ITO-22 (2)(1), MUMBAI vs. NILESH CHANDRAKANT VORA, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL "SMC" BENCH, MUMBAI SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITO -22(2)(1), Mumbai, Room No. 508, 5th Floor, Piramal Chamber, Lalbaug, Mumbai - 400012 .…………… Appellant Nilesh Chandrakant Vora, Vs 202, Vivek Co op Hsg Soc Besent Road, Santacruz (W), Mumbai - 400054 Respondent …………… [PAN: AACPV8100C] Appearance For the Appellant/Department : Shri Sridhar Govind Menon For the Respondent/Assessee : None Date : 16.05.2023 Conclusion of hearing : 18.05.2023 Pronouncement of order O R D E R Per Rahul Chaudhary, Judicial Member: By way of the present appeal the Revenue has challenged the 1. order, dated 16/12/2022, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2009-10, whereby the Ld. CIT(A) had partly allowed the appeal of the Assessee against the Assessment Order, dated 27/03/2015, passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

The Revenue has raised the following grounds of appeal: 2. “1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in restricting the addition made on account of bogus purchase to 12.5% of total bogus purchases ignoring the fact that the Sales Tax Department has proved beyond doubt that the parties declared as hawala traders were involved in providing accommodation entry of purchases and the assessee was one of the beneficiary of accepting accommodation entry for the purchase.

2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the assessee failed to produce the parties for verification, in spite of opportunity provided by the Assessing Officer.

3. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was correct in restricting the addition made by the Assessing Officer to 12.5% of the bogus purchase value without appreciating the judgment in the case of M/s. Vijay Proteins Limited (1996) reported in 25 ITD 428 (Ahd. Tribunal).

4. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in appreciating the fact that the mere payment through banking channels will not be sacrosanct since neither notices were served on the parties and also the assessee failed to produce the parties for verification".

5. This appeal is being filed as it is covered under the exception provided in para 10(e) of the CBDT's Circular No.3 of 2018 dated 11.07.2018 as amended videF.No. 279/Misc.142/2007- ITJ(Pt) dated 20.08.2018.

6. The appellant prays that the order of the National Faceless Appeal Centre (NFAC), Delhi on the above grounds be reversed and that of the Assessing Officer be restored.” Brief facts of the case are that the Assessee, an individual engaged 3. in the business of trading in electrical goods, filed its return of income on 25/09/2009 for the Assessment Year 2009-10 declaring total income of INR 2,99,067/-. Information received from Sales Tax Authorities through Director General of Income Tax (Investigation), Mumbai, that the Assessee had made purchases 2 aggregating to INR 10,19,101/- from the following hawala parties: Sr. TIN/PAN Name of the Bogus Amount of Bogus No. Supplier & PAN Purchases (INR) 1. 27940631968V Varah Laxmi Sales Agency 63,693 AEPPT8680N 2. 27630606579V Pawan Enterprises 130,188 AEPPT8679H 3. 27330629636V Padmavati Trading Co 66,875 ATYPK4207E 4. 27210620875V Kalash Trading Co 352,032 AUPPK0439A 5. 27030119581V Viraj Enterprises 406,313 ALZPK6806A Total 10,19,101 On the basis of the above information, reassessment proceedings 4. were initiated. During the assessment proceedings, the Assessing Officer issued notices to some of creditors. In case of the following creditors either the notices were returned as un-served or reply was received not received:

Sr. Name of the party Status of notice Amount No. sent involved (INR) 1 Mahesh Electricals Returned 6,45,126 2 Armaan Metal Works Returned 10,59,891 3 Navbharat Trading Co. Reply not received 3,37,201 4 Airfig Sales Reply not received 12,97,946 Total 33,40,164 5. The Assessee was asked to show cause why purchases made from the abovesaid parties should not be treated as bogus purchases. Vide replies filed by the Assessee vide letter, dated 18/08/2014, 3 26/08/2014 and 12/09/2014, the Assessee furnished: a) Party-wise details of Purchases b) Purchase Bills, Ledger Account of alleged bogus parities. c) Purchase Register & Sales Register d) Ledger extract of the suppliers accounts along with bank statement highlighting the payment made to these parties through cheques e) Statement showing bill wise quantitative details of the purchases f) A statement showing details of purchases made from the alleged bogus parties and the corresponding sales of the material purchased to other parties On the basis of the above, the Assessee contended that the 6. purchases were genuine and the goods were sold during the normal course of business. Without prejudice, to buy piece and to avoid litigation, the Assessee contended that only the profit element forming part of the alleged bogus purchases could be brought to tax.

However, the Assessing Officer was not convinced and therefore, 7. vide Assessment Order, dated 27.03.2015, passed under Section 143(3) read with Section 147 of the Act the Assessing Officer made an addition of INR 13,12,280/- on account of bogus purchases holding that 25% of the bogus purchases should be disallowed by placing reliance on the decision of the Ahmadabad Bench of the Tribunal in the case of Vijay Proteins Ltd. vs. Assistant 4 Commissioner of Income Tax: 58 ITD 428 (Ahd).

Being aggrieved, the Assessee carried the issue in appeal before 8. CIT(A). The Assessee challenged the above ad-hoc disallowance of 25% of alleged bogus purchase contending as under:

(a) The purchases made by the Assessee were genuine.

(b) During the assessment proceedings the Assessee has filed detailed submissions clearly showing that the Assessee has established one to one identification of purchases made from five parties aggregating to INR 10,19,101/- (incorrectly taken by the Assessing Officer as INR 19,08,957/-) with the corresponding sales with supporting documents. Further, the payments to these purchases were made through the account payee cheques as reflected in bank statement of the Assessee

(c) The ad-hoc disallowance of INR 8,35,041/- being 25% addition of the alleged bogus purchases aggregating to INR 33,40,164/- is liable to be set aside for the reason that the four parties from which alleged bogus purchases were made were not reported as hawala dealers. The disallowance was made by the Assessing Officer merely on the ground that they were not found at the given address, or did not respond to the notices u/s 133(6), which is totally unjustified.

(d) The decision in the case of Vijay Proteins Ltd. (supra) was not applicable to the facts of the present case as the Assessee was able to identify the alleged bogus purchases with the corresponding sales 5 The CIT(A), vide order, dated 16/12/2022, rejected the contention 9. of the Assessee that the purchases were genuine. However, the CIT(A) granted relief to the Assessee by restricting the disallowance on account of bogus purchases to INR 5,44,908/- being 12.5% of aggregate bogus purchases of INR 43,59,265/- (INR 10,19,101/- + INR 33,40,164/-).

Being aggrieved, the Revenue is in appeal before us.