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Income Tax Appellate Tribunal, MUMBAI BENCH “E”,MUMBAI
Before: SHRI KULDIP SINGH & MS. PADMAVATHY S.
2 ITA 476/Mum/2023 & 1082/Mum/2023 Shri Himanshu Lalit Ranka Per Padmavathy S (AM): These cross appeals by the assessee and the Revenue are against the order of the Commissioner of Income-tax (Appeals) (National Faceless Appeal Centre, Delhi) [in short, ‘the CIT(A)] dated 19/12/2022 for the assessment year 2011-12. 2. The assessee and the revenue raised the following grounds of appeal:-
(Assessee’s Appeal) “1. The orders passed by the lower authorities are bad in law and bad in facts.
The assessment order passed by the learned Assessing Officer by recourse to section 147 / 148 of the I.T. Act, 1961 is ab- initio void.
3. The assessment order passed is ab-initio void, inasmuch as no opportunity was granted to cross examine alleged hawal parties whose testimony was relied upon for making / upholding impugned addition of Rs.16,09,535/- (12% of Rs.1,34,12,795).
4. The learned lower authorities have grossly erred in passing orders ex- parte and have further erred in making / upholding impugned addition of Rs.16,09,535/-.
5. The learned lower authorities have grossly erred in making / upholding an addition of Rs.16,09,535/- by recourse to section 69C of the I.T. Act, 1961, even though said provisions are not applicable in appellant’s case.
Having regard to the facts of the case and provisions of law & judicial propositions impugned addition of R.16,09,535/- is wholly un-tenable in law.” (Revenue’s appeal) “a. On the facts and in circumstances of the case, the CIT(A) erred in restricting the disallowance to 12% of purchases instead of 100% of purchases of Rs. 1,34,12,795/-from nonexistent vendors by not following the decision of the Hon'ble Gujarat High Court in Tax Appeal No.242 of 2003 dated 20/06/2016 in the case of N.K. Proteins Ltd. Vs DCIT wherein it has been held that once the purchases are bogus, additions should be made on the entire purchases and not only the profit embedded in such purchases against which the SIP filed by the assessee was dismissed by the Hon'ble Apex Court vide [2017] 292 CTR 354 (SC).
3 ITA 476/Mum/2023 & 1082/Mum/2023 Shri Himanshu Lalit Ranka b. It is humbly requested that present appeal may be filed in accordance with the CBDT's Circular No.3/2018 dated 11.07.2018 amended vide letter dated 20.08.2018 as per para 10(e) of the said circular. Therefore, the order of the CIT(A) may kindly be vacated and that of the AO may be restored.”
The assessee, for the assessment year 2011-12, filed the return of income on 29/09/2011 declaring total income of Rs.3,52,544/-. The return was processed under section 143(1) of the Act (in short, ‘the Act’). Subsequently the assessment was re-opened, based information received from sales-tax department, Maharashtra, giving names and address and other details of certain persons, who have been providing entries for bogus purchases and that the name of the assessee appeared in the list of persons, who have obtained bogus purchase bills from entry providers. The Assessing Officer accordingly issued a notice under section 148 for reopening the assessment and called on the assessee to furnish the details of the following alleged bogus purchases:-
Sr.No. Hawala Tin Hawala Name F.Y. Amount 1 27340760920V N.R. Traders 2010-11 43271791 2 27020712790V Darshat Trading Pvt Ltd 2010-11 4266565 3 27320588465V Jay Enterprise 2010-11 4774439 Total 13412795 3.1 The Assessing Officer in this regard issued notice under section 142(1) but did not receive any response from the assessee. Therefore the Assessing Officer proceeded to complete the assessment under section 144. The Assessing Officer issued notice under section 133(6) dated 29/01/2015 to the above mentioned parties with whom the assessee had undertaken the impugned transactions in order to verify the genuineness. However, no reply was received from the said parties. The Assessing Officer also issued a show cause notice dated 06/02/2015 calling on 4 ITA 476/Mum/2023 & 1082/Mum/2023 Shri Himanshu Lalit Ranka the assessee to show cause as to why the purchase transactions of Rs.1,34,12,795/- should not be added to the income of the assessee as unexplained under section 69C of the Act. The assessee failed to respond to the show cause notice also. In the meantime, the Assessing Officer noticed that certain affidavits were filed by the above listed parties with the Sales-tax Department and those affidavits were placed on record as part of assessment. It has been stated in the affidavit that the said parties have affirmed that they have not done any business activity of sale or purchase but have only been issuing bills to the parties against payment of commission. Therefore, the Assessing Officer concluded the assessment under section 144 read with section 147 by making an addition of Rs.1,34,12,795/- under section 69C of the Act. The assessee filed appeal before CIT(A) on being aggrieved by the order of the Assessing Officer. The assessee did not appear before the CIT(A) but made only written submissions on the impugned additions. Based on the written submissions the CIT(A) gave partial relief to the assessee by estimating the profit from bogus purchase bills @12%. Aggrieved by the order of the CIT(A), both the assessee and the revenue are in appeal before the Tribunal.
