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Income Tax Appellate Tribunal, ―SMC‖ BENCH, MUMBAI
This appeal is filed by the assessee against appellate order passed by the learned Commissioner of Income-tax (Appeals)-30, Mumbai [the learned CIT (A)] dated 12thSeptember 2019 for A.Y. 2011-12.
The only ground raised by the assessee is that learned AO made addition of 100% of the purchases of ₹15,15,211/- under Section 69C of the Act and the learned CIT – A conform to the same.
Brief fact of the case shows that assessee is an individual who filed his return of income on 10th August 2011 declaring income of ₹1,53,643/-. This
Subsequently, information was received from Sales Tax Department and DGIT (Investigation), Mumbai with respect to the bogus purchases booked in a proprietor concern of the assessee M/s Padmavati forge and fitting, which is engaged in business of trading in stainless steel from three different parties amounting to ₹15,52,111/-. After recording of the reasons, notice under Section 148 of the Act was issued on 10thFebruary 2015. On 2ndMarch 2015, assessee reiterated the original return.
The learned Assessing Officer noted that assessee is running a proprietary concern in the name of Padmavati Forge and Fittings carrying on the business of stainless steel. Assessee has booked purchase amounting to ₹15,52,111/- from three different parties. These parties are found to be bogus parties and therefore, purchases were not genuine. The assessee was apprised of this fact. Assessee was asked to produce these parties. He expressed his inability to do so. Accordingly, the learned Assessing Officer held that assessee has failed to prove the primary onus cast upon him of genuineness of purchases and assessee has not even provided the address of these parties where the learned Assessing Officer could have verified. Accordingly, the learned Assessing Officer made an addition of ₹15,15,111/-
The assessee preferred the appeal before the learned CIT (A). Assessee submitted that assessee has earned gross profit at the rate of 8.23% during the year. Disallowance of the above purchases will result into gross profit at 34.11% which is not possible. Assessee further stated that it has booked total purchases of ₹67.28 lacs and has also recorded the sale which could not have been possible without purchasing the goods. He otherwise submitted that even otherwise the addition could have been only to the extent of gross profit.
The learned CIT (A) dismissed the appeal of the assessee on all counts and upheld the action of the learned Assessing Officer in addition of 100% of the bogus purchases. He confirmed the disallowance because that assessee has failed to show any evidence that the purchases have gone into the sale. It was held that if the appellant claims that it did indeed the sales as claimed, then it is for the appellant to establish how the purchases were made, if these purchases were from grey market, it is for the appellant to establish from whom those
Assessee is aggrieved and is in appeal before us. Assessee has not challenged the reopening of assessment but has challenged the addition on merits. Despite notice to the assessee on 6th occasions, none 09. appeared, therefore, the appeal of the assessee is disposed of on the merits of the case as per information available on record.
The learned departmental representative vehemently supported the orders of the lower authorities. It was submitted that it is for the assessee to establish genuineness of the purchases, if the same are not proved, hundred percent of such purchases are required to be added. The learned DR vehemently supported the various judicial precedents mentioned by the learned CIT (A) in his order.
We have carefully considered the rival contention and perused the orders of the lower authorities. Assessee is an individual engaged in the business of trading in stainless steel. Out of the total purchases shown by the assessee of 67.29 lakhs, the purchases amounting to ₹ 1,552,111 with respect to 3 different
Honourable Bombay High Court on the issue whether hundred percent addition on account of bogus purchases can be made or not has dealt with in Principal Commissioner of Income-tax-17v.Mohmmad Haji Adam & Co.*2019] 103 taxmann.com 459 (Bombay) [11-02- 2019]as Under: -
‗8. In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by " So far as the question regarding addition of Rs. 3,70,78,125/- as gross profit on sales of Rs. 37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the
In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. ―
Therefore, respectfully following the decision of the Honourable Bombay High Court, we disapprove the orders of the lower authority in making hundred percent addition on account of the bogus purchases. We direct the learned assessing officer to only make an addition to the extent of gross profit earned by the assessee embedded in the bogus purchases made by considering the above 2 decisions of the Honourable Bombay High Court. Accordingly solitary
In the result appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 25.10.2022.