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Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED & Ms. MADHUMITA ROY
आदेश / O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeals have been filed at the instance of the Assessee against the separate orders of the Commissioner of Income Tax (Appeals)–6, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)-6/20 and 19/16-17 dated 17/08/2017 arising in the assessment order passed under s.147 r.w.s. 143(3) of the Income Tax Act, 1961(here-in-after referred to as "the Act") dated 14/03/2016 relevant to Assessment Years (AYs) 2010-11 & 2011-12 respectively.
& 2249/Ahd/2017 Nilesh Rameshchandra Shah vs. DCIT Asst.Years - 2010-11 & 2011-12 - 2 - Before us, both the parties submitted that though the appeals relate to different assessment years, the facts in both the appeals are identical except for the assessment year and the amounts involved and the submissions made by them while arguing one case would apply to the other appeal also. In view of the aforesaid submissions, we, therefore, for the sake of convenience, proceed to dispose of both the appeals by way of a consolidated order.
The assessee in AY 2010-11 has raised the following grounds of appeal:-
1. The Ld. CIT(A) has grossly erred in law and on facts in dismissing the appeal. He ought to have allowed the appeal fully in accordance with the grounds of appeal
raised by the appellant before him.
1. REJECTION OF BOOKS OF ACCOUTNS
1. The Ld. CIT(A) has erred in law and on facts while confirming the action of the Ld. A.O. in rejecting the books of accounts even though the appellant is maintaining the books of accounts which were duly audited by the Auditor as per the provisions of the Income Tax Act and u/s.44AB of the Act and the Auditor has not made any qualification in the Auditor’s report and they have not pointed out any defects,.
II. DISALLWOANCE ON ACOUNT OF ALLEGED BOGUS PURCHASES – RS. 63,44,326/-
1. 1. The ld. CIT(A) has erred in law and on facts in confirming the disallowance made by the Ld. Assessing Officer. On alleged bogus purchases of Rs.63,44,326/- by treating the purchases made by the appellant as bogus.
2. The Ld. CIT(A) has erred in law and on facts in failing to properly consider appellant’s submissions and various judicial pronouncements relied upon by the appellant.
& 2249/Ahd/2017 Nilesh Rameshchandra Shah vs. DCIT Asst.Years - 2010-11 & 2011-12 - 3 - 3. The appellant reserves his right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing. PRAYER The appellant therefore respectfully prays that:-
1. 1. The rejection of appellant’s books of accounts confirmed by the Ld.CIT(A) may kindly be quashed.
2. Addition on account of alleged bogus purchases of Rs.63,44,326/- as confirmed by the Ld.CIT(A) may kindly be deleted.
3. Such and further relief as the nature and circumstances of the case may justify. At the outset, we note that the learned AR for the assessee has not advanced any argument on the issue of rejection of the books of accounts as raised in the 1st ground of appeal. Thus in the absence of any argument by the learned counsel for the assessee, we deem it appropriate to reject the same as not pressed. Hence the ground of appeal of the assessee is dismissed.
The 2nd issue raised by the assessee is that the learned CIT (A) erred in confirming the addition made by the AO for ₹ 63,44,326.00 on account of bogus purchases.
