ITO 27(2) (1), MUMBAI vs. SHRI PARESH PRAVINCHANDRA PAREKH, MUMBAI

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ITA 2367/MUM/2021Status: DisposedITAT Mumbai02 August 2022AY 2010-114 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the sales turnover declared by the assessee was accepted by the Revenue, only the profit element embedded in the bogus transactions can be brought to tax, not the entire purchase amount. Therefore, the disallowance restricted to 12.5% by the CIT(A) was upheld.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restricted the disallowance of bogus purchases to 12.5%. The Assessing Officer had made an addition of the entire alleged bogus purchases of Rs. 6,49,500/- as the assessee failed to prove the genuineness of the transactions and dealers.

What were the issues?

Whether the entire amount of bogus purchases should be disallowed when sales turnover is accepted, or only the profit element embedded in such purchases.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 133(6)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Hearing: 02/08/2022Pronounced: 02/08/2022

आदेश/ ORDER

1.

This appeal by the Revenue is directed against the order of Commissioner of Income Tax(Appeals), National Faceless Appeal Centre, Delhi [in short 'the CIT(A)’] dated 17/10/2021 for the assessment year 2010-11.

2.

The brief facts of the case as emanating from records are: The assessee is engaged in manufacturing and reselling of electrical and electronic goods. The assessment in the case of assessee for assessment year 2010-11 was reopened on the ground that the assessee has indulged in obtaining bogus purchase bills aggregating to Rs.6,49,500/- from the dealers stated to be entry providers:

(i) Anshu Mercantile Pvt. Ltd. : Rs. 2,16,717/- (ii)Dhiren Mercantile Pvt. Ltd. : Rs. 4,32,783/- Total : Rs.6,49,500/- During the course of assessment proceedings, the assessee failed to discharge its burden in proving genuineness of the transaction and the dealers. The Assessing Officer issued notices under section 133(6) of the Income Tax Act, 1961 [ in short ‘the Act’] to the aforesaid hawala parties. The notices were received back from Postal Authorities unserved with remarks “left” or “not known”. Hence, the Assessing Officer made addition of the entire alleged bogus purchases. Aggrieved by the assessment order dated 16/03/2016 passed under section 143(3) r.w.s 147 of the Act, the assessee filed appeal before the CIT(A). The CIT(A) after considering the submissions of assessee and various decisions upheld the findings of the Assessing Officer to the extent that the assessee has obtained bogus purchase bills , however, CIT(A) restricted the disallowance in respect of bogus purchases to 12.5%. Hence, the present appeal by the Revenue.

3.

Ms.Beena Santosh representing the Department vehemently defended the assessment order. The ld.Departmental Representative placed reliance on the decision Hon'ble Supreme Court of India in the case of N.K. Proteins Ltd. vs. DCIT reported as 250 Taxman 22(SC) and prayed for reversing the findings of CIT(A) in restricting disallowance to 12.5%.

4.

Per contra, Shri Shyam Saboo appearing on behalf of the assessee prayed for upholding the findings of CIT(A) and dismissing the appeal of Revenue. The ld.Authorized Representative of the assessee submitted that the entire alleged bogus purchases cannot be disallowed as the Assessing Officer has accepted the sales turnover and closing stock of the assessee. Without purchase there cannot be sales.

5.

Both sides heard, orders of authorities below examined. Undisputedly, the assessee failed to discharge his onus in proving genuineness of the purchases and authenticity of the dealers. At the same time it is observed that the sales turnover declared by the assessee was accepted by the Revenue. Without purchases there cannot be sales. In such situation, it is only profit element embedded in bogus transaction that can be brought to tax and the entire alleged bogus purchases cannot be disallowed. In the facts of the case, I concur with the findings of CIT(A) in restricting disallowance to 12.5% of impugned purchases, therefore, the same are upheld and the appeal by Revenue is dismissed being devoid of any merit.

6.

In the result, appeal by the Revenue is dismissed.

Order pronounced in the open Court on Tuesday the 2nd day of August, 2022.

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