ACIT Vs Shri Pankaj Sancheti (ITAT Indore)
The issue under consideration is whether the CIT(A) is correct in restricting the addition u/s 69C for bogus purchases to 12.5% against the total purchase disallowance made by AO?
ITAT states that on examining the facts of the instant appeal, the books of accounts regularly maintained by the assessee including quantitative details have not been rejected by the Ld. A.O u/s 143 of the Act except the alleged purchases. No other major discrepancy have been noticed in the books. Books of accounts are duly audited. Sales made by the assessee are not in dispute. The assessee is into the business since many years and is consistently showing the gross profit and net profit. Alleged supplier of goods are duly registered under Value Added Tax Act. Payment made through banking channel. Quantity maintained in the alleged bills are part of quantitative records maintained by the assessee. There is no drastic change in the gross profit and net profit rate. Since the sales have not been doubted there ought to be corresponding purchases. However some of the ingredients for testing the genuineness of purchases are missing but for this reason itself total purchase cannot be disallowed else abnormal and distorted profits will appear in the profit and loss account. Hence, ITAT is of the opinion that the disallowance of entire disputed purchases cannot be made and only the income on the disputed purchase could be sustained.
ITAT therefore in the given facts and circumstances of the case find no inconsistency in the well reasoned finding of CIT(A) confirming the disallowance of purchases at 12.5% of the alleged bogus purchases. In the result appeal of the Revenue stands dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
The above captioned appeals filed at the instance of Revenue and Cross Objection filed by the assesse pertaining to Assessment Years 2009-10 & 2010-11 are directed against the orders of Ld. Commissioner of Income Tax (Appeals)-II (in short ‘Ld.CIT(A)’], Indore dated 31.05.2016 which is arising out of the order u/s 143(3)/1 47 dated 31.5.2016 framed by DCIT & JCIT, Khandwa respectively.
2. As the issues raised in these appeals are common these were heard together and are therefore being disposed off by this common order for sake of convenience and brevity.
3. We find that the Cross Objections filed by the assessee are delayed by 280 days and affidavits have been filed for condonation of We have gone through the same and in the interest of justice we condone the delay of 280 days which in our considered view has occurred due to reasonable cause and thus admit the Cross Objections for adjudiciation on merits.
4. Respective I.T.A Numbers, grounds., Cross Objections and Ground are as under;
ITA No.882/Ind/2016 by Revenue Assessment Year 2009- 10
“1. The Ld. CIT(A) was not justified in restricting the disallowance made out of bogus purchase of Rs.5,49,177/- as against total addition made of Rs. 62,50,997/-.
2. The appellant craves leave to add or otherwise amend the above grounds of appeal.
ITA.No.883/Ind/2016 by Revenue Assessment Year 2010-11
“1. The Ld. CIT(A) was not justified in restricting the disallowance made out of bogus purchase of Rs.4,12,550/- as against total addition made of Rs.38,61,472/-.
2. The appellant craves leave to add or otherwise amend the above grounds of appeal.
C.O.No.51/Ind/2017 by Assessee Assessment Year 2009- 10
1. Without prejudice to addition deleted by Ld. CIT(A), the addition of Rs.5,49,1 17/- being 12.5% of the total alleged purchases liable to be deleted since the profit element in the sales against the alleged purchases have already been disclosed in the profit & Loss Account of the appellant.
2. Without prejudice to addition deleted by Ld. CIT(A), the addition Rs. 5,49,177/- to be deleted since the GROSS PROFIT ratio and NET PROFIT ratios are higher as compared to earlier years.
The appellant craves leave to add, amend, alter and/or withdraw any of the grounds of appeal at the time of hearing.
C.O.No.51/Ind/2017 by Assessee Assessment Year 2010-11
1. Without prejudice to addition deleted by Ld. CIT(A), the addition of Rs. 4,12,550/- being 12.5% of the total alleged purchases liable to be deleted since the profit element in the sales against the alleged purchases have already been disclosed in the profit & Loss Account of the appellant.
2. Without prejudice to addition deleted by Ld. CIT(A), the addition Rs.4,12,550/- to be deleted since the GROSS PROFIT ratio and NET PROFIT ratios are higher as compared to earlier years.
The appellant craves leave to add, amend, alter and/or withdraw any of the grounds of appeal at the time of hearing.
5. We will first take up the revenue’s appeal for Assessment Year 2010-11 and since both the parties have agreed that the same issues have been raised by the revenue for Assessment Year 2009-10 also, our decision on adjudication of revenue’s appeal for Assessment Year 2010-11 shall apply mutandis mutandis on the appeal for Assessment Year 2009-10 also.
6. Brief facts of the case as culled out from the records for Assessment Year 2010-11 are that the assessee is an individual running sole proprietary ship concern in the name of Comprint Return of income was e-filed on 15.10.2010 which was subsequently revised declaring income of Rs.82,04, 180/- and agriculture income of Rs. 1,07,800/-. Case selected for scrutiny through Computer Assisted Scrutiny Selection (CASS). Notices u/s 143(2) and 143(1) of the Act duly served. Books of accounts, cash book, ledger sale, purchase bills & vouchers were produced. Various additions and disallowances were made by the Ld. A.O including the addition for unaccounted purchase at Rs.38,61,472/-. The instant appeal relates to the addition for unaccounted purchases. Ld. A.O on examining the records and also in light of the letter received from CIT(A)-II, Indore dated 1.3.2013 observed that the assessee had made purchase of goods from M/s. Soham International and M/s. Shweta Enterprises and Lifeline Pharmaceuticals and Madhur Impex. Both are having Permanent Account No.AEGPJ0412D and AIZPS7 1 75D respectively and goods were purchased at Rs. 12,57,012/-and Rs.20,43,392/- respectively. Though the assessee has submitted the purchase bills, audited financial statements with respective Permanent Account No as well as VAT registration numbers, he was unable to satisfy the Ld. A.O who was of the confirmed view that the alleged purchases including VAT paid @ 12% and commission paid at 5% are part of the bogus purchases and added them to the income. Income of the assessee assessed at Rs. 1,37,58,671/- after making following additions;
