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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT
Per Kuldip Singh, Judicial Member: Appellant Shri Satyanarayana Chinnayya Jakkul (hereinafter referred to as ‘assessee’) by filing present appeal sought to set aside the impugned order passed by the National Faceless Appeal Centre (NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] on the grounds inter alia that:
“1. The Ld. CIT(A) erred in passing order without giving proper opportunity of hearing and hence order passed by Ld. CIT(A) is bad in law. 2. The Ld. CIT(A) erred in sustaining the additions made u/s. 69C of the Act by the Ld. AO to the extent of Rs.1,66,646/- i.e. alleged 2 Shri Satyanarayana Chinnayya Jakkul unproved/bogus purchases from M/s. R.S. Industries without considering the factual and legal matrix of the case. 3. The respondent craves, to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of appeal.”
2. Briefly stated facts necessary for adjudication of the controversy at hand are : Income tax department received information from the Sales Tax Department, Government of Maharashtra giving names and address and other details of certain persons who have provided entries for bogus purchase bills to a large number of tax payers. The assessee is found to have obtained such bogus purchase bills from M/s. R.S. Industries to the tune of Rs.1,66,646/-. Believing the same to have escaped assessment at the hands of assessee, the AO reopened the issue by initiating the proceedings under section 147/148 of the Income Tax Act, 1961 (for short ‘the Act’). During the assessment proceedings assessee was called upon to file the Xerox copies of purchase bills, transport bills and octroi payment receipts qua the transactions made with M/s. R.S. Industries which the assessee has failed to bring on record. Consequently, AO disallowed the assessee’s claim of purchases made from these parties amounting to Rs.1,66,646/- under section 69C of the Act and thereby made addition thereof to the total income of the assessee.
3. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has upheld the disallowance /addition made by the AO by dismissing the appeal. Feeling aggrieved the assessee has come up before the Tribunal by way of filing present appeal.
We have heard the Ld. Authorized Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower 3 Shri Satyanarayana Chinnayya Jakkul Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Undisputedly, entire assessment in this case has been framed by the AO on the basis of alleged information received from the Sales Tax Department. It is also not in dispute that during the assessment proceedings the assessee was called upon to prove the genuineness of the purchases by producing purchase bill, transport bill, octroi receipt etc. Both the AO as well as the Ld. CIT(A) have proceeded to make the addition qua alleged bogus purchases on the basis of information received from Sales Tax Department, Maharashtra without bringing on record the evidence to substantiate these allegations.
In the backdrop of the aforesaid undisputed facts the Ld. A.R. for the assessee contended that in such type of cases entire amount cannot be disallowed as the sales in this case have not been disputed by the Revenue Authorities and in these circumstances addition of more than 25% of the alleged bogus purchases i.e. Rs.1,66,646/- is not sustainable and relied upon the order passed by the co-ordinate Bench of Tribunal in assessee’s own case for A.Y. 2010-11 & 2011-12 in & 6865/M/2018 respectively order dated 17.12.2019.
However, on the other hand, Ld. D.R. for the Revenue to repel the argument addressed by the Ld. A.R. for the assessee relied upon the order passed by the AO that in such cases total amount of the bogus purchases needs to be added to the income of the assessee. 4 Shri Satyanarayana Chinnayya Jakkul 8. We have perused the order passed by the co-ordinate Bench of the Tribunal in assessee’s own case for A.Y. 2010-11 & 2011-12 which is on identical issue, in which addition to the extent of 25% of alleged bogus purchases has been restricted by returning following findings: “6. The submissions made by rival sides heard and the orders of the authorities below perused. The sales made by the assessee have not been disputed by the Revenue. Therefore, the entire alleged bogus purchase cannot be added back. Without purchases, there cannot be sales. In the given facts of the case, it appears that the assessee has made purchases from grey market and thereafter, obtained bills from alleged hawala operators. The FAA has restricted the addition to the extent of 25% of the bogus purchases i.e., Rs.1,88,897/-. I am of considered view that the order of CIT(A) is fair and reasonable, hence, no interference is warranted. The impugned order is upheld and the appeal by Revenue is dismissed.” 9. In view of what has been discussed above & order passed by the co ordinate tribunal in assessee’s own case, we are of the considered view that in such like cases entire alleged bogus purchases cannot be disallowed because at the most assessee by making bogus purchases has suppressed the profit component and even otherwise there cannot be any sales without purchases. So we hereby restrict the addition to the extent of 25% of bogus purchases i.e. Rs.1,66,646/-. Consequently, appeal filed by the assessee is partly allowed. Order pronounced in the open court on 30.05.2022.