TITAN LABORATORIES P LTD.,,MUMBAI vs. DCIT CIRCLE-14(1)(2), MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 29.01.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2011-12, raising following grounds:

I. Reopening of Assessment : 1. The ld CIT(A) erred in confirming the order of Assessing officer in reopening the assessment vide notice w/s 148 of the act which is merely on information received from sales

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tax department, Mumbai without considering the fact that tax department, Mumbai without considering the fact that tax department, Mumbai without considering the fact that there was no tangible material on basis of which an there was no tangible material on basis of which an there was no tangible material on basis of which an assessment can be reopened, furthe assessment can be reopened, further the A failed to apply r the A failed to apply his independent mind to such material before reopening the his independent mind to such material before reopening the his independent mind to such material before reopening the assessment, therefore the reopening is bad in law. assessment, therefore the reopening is bad in law. assessment, therefore the reopening is bad in law. II. Addition of purchases Rs. 19,82,500/ II. Addition of purchases Rs. 19,82,500/-: 2. The Id CIT(A) erred in confirming the order of Assessing 2. The Id CIT(A) erred in confirming the order of Assessing 2. The Id CIT(A) erred in confirming the order of Assessing officer in disallow officer in disallowing the purchases from two parties ing the purchases from two parties namely namely namely M/s M/s M/s Palak Palak Palak Enterprises Enterprises Enterprises and and and Ms Ms Ms Waksons Waksons Waksons Enterprises Enterprises Enterprises aggregating aggregating aggregating to to to Rs. Rs. Rs. 19,82,500/- 19,82,500/ 19,82,500/ withoutconsidering the genuine of purchase duly supported withoutconsidering the genuine of purchase duly supported withoutconsidering the genuine of purchase duly supported by documents details. like bank statement showing by documents details. like bank statement showing by documents details. like bank statement showing payments made to supplier, payments made to supplier, purchase bills, delivery purchase bills, delivery challans, ledger accounts etc, therefore merely on the challans, ledger accounts etc, therefore merely on the challans, ledger accounts etc, therefore merely on the information received from the sales tax department and information received from the sales tax department and information received from the sales tax department and third party statement,purchases cannot be treated as non third party statement,purchases cannot be treated as non third party statement,purchases cannot be treated as non- genuine. 2. Briefly stated, facts of the case are that the Briefly stated, facts of the case are that the assessee filed its assessee filed its return return return of of of income income income on on on 24.08.2011 24.08.2011 24.08.2011 declaring declaring declaring total total total loss loss loss of of of Rs.5,40,77,862/-. The return of income filed by the assessee was . The return of income filed by the assessee was . The return of income filed by the assessee was selected for scrutiny assessment selected for scrutiny assessment, which was completed u/s 143(3) which was completed u/s 143(3) of the Income-tax Act Act, 1961( in short the Act) at t at total income of Rs.4,76,65,760/-. Subsequently, on receipt of information from the . Subsequently, on receipt of information from the . Subsequently, on receipt of information from the Sales Tax Department that assessee had obtained accommodation Sales Tax Department that assessee had obtained accommodation Sales Tax Department that assessee had obtained accommodation entry of bogus purchase entry of bogus purchase, the assessment was reopened and he assessment was reopened and reassessment was completed on 17.12.2016 u/s 143(3) r.w.s. 147 reassessment was completed on 17.12.2016 u/s 143(3) reassessment was completed on 17.12.2016 u/s 143(3) of the Act, wherein addition in respect of 14 bogus purchase parties wherein addition in respect of 14 bogus purchase parties wherein addition in respect of 14 bogus purchase parties amounting to Rs.4,92,14,439/ amounting to Rs.4,92,14,439/- was made. Against . Against the said assessment order, the assessee preferred appeal before the Ld. the assessee preferred appeal before the Ld. the assessee preferred appeal before the Ld. CIT(A), who dismissed ed the appeal of assessee. However, o the appeal of assessee. However, on further

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appeal, the Tribunal vide order dated 01.10.2021 restricted the appeal, the Tribunal vide order dated 01.10.2021 restricted the appeal, the Tribunal vide order dated 01.10.2021 restricted the disallowance to 6% of the disallowance to 6% of the quantum of bogus purchases. of bogus purchases.

2.1 Subsequently, the Subsequently, the Assessing Officer issued another notice u/s issued another notice u/s 148 of the Act on the ground that information from sales tax 148 of the Act on the ground that information from sales tax 148 of the Act on the ground that information from sales tax Department in relation two parties namely , in relation two parties namely , M/s Palak Enterprises s Palak Enterprises and Waksons Enterprises as bogus purchases and Waksons Enterprises as bogus purchases was received was received. The Assessing Officer completed the reassessment proceedings on Assessing Officer completed the reassessment proceedings on Assessing Officer completed the reassessment proceedings on 17.12.2016 and disallowed the purchases from 17.12.2016 and disallowed the purchases from those two those two parties amounting to Rs.19,82,500/ Rs.19,82,500/-. Before the Ld. CIT(A), the assessee . Before the Ld. CIT(A), the assessee challenged reopening challenged reopening and addition on merit. However, the assessee addition on merit. However, the assessee could not get any relief before the Ld. CIT(A). could not get any relief before the Ld. CIT(A).

