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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
O R D E R
PER PAVAN KUMAR GADALE JM:
The revenue has filed the appeal against the order of the CIT(A)- National Faceless Appeal Centre (NFAC) Delhi passed u/s 143(3) r.w.s 147 and 250 of the Act. The revenue has raised the following grounds of appeal:
1. Whether Ld.CIT(A) is right in law and facts in restricting the addition of Rs. 1,01,08,283/-on account of bogus purchases to only 2% of the such bogus
M/s K. Rasiklal Exim Pvt Ltd, Mumbai. - 2 - purchase, without giving any findings as to how 2% has been worked out and also ignoring that the assessee failed to discharge the onus on it to establish during the assessment proceedings, the genuineness of purchase which were made through bogus parties".
2. Whether Ld.CIT(A) is right in law and facts in restricting the addition on account of bogus purchases to only 2% of the bogus purchase, without appreciating the ratio of the decision of the Hon'ble Gujarat High Court in the case of N.K.Proteins Ltd, wherein it has been held that in the event of bogus purchases, the addition of whole of such purchases is required to be made and this decision has been confirmed by the Hon'ble Supreme Court in SLP No.CC No. 769 of 2017, by dismissing the SLP of that assessee".
3. The Appellant prays that the order of the CIT(Appeals) on the above ground be set aside and that of the Assessing Officer be restored.
4. The Appellant craves leave to amend or alter any ground or to submit additional new ground, which may be necessary.
The case was posted for hearing on 26.04.2022, 15.06.2022. 27.06.2022 & 29.06.2022 and today i.e 29.08.2022, none appeared on behalf of the assessee on said dates. The Ld. DR made submissions and relied on the material on record.
M/s K. Rasiklal Exim Pvt Ltd, Mumbai. - 3 -
The brief facts of the case are that the assessee company is engaged in the business as dealers in chemicals. The assessee has filed the return of income for the A.Y 2011-12 on 22.08.2011 disclosing a total income of Rs.1,24,12,082/-. Subsequently the case was selected for scrutiny and assessment was completed u/s 143(3) of the Act assessing the total income of Rs. 1,24,52,480/- on 11.12.2013. Subsequently the AO has received the information from DGIT(Inv), Mumbai that the based on the enquiries conducted by the Sales Tax Department of Maharashtra, the assessee has obtained bogus purchase entries which are in the nature of none genuine purchases from the dealers. Therefore the AO has reason to believe that the income has escaped assessment and issued notice u/s 148 of the Act. In compliance, the assessee has filed the return of income on 01.11.2018 and sought the reasons recorded for reopening of assessment.
Further, the notice u/s 143(2) and 142(1) of the Act are issued, in compliance to the notice, the Ld. AR of the assessee appeared from time to time and submitted the details. The A.O found that the assessee has obtained the bogus purchase bills from three parties
M/s K. Rasiklal Exim Pvt Ltd, Mumbai. - 4 - aggregating to Rs.1,01,08,283/- and to test check the genuineness of the transactions, the AO has issued notice u/s 133(6) of the Act on the parties and the notices were returned un served by the postal authorities. The A.O. has called for additional details and the assessee was also issued show cause notice. The assessee has reply but the AO was not satisfied with the explanations and observed that the genuineness of transactions could not be established and made disallowance of purchases of Rs. 1,01,08,283/- and assessed the total income of Rs. 2,25,60,763/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 29.12.2018.
Aggrieved by the order, the assessee has filed an appeal before the CIT(A). The CIT(A) has considered the grounds of appeal, submissions of the assessee and findings of the AO and the assessee has challenged the validity of assessment. The CIT(A) has confirmed the validity of assessment and in respect of addition made by the AO, the CIT(A) has relied on the order for the A.Y 2010-11 where the 2% of the alleged purchases were treated as income of the assessee and applied the same ratio and restricted the addition @ 2% which M/s K. Rasiklal Exim Pvt Ltd, Mumbai. - 5 - worked out to Rs.2,02,166/- and partly allowed the appeal. The observations of the CIT(A) at page 3 of the order is as under:
After going through the findings of the assessing officer in the reassessment order, findings of the AO in the original scrutiny assessment order and the submissions of the appellant, it is apparent that the issue of bogus purchases were already examined by the AO in the original scrutiny assessment u/s 143(3) dtd 11/12/2013. The AO had calculated the peak of credit purchases at Rs.1,10,19,320/- but no addition was made in the current AY as addition was already made in the AY 2010 11. Thus, there is no dispute that bogus parties for purchases were already inquired during original assessment proceeding and the AO reopened the current assessment proceedings merely on the basis of change of opening and revisiting the same facts of bogus purchases as examined earlier in original scrutiny. The addition made in AY 2010-11 were deleted by the CIT(A)-12, Mumbai after examining the details filed during assessment proceeding including the stock reconciliation statement. As the appellant is a trader in chemicals, the sales corresponding to the bogus purchases could not have materialised without those purchases. However, the finding of DGIT Investigation wing, Mumbai and as well as sales tax authority leads to conclusion that these parties were providing mere accommodation entries. This situation leads to a position where the appellant must have purchased the goods through the grey market and bills were taken from these paper entities and in such a situation, there is only an element of suppression of profit through inflated purchases if any from these bogus parties. In the assessment year 2010-11, the profit at the rate of 2% from such entry providers were treated as suppressed profit.
M/s K. Rasiklal Exim Pvt Ltd, Mumbai. - 6 - Therefore, in the current AY also, 2% of the bogus purchases of Rs.1,01,08,283/- i.e. Rs.2,02,166/- can be worked out as suppressed profit on such bogus purchases which can be sustained for addition. Hence, as against the addition of Rs.1,01,08,283/-, only Rs.2,02,166/- is hereby confirmed and rest addition gets deleted. The appellant gets partial relief.
Aggrieved by the CIT(A) order, the revenue has filed an appeal before the Honble Tribunal. At the time of hearing, the Ld.DR submitted that the CIT(A) has erred in restricting the addition to 2% irrespective of facts that no proper information was filed in the Assessment proceedings. None appeared on behalf of the assessee.
We heard the Ld.DR submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld.DR that the CIT(A) has erred in restricting the addition to the extent @ 2% of the bogus purchases considering profit element embedded. We find that the CIT(A) has dealt on the facts and considered the assessee own case for the A.Y.2010-11 and has restricted the estimation of income @2% of alleged bogus purchases. Further, the Ld.CIT(A) took a reasonable view that the only profit percentage has to be added. The Ld. DR could not controvert the observations of the Ld. CIT(A) with any new cogent
M/s K. Rasiklal Exim Pvt Ltd, Mumbai. - 7 - evidence and material to take different view. We are of the opinion that the CIT(A) dealt on the facts and considered the profit element in the bogus purchases and also the A.O has not disputed the sales. The Ld.CIT(A) has relied on the assesses own case decision for A.Y.2010-11 and passed a reasoned order. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal raised by the revenue.
In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 30.08.2022.