The Ld.AR submitted that the Assessing Officer has made the addition merely based on the facts that the notices issued under section 133(6) were not responded. Accordingly, the Ld.AR prayed for deleting the addition.
The Ld.DR, on the other hand, submitted that the CIT(A) has erred in giving relief to the assessee by taking only the profit element of the bogus purchases. The Ld.DR argued that the entire transaction is non genuine as identified by the Assessing Officer and, therefore, the Assessing Officer has correctly added the entire purchases as unexplained under section 69C.
5 ITA 476/Mum/2023 & 1082/Mum/2023 Shri Himanshu Lalit Ranka 6. We heard the parties and perused the materials on record. We notice that the assessee has not made any representation with regard to the alleged bogus purchases before the Assessing Officer due to which the assessment was completed under section 144 read with section 147 of the Act by the Assessing Officer. Before the CIT(A), the assessee had made written submissions but did not make any further submissions. We notice that the CIT(A) has considered the merits of the issue based on the remand report of the Assessing Officer and the written submissions. The relevant observations of the Ld.CIT(A) in this regard are extracted below:-
5.2 The addition made by the AO u/s.69C of the Act, AO's remand report dated 05.07.2017 and the submissions of the appellant have been perused. The allegations made by the appellant in the submissions are not correct, since the AO after obtaining information from the Sales Tax Department and examination of the details, passed the order. Now coming to the main issue, the submissions made by the appellant were forwarded to the Assessing Officer for a remand report by the erstwhile CIT(A)-3, Nasik vide letter No.THN/CIT(A)-3/HLR/2016-17 dated 02.02.2017. In response, the AO submitted his remand report vide his letter dated 05.07.2017. As a principle of natural justice, the remand report of the AO was forwarded to the appellant for his comments/objections. Several opportunities were given to the appellant to file his submissions on the remand report. However, there was no compliance. A final opportunity was given to the appellant to file his submissions on or before 09.12.2022, for which there was also no compliance. 5.3 It appears that the appellant is not interested in pursuing his appeal. However the appeal is disposed on merits. It is a fact that there exists no purchases as evidenced by the Sales Tax Department, which was confirmed by way of affidavits by the entry providers. The appellant is one of the beneficiary of bogus purchase bills to the tune of Rs.1,34,12,795/-. As per the details submitted, it can be seen that the appellant is in trading business and all purchases cannot be disallowed, which will result in high percentage of profit, which is inappropriate and unreasonable. Therefore, considering the facts and circumstances of the case, the profit from bogus purchase bills shall be estimated @ 12% of Rs.1,34,12,795/- over and 6 ITA 476/Mum/2023 & 1082/Mum/2023 Shri Himanshu Lalit Ranka above the regular income of the appellant. The various Tribunals and High Courts have adopted this percentage as norm for estimating income in such bogus purchase cases in case of trading concerns. The AO is accordingly directed to estimate income on the bogus purchase bills @ 12%. Hence, appeal is partly allowed.
From the above, it is clear that the assessee has not made any proper representation before the lower authorities and has not submitted any evidence to substantiate the genuineness of the alleged bogus purchases. Therefore, in the interest of justice and fair play, we are of the considered view that the assessee should be given one more opportunity to make submissions and produced evidences with regard to the issue under consideration. Accordingly, we remit the issue back to the CIT(A) with a direction to examine the issue afresh by calling for relevant details from the assessee. The assessee is directed to respond to the notices, submit the required details, and co-operate with the proceedings before the CIT(A). It is ordered accordingly.
In the result, both the appeals are allowed for statistical purpose.