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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM
These are the four cross appeals for two different assessment years i.e. Assessment Year 2009-10 and 2010-11 filed by the parties against the order passed by the learned Commissioner of income-tax (Appeal)-40, Mumbai [ The Ld CIT (A) ] dated 23.07.2019 for both the years.
The appeal of the learned Assessing Officer for Assessment Year 2009-10 in has following grounds of appeal:-
“A. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A)) has erred in restricting the disallowance of 12.5% of the total of bogus purchase transaction instead of 100% of the total amount of bogus purchase made by the AO for the A. Y. 2009-10?"
B. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in not considering that the addition was made on the basis of information received from DIT(Inv.) and Sales Tex Department, Maharashtra with regard to bogus purchase made by the assessee from dealers without supply of actual goods?"
D. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in not considering that the assessee could not prove the genuineness and creditworthiness of purchase transactions during the course of assessment proceedings?"
E. Whether on the facts and circumstances of the case and in Law, the Ld. CIT (A) has erred in law by not appreciating the fact that the onus to justify the claim of expenses is on the assessee and the same has failed to discharge it in relation to the purchases made from the non-existent vendors ?
F. The Ld. CIT (A) failed to uphold the decision of Hon'ble Apex Court in the case of NK Proteins Ltd. vs. DCIT in SLP (Civil) No. 769/2017 dated 16.01.2017 where 100% of addition was confirmed by the Apex Court?"
Assessment Year [ AY 2009-10] has following grounds of appeal:-
“The appellant firm prefers an appeal against an order dated 23/07/2019 passed by Ld. Commissioner of Income Tax Appeals-40, Mumbai on following amongst other grounds each of which are without prejudice to any other :
1.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in making disallowance to the extent of adhoc estimated GP margin of 12.50% of alleged purchase of Rs. 86,75,913/- amounting to Rs. 10,84,489/-.
2.0 The Ld CIT(A) failed to appreciate that utmost the profit embedded in the corresponding sales could be treated as undisclosed income and appellant itself has already disclosed the Profit @ 17% approx. being par with own past history and an additional disallowance @ 12.50% over and
Brief facts of the case show that assessee is a partnership firm engaged in the business of washing and processors of garments and manufacturing of the garments. It filed its return of income at Rs. 29,14,879/- which was assessed under section 143(3) of the Income tax Act [ the Act] on 17.11.2011 at Rs. 31,08,370/-. Thereafter information was received that assessee is one of the beneficiary of accommodation bills in the form of bogus purchases and therefore the notice under section 148 of the Act was issued to the assessee on 26.02.2013.
During the course of reassessment proceedings the Assessing Officer found that because of investigation carried out by the sales tax department, it was found that assessee has purchased of Rs. 40,06,166/- from M/s Saileela Trading Pvt. Ltd. and Rs. 2295/- from M/s Nisha Enterprises. The assessee could not provide the address of Nisha Enterprises. With respect to Saileela Trading Pvt. Ltd., notices were issued under section 133(6) of the Act but no response was received. Therefore, assessee was asked to produce the above party. Same were not produced and therefore, the Assessing Officer found that these parties are bogus.
Assessee preferred appeal before learned CIT (A) who accepted argument of the assessee that only profit embedded in non-genuine purchases should have been added. Therefore, he directed Ld Assessing Officer to adopt 12.5% as profit [ income] out of the bogus purchases of Rs. 86,75,913/- Accordingly, he upheld the addition of Rs. 10,84,489/-.
Therefore, the Assessing Officer is aggrieved with the deletion of the part addition and assessee is aggrieved with the retention of the part addition.
Coming to the appeal of the Revenue, the learned Departmental Representative relied very heavily on (1) N. K. Proteins Ltd. Vs. DCIT [2017] 84 taxmann.com 195 (SC).
(2) CIT vs. La Medica [2001] 250 ITR 575 (Delhi)
(3) CIT vs. Arun Malhotra [2014] 363 ITR 195 (Delhi).
