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TMI Blog2019 (7) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. On the facts and circumstances of the case and in law, the CIT(A) has erred in confirming the addition of ₹ 3714973/- made by the AO on account of alleged unexplained purchases. 2. On the facts and circumstances of the case and in law, the addition of ₹ 3714973/- made by the AO is beyond the scope / jurisdiction of provisions of section 153A of the Income Tax Act, 1961 and the CIT(A) has erred in not holding so. That the appellant craves leave to add one or more ground of appeal or to alter / modify the existing ground before or at the time of hearing of appeal. 2. The brief facts of the case are that a search seizure operation u/s 132 of the Income Tax Act, 1961 was conducted on 19.10.2011 on the premises of the assessees comprising Agarwal Associates Jainco Group of cases. In view of search operation, the group cases were centralized to Central Circle, Ghaziabad. The premises covered u/s 132 of the Income Tax Act, 1961 (in short Act ) operation were Bharat Bhawan, 10, New Rajdhani Enclave, Vikas Marg, Preet Vihar, Delhi, GF - 16, Kasturba Gandhi Marg, Cannaught Place, New Delhi (Opposite British Council ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of opening of bank account at PNB, Ghaziabad was also got verified from Trade Tax Department, Muzaffarnagar and it was found that the registration number, mentioned in the registration certificate submitted to the bank at the time of opening account, is related to Mis Kumar Traders, Meerut Road, Near Suzru Chungl, Muzoffamagar. Dy. Commissioner Varijyakar, Khand - 4, Muzzafarnagar has also mentioned that M/s Meet Enterprises is non-existent firm as per their records. Further enquiries of these cheques revealed that such amounts were cleared to the Current Account No. 095010200013086 of Mis Meet Enterprises maintained in the Axis Bank Limited, Plot No.3, Ambedkar Road, Nehru Nagar, Ghaziabad. Copy of said bank account was obtained from the Axix Bank Limited, Ghaziabad. A perusal of this account shows that the said account is also in the name of Mis Meet Enterprises with address at B - '262, Nand Gram. GDA Colony, Ghaziabad. Enquiries from Trade Tax Department revealed that the Prop. Of firm M/s Meet Enterprises, Ramdham Colony, Shivalik Nagar, Hardwar, Tin No. 05006640257 is Shri Vikas Kumar S/O Vijay Pal Singh Rio 464/A, Keshavpuri, Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haranpur Road, . Roorkee (Phone 9810560969 and TIN 05004093813) and Tehri Steels Ltd, Vi/age Dhaliwala, Muni Ki Reti Post Box No. 21, Rishikesb Distt. Tehri Garwal (Phone 0135-2431083, TIN No. 05003639950] 6. The payment has been paid form our bank account vide cheques of Indian Overseas Bank, total payment amounting to ₹ 3714973/- (details enclosed). Further, we would like to state that the material was ordered by our staff Mr. Gupta who is no more working with us neither we have no connection with M/s Meet Enterprise because last dealing with company was upto September, 2008. We have purchased the material which is utilized for our construction site at Dehradun and the payment has been paid through account payee cheques after receiving the material which is duly certified by our contractor. Necessary certificate from the contractor M/s VK. Agarwal Co. is enclosed confirming that the steel has been deceived by company through their project manager at site. So in these circumstances your are requested not to treat as bogus expenditure. 2.2 The AO observed that the assessee failed to furnish confirmation from the Meet Enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal of the assessee be dismissed by not directing the AO to restrict the disallowance of the impugned purchases. He relied upon the following case laws:- i) N.K. Proteins Ltd. vs. CIT (2017-TIOL-23-SC-1T) ii) N.K. Industries Ltd. Vs. DCIT 292 CTR 354 (Guj) iii) CIT vs. Arun Malhotra 363 ITR 195 (Del) iv) CIT vs. La Medica 250 ITR 575 (Del) v) Vijay Proteins Ltd. vs. ACIT 58 taxmann.com 44 (Gu}) vi) Sri Ganesh Rice Mills vs. CIT (2007) 294 ITR 316 (Allahabad). vi) Sanjay Oilcake Industries vs. CIT 316 ITR 274 (Gu}) 5. We have heard both the parties and perused the records especially the orders passed by the revenue authorities alongwith the arguments advanced by both the parties and the case laws cited before us as well as the ITAT, Delhi E Bench decision passed in ITA No. 7022/Del/2014 (AY 2008-09) vide order dated 29.4.2019 in the case of M/s Mansarovar Infratech Pvt. Ltd. (Formerly known as Garhwal Mandal Sales Pvt. Ltd.) vs. ACIT (Supra). We find that exactly on similar facts and circumstances of the case, the ITAT, Delhi E Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) That books of accounts so maintained by the appellant company have not been rejected by the learned Assessing Officer by invoking section 145(3) of the Act and, profit declared stands accepted as such; vi) That entire purchase and sales duly accepted and verified in sales tax order for the instant assessment year (pages 30-32 of Paper Book); viii) That the consideration was duly discharged through banking channels as would be evident from the following evidence: a) Copy of cheque issued by the appellant company to M/s Meet Enterprises (pages 111-113 of Paper Book) 4.2 It was further contended that in case of purchases, assessee is under a burden to establish delivery of goods and payment of consideration for such delivery. It was submitted that in the instant case, both the facts are not in dispute as the delivery of goods is duly recorded in the stock register and the fact of supply is also accepted in the sales tax order for the instant assessment year. Furthermore, as regards payment of consideration, it was also stated that such payments have been made through banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper Book. It is also matter of record that statement of Director of assessee has been recorded by the Investigation Wing and in the course of such investigation, he had admitted to have received supplies from MIs. Meet Enterprises, Haridwar. The purchase and sale of assessee have also been accepted in the order of sales tax for the instant assessment year, copy of which is placed at pages 32 to 34 of Paper Book. The issue, therefore, arises is that once the supplies have been received by the assessee which are duly recorded in the books of account accepted as such and also accepted in the sales tax order, would it be justified to hold that such supplies against which payments have already been made are not genuine purchases for the reason that there is another proprietorship concern by the same name i.e. Meet Enterprises at Ghaziabad. It is no doubt true that cheques issued by the assessee in the name of MIs. Meet Enterprises had been deposited in the account of MIs. Meet Enterprises, Ghaziabad instead of Meet Enterprises, Haridwar. But the sales made by the assessee have not been doubted by the Assessing Officer. It is impossible to make sales without corresponding purchases. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, when we are not inclined to interfere with the Tribunal's order on merits, we do not insist on the revenue's filing a separate appeal. 5. From the record, we noticed that the Commissioner (Appeals) as well as the Tribunal found that the purchase of raw-material, in which the assessee was trading, were only made, but not from the disclosed sources. In other words, the case against the assessee was that the purchases were made in the grey market through cash payment and some entries were obtained from certain suppliers who had not sold such goods. 6. The present case, thus, being one oj only purchase but not from disclosed sources, it would be only profit element embodied in such purchase which could be added in the income oj the assessee and thus, rightly so done by the Commissioner (Appeals) and the Tribunal. 7. If this be our conclusion, only question arises whether such profit element should be estimated at the rate of 30% or 12 %. Whenever such a question arises, some reasonable estimation is always permissible. Hardly any question of law on such aspect would arise. Merely it is pointed out that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. Hardly any question of law on such aspect would arise. Merely, it is pointed out that the assessee was a trader and that the Tribunal retained 12 % of the purchase towards its possible profit, we do not find any reason to entertain the appeal. In the, result, Tax Appeal is dismissed. 4.8 Similar view has also been expressed in the case of CIT vs. Simit P. Sheth 356 ITR 451 wherein it has been held as under: 6. In the present case, the Commissioner of Incometax (Appeals) 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 the assessee's theory that the purchases were not bogus but were made from the parties other than those mentioned in the books of account 7. That being the position, not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. So much is clear by the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Seth [2013(356 ITR 451)J and by Hon'ble Bombay High Court in Hariram Bhambani ITA No 313 of 20 13. 8. Thus, respectfully following the decision of Hon'ble Gujarat High Court in CIT Vs Simit P Seth supra and by Hon'ble Bombay High Court in Hariram Bhambani (supra), the disallowance of cost of purchases of steel is restricted to 5% of the purchases. The assessing officer is directed accordingly. In the result the ground No. 1 of the appeal is partly allowed. 4.10 As the assessee is also involved in trading of identical products, respectfully following the decision of the Tribunal in the case of Sh. Sanjay H. Shah (supra), we direct the learned Assessing Officer to restrict the disallowance to 5% of the impugned purchase of ₹ 32,76,741/-. The grounds no. 2 3 of the appeal are partly allowed. 5.1 Keeping in view of the aforesaid discussions and respectfully following the aforesaid precedents, we direct the Assessing Officer to restrict the disallowance to 5% of the impugned purchase of ₹ 37,14,973/-. Since we have already decided the appeal on merit of the case, hence, there is no need to adjudicate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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