT CERTAIN DEALERS A RE INDULG ING IN ISSUING ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIALS AND UPON NOTICING THA T THE ASSESSEE HAS PURCHASED GOODS FROM SOME OF SUCH SUSPICIOUS DEALERS, THE ASSESSING OFFICER REOPENED THE ASSESSMENT S OF ALL THE THREE YEARS UNDER CONSIDERATION. BEFORE THE ASSESSING OFFICER THE ASSESSEE FURNISHED COPY OF BILLS AND DETAILS OF PAYMENTS. H OWEVER, ASSESSEE COULD NOT PRODUCE ANY CONFIRMATION LETTERS FROM THE SUPPLIERS AND ALSO COULD NOT PRODUCE THE SUPPLIERS BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER ALSO ISSUED NOTICES U/S. 133(6) AND THE Y WERE RETURNED BACK UN - SERVED . H ENCE THE ASS ESSING OFFICER DISALLOWED ENTIRE AMOUNT OF PURCHASE IN ALL THE THREE YEARS TREAT ING THEM AS BOGUS IN NATURE. THE LEARNED CIT( A), HOWEVER, RESTRICTED THE ADDITION TO 12.5% OF THE VALUE OF PURCHASES MADE FROM SUSPICIOUS DEALERS IN ALL THE THREE YEARS UNDER C ONSIDERATION. THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A). 6 . WE NOTICED THAT THE LEARNED CIT(A) HAS DECIDED THE ISSUE BY MAKING FOLLOWING OBSERVATION S : - 5. THE APPELLANT IS ENGAGED IN THE BUSINESS OF RESELLING OF ELECTRICAL AND GEN ERAL HARDWARE GOODS. ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING, THE AO NOTICED THAT THE APPELLANT WAS A BENEFICIARY OF HAWALA ENTRY OPERATORS. THE APPELLANT HAD SHOWN PURCHASES AMOUNTING TO RS. 50,09,091/ - FROM VARIOUS PARTIES, WHO WERE LISTED BY THE SALES TAX AUTHORITIES AS HAWALA OPERATORS I.E. ONLY PROVIDING BILLS WITHOUT THERE BEING ANY ACTUAL TRANSACTION OF PURCHASES OR SALES. THEREFORE, AO ISSUED NOTICE U/S. 148 OF THE T.T. ACT, TO THE APPELLANT AND RE - OPENED THE ASSESSMENT PROCEEDI NGS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO ASKED THE APPELLANT TO ESTABLISH THE GENUINENESS OF THE PURCHASES SHOWN FROM ALL SUCH PARTIES. THE APPELLANT FILED COPIES OF PURCHASE BILLS AND ALSO STATED THAT THE PAYMENT TO ALL THE PARTIES HAD BEEN MADE THROUGH CHEQUES. HOWEVER, THE APPELLANT COULD NOT FILE COPIES OF TRANSPORT HILLS, DELIVERY CHALLANS AND OCTROI PAYMENTS MW IN RESPECT OF ALL SUCH SHRI BHARAT R. VALIA 3 TRANSACTIONS. IT WAS SUBMITTED THAT AS THE GOODS WERE HAND DELIVERED TO THE APPELLANT, THEREFORE, T HERE WERE NO SUCH TRANSPORT AND OCTROI HILLS. THE AO DEPUTED HIS INSPECTOR, WHO OBTAINED INFORMATION IN RESPECT OF ALL SUCH PARTIES U/S. 133(6) OF THE I.T. ACT AND REPORTED THAT NO BUSINESS ACTIVITY WAS BEING CARRIED OUT AT ANY OF THE ADDRESSES MENTIONED I N RESPECT OF ALL THESE PARTIES. THE AO ASKED THE APPELLANT TO PRODUCE THE PARTIES BEFORE HIM FOR EXAMINATION, WHICH WAS NOT (LONE. THE AO THEREFORE, AFTER REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT U/S. 145(3) OF THE I.T. ACT FOR NOT BEING COMPLETE A ND CORRECT, ADDED THE AMOUNT OF RS. 50,09,091/ - TO THE APPELLANT'S INCOME BY TREATING ALL SUCH PURCHASES AS BOGUS PURCHASES. 