4. Briefly stated facts are that the assessee is an individual and proprietor of M/s Shagun Art. The assessee is dealing in the business of gift articles. The AO based on the information received from the VAT/ Sales Tax Department of Mumbai found that the assessee has made bogus purchases from the several parties amounting to ₹63,44,324.00 only. Therefore, the AO disallowed the same and added to the total income of the assessee. & 2249/Ahd/2017 Nilesh Rameshchandra Shah vs. DCIT Asst.Years - 2010-11 & 2011-12 - 4 - The aggrieved assessee preferred an appeal to the learned CIT (A) who also confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR for the assessee before us submitted that the Tribunal in the own case of the assessee involving identical issue has allowed the appeal in favor of the assessee in part in for the assessment year 2009-10 vide dated 31-10-2018. Accordingly, the learned AR prayed that the same finding could be applied in the case on hand.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the impugned issue is covered in the own case of the assessee as discussed above. The relevant extract of the order is reproduced as under:
“7. We have carefully considered the rival submissions and the orders of the authorities below. The maintainability of estimated disallowance out of alleged bogus purchases is in controversy. In this regard, we notice that the assessee is engaged in trading of goods and therefore every purchase gets matched by corresponding sales/closing stock. Thus, the scope of manipulation in bills towards purchase quantity is nearly non-existent. What at best thus can be manipulated is the & 2249/Ahd/2017 Nilesh Rameshchandra Shah vs. DCIT Asst.Years - 2010-11 & 2011-12 - 5 - price/value of the goods purchased. In other words, while it may be possible that purchases might have been made from bogus parties, nevertheless, the purchases themselves cannot be treated as bogus. The sale recorded in books is not in question. Contextually, the assessee had declared 7.31% towards profit on such alleged bogus purchases. As stated, the relevant documents including invoice, payment through banking channel, quantity tally were made available to the Revenue authorities. The cross examination of the suppliers was not provided despite requests. In these circumstances, we find considerable merit in the case of the assessee in the light of the decision of the Hon’ble Gujarat High Court in Gujarat Ambuja Exports (supra); CIT vs. Bholanath Poly Fab Pvt. Ltd. 355 ITR 290 (Guj) and the decision of the Hon’ble Supreme Court in the case of PCIT vs. Tejua Rohitkumar Kapadia arising out of the decision of the Hon’ble Gujarat High Court in Tax Appeal No.691 of 2017, judgment dated 18.09.2017. In view of the facts recorded, it is difficult to dispute the quantitative aspects of the purchases made. This leaves us to the limited aspect of pricing of alleged bogus purchase. Having regard to the facts and circumstances of the case and more particularly in view of profits already declared on alleged bogus purchases in the vicinity of 7%, we are of the view that an estimated disallowance of 5% alleged bogus purchases over and above the profits already declared would cover possible suppression in profits and will balance the equity. Such estimation would also be in tune with the judgment of Hon’ble Gujarat High Court in Gujarat Ambuja Exports (supra). Accordingly, we direct the AO to restrict the estimated disallowance to Rs.6,42,657/- on account of alleged bogus purchase.
In the result, the appeal of the assessee is partly allowed.”
As the issue involved in the present appeal is identical to the facts as discussed above, therefore we are not inclined to take any contrary view. Moreover, the learned DR has not brought anything contrary to the argument of the learned AR for the assessee. Therefore, respectfully following the same the ground of appeal of the assessee is partly allowed. & 2249/Ahd/2017 Nilesh Rameshchandra Shah vs. DCIT Asst.Years - 2010-11 & 2011-12
- 6 - 5. In the result, the appeal of the assessee in AY 2010-11 is partly allowed.
Coming to Assessee’s appeal in ITA 2249/AHD/2017 for AY 2011-12
The assessee raised the following grounds of appeal:
1. The Ld.CIT(A) has grossly erred in law and on facts in dismissing the appeal. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him.
1. REJECTION OF BOOKS OF ACCOUNTS
1. The Ld. CIT(A) has erred in law and on facts while confirming the action of the Ld. A.O. in rejecting the books of accounts even though the appellant is maintaining the books of accounts which were duly audited by the Auditor as per the provisions of the income Tax Act and u/s.44AB of the Act and the Auditor has not made any qualification in the Auditor’s report and they have not pointed out any defects. II. DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASES – Rs. 8,28,788/-.
1. The Ld. CIT(A) has erred in law and on facts in confirming the disallowance made by the Ld. A.O. on alleged bogus purchases of Rs.8,28,788/- by treating the purchases made by the appellant as bogus.
2. The Ld. CIT(A) has erred in law and on facts in failing to properly consider appellant’s submissions and various judicial pronouncements relied upon by the appellant.
The appellant reserves his right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing. PRAYER
The appellant therefore respectfully prays that:- 1. The rejection of appellant’s books of accounts confirmed by the Ld.CIT(A) may kindly be quashed.
& 2249/Ahd/2017 Nilesh Rameshchandra Shah vs. DCIT Asst.Years - 2010-11 & 2011-12 - 7 - 2. Addition on account of alleged bogus purchases of Rs.8,28,788/- as confirmed by the Ld.CIT(A) may kindly be deleted. 3. Such and further relief as the nature and circumstances of the case may justify.
Both the sides consented that identical issue is involved in this appeal too. Thus, for parity of reasons noted above, our view in AY 2010-11 above shall apply mutatis mutandis to this appeal captioned above. As a result, the appeal of the Assessee in for AY 2011-12 is partly allowed.