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TMI Blog2016 (8) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure was unsatisfactory. Therefore, in our opinion, the AO had wrongly invoked the provisions of the section 69C of the Act. Considering the above, effective GOA, raised by the AO is decided against him. - Decided in favour of assessee - I.T.A. 5288/Mum/2013, I.T.A. 5436/Mum/2013 - - - Dated:- 22-7-2016 - Sh. Rajendra, Accountant Member Pawan Singh, Judicial Member For the Revenue : Ms. Radha Katyal Narang-DR For the Assessee : Shri Yogesh Thar-AR ORDER Per Rajendra, AM Challenging the order dt. 16. 5. 13 of CIT(A)-35, Mumbai the assessee and the Assessing Officer(AO), have filed Cross appeals for the year under consideration. Assessee-firm engaged in the business of reselling of iron and steel filed its return of income on 28. 9. 10 declaring total income at ₹ 42. 45lakhs. The AO completed the assessment u/s. 143(3) of the Act, on 05. 02. 13, determining the income of the assessee at ₹ 1. 22Crores. 2. During the assessment proceedings, the AO found that the assessee had debited purchase of 25. 25 Croresores. He directed it to file details of purchases, TIN and names and addressed of the parties from whom purchases were made. In re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after by R. B. Shah that NK Shah also admitted that TTPL and NIPL were issuing bogus bill, that RB Shah in his deposition had accepted that he was issuing bogus bills, that NK shah had also accepted of issuing bogus bills, that the assessee did not purchase any goods from the above mentioned parties. Accordingly aggregate of the above mentioned purchases totaling to ₹ 80. 09 lakhs was treated as unexplained expenditure as per the provisions of section 69C of the Act. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appeallate Authority(FAA). Before him, it argued that the AO had passed the order without considering the submissions made by it and had violated the principles of natural justice, that the assessee had made a request from Cross examination of parties whose statements and affidavits were furnished along with the show cause notice, that details of stock tally were furnished during the assessment proceedings, that it had received goods from the NIPL, SMTC and TTPL in its warehouse for which it had paid transport as well as loading /unloading charges, that the payments had been made through A/c. payee cheques after deducting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O were returned with the remark left/ unknown no adverse inference could be drawn against the assessee, that the assessee was denied an opportunity to cross examine the suppliers, that the affidavit had no evidential value. Finally , he held that the disallowance made by the AO on the ground of bogus purchases could not be sustained in toto. 3. 2. He further held that as per his direction the assessee had filed the GP ratio for the previous three AY. s. Referring to the GP of 5. 5% , 4. 93% and 4. 49% for the AY. s. 2007- 08, 08-09 and 09-10 respectively he held that during the year under consideration the assessee had shown GP ratio @4. 29%. He directed the assessee to explain the reason for fall in GP ratio. The assessee submitted that GP ratio had fallen because of inCroresease in turnover. After considering the submission of the assessee , the FAA held that assessee was a trader in the business of Iron and Steel, that in the case of Fortune steel Industries (supra) the assessee had shown GP @ 16. 13% in the AY 03-04 and 10. 81% in the immediate preceeding year, that the Tribunal did not confirm any addition on the GP ratio, that still it was an indication that GP margin in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O had not doubted the genuineness of the sales made by the assessee , that it had asked for Cross examination(Pg. 86-88 of the PB), but the AO did not allow him to Cross examine the parties. 5. We have heard the rival submissions and perused the material before us. We find that the FAA had given partial relief to the assessee, that he had applied the provision of section 145(3) of the Act, that applying the GP of the earlier year, partial addition was upheld, that the AO had not disturbed the GP shown by the assessee, that he had not issued notice as envisaged by provisions of section 251(2) of the Act, that for applying the earlier years GP the FAA had not given any reasonable basis. In our opinion, enhancing the income of the assessee without issuing a notice u/s 251(2) was bad in law. Secondly, the adoption of GP at 5. 5% for the entire purchase cannot be endorsed in our opinion the order of Fortune Steel Industries relied upon by FAA does not justify the addition. Therefore, reversing his order, we decide the effective GOA in favour of the assessee . 5. 1. As far as appeal of the AO is concerned, we want to hold that the order of the FAA does not suffer from any legal inf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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