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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI AMARJIT SINGH
2 ITA 2858/Mum/2022 CO 6/Mum/2023 O R D E R PER BENCH:
The appeal of the Revenue and the cross objection filed by the assessee are based on similar facts and issue, therefore, both are adjudicated together by this order. (Filed by Revenue) 2. The solitary ground of appeal of the Revenue is directed against the decision of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter, called the Ld.CIT(A)] in deleting the addition of Rs.50,59,242/- out of total addition of Rs.57,81,990/- made on account of bogus purchases.
3. The facts in brief are that the case of the assessee for the year under consideration was reopened by issuing of notice under section 148 dated 10/09/2013. Thereafter notices under section 143(2) and 142(1) were issued on 16/09/2014. In this case, information was received from the sales-tax authorities regarding various entities, who were engaged in the activity of giving accommodation bills without actually supplying the goods. Assessee had made purchases to the amount of Rs.57,81,990/- from 5 parties, as given below:- Tin of Hawala Name of PAN of Asstt.Yea Amount in Rs. Dealer Hawala Hawala r Dealer Dealer 27600634774V Siddhivinayak AUEPS9671B 2010-11 Rs.5,01,166/- Trading Company 27600634774V Deepali AEAPT8181P 2010-11 Rs.5,01,847/- Enterprises 27600634774V Hans Trading AADHN5216L 2010-11 Rs.37,75,148/- Co 3 ITA 2858/Mum/2022 CO 6/Mum/2023 27600634774V Renuka Sales ATEPK9424B 2010-11 Rs.5,01,972/- 27600634774V Rekha AABPD2048N 2010-11 Rs.5,01,972/- Trading Co Total Rs.57,81,990/-
During the course of assessment, Assessing Officer issued notice under section 133(6) to the above mentioned parties, which were returned unserved by the postal authorities. However, the assessee submitted copies of bills and reconciliation statement of sales corresponding to purchases made. However, no delivery challan or transportation details were submitted. The Assessing Officer was also of the view that the purchases have been made from undisclosed parties in the open market in cash, but not from the above mentioned parties from whom only bills were obtained. However, the Assessing Officer has treated the whole purchases as bogus purchases and added to the total income of the assessee. Further, the Assessing Officer noticed that assessee has debited expenses of R.2,07,747/- to the P&L Account and made disallowance of 20% of such expenses on the ground that the same were not proved. Aggrieved, assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) held that there cannot be sales without corresponding purchases. Therefore, he restricted the disallowance to the extent of profit margin of 12.5% of the bogus purchases. However, in respect of disallowance of Rs.2,07,747/- pertaining to expenses, the Ld.CIT(A) has dismissed the ground of the assessee.
Heard both sides and perused the materials on record. During the course of assessment, the Assessing Officer found that assessee had 4 ITA 2858/Mum/2022 CO 6/Mum/2023 shown purchases from the parties, who were engaged in providing bogus sale bills without supplying any goods on the basis of information revealed by the sales-tax department. The Assessing Officer has added 100% of such purchases to the total income of the assessee by treating the same as non genuine. During the course of assessment, the assessee submitted the details of corresponding sales made against such purchases which have not been disproved by the Assessing Officer. We observe that in such type of transaction, the assessee purchases goods from the grey market which are cheaper than the material sourced from the genuine dealer and the bills are obtained from the third parties. In the light of the above circumstances, we observe that the assessee had shown corresponding sales against the purchases debited. Therefore, genuineness of purchases as a whole cannot be doubted and only the profit margin embedded in such transaction could be taxed. Therefore, we find justification in the action of the Ld.CIT(A) in restricting the addition to the extent of profit element embedded in such transaction. Accordingly, appeal of the Revenue stands dismissed. CROSS OBJECTION NO.6/MUM/2023 (Filed by Assessee) 6. Regarding cross objection filed by the assessee that Assessing Officer had disallowed 20% of expenses debited to the P&L Account, we find that Assessing Officer has not given appropriate reason for making disallowance @20% o such expenses. Therefore, we consider that it is reasonable to disallow such expenses @10%. Therefore, we direct the Assessing Officer to restrict the disallowance of these expenses debited to 5 ITA 2858/Mum/2022 CO 6/Mum/2023 the P&L Account to the extent of 10%. Accordingly, this cross objection filed by the assessee is partly allowed.
In the result, appeal filed by the Revenue is dismissed and the cross objection filed by the assessee is partly allowed. Order pronounced in the open court on 22/02/2023.