TaxTMI 
TaxTMI 
2019 (7) TMI 659
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....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). The jurisdiction order uls 127 of the Income tax Act, 1961, in this case was passed by the Ld. Commissioner of Income Tax, Delhi - I, New Delhi communicated vide F. No. CIT - I1Centralization/20 13- 14/2816 dated 16.09.2013. Subsequently, notice u/s 153A was issued on 30.09.2013. The assessee filed return of income on 13.12.2013 declaring total income of Rs. 3,65,12,490/-. Notice. under section 143(2) was issued on 13.12.2013. Notice U/s J42(1) alongwith questionnaire was already issued on 03.12.2013. IN response to the same, the AR of the assessee attended the proceedings and filed the necessary supporting documents. The assessee is engaged in bu....
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...., 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, Muzaffarnagar. Mr. Vikas Kumar was examined and he stated that he used to run the business of Meet Enterprises and that he only had one transaction in which he sold goods to National Trading Company, Roorkee and that he had no other business transactions. He also declined to have any other bank accounts except saving bank no. 033000100362580 in PNB. New Mandl, Muzafarnagar. You are required to explain the genuineness of expenses claimed on account of purchase of steel amounting to Rs. 3714973/- should not be treated as bogus expenditure and why the same should not be disallowed and added to the income; Furnish complete address of M/s Tehri Steels Ltd alongwith copy of account and copies of bills for supply of steel....
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....ecessary 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 Enterprises, even TIN no. was not verifiable. The assessee's submission was not supported by third party evidence and therefore, the expenditure treated as unexplained and unverifiable. Therefore, the expenses claimed on account of purchases amounting to Rs. 37,14,973/- from Meet Enterprises was disallowed and added to the income and assessed the income of the assessee at Rs. 4,04,06,190/ u/s. 143(3)/153A of the I.T. Act, 1961 vide order dated 30.3.2014 passed by the AO. Against the assessment order, assessee is in appeal before the Ld. CIT(A), who vide his impugned order dated 22.12.2015 has upheld the action of the AO and dismissed the appeal of the assessee. Aggrieved with the impugned order, assessee is in appeal before the Tribunal. 3. At the time of hearing, Ld. Counsel for the assessee has stated that the legal issue is covered in the ....
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....he 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' Bench 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 has directed the Assessing Officer to restrict the disallowance to the tune of 5% of the impugned purchases wherein the same party M/s Meet Enterprises was involved. Hence, the aforesaid case of M/s Mansarovar Infratech Pvt. Ltd. is squarely applicable in the present case. For the sake of convenience, we are reproducing hereunder the relevant paras of the Tribunal's order dated 29.4.2019 in the case of M/s Mansarovar Infratech Pvt. Ltd. wherein the tribunal on exactly similar issue has directed the AO to restrict the disallowance to 5% of the impugned purchases from the same party i.e. M/s Meet Enterprises, which also involved in the present case. "4. Grounds Nos. 2 and 3 relate to addition of Rs. 32,76,741/- representing the purchases made by the assessee company and held to be an accommodatio....
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....yments have been made through banking channels and there is no allegation or evidence to suggest that such payments as made by the appellant have remitted back to the supplier. It was therefore, submitted that addition so made is not in accordance with law and therefore, may kindly be deleted. Reliance was placed on the following judgments: i) CIT vs. Precious Jewels Corporation 205 Taxman 22 (Raj)(MaG.) ii) ACIT v. Karam Chand Ruber Industries ITA No. 6599/ D/ 2014 iii) Manoj Sharma v.!TO 103 taxmann.com 105 (Del) iv) CIT v. Nikunj Eximp Enterprises (P) Ltd. 372ITR 619 (Bom) v) CIT v. Simii P. Seth Tax No. 553/203 (Gu}) dated 16.3.2013 4.3 On the contrary, the learned DR supported the action of the authorities below and relied on the following judgments: 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) Sanjay Oilcake Industries vs. CIT 316 ITR 274 (Gu}) 4.4 We have consi....
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....served In the inventory record, entire purchases of Rs. 32,76,741/- cannot be disallowed. 4.5 In the above facts and circumstances, we are of the considered opinion that it would be inappropriate to deny the entire expenditure claimed by the assessee. We are of the opinion that at best it would be a case that purchases have been made from one party in grey market and bills have been obtained from another party i.e. accommodation entry provider. Thus, the purchases themselves cannot be said to be bogus as the same is duly recorded in the books of account of the appellant and such books stands accepted even in the impugned order of assessment. 4.6 We are of the opinion that the entire amount should not be disallowed but the disallowance should be restricted to the profit margin embedded in such amount. This view is also supported by the judgment of Gujarat High Court in the case of CIT vs. Bhola Nath, 355 ITR 290. The relevant portion of the order is as under: "6. We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is e....
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.... 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 Income-tax (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 this court In particular, the court has also taken a similar view in the case of CIT v. Vijay M. Mistry Construction Ltd. [2013J 355 ITR 498 (Guj) and in the case of CIT v. Bholanath Poly Fab (P.) Ltd. [2013] 355 ITR 290 (Guj). The view taken by the Tribunal in the case of Vijay Proteins Ltd. v. Asstt CIT [1996] 58 ITD 428 (Ahd.) came to be appr....
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....1996} 58 ITD 428 (Ahd.) came to be approved. " 4.9 In the instant case, the assessee is engaged in dealing in MS Bar (Ironj Steel Product) and has shown gross profit rate of 5.22%. We find that in the case of Sh. Sanjay H. Shah, Mumbai Vs. Income Tax Officer in ITA No.5063 to 5065/Mum/2017 for assessment year 2009-10 to 2011-12, who was also engaged in trading of Iron & Steel product, the Tribunal restricted the disallowance to 5% of the total alleged bogus purchases observing as under: "7. The Ld. AR of the Assessee in his submission claimed that VAT rate is only 4%. The rate of VAT is not disputed by Revenue. In our view considering the nature of trade of assessee and the facts of the present case, the disallowance made by AO and sustained by Id. CIT(A) is excessive and unreasonable. In our view the assessee has given sufficient evidences to substantiate its purchases, on which no finding was given by the lower authorities. Moreover, no incriminating material is brought on record except assumption and presumption of AO that assessee has availed accommodation bills. The addition of alleged bogus purchased are based on third party information. We are of the consid....