6. THE APPELLANT IN RESPONSE TO THIS ADDITION SUBMITTED THAT COMPLETE NAME AND ADDRESS OF THE PARTIES HAD BEEN SUPPLIED TO THE AO. THE COPIES OF INVOICES IN RESPECT OF ALL THESE PURCHASES AND LEDGER ACCOUNTS OF ALL THE PARTIES WERE FILED BEFORE THE AO. FURTHER, THE PAYMENT TO ALL SUCH PARTIES HAD BEEN MADE THROUGH CHEQUE. THE APPELLANT FILED THE FOLLOWING COMPARATIVE CHART OF GROSS P ROFIT AND NET PROFIT FOR THE YEAR UNDER CONSIDERATION AND TWO PRECEDING AND SUCCEEDING YEARS A/C. YEAR 2008 - 09 A/C. YEAR 2009 - 10 A/C. YEAR 2010 - 11 A/C. YEAR 2011 - 12 A/C. YEAR 2012 - 13 GP 23,72,895 25,87,399 31,84,790 40,24,437 45,33,170 GP RATIO 4.30% 4.23% 3.87% 4.42% 5.35% NP 4,82,121 5,12,160 7,24,120 7,96,680 11,48,094 NP RATIO 0.87% 0.84% 0.88% 0.87% 1.35% 7. THE APPELLANT ALSO RELIED ON THE FOLLOWING DECISIONS - 'ITAT MUMBAI IN THE CASE OF SHRI RAJEEV G. KALATHIL VS. DC1T HELD THAT PURCHASES CANNOT BE TERMED AS BOGUS BY THE AO MERELY BECAUSE THE SUPPLIER WAS LISTED AS A HAWALA DEALER BY THE VAT AUTHORIZES. ITAT BOMBAY BENCH 'B' CASE OF BALAJI TEXTILE INDUSTRIES (P) LTD. VS. THIRD INCOME - TAX OFFICER, HELD THAT NO SALES WERE LIKELY TO BE EFFECTE D IF THERE WERE NO PURCHASES. A SALE COULD BE MADE IF THE GOODS WERE AVAILABLE WITH THE SELLER. THEREFORE, THE ASSESSEE WAS ENTITLED TO GET THE ENTIRE DEDUCTION OF PURCHASES MADE. MERELY BECAUSE THE PARTIES WERE NOT FOUND AT THE ADDRESS GIVEN, NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE AHMED & SONS VS. C1T (297 ITR 431). SHRI BHARAT R. VALIA 4 ALSO THE JUDGEMENT OF THE HON'BLE COURT OF GUJARAT IN THE CASE OF MK. BROS. VS. 'IT 163 ITR 240 SUPPORTS THE CASE OF THE ASSESSEE. IN THAT CASE, THE SELLERS HAD ADMITTED BEFORE THE SALES TAX AUTHORITIES, THEY HAD ISSUED BOGUS VOUCHERS. THE TRIBUNAL HOWEVER FOUND THAT THERE WAS NO EVIDENCE THAT THE VOUCHERS WERE BOGUS AND THERE WAS ALSO NO MATERIA L TO SHOW THAT THE PAYMENTS MADE BY THE ASSESSEE HAD BEEN RETURNED TO IT. THE TRIBUNAL DELETED THE ADDITION WHICH WAS UPHELD BY THE HON'BLE HIGH COURT. RECENTLY, IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BHOLANATH POLY FAB. PVT. LTD., THE HON'BLE HIGH COURT OF GUJARAT (2013) 355 ITR 290 ( G UJ) HAS HELD AS BELOW 'WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS IS ESSENTIALLY A QUESTION O F FACT. THE TRIBUNAL EXAMINED THE EVIDENCE ON RECORD AND CONCLUDED THAT THE ASSESSEE DID PURCHASE THE CLOTH AND SELL FINISHED GOODS. IN THAT VIEW OF THE MATTER, AS NATURAL COROLLARY, NOT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDED THEREIN WOULD BE SUBJECT TO TAX.' UNDER THE CIRCUMSTANCES AND THE FACTS OF CASE, WE REQUEST TO DELETE THE ADDITION MADE BY THE AO. WITHOUT PREJUDICE THE