ITO Vs Sha Tarachand Fojmal And Company (ITAT Mumbai)
The appeal before the Income Tax Appellate Tribunal, Mumbai was filed by the Revenue against an order of the Commissioner of Income Tax (Appeals) for Assessment Year 2011–12, arising out of reassessment proceedings under Sections 143(3) read with 147 of the Income-tax Act, 1961. The assessee, a partnership firm engaged in trading aluminium sheets, coils, and allied materials, had filed its return declaring income of ₹39.38 lakh. The reassessment was initiated based on information from the Maharashtra Sales Tax Department alleging that the assessee had obtained accommodation bills from entities identified as hawala dealers.
During reassessment, the Assessing Officer noted purchases aggregating to ₹11.88 crore from such parties and treated them as not fully verifiable. However, instead of disallowing the entire purchases, the Assessing Officer applied a higher gross profit rate of 5.54% on the impugned purchases, thereby making an addition representing alleged inflation of expenses. On appeal, the CIT(A) observed that the assessee’s disclosed gross profit rate of 3.41% during the relevant year was consistent with past years and had been accepted by the Department. Finding no justification for adopting a higher rate, the CIT(A) restricted the addition by applying the assessee’s own GP rate of 3.41%.