The learned Authorised Representative made a detail submission before us submitting that assessee has completely discharged its onus before the learned Assessing Officer by submitting the purchase bills, ledger of the suppliers and bank statement evidencing payments. Therefore, all necessary evidence is produced to show the genuineness of above parties and Purchases made from them. He further stated that the books of accounts of the assessee are also not rejected. He further contended that assessee has already disclosed the gross profit 18.50% and the learned CIT (A) has further confirmed the addition of 12.5% over and above the same. He further referred to several judicial precedents by stating that mere suspicion is not enough to treat the purchases as bogus. He relied on several judicial precedents for this proposition. He further referred to 13 different judicial
We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact shows that assessee is a partnership firm engaged in the business of government washing processing and stitching. The information was received from the DGIT (investigation) that the assessee has taken certain accommodation entries to inflate its purchases. Therefore the enquiry was conducted by issue of notice u/s 133 (6) of the act wherein it was found that many of such parties are not available at the address given and notices have returned. Therefore, these parties were not traceable. Assessee was asked to produce them along with the details of purchase of goods including transportation, delivery challans and stock registers etc. The assessee did not maintain stock register and quantitative details have also not been produced therefore the case of the assessee was reopened and subsequently during the course of assessment proceedings the assessee could not produce the parties as well as the notice is sent to the parties u/s 133 (6) also returned and therefore the addition of ₹ 8,675,913 was made by the learned assessing officer
‘4. Based on the information received that the assessee is one of the beneficiaries of accommodation bills in the form of purchases, the AO reopened the assessment proceedings u/s 147 of the IT act. The AO got information from the office of DGIT (investigation) Mumbai that the appellant got purchases from the following parties as under:- 1. Nisha Enterprises ₹ 2295 2. Sai Leela trading private limited ₹ 4,006,166 total ₹ 4,008,461 Based on since tax survey reports, the assessee has indulged in bogus purchases by getting accommodation bills to the tune of ₹ 4,008,461/– from the above 2 parties who have not responded to the notice u/s 133 (6) in the date of completion of assessment proceedings. Similarly, the appellant file details of purchases made from Sai Leela trading private limited from the following parties which included the above 2 parties mentioned supra amount in two ₹ 4,008,461/– vide his letter dated 6/1/2014. The other parties from womb similar purchases were made are given as under:- 1. AAkar engineering and manufacturing Co Ltd ₹ 1,855,500 2. Krishna trading Co ₹ 2,811,952 The AO treated the entire amount of ₹ 8,675,913/– from the above 4 parties as
The judicial precedent relied upon by the learned departmental representative are on distinguishable facts. In case of Arun Malhotra [[2014] 47 taxmann.com 385 (Delhi) the matter was remanded to the ITAT for deciding the issue afresh and with reasons and after looking at the evidences. In case of CIT V La Medica 2001] 117 Taxman 628 (Delhi)/ [2001] 250 ITR 575 (Delhi) it was always the claim of the assessee that purchases are not bogus. Here there is no issue on that aspect but about determination of profit only. Further in case of N K proteins Limited [2016] 72 taxmann.com 289 (Gujarat)/[2017] 292 CTR 354] during the course of search proceedings at the office premises of NKPL, blank signed cheque books and vouchers of number of concerns were found. Endorsed blank cheques of NKPL by these concerns were also found from the office premises of NKPL wherein the endorsement was on the back of the cheques. Blank bill books, letter heads and vouchers of these concerns were found and seized from the factory premises of NKPL. Purchases made from
The claim of the assessee that assessee has discharged its complete onus as well as the entire addition has been made purely on the basis of the assumptions and surmises is purely devoid of any merit. The assessee failed to produce the parties from womb assessee has purchased the goods. The claim of the assessee that it has already disclosed higher gross profit margin at the rate of 18.5% the further addition at the rate of 12.5% of the bogus purchase is not justified, does not have any merit. The assessee when it has sold the goods to the third parties and obtained bogus purchase bills of those goods naturally there would be certain expenditure that assessee has incurred for obtaining such accommodation entries and therefore no infirmity can be found in estimating the profit at the rate of 12.5% of such bogus purchases. Even before the learned CIT – A assessee agreed four addition to the extent of 5% of bogus purchases. There is no justification for retaining profit at the rate of 2% of such bogus purchases as addition. Therefore, we
In the result, for ay 2009-10 appeal of the learned AO as well as the assessee are dismissed.
The facts of the case for AY 2010-11 in appeal of LD AO as well as assesee are identical. For the reason given by us in deciding appeal of the parties for AY 2009-10, we dismiss appeal of both the parties for Ay 2010-11 also.
In the result, all the appeals pertaining to both the assessment years are dismissed.
Order pronounced in the open court on 25.03.2022.