3.1 Regarding the second ground challenging the addition on merit, he second ground challenging the addition on merit, he second ground challenging the addition on merit, the Ld. Counsel of the assessee submitted that the assessee would the Ld. Counsel of the assessee submitted that the assessee the Ld. Counsel of the assessee submitted that the assessee not object if disallowance for bogus purchase is restricted @ 6% isallowance for bogus purchase is restricted @ 6% isallowance for bogus purchase is restricted @ 6% which was sustained by the Tribunal in case of another 14 parties which was sustained by the Tribunal in case of another 14 parties which was sustained by the Tribunal in case of another 14 parties having identical issue issue of bogus purchases.

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3545/M/2019 for assessment years 2009 3545/M/2019 for assessment years 2009-10 and 2011 10 and 2011-12 has restricted the disallowance of bogus purchases to 6% of the alleged restricted the disallowance of bogus purchases to 6% of the alleged restricted the disallowance of bogus purchases to 6% of the alleged bogus purchase amount. The relevant fi bogus purchase amount. The relevant finding of the Tribunal nding of the Tribunal(supra) is reproduced as under: is reproduced as under:

“8. We have heard the rival submissions, perused the 8. We have heard the rival submissions, perused the 8. We have heard the rival submissions, perused the orders of the authorities below and the documents on orders of the authorities below and the documents on orders of the authorities below and the documents on record. We have perused the remand report of the record. We have perused the remand report of the record. We have perused the remand report of the Assessing Officer furnished before the Ld.CIT(A) Assessing Officer furnished before the Ld.CIT(A) Assessing Officer furnished before the Ld.CIT(A). We find from the remand report that the Assessing Officer has not from the remand report that the Assessing Officer has not from the remand report that the Assessing Officer has not doubted records, details and evidences i.e. purchases made doubted records, details and evidences i.e. purchases made doubted records, details and evidences i.e. purchases made by by by the the the assessee, assessee, assessee, consumption, consumption, consumption, sales sales sales and and and stock stock stock reconciliations furnished by the assessee during the reconciliations furnished by the assessee during the reconciliations furnished by the assessee during the remand proceedings. No adverse remand proceedings. No adverse inference was drawn by inference was drawn by the Assessing Officer in the remand report against the claim the Assessing Officer in the remand report against the claim the Assessing Officer in the remand report against the claim of the assessee. We observe that even though the Tribunal of the assessee. We observe that even though the Tribunal of the assessee. We observe that even though the Tribunal in assessee’s own case for A.Y. 2010 in assessee’s own case for A.Y. 2010-11 restricted the 11 restricted the disallowance to 10%, however, the facts in the current disallowance to 10%, however, the facts in the current disallowance to 10%, however, the facts in the current assessment year are slightly different as there is a remand essment year are slightly different as there is a remand essment year are slightly different as there is a remand report called for by the Ld.CIT(A) in the year under report called for by the Ld.CIT(A) in the year under report called for by the Ld.CIT(A) in the year under consideration but whereas such remand report was not consideration but whereas such remand report was not consideration but whereas such remand report was not available for adjudication before the Ld.CIT(A) and also available for adjudication before the Ld.CIT(A) and also available for adjudication before the Ld.CIT(A) and also before the Tribunal for A.Y.2010 before the Tribunal for A.Y.2010-11. Taking the totality of Taking the totality of the facts and circumstances into consideration we are of the the facts and circumstances into consideration we are of the the facts and circumstances into consideration we are of the view that ends of justice would be met if the disallowance view that ends of justice would be met if the disallowance view that ends of justice would be met if the disallowance is sustained at 6% of the alleged bogus purchases is sustained at 6% of the alleged bogus purchases is sustained at 6% of the alleged bogus purchases considering the fact that even the Assessing Officer in his considering the fact that even the Assessing Officer in his considering the fact that even the Assessing Officer in his remand report did not dispute the records in respect of mand report did not dispute the records in respect of mand report did not dispute the records in respect of purchases, consumption, sales as well as the stock purchases, consumption, sales as well as the stock purchases, consumption, sales as well as the stock reconciliation etc., furnished by the assessee. Thus, we reconciliation etc., furnished by the assessee. Thus, we reconciliation etc., furnished by the assessee. Thus, we direct the Assessing Officer to restrict the disallowance to direct the Assessing Officer to restrict the disallowance to direct the Assessing Officer to restrict the disallowance to 6% of the alleged bogus purchases 6% of the alleged bogus purchases. Ground raised by the . Ground raised by the assessee on this issue is partly allowed. assessee on this issue is partly allowed.” 4.1 Since, the issue in dispute before us being identical to the Since, the issue in dispute before us being identical to the Since, the issue in dispute before us being identical to the issue in dispute of bogus purchases raised before the Tribunal issue in dispute of bogus purchases raised before the Tribunal issue in dispute of bogus purchases raised before the Tribunal (supra) therefore, respectfully following the finding of the Tribunal, (supra) therefore, respectfully following the finding of the T (supra) therefore, respectfully following the finding of the T

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we restrict the disallowance of the bogus purchases in respect of we restrict the disallowance of the bogus purchases in respect of we restrict the disallowance of the bogus purchases in respect of these two parties to 6% of the bogus purchases amount of these two parties to 6% of the bogus purchases amount of these two parties to 6% of the bogus purchases amount of Rs.19,82,500/-. The . The ground No. 2 of the appeal of the assessee is No. 2 of the appeal of the assessee is accordingly allowed partly. accordingly allowed partly.

Order pronounced in the open Court on nounced in the open Court on 22/06/2023. /06/2023. Sd/- Sd/ Sd/- (NARENDER KUMAR CHOUDHRY NARENDER KUMAR CHOUDHRY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 22/06/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai