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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & MS. KAVITHA RAJAGOPAL, JM
O R D E R Per Kavitha Rajagopal, J M:
This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2011-12.
The assessee has challenged the addition of Rs.1,66,17,342/- made u/s. 69C of the Act on account of bogus purchases from various parties alleged to be accommodation entry providers. The assessee has also challenged the order of the ld. CIT(A) in not condoning the delay of 30 days in filing the appeal before the first appellate authority.
(AY 2011-12) Raxit Harshad Shah vs. ITO 3. The brief facts of the case are that the assessee is engaged in the business of trading in iron building material and had filed his return of income dated 29.09.2011, declaring total income at Rs.8,51,170/-. The assessee’s case was then reopened u/s. 147 of the Act based on the information received from the Sales Tax Department, Mumbai and DGIT(Investigation), Mumbai that the assessee was one of the beneficiary of receiving bogus purchase bill from various parties mentioned below who are alleged to be accommodation entry provider to the tune of Rs.1,66,17,342/-:
S. TIN No. Name of the Parties F.Y. Amount (Rs.) No. 1 27870658730V PAYAL ENTERPRISE 2010-11 3,55,228 2 27710551730V M R CORPORATION 2010-11 12,88,746 3 27420745744V VARDHMAN TRADERS 2010-11 16,34,688 4 27550632037V JAIN CORPORATION 2010-11 1,99,992 5 27460654736V SAVITA INTERNATIONAL 2010-11 5,38,434 6 27750610781V RIDDHI SIDDHI ENTERPIRSE 2010-11 7,67,541 7 27860154093V SIDDHI ENTERPRISES 2010-11 7,68,362 8 27120772196V AMBIKA SALES CORPORATION 2010-11 29,40740 9 27370739127V OM SAI ENTERPRISES 2010-11 21,00,154 10 27390570433B JIMIT ENTERPRISE 2010-11 29,02,339 11 2760799630V POOJA SALES CORPORATION 2010-11 31,21,118
It is observed that the assessee has not made compliance to notice u/s. 148 of the Act dated 24.02.2015 and notice u/s. 142(1) dated 01.05.2015 and 23.07.2015 and other subsequent notices. The A.O. made addition on the impugned amount alleged to be bogus purchases amounting to Rs.1,66,17,342/-.
The assessee was in appeal before the ld. CIT(A), challenging the impugned addition made by the A.O. It is observed that the assessee had filed the appeal before the first appellate authority with a delay of 30 days and had sought for condoning the delay before the ld. CIT(A) for having ‘sufficient cause’ for the said delay. The ld. CIT(A)
(AY 2011-12) Raxit Harshad Shah vs. ITO dismissed the appeal filed by the assessee without condoning the said delay, thereby confirming the impugned addition made by the A.O.
The assessee is in appeal before us, challenging the order of the ld. CIT(A).
The learned Authorised Representative (ld. AR for short) for the assessee contended that the A.O. has not disputed the sales made by the assessee in the assessment order and the only dispute is pertaining to the alleged bogus purchases made from various parties which according to the A.O. were accommodation entry providers. The ld. AR further contended that considering the nature of the assessee’s business, the assessee agrees to 12.5% tax on bogus purchases and relies on various decisions which has held that only the profit element embedded in the bogus purchases has to be taxed instead of the entire sales. The ld. AR for the assessee stated that in order to bring an end to the litigation, the matter may be settled before the Tribunal without setting aside to the lower authorities.
The learned Departmental Representative (ld. DR for short) for the Revenue, on the other hand, stated that the A.O. was right in making an addition on the entire bogus purchases. The ld. DR relied on the order of the lower authorities.
We have heard the rival submissions and perused the materials available on record. The solitary issue involved in this appeal is the alleged bogus purchases made by the assessee from various parties to the tune of Rs.1,66,17,342/-. It is also evident that the A.O. has not disputed the sales made by the assessee, wherein the A.O. has recorded in the assessment order that as per the return of income filed by the assessee, the opening stock has been shown at Rs.50,54,061/- purchases during the year was at (AY 2011-12) Raxit Harshad Shah vs. ITO Rs.8,74,17,834/-, sales at Rs.9,31,07,044/- and closing stock at Rs.53,24,021/-. The A.O.
has also stated that the assessee has declared gross profit at 6.40% on net profit at 1.12%.
From this, it is evident that the sales has not been disputed by the A.O. and the only issue pertain to was that the assessee must have purchased the raw material from the grey market and had received bogus purchase bills from the hawala parties without any actual delivery of goods. We would like to place reliance on the decision of the Hon'ble Bombay High Court in the case of PCIT vs. Vishwashakti Construction [2023] 151 taxmann.com 93 (Bom), wherein it was held on similar facts that the entire purchase cannot be held to be non-genuine and reliance is also place on the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Bholanath Poly Fab (P) Ltd. [2013] 355 ITR 29 (Guj). Hence, it is a settled proposition of law that in case of bogus purchases, various courts including the higher forum has held that only the profit element embedded in the bogus purchases are to be taxed when the corresponding sales made by the assessee are not disputed. Considering the nature of business of the assessee which is into trading of iron building material, we deem it fit that 12.5% on the alleged bogus purchases are to be taxed in the hands of the assessee instead of the entire purchases made by the assessee in the interest of justice. Therefore, the A.O. is directed to restrict the addition to 12.5% on the alleged bogus purchases made by the assessee.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 27.06.2023