ABOVE, WE FURTHER STATE THAT TO BUY PEACE OF MIND AND TO AVOID PROLONGED STRENUOUS, LITIGATION AT THE PROCEEDINGS WE AGREES THAT THE LAW LAID DOWN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE C1T - 1 VS. SIMIT P. SHETH 1TA NO. 553 OF 2012 ORDER DATED 16/01/2013 MAY BE APPLIED TO THE FACT (. F OUR CASE AND ADDITION ON ACCOUNT OF PROFITS SUPPRES.VED DUE TO THIS TRANSACTION BY APPLYING GP PERC ENTAGE MAY BE BROUGHT TO TAX.' 8. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISSIONS, OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AND THE FACTS OF THE CASE. THE APPELLANT HAD SHOWN PURCHASES AMOUNTING TO RS. 50,09,091/ - FROM VARIOUS PARTIES WHICH AP PEARED IN THE LIST OF SALES - TAX DEPARTMENT WHO HAD INDULGED IN .HAWALA TRANSACTIONS I.E. PROVIDING ONLY BILLS WITHOUT THERE BEING ANY ACTUAL PURCHASE OR SALE TRANSACTION. THE AO CONDUCTED INQUIRIES THROUGH HIS INSPECTOR, WHO REPORTED THAT NONE OF THE PARTI ES EXISTED AT THE GIVEN ADDRESSES AND NO BUSINESS ACTIVITY WAS BEING CARRIED OUT AT THOSE ADDRESSES. THE APPELLANT COULD NOT PRODUCE THE PARTIES BEFORE THE AO FOR HIS EXAMINATION. THE APPELLANT ALSO DID NOT HAVE ANY TRANSPORT BILLS, DELIVERY CHALLANS OR OC TROI PAYMENT RECEIPTS IN RESPECT OF THESE SHRI BHARAT R. VALIA 5 PURCHASES. THEREFORE, THE APPELLANT HAD NOT BEEN ABLE TO ESTABLISH THE GENUINENESS OF THE PURCHASES FROM SUCH PARTIES. 9. WITH REGARD TO THE APPELLANT'S RELIANCE ON VARIOUS DECISIONS IT IS SEEN THAT THE FACTS OF THE APPELLANT'S CASE ARE DIFFERENT FROM THE FACTS OF THE DECISIONS RELIED UPON BY THE APPELLANT. IN THE CASE OF NIKUNJ EXIM (SUPRA) THE HON'BLE BOMBAY HIGH COURT HELD THAT THE ASSESSEE IN THAT CASE HAD FILED CONFIRMATIONS FROM THE SUPPLIERS, COPY OF BANK ACCOU NT STATEMENT SHOWING PAYMENT THROUGH CHECK, STOCK RECONCILIATION STATEMENT ETC. BASED ON ALL THIS EVIDENCE THE TRIBUNAL'S ORDER HOLDING THAT PURCHASES WERE NOT BOGUS WAS HELD TO BE WELL REASONED. IN THE CASE OF CIT VS. M.K. BROTHERS, IT WAS HELD BY THE ITA T THAT THERE WAS NO EVIDENCE THAT THE PARTIES HAD ISSUED BOGUS VOUCHERS AND THAT THE PAYMENT MADE BY THE ASSESSEE IN THAT CASE THROUGH CHECKS HAD BEEN RECEIVED BACK BY THE ASSESSEE. IT WAS HELD THAT EVEN THOUGH THERE WERE SOME DOUBTFUL FEATURES OF THE TRAN SACTIONS BUT SUFFICIENT EVIDENCE WAS NOT THERE TO HOLD THE PURCHASES AS BOGUS. THE HON'BLE GUJRAT HIGH COURT UPHELD THE ORDER OF THE ITAT BY OBSERVING THAT WHETHER THE SAID TRANSACTIONS WERE BOGUS OR NOT WAS A QUESTION OF FACT. IN THE CASE OF RAJEEV KALATH IL VS ITO IT WAS HELD THAT ASSESSING OFFICER HAD MADE THE ADDITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWALA DEALER BY THE VAT DEPARTMENT. IT WAS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATION AND TAKING IT TO LOGICAL END. BUT THE AO LEFT THE JO