ITA No.4994/Mum/2018 A.Y. 2010-11 FGB Manufacturing Co. - IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI, BEFORE HON BLE SHRI MAHAVIR SINGH, JM AND HON BLE SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. No.4994/Mum/2018 (Assessment Year 2010-11) FGB Manufacturing Co. Income tax Officer -Ward 27(1)(4) 209-C, Ghatkopar Indl. Estate Tower No.6, 412 Amrut Nagar, LBS Marg Vashi Railway Station Complex Ghatkopar (W est) Vs. Vashi Mumbai-400 086. Navi Mumbai-400 703. PAN/GIR No. AAAFF5076D (Appellant) (Respondent) Revenue by Shri Ashutosh Rajhans-Ld.DR Assessee by Shri Rajesh Shah-Ld. AR 11/09/2019 Date of Hearing 11/09/2019 Date of Pronouncement ORDER Per Bench - 1. Aforesaid appeal by assessee for Assessment Year [AY] 2010-11 contest order of Ld. Commissioner of Income-Tax (Appeals)-24, Mumbai, [in short referred to as CIT(A) ], Appeal No.CIT(A)-24/IT- 2 ITA No.4994/Mum/2018 A.Y. 2010-11 FGB Manufacturing Co. 4/847/ITO-27(1)(4)/2018-19 dated 12/07/2018 on following grounds of appeal: - Being aggrieved against Order of Commissioner of Income Tax (Appeals) 24, this appeal petition is being filed to consider following grounds of appeals, which are independent of and without prejudice to each other: 1) On facts and circumstances of case and in law, Commissioner of Income Tax (Appeals) erred in confirming addition made by A.O. amounting to Rs.3,14,335/- on account of bogus purchases. 2) On facts and circumstances of case and in law, learned CIT(A) erred in confirming addition though appellant provided all supporting to prove genuineness of purchases and transactions. 3) On facts and circumstances of case and in law, learned CIT(A) erred in confirming addition though full particulars were filed assessment proceedings and PAN No. of said parties are available on record. 4) On facts and circumstances of case and in law, assessing officer ought to have gone through record of parties whose Pan numbers were available on record and some of parties are registered with MCA. 5) On facts and circumstances of case and in law, appellant have already declared Gross Profit of 27.32%, again adding same percentage, GP will go up to 54.64% which amounts to double addition and hence addition is un called for. 2.1 Facts on record would reveal that assessee being resident firm stated to be engaged in manufacturing of pressure gauges, was assessed for impugned AY u/s. 143(3) r.w.s. 147 wherein income of assessee was determined at Rs.13.65 Lacs after sole addition of alleged bogus purchases for Rs.11.50 Lacs as against returned income of Rs.2.14 Lacs filed by assessee on 06/07/2010 which was processed u/s.143(1). 2.2 Pursuant to receipt of certain information from investigation wing / Sales tax Department, Govt. of Maharashtra, it transpired that assessee stood beneficiary of alleged bogus purchases to tune of Rs.11.50 Lacs from 11 parties, details of which has already been extracted at para-5.1 of quantum assessment order. Accordingly, as per due process of law, re-assessment proceedings were initiated against assessee u/s 147 by 3 ITA No.4994/Mum/2018 A.Y. 2010-11 FGB Manufacturing Co. issuance of notice u/s 148 on 19/03/2015. statutory notices u/s 143(2) & 142(1) were issued in due course of assessment proceedings wherein assessee was directed to substantiate purchase transactions. 2.3 To confirm purchases transactions, notices u/s 133(6) were issued to all parties, however same were returned back unserved by postal authorities with remarks left . assessee submitted that purchases were genuine and material was used in manufacturing process. attention was drawn to fact that payments were made through banking channels. However, not satisfied, stated purchases were disallowed and added to income of assessee. learned first appellate authority, inter-alia, relying upon decision of Hon ble Gujarat High Court rendered in CIT V/s Simit P. Sheth [356 ITR 451] restricted addition to 27.32%, being Gross Profit rate reflected by assessee. Aggrieved, assessee is in further appeal before us. It appears that revenue is not in further appeal. 3. We have heard and considered arguments of respective representatives. 4. We are of considered opinion there could be no sale without actual purchase of material keeping in view assessee s nature of business. As noted by lower authorities, assessee was in possession of primary purchase documents and payments to suppliers were through banking channels. sales turnover reflected by assessee has not been disturbed / disputed by Ld. AO. However, at same time, assessee miserably failed to substantiate purchases during assessment 4 ITA No.4994/Mum/2018 A.Y. 2010-11 FGB Manufacturing Co. proceedings and could not produce any of suppliers to confirm transactions. Under such circumstances, additions which could be sustained, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in grey market and undue benefit of VAT against such bogus purchases, which Ld. first appellate authority has rightly done. However, finding estimated rate to be on higher sider, we reduce same to 12.5% of alleged bogus purchases. same comes to Rs.1,43,821/-. balance addition stands deleted. impugned order stand modified to that extent. 5. In result, appeal stands partly allowed. Order pronounced in open court on 11th September, 2019. Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) Judicial Member Accountant Member Mumbai; Dated 11/09/2019 Sr.PS-Jaisy Varghese Copy of Order forwarded to 1. Appellant 2. Respondent 3. CIT(A) 4. CIT concerned 5. DR, ITAT, Mumbai 6. 3 Guard File 5 ITA No.4994/Mum/2018 A.Y. 2010-11 FGB Manufacturing Co. BY ORDER, (Dy./Asstt.Registrar), ITAT, Mumbai. FGB Manufacturing Co. v. Income-tax Officer -Ward 27(1)(4), Navi Mumbai