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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
The assessee has filed this appeal challenging the order dated 17.10.2018 passed by learned CIT(A)-53, Mumbai and it relates to A.Y. 2011- 12. The assessee is aggrieved by the decision of learned CIT(A) in confirming the addition made by the Assessing Officer in respect of alleged bogus purchases.
We have heard the parties and perused the record. The assessee is engaged in the business of trading in various articles under the name and style of M/s. Tubefit Engg. Comapny. The Income Tax Department received information from the Sales tax department of Maharashtra Government that certain suspicious dealers have issued accommodation bills without actual delivery of goods. The sales tax department furnished list of suspicious dealers and the details of persons who were beneficiaries. It was noticed that the assessee has purchased goods to the extent of Rs.21,41,539/- from some of the suspicious dealers. Hence, the Assessing Officer reopened the assessment of the assessee by issuing notice under section 148 of the Act.
2 Amit Ashok Golwala During the course of assessment proceedings Assessing Officer asked the assessee to produce suppliers before him. However, the assessee contended that the purchases made by him are genuine and further expressed his inability to produce the suppliers. Accordingly the Assessing Officer held that he was not satisfied the correctness and completeness of the bogus purchases. Accordingly he rejected the books of account under section 145 of the Act. Further, by placing reliance on the decision rendered by Ahmedabad Bench of the Tribunal in the case of Vijay Proteins Ltd. Vs. ACIT (58 ITD 428), the Assessing Officer took the view that profit element involved in the bogus purchases should be assessed as income of the assessee. Accordingly the Assessing Officer estimated the profit element involved in alleged bogus purchases @ 25% and accordingly assessed a sum of Rs. 5,35,385/- in the hands of the assessee. The Learned CIT(A) also confirmed the same and hence, the assessee has filed this appeal before us.
The Learned AR submitted that the Assessing Officer did not make any inquiry with regard to alleged bogus purchases and hence the impugned addition made by the Assessing Officer was not legally correct and it should not have been confirmed by learned CIT(A). In this regard assessee placed his reliance on the decision rendered by Hon'ble Bombay High Court in the case of PCIT Vs. Vaman International Pvt. Ltd. (2020) 422 ITR 520. The Learned AR also placed reliance on the decision rendered by Hon'ble Bombay High Court in the case of PCIT Vs. M/s. Mohommad Haji Adm & Co. (ITA No. 1004 of 2016 dated 11.2.2019) wherein Hon'ble Bombay High Court has upheld the decision of the Tribunal in restricting the addition to the extent of gross profit rate on purchases.
On the contrary, learned DR supported the order passed by learned CIT(A).
3 Amit Ashok Golwala
We heard the rival contentions. We notice that the Assessing Officer has assessed the profit element involved in the alleged bogus purchases instead of disallowing entire amount of purchases. The said action of the AO is in tune with certain judicial decision. We noticed that the Assessing Officer has estimated the profit element @ 25% without bringing on record any basis for so estimating profit element. In the case of M/s. Mohommad Haji Adam & Co. (supra), adoption of gross profit rate on genuine purchases for the purpose of estimating profit from bogus purchases was upheld by Hon'ble Bombay High Court. Accordingly we are of the view that the gross profit rate declared on genuine purchases declared by the assessee may be adopted for the purpose of estimating profit element on the impugned alleged bogus purchases. Accordingly, we set aside the order passed by learned CIT(A) and direct the Assessing Officer to restrict the addition by applying the gross profit rate declared by the assessee in respect of other genuine purchases. We order accordingly.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 25.08.2022.