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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI KULDIP SINGH, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLEShri Jai Bhagwan Mittal v.
O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 21.10.2022 for the A.Y.2009-10 in sustaining the action of the Assessing Officer.
2 (A.Y: 2009-10) Shri Jai Bhagwan Mittal 2. Briefly stated the facts are that, assessee is an individual, engaged in the business of Trading in Iron & Steel Scrap and filed its return of Income on 10.09.2009, declaring total income of ₹.3,61,700/-. The return was processed u/s.143(1) of Income-tax Act, 1961 (in short “Act”). Subsequently, case was reopened u/s. 147 of the Act and notice u/s.148 of the Act was issued on 03.04.2013. The reopening of the case was made on the basis of information received from the Sales Tax Department, Maharashtra that the assessee has taken bogus purchase bills of ₹.3,27,236/- from M/s. Maruti Steel Traders and ₹.11,34,276/- from M/s.Shiv Industries. During the assessment proceedings the Assessing Officer has issued the notice u/s.133(6) of the Act to the above mentioned parties in order to verify the genuineness of the transaction, but no response was received from the parties. Thereafter, the Assessing Officer had issued the show cause notice dated 12.09.2014 asking the assessee why the purchase transaction of ₹.14,61,512/- should not be added to the total income as unexplained investment u/s.69C of the Act and assessee had not replied to the same. Thereafter, on the basis of the affidavit filed by the said parties before the Sales Tax Department that they had only provided the bogus bills, the Assessing Officer has disallowed the purchases of ₹.14,61,512/- and made an addition u/s.69C on account of 3 (A.Y: 2009-10) Shri Jai Bhagwan Mittal alleged unexplained investment in purchases. Assessing Officer proceeded to complete the assessment order u/s.143(3) r.w.s 147 of the Act on 17.10.2014 by assessing the Total Income of the assessee at ₹.18,23,210/-. On appeal, Ld.CIT(A) sustained the addition made by the Assessing Officer. Against this order of the Ld.CIT(A) assessee is in appeal.
Before us, assessee has raised following grounds in its appeal: - “1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in reopening the assessment u/s. 147 of the Income Tax Act, 1961, without considering the facts and circumstances of the case.
2. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition of Rs. 14,61,512/- as alleged unexplained investment u/s 69C of the Income Tax Act, 1961 by treating the genuine purchases as alleged bogus purchases, without considering the facts and circumstances of the case.
3. WITHOUT PREJUDICE the appellant prays that the purchases are genuine and hence in the alternative without conceding to the same, an adhoc amount may be disallowed as has been done in other cases of similar nature.
4. The appellant craves leave to add, amend, alter or delete the said ground of appeal.”
4. At the time of hearing, Ld. Counsel for the assessee reiterated the submissions made before the Ld.CIT(A). Ld. Counsel for the assessee further submitted that the assessee is in the business of Iron and steel and already declared the profit of 3,22,657/- in A.Y. 2009-10. The
On the other hand, Ld. DR vehemently supported the orders of the authorities below.
Considered the rival submissions and material placed on record and perused the orders of the authorities below. It is not in dispute that sales have been accepted as non-genuine from out of these parties. When the sales have been accepted as genuine the entire purchases cannot be treated as non-genuine. The Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. Similar view has been taken by the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth [38 taxman.com 385]. Simply because the parties were not produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171]. In our considered view, disallowance should be estimated reasonably as the assessee could not conclusively prove that the purchases made are from 5 (A.Y: 2009-10) Shri Jai Bhagwan Mittal the parties as claimed, especially in the absence of any confirmations from them. Taking the totality of facts and circumstances, keeping in view the nature of business of the assessee i.e. trader in Iron and Steel Metals, it would be justified if the profit element embedded in those purchases are estimated at 5%. Accordingly, we direct the Assessing Officer to estimate the profit element from the non-genuine purchases at 5% for the assessment year under consideration and restrict the disallowance of purchases to 5% and compute the income accordingly.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 21st February, 2023.