B AT INITIAL POINT ITSELF. IN THE APPELLANT'S CASE, THE AO HAS CARRIED OUT INDEPENDENT ENQUIRIES BY ISSUING NOTICES U/S 133(6) AND ALSO THROUGH THE INSPECTOR OF THE WARD. ON THE BASIS OF INQUIRIES CONDUCTED BY THE AO, IT WAS ESTABLISHED THAT NONE OF THESE PARTIES EXISTED AT THE ADDRESSES GIVEN BY THE APPELLANT AND NO BUSINESS ACTIVITY WAS BEING CARRIED OUT THERE. THEREFORE, THE APPELLANT HAS NOT BEEN ABLE TO ESTABLISH THE GENUINENESS OF THE PURCHASES. HOWEVER, IT IS SEEN THAT IF THE WHOLE OF THE AMOUNT OF B OGUS PURCHASES IS ADDED TO THE INCOME OF THE APPELLANT THEN THE NET PROFIT RATE FOR THE YEAR UNDER CONSIDERATION WILL GO UP TO 7% AND FOR THE ASSESSMENT YEAR 2009 - 10 AND 2010 - 11 TO 8% AS CAN BE SEEN FROM THE CHART BELOW SHRI BHARAT R. VALIA 6 10. SUCH A NET PROFIT RATE IS T OO HIGH AND NOT PRACTICAL IN THE APPELLANT'S LINE OF BUSINESS CONSIDERING THAT THE APPELLANT HAD SHOWN A NP RATE OF .87% AND 1.35% IN TWO SUCCEEDING YEARS (AY 2012 - 13 AND 2013 - 14) WHERE THE ISSUE OF BOGUS PURCHASES WAS NOT THERE. MOREOVER, IF THE SALES WER E THERE, PURCHASES HAVE TO BE THERE AS WELL AS HELD BY THE ITAT, BOMBAY BENCH 'B' IN THE CASE OF BALAJI TEXTILE INDUSTRIES PVT. LTD. THEREFORE, THE ONLY INFERENCE THAT CAN BE DRAWN IN THAT CASE IS THE APPELLANT HAD MADE PURCHASES IN THE OPEN MARKET AND HAD OBTAINED BILLS FROM THE HAWALA OPERATORS. IN THIS PROCESS THE APPELLANT SAVED ON THE SALES - TAX / VAT AND ENHANCED HIS PROFIT BY INFLATING THE PURCHASES. IN THIS REGARD IT IS SEEN THAT IN THE CASE OF CIT VS SIMIT P. SHETH, 356 ITR 451, HON'BLE GUJRAT HIGH COURT HELD AS UNDER - THE ASSESSEE IN THIS CASE WAS ENGAGED IN THE BUSINESS OF TRADING IN STEEL ON WHOLESALE BASIS. ASSESSING OFFICER NOTICED THAT SOME OF THE ALLEGED SUPPLIERS OF STEEL TO THE ASSESSEE HAD MADE THEIR STATEMENTS ON OATH TO THE EFFECT THAT THEY HAD NOT SUPPLIED THE STEEL TO THE ASSESSEE BUT HAD ONLY PROVIDED SALE BILLS. IN TURN, THEY WERE RECEIVING A SMALL COMMISSION. THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS NOTICED THAT THERE WERE NO DOCUMENTS OTHER THAN THE DELIVERY CHALLANS AND SALE INVOICES. THERE WAS NO MOVEMENT OF GOODS. HE, THEREFORE, CONCLUDED THAT TOTAL PURCHASES OF RS. 41,04,903/ - CUMULATIVELY MADE FROM THE SAID THREE PARTIES WERE BOGUS. HE THUS, TREATED SUCH PURCHASES AS BOGUS PURCHASES AND ADDED THE ENTIRE AMOUNT OF RS. 41,04,903/ - TO THE GROSS PROFIT OF THE ASSESSEE. THE COMMISSIONER (APPEALS) THOUGH CONFIRMED THE VIEW OF THE ASSESSING OFFICER THAT THE PURCHASES WERE NOT MADE BY THE SAID THREE PARTIES VIZ. BHAVNA TRADING CO., M/S. MINAXI ENTERPRISE AND ARUN INDUSTRIA L CORPORATION BUT BELIEVED THAT THE APPELLANT ASSESSEE HAD MADE THE PURCHASES FROM OTHER PARTIES IN THE OPEN MARKET. THEREUPON, HE RETAINED 30% OF THE PURCHASE COST AS THE