DCIT-7(2)(2),, MUMBAI M/S. NEW AGE FIRE PROTECTION ENGINEERING PVT. LTD.,, MUMBAI

This Income Tax Appellate Tribunal case concerns an appeal by the DCIT against M/s. New Age Fire Protection Engineering Pvt. Ltd. regarding additions made for bogus purchases. The Assessing Officer had added 25% of the purchase value, estimating the profit element, as the assessee could not fully prove the veracity of purchases from certain parties, though corresponding sales were proven. The CIT(A) reduced this addition to 12.5%, relying on High Court decisions, which the Revenue appealed.

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT), ‘B ‘ BENCH MUMBAI
BEFORE SHRI M.BALAGANESH, AM
&
SHRI AMARJIT SINGH, JM

ITA No.1566/Mum/2019 
(Assessment Year :2011-12)

DCIT – 7(2)(2) Mumbai Room No.126B, First Floor Aayakar Bhavan M.K.Road, Mumbai – 400 020
(Appellant)

Vs.

M/s. New Age Fire Protection Engineering Pvt. Ltd., 101/102, Champaklal Udyog Bhavan Sion (E) Mumbai – 400 022
PAN/GIR No.AACCN9026C
(Respondent)

Revenue by Shri Rajendra Joshi
Assessee by None 
Date of Hearing 02/12/2020
Date of Pronouncement 04/12/2020

O R D E R 

PER M. BALAGANESH (A.M):

This appeal in ITA No.1566/Mum/2019 for A.Y.2011-12 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-16, Mumbai in appeal No.CIT(A)-16/ACIT-7(2)(2)/IT-16/2016-17 dated 24/12/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 01/03/2016 by the ld. Asst. Commissioner of Income Tax, Circle 7(2)(2), Mumbai (hereinafter referred to as ld. AO). 

2. The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in restricting the addition made on account of bogus purchases to 12.5% of value thereon as against 25% added by the ld. AO in the facts and circumstances of the instant case.

3. None appeared on behalf of the assessee. We have heard the ld. DR and perused the materials available on record. We find that assessee is a private limited company engaged in trading and export of fire fighting equipments to Public Sector companies and for exports. It is not in dispute that assessee had made certain purchases from five parties totalling to Rs.35,92,013/- whose names appeared to be tainted dealers in the website of Sales Tax department of Government of Maharashtra pursuant to which the assessee’s case was sought to be reopened. The assessee filed the requisite details before the ld. AO and the ld. AO observed that assessee in the instant case was not able to prove the veracity of purchases made from aforesaid five parties, however, had furnished details of corresponding sales made thereon. In other words, the sales made by the assessee out of the corresponding disputed purchases have been proved by the assessee in the instant case and the same was not disputed by the ld. AO. The ld. AO proceeded to bring to tax the profit element embedded in the value of such disputed purchases and such profit element was estimated at 25% and accordingly, the ld. AO made an addition of Rs.8,98,003/- in the assessment. The ld. CIT(A) by placing reliance on the decision of the Hon’ble Gujarat High Court in the case of Vijay M Mistry Constructions Ltd., reported in 355 ITR 498 and yet another decision of Hon’ble Gujarat High Court in the case of CIT vs. Simit P Sheth reported in 38 taxmann.com 385 determined the profit element embedded in the value of said disputed purchases to be at 12.5% and granted relief accordingly to the assessee.

To know more in details find the attachment file