Loading judgment…
Facts
The revenue filed appeals against the Ld.CIT(A) orders concerning assessment years 2009-10 and 2011-12. The AO had added back 12.5% gross profit on alleged bogus purchases of Rs. 2,50,59,386. The Ld.CIT(A) restricted this addition to 4% gross profit.
Held
The Tribunal held that in cases of bogus purchases, only the profit element embedded should be taxed. Following the jurisdictional High Court's decisions in PCIT vs. Mohammad Haji Adam & Co. and PCIT vs. S.V. Jiwani, the addition was restricted to 4% gross profit.
Key Issues
Whether the addition on account of bogus purchases should be the entire purchase amount or restricted to the profit element. Whether the Ld.CIT(A) was justified in restricting the gross profit addition to 4%.
Sections Cited
250, 143(3)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, MUMBAI BENCH “J(SMC
Both the appealsof the revenue were filed against the orders of the National Faceless Appeal Centre (NFAC), Delhi *for brevity, ‘Ld.CIT(A)’) passed under section 250 of the Income-tax Act, 1961 (for brevity, ‘the Act’) for Assessment years 2009-10 and 2011-12, both dated18/06/2024. The impugned orders were emanated from the orders of the Learned Income-tax Officer, Ward 19(1)(4), Mumbai (in brevity, ‘the AO’), passed under section 143(3) of the Act,1961, date of orders 04/03/2015. and 4082 /Mum/2024 Deepak JagshibhaiVisaria 2. Both the appeals have same nature of facts and a common issue, so the appeal of the revenue in AY 2009-10 is taken as lead case. ITA No.4082/Mum/2024 3. The appeal filed by the revenue is below the monetary limit prescribed for filing the appeal before ITAT by the CBDT, vide its circular No.5/2024 dated 15/03/2024 as mended by circular No. F.No.279/Misc/142/2007-ITJ(PG) dated 15/03/2024. But the Ld.DR stated that the assessee’s case falls under the exception provided in paragraph 3.1(h) of the above circular, wherein it is stated that in case involving organized tax evasion including the case of accommodation entry of bogus purchases, the decision of that appeal shall be taken on merit without having rigor to tax effect and the monetary effect. The Ld.AR has not made any objection. So accordingly, both the appeals are taken for adjudication.
As per the information of the Maharashtra Sales-tax Department,the Ld.AO found that the assessee had made the bogus purchases amount of Rs.2,50,59,386/- which was booked in the books of account of the assessee. The ld. AO treated the alleged purchase as non-genuine. The parties have issued the false bills without the delivery of goods as reported by the Sales-tax Department. Relied on the information of the Sales-tax authorities, the Ld.AO added back the gross profit @12.5% on alleged bogus purchases amount to Rs.2,50,59,386/- which works out to Rs.31,32,423/- with the total income of the assessee. The assessee filed an appeal by challenging the addition before the Ld. CIT(A). The Ld.CIT(A) considered the submission of the assessee and restricted the addition of and 4082 /Mum/2024 Deepak JagshibhaiVisaria the gross profit @4% on the alleged bogus purchases. Being aggrieved on the order of the Ld.CIT(A), the revenue filed an appeal before us.
We heard the rival submission and considered the documents available in record. The Ld.CIT(A) has taken the view which is reproduced as below: - “7 On perusal of the submissions filed by the appellant during the appeal proceedings, it is observed that there are number of judicial pronouncements as presented above by the appellant which basically have taken the view of not disallowing the entire purchases even if the same are considered to be bogus by the AO mainly due to the reason that sales have also been declared by the appellant and such assessees in their relevant books of account, Relevant judgement in this case would be the one rolled by the appellant which is as under reliance is placed on the decision of Hon'ble High Court of Bombay in the case of PCIT Vs. Mohammad Haji Adam & Co. reported in [2019] 103 taxmann.com 459 (Bombay) wherein it is clearly hold that in case where the sales are not disputed then the addition on account of bogus purchases is to be restricted to the difference between the Gross Profit declared in the case of genuine purchases and non-genuine purchase. Further it is also in the case of the appellant's brother where a similar matter was involved the Hon'ble ITAT as well as the hon’able High Court has given relief to the appellant's brother also. Keeping in view the above facts and judgements on the issue involved the AO is advised to apply the judgement of PCIT VS. Mohammad Haji Adam & Co. reported in [2019] 103 taxmann.com 459 (Bombay) and apply Gross Profit % of 4% to the bogus purchases shown by the appellant.” (Emphasis supplied) The Ld. AO determined the gross profit at 12.5% on the alleged bogus purchases. The alleged bogus purchases were accounted for, and tax was paid on the gross and 4082 /Mum/2024 Deepak JagshibhaiVisaria profit so determined. The Ld. AR relied on the decision of the co-ordinate Bench- "H" of the ITAT, Mumbai in the case of Hasmukh Jagshi Visaria vs. ITO, & 2303/M/2016, pronounced on 12/07/2021. In that case, the bench held that where the assessee had a lower gross profit rate, the adoption of a gross profit rate of 12.5% was excessive, as it also included a VAT component of 4%. Consequently, the gross profit rate was reduced to 2% on the bogus purchases. Reliance was also placed on the judgment of the Hon’ble Bombay High Court in PCIT vs. S.V. Jiwani, (2022) 145 taxmann.com 230 (Bombay), where the Hon’ble High Court held that in cases involving bogus purchases, only the profit element embedded in such purchases should be treated as the income of the assessee. The Ld. CIT(A) accordingly adopted a gross profit rate of 4%, respectfully following the rulings of the Hon’ble Bombay High Court in Mohammad Haji Adam & Co. (supra). These decisions of the Hon’ble Jurisdictional High Court are binding upon us. We respectfully follow the direction in the cases of Mohammad Haji Adam & Co(supra) and S.V. Jiwani(supra). We find no infirmity in the impugned appellate order. Accordingly, the grounds raised by the revenue fail and are dismissed.
6. As stated earlier, the facts and circumstances in this appeal are identical to the facts and circumstances in which we have already decided against the revenue above. Therefore, the decision arrived at above shall apply mutatis mutandis to this appeal also. and 4082 /Mum/2024 Deepak JagshibhaiVisaria 7. In the result, both the appeals of the revenue bearing & 4082/Mum/2023 are dismissed. Order pronounced in the open court on 04th day of January, 2025. Sd/- sd/- (AMARJIT SINGH) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 04/01/2025 Pavanan