PROBABLE PROFIT OF THE ASSESSEE. THE TRIBUNAL WAS OF THE OPINION THAT TWELVE AND HAL F SHRI BHARAT R. VALIA 7 PERCENT OF THE DISPUTED PURCHASES SHOULD BE RETAINED IN THE HANDS OF THE ASSESSEE AS BUSINESS PROFIT. IN THE PRESENT CASE, CIT BELIEVED THAT WHEN AS A TRADER IN STEEL THE ASSESSEE SOLD CERTAIN QUANTITY OF STEEL, HE WOULD HAVE PURCHASED 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 ASSESSEE'S THEORY THAT THE PURCHASES WERE NOT BOGUS BUT WER E MADE FROM THE PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNTS. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. SO MUCH IS CLEAR BY DECISION OF THIS COURT. IN PARTICULAR, COURT HAS ALSO TAKEN A SIMILAR VIEW IN CASE OF COMMISSIONER OF INCOME TAX - IV VS. VIJAY M MISTRY CONSTRUCTION LTD VIDE ORDER DATED 10.01.2011 PASSED IN TAX APPEAL NO. 1090 OF 2009 AND IN CASE OF COMMISSIONER OF INCOME TAX - I VS . BHOLANATH POLY FAB PVT. LTD VIDE ORDER DATED 23.10.2012 PASSED IN TAX APPEAL NO. 63 OF 2012. THE VIEW TAKEN BY THE TRIBUNAL IN CASE OF VIJAY PROTEINS PVT. LTD. VS. CIT REPORTED IN 58 LTD 428 CAME TO BE APPROVED. THIS BEING THE POSITION, THE ONLY QU ESTION THAT SURVIVES IS WHAT SHOULD BE THE FAIR PROFIT RATE OUT OF THE BOGUS PURCHASES WHICH SHOULD BE ADDED BACK TO THE INCOME OF THE ASSESSEE. THE COMMISSIONER ADOPTED RATIO OF 30% OF SUCH TOTAL SALES. THE TRIBUNAL, HOWEVER, SCALED DOWN TO 12.5%. WE MAY NOTICE THAT IN THE IMMEDIATELY PRECEDING YEAR TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARED GROSS PROFIT @ 3.56% OF THE TOTAL TURNOVER. IF THE YARDSTICK OF 30%, AS ADOPTED BY THE COMMISSIONER, IS A CCEPTED GP RATE WILL BE MUCH HIG HER. IN ESSENCE, THE TRIBUNAL ONLY ESTIMATED THE POSSIBLE PROFIT OUT OF PURCHASES MADE THROUGH NON - GENUINE PARTIES. NO QUESTION OF LAW IN SUCH ESTIMATION WOULD ARISE. THE ESTIMATION OF RATE OF PROFIT RETURN MUST NECESSARILY VARY WITH THE NATURE OF BUSINESS AN D NO UNIFORM YARDSTICK CAN BE ADOPTED. 11. THE APPELLANT IS ALSO ENGAGED IN THE BUSINESS OF TRADING/ RESELLING. THEREFORE, FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMITH P. SHETH (SUPRA) 12.5% OF THE AMOUNT OF UNPROVED PURCHASES IS DISALLOWED TO THE APPELLANT. CONSEQUENTLY, ADDITION AMOUNTING TO RS.6,26,136/ - (BEING 12.5% OF RS.50,09,091/ - ) IS SUSTAINED FOR THE AY 2011 - 12. THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. 1 SHRI BHARAT R. VALIA 8 12. AS THE FACTS OF THE APPELLANT'S CASE FOR AY 200 9 - 10 AND 2010 - 11, ARE IDENTICAL, ADDITION FOR THOSE YEARS IS ALSO SUSTAINED TO THE EXTENT OF RS. 4,78,919/ - AND RS. 5,76,778/ - BEING 12.5% OF THE UNPROVED PURCHASE AMOUNT OF RS. 38,31,356/ - AND RS. 46,14,228/ - RESPECTIVELY. 7 . WE NOTICED THAT THE ASSESSEE HAS BEEN DECLARING GP RATIO OF AROUND 4% IN ALL THE YEARS. THE LD CIT(A) HAS NOTICED THAT THE ASSESSEE HAS PRODUCED COPY OF PURCHASE BILLS AND DETAILS OF PAYMENT. HE HAS ALSO NOTICED THAT THE NET PROFIT DECL A RED BY THE ASSESSEE WAS LESS THAN 1% IN THESE THREE YEARS AND IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER WOULD RESULT IN ABNORMAL INCREASE IN NP RATIO TO AROUND 8% , WHICH IS UNREASONABLE ONE . HENCE THE LD CIT(A) HAS TAKEN THE VIEW THAT THE ENTIRE PURCHASES COULD NOT BE DISALLOWED. HOWEVER, SINC E THE ASSESSEE HAS FAILED TO FURNISH CONFIRMATION LETTERS OBTAINED FROM SUPPLIERS NOR COULD HE PRODUCE THEM BEFORE THE ASSESSING OFFICER, THE LEARNED CIT(A) BY FOLLOWING THE DECISION RENDERED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIMIT P. S HETH (356 ITR 451) HAS RESTRICTED THE ADDITION TO 12.5% OF THE VALUE OF PURCHASES. THE APPARENT INFERENCE DRAWN BY THE LD CIT(A) IS THAT THE ASSESSEE COULD HAVE MADE PROFIT FROM OUT THE IMPUGNED PURCHASES BY SOURCING THE MATERIALS FROM SOME OTHER SOURCES. UNDER FACTS OF THIS CASE, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS TAKEN A FAIR VIEW ON THIS MATTER AND HENCE THE ORDER S PASSED BY HIM ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE. 8. THE REVENUE IS ALSO AGGRIEVED BY THE DECISION OF THE LEARNE D CIT(A) IN RESTRICTING DISALLOWANCE OF MADE OUT SALES PROMOTION EXPENSES TO 10% , AS AGAINST THE DISALLOWANCE MADE BY AO @ 100%. THE ASSESSING OFFICER DISALLOWED 100% OF SALES PROMOTION EXPENSES AND 10% OF ADVERTISEMENT AND TRANSPORT EXPENSES , SINCE THE A SSESSEE FAILED TO FURNISH EVIDENCE S IN SUPPORT OF THE EXPENSES CLAIMED BY HIM. THE LEARNED CIT(A) NOTICED THAT THE AO DID NOT GIVE ANY REASONING FOR DISALLOWING EXPENSES AT DIFFERENT RATES. ACCORDINGLY HE RESTRICTED THE DISALLOWANCE MADE OUT OF SALES PROM OTION EXPENSES ALSO AT UNIFORM RATE OF 10% IN ALL THE THREE YEARS UNDER CONSIDERATION . WE NOTICE THAT THE LEARNED CIT(A) HAS TAKEN THIS VIEW UPON NOTIC ING THAT THE ASSESSING OFFICER SHRI BHARAT R. VALIA 9 HAS NOT FURNISHED ANY CREDIBLE REASON FOR DISALLOWING SALES PROMOTION EXPE NSES @ 100% , WHILE MAKING DISALLOWANCE OUT OF ADVERTISEMENT AND TRANSPORT EXPENSES @ 10%. BEFORE US, THE REVENUE COULD NOT FURNISH ANY VALID REASON FOR ADOPTING DIFFERENT STANDARDS FOR MAKING DISALLOWANCE OUT OF EXPENSES, WHEN THE UNDERLYING FACTS ARE IDE NTICAL IN ALL THE CASES. HENCE WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE ALSO DOES NOT CALL FOR ANY INTERFERENCE IN ALL THREE YEARS UNDER CONSIDERATION. 9. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE DISMIS SED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 0 9 . 10 .201 7. SD/ - SD/ - (D.T. GARASIA ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 0 9 / 10 / 20 1 7 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./ASSTT. REGISTRAR) PS ITAT